Starting up clean!

Lately, I’ve had some friends ask me whether they should go back to school.

It seems whenever a friend is considering a major life decision I’ve become the go to guy. Whether it’s to quit their job, go to business school or start a business.

I always want to find out what a person really wants in order to help them find their path forward.

When you search deep enough I’ve found that the common reason is.. Change

People want change.

Unhappy with the road they’re on they look for alternative routes to find happiness, success, whatever makes them tick. A common thread among entrepreneurs is the want for freedom and that’s what it was for me when I began my first venture.

So my common response is find what motivates them first, because the road to business success is long. It takes passion and commitment and the ability to accept uncertainty and ambiguity.

Clean tech is a sector where passionate people collaborate. Most innovators in the sector are developers of new technology. The engineers and scientists that have found meaning in the creation of renewable energy solutions. So if you are looking for change and you want to learn how to start your own business I have created this post to be a overview of clean-tech, business and everything you need to know to get started.

What is clean-tech?

“Clean-tech is any product, service, or process that harnesses renewable materials and energy sources, reduces the use of non-renewable natural resources and cuts or eliminates emissions and wastes.” – Clean-tech Nation by Ron Pernick and Clint Wilder

Might be a new term to you, but I’m sure you’ve been exposed to cleantech before. Just to be sure we are going to get clear about what clean-tech actually is.

Clean-tech is term to describe a business that produces a product, service or process that seeks to reduce adverse environmental impacts. I’m sure you’ve seen a view windfarms or some solar panels on the roof of building… maybe even in the last week. These are produced by clean-tech companies. But clean-tech is more than wind farms, solar panels and renewable energy…

Clean-tech is also…

• energy distribution & storage
• energy efficiency
• chemicals & advanced materials
• information and communications technologies (ICT)
• green building
• transportation
• agriculture
• water and waste

Why clean-tech?

In short the reasons for cleantech are…

Climate Change: come on, no climate deniers here. I’m not wasting time getting into climate debates. The science is conclusive enough that change is necessary. Let’s move on and work on solutions. If you are interested in the latest climate findings here are a couple resources…

IPCC – http://www.ipcc.ch/

IEA – http://www.iea.org/

Growth Potential: most people can’t deny the growth. Over the last decade from 2000-2010 the combined global market for solar PV and wind power grew by 20x from $6.5b to $131.6b. The pure scale of the industry is becoming undeniable.

Personal Meaning: this one is often overlooked but important. This the reason why passionate people do anything… because their passionate. Those involved at all levels in cleantech are finding meaning in taking action to create environmental change.

What Defines a Business: the Basics!

“A business is a repeatable process that makes money. Everything else is a hobby.” — Paul Freet, serial entrepreneur and commercialisation expert.

You’ll get many different answers for the definition of a business. I find the best way to describe business activities is to talk in terms of ‘value’ for everything. This helps you remember that customer is the one who determines an offerings worth… not you.

A basic description would be simply that a business produces something of value for someone and captures value in return. The value of the offering must be equal to or greater than the value capture for the transaction to take place. Again, it is important to remember that it is the customer (who is purchaser) who ultimately decides whether the offering has value, and how much value it has.

Josh Kaufman the author of the Personal MBA describes a business as a repeatable process that:

• Creates and delivers something of value…
• That other people want or need…
• At a price they’re willing to pay…
• In a way that satisfies the customer’s needs and expectations…
• So that the business brings in enough profit to make it worthwhile for the owners to continue operation.

The last point on that list is interesting. “To bring in enough profit” is simply a way to say that only the owners, founders, director of a business can determine what qualifies as “enough”. So this means that the basic model for non-profit business is a business that does not distribute profits amongst the shareholders.

That describes the philosophy of the business process. But what about the moving parts of a business?  Again let’s use value to describe things here. It’s just an easier convention. Traditionally we would think business is made of the following components…

Production, Manufacture, Distribution, Marketing, Sales, Finance, Accounting, Management, Leadership, Legal, investors, mentors…

Ok, it gets messy…

Many of these are overlapping which makes it difficult to describe the roles of each business unit. Again referring to our value convention we can categorise the active roles of a business in terms of…

Value Creation – This finding out someones need, and generating a valuable solution

Marketing – Is making someone aware that your solution exists and explaining the value it offers

Sales – Is to facilitate the value exchange between someone and the business.

Value Delivery – Meeting someone’s expectations of that value.

Finance – Revenues, costs and profits: the value exchanges within a business, customers and suppliers.

“A business is a social group. It differs from other social groups in only one way. A business has customers.” – Peter Drucker, Management

The main reason we explain business in terms of value is because of the convention of the “customer”. The business helps the customer solve a problem and then the business receives value for its efforts.

