Getting the timing right on innovation: Why Better Place pressed the pause button

The leaders of Better Place have a big dream, but it is no longer shared by Australian entrepreneur, Evan Thornley.

Thornley resigned this week after three months as CEO of the Silicon Valley-based global company, which has created a switchable battery for electric cars and a network of automated “battery switch stations”. Thornley led the Australian operation of Better Place for the five years from its inception here, controversially leaving a career as a Victorian Labor politician to do so. Our sister site, Crikey, reported the news yesterday.

The best leaders have big dreams – a vision of a better world – but not every dream ends in a successful reality. Creel Price, who founded a business with $5000 at age 25 and sold it 10 years later for $109 million, says timing plays a big part in achieving the scale that brings global success. “Timing is not everything, but there are a lot of entrepreneurs who get the timing wrong,” Price tells LeadingCompany. “Better Place sounds like a business that is ahead of its time and I think it still is in Australia.”

Thornley’s departure is not the end of Better Place globally – a statement from the company says global expansion will continue but after consolidation in markets such as Israel and Denmark where electric “cars are on the road”. The company has 130 charge points in Hawaii, a battery switch station in Denmark, 21 in Israel and two in Canberra, Australia.

But the company is facing a big strategic challenge to its business model. And as it does so, the local Australian operations are likely to be scaled back or closed, against the wishes of Thornley.

In an email obtained by Crikey, Thornley tells his staff about the leadership dispute and his reasons for stepping aside:

“As our company continues its rapid transformation to commercial operation, it is essential that we are unified at every level on what we are seeking to achieve and how we intend to achieve it. In recent times, strong and honestly-held differences have emerged at the most senior levels of the company about how we best take the company forward. I do not wish to be a barrier to that unity and so will step down and let the company transition to new leadership.”  

For leaders, there are many lessons in innovation in the story of Better Place so far.

Be the follower, not the leader

The first-mover advantage is not what it is cracked up to be. With disruptive innovations, companies spend a lot of money educating the market, says Price. “I’m not a huge believer in being first to market. Companies spend a huge amount of money educating the market and that sends companies broke before there is enough money in the market to make a business profitable. The obvious example is Google: it was not the first search engine, so it was easier for them to simply do it better and faster. I’m not the first to say be at the leading edge but not the bleeding edge.”

Focus on the problem and its solution, not the technology

Better Place is about making the electric car viable. The problem is that electric cars are not the only solution to the problem of limited oil supplies and out-of-control greenhouse gas emissions. Paul Harrison, senior lecturer, Graduate School of Business at Deakin University, says: “Consumers are only ever looking for a solution to their problem, and the large majority of people don’t see a problem with petrol-fuelled cars. They are becoming more and more efficient. This is a marketing myopia; we teach people to ask: what problems are you solving that aren’t solved elsewhere? Or are you so enamoured with your idea you are missing the problem?”

Price, who has recently returned from Silicon Valley, says electric car use is widespread, and charging stations are everywhere – as opposed to battery switch stations.

Stick at it

Time in the market can solve problems for innovators.
Australian company Resmed spent decades educating the population about the dangers of sleep apnoea in order to build a market for its CPAP machine, which controls it.

Harrison points out that Apple’s first version of the iPad, the Newton, was a flop. “Perseverance is a winner,” he says. “The best entrepreneurs believe so strongly in their vision that they ignore the naysayers around them. One of the critical things is time in the marketplace; if you can survive more than a year, you improve your chances and if you stay in the market for three years, you have done really well.”

Better Place started in 2007, and has raised $25 million in venture capital in Australia, and $860 million in the United States. Its largest shareholder is Israel Corporation, the holding company of Israel’s richest man Idan Ofer, worth an estimated US$6.2 billion. Crikey reports that Ofer issued an ultimatum late last year to Better Place to come up with a viable business strategy or have his support pulled.

Charismatic leadership

Big vision demands a commanding leader to communicate the dream to the community and convince them of its potential, and to keep staff motivated by a long-term goal, says Kosmas Smyrnios, professor of family business entrepreneurship, at the School of Management, RMIT. “Any form of innovation is not something that happens overnight. It is really a process and not so much an event. One ingredient is of leadership, a charismatic, transformational type leader, who can bring the community within the organisation and the community at large to follow them.

“There needs to be a culture within the organisation that encourages and sustains individuals who are eccentric, different, lateral thinkers rather than the yes person, who goes along with everything.

“And there needs to be a culture externally, with the government and with communities, or it just won’t work.”

Better Place was initially led by its founder, Israeli entrepreneur, Shai Agassi, who was named as one of the top 20 global influencers by Time magazine in 2003, and listed among the top 100 most influential people in 2009 by the same magazine. Agassi was replaced by Thornley last October as job cuts began at the company.

Wait for the market to catch up

Price says the move by Better Place to consolidate in key market sounds like it makes sense. “They are taking a good hard look at how big market [will be] in next five years, and it is not going to be that big. It seems like a sound decision.”

Harrison says companies need to reassess innovations. “Do you drive the market need or wait for the market need to drive your product? You get yourself some sophisticate data research and modelling,” he says.

RMIT’s Smyrnios says it may be time to look at alternate strategies. “It is one thing to do something on a grand scale, but what might have worked best for them is to prototype it. This is where rapid prototyping is important, to have a Better Place 101 model in a developing nation, in a community in Africa, and then from there introduce it into a Western community. It is being able to do it on a small scale that is indicative of it feasibility and then you take it from there.”

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