In many industries, including energy storage, incumbent companies continually improve their products to fulfill the needs of their most demanding users. Though important for the growth of a firm, this usually results in a swath of users who are over-served, as well as a large group of users who simply aren't willing to pay for the existing solution. Though this type of innovation is important, it does not create new markets or revolutionize industries. To achieve this level of innovation, companies must be willing to disrupt markets and offer a new value proposition to overserved customers.
CRM Leads the Way
Take Customer Relationship Management (CRM) software, for example. As the idea of CRM developed in the 1990s, the space became dominated by the existing enterprise software providers such as SAP, Oracle, and Microsoft. They based their solutions on in-house servers, as they had done in the past with their other enterprise softwares. This worked well for large companies who had the existing infrastructure. Smaller companies, however, found it too costly to invest in CRM, and SAP, Oracle, and Microsoft did not find it profitable to develop solutions for these companies.
Fast forward to 1999, when a small startup called Salesforce.com begins offering CRM Software as a Service (SaaS) to small business. Rather than install servers in each company, the software is kept “in the cloud” and customers pay a set price each month to use it. Though at first much simpler than the offerings of SAP and Microsoft, the software was perfect for small businesses who couldn’t afford to pay the upfront server installation costs. Jump to the present, and Salesforce.com is now a major threat in the CRM space.
Lessons Learned from Salesforce.com
One of the major reasons Salesforce.com succeeded was because it realized that a large group of customers was being overserved by the current solutions. This is similar to the current large-scale stationary