Of course their are many other groups involved. However, these are the most important. A business cannot exist which out a customer.

By now you’ve probably got an idea of what is going on in the basic model of a business. Let’s look at how to start one and why it’s easier than you would think…

How to Create a Business: Startup Skills

You are probably familiar with scientific method. Make a hypothesis, test it with experimentation then report the findings. This is a great model to apply to getting into business except for one essential step…

IMPLEMENTATION

Ask any successful business owner, founder or entreprenuer and they will tell you: the best way to learn business, is to be in business. No one cares if your market research and business plan is perfect. Just as no one cares how much that you think you can sing, if it’s clear you don’t have gifted vocal chords and are actually completely tone deaf!

Yes preparation is important. But it’s the easy part, the hard part is; execution. Successful entrepreneurs are effective executors and are in a constant flux of observing feedback and taking corrective action. It’s cycle that continues as an idea grows all the way through development into a business. So now we have a process similar to the scientific method in which to adopt when starting a business…

Hypothesis (Research)

Experimentation (Validating hypothesis)

Implementation (Execution)

Feedback (Metrics to measure success)

Corrective Action (Making tweaks or even pivoting)

Repeat (Continuous innovation)

Hypothesis (Research)

Do you have a great idea? Great! now do some secondary research to validate it why it might work. Research environmental factors to give some rough estimates of what you might expect if you implemented your idea. The assumptions for this analysis can be rough around the edges the aim is just to determine general trends. You need to find out estimates for…

Market size? (dollar value)

Market growth? (% change and direction of change)

This will give you an indication of attractiveness of your proposal. If the market is small it’s ok as long as its growing. And if the market is large but is declining for the foreseeable future its probably not attractive. This is a step that can help you see the possible outcomes of launching a new venture.

Experimentation (Validating hypothesis)

Now that you have a idea and you know about your market you need to conduct some primary research or market validation to accompany your secondary research. Go about reaching potential customers and use surveys and interviews to find out:

Do customers want your solution? (Need)

Are customers are willing to pay for it? (Willingness to purchase)

What they are willing to pay? (Price point)

Minimum Viable Product: there is a common tool used in startups called Minimum Viable Product or MVP. This to create something that meets the bare minimum of a customers needs to provide a solution of value.

“The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.” – Eric Rees

Using an MVP is a great research tool very similar to a scientific or engineering prototype. But the key difference here is to test customer response to a product rather than functionality.

Use a Business Planning tool

One tool which is excellent for this purpose is the “Business Model Canvas”. This is a one page business planning resource that helps to keep the main areas of a business plan all in one place. You can also use a traditional business plan but these are often not that useful for practical purposes. Like I mentioned earlier, success in business is about implementation so don’t waste time creating a 50 page plan that you won’t use.

Implementation (Execution)

The basics of implementation are to secure the function parts of the business mentioned in the business basics section of this post. This means to do stuff. If you’ve got as far as having a idea that has been successfully market validated you probably now have a monstrous to-do list.

Product development, securing suppliers, dealing with distributors your list will be unique depending on your business and cleantech sector. Implementation is most important part of setting up and establishing a business. So now go ahead… and get stuff done.

Feedback and Corrective Action (Making tweaks or even pivoting)

So now you have launched your products, service or process. How do you measure success? Choose some metrics relevant to your business and watch them. You may need to tweak your product, marketing, or even pivot your business completely. Staying engaged with that feedback will give you the ability to steer your business quickly and serve those customers effectively.

Repeat (Continuous Innovation)

Repeat doesn’t mean start another business completely. What it means is to continue refining and improving whatever it is you do. Whether it’s a clean-tech product or service use the feedback and some creativity to improve as much as you can. We are now at a age where the only thing that competitors can’t copy: is a changing process. This process is that of continual innovation. Make this your business philosophy and watch as the competition falls by the wayside. ‘Keep doing what you’re doing’ doesn’t work when markets are changing faster than ever.

Recap

Phew… we got there. Now lets look at what we covered.

Clean-tech…

“ Clean-tech is any product, service, or process that harnesses renewable materials and energy sources, reduces the use of non-renewable natural resources and cuts or eliminates emissions and wastes.”

Business…

A business is a repeatable process that involves value exchange between customers.

Startup Process…

Hypothesis (Research)

Experimentation (Validating hypothesis)

Implementation (Execution)

Feedback (Metrics to measure success)

Corrective Action (Making tweaks or even pivoting)

Repeat (Continuous innovation)

Now that we have covered everything… Get started. Once an opportunity is identified, researched and tested, then go ahead and execute. Don’t wait for perfection just sink into it and get going. If you apply the principle of continual innovation you’ll be able to stay proactive in light of external factors such as; changes in policy and the market. So don’t wait for tomorrow because today is all there ever is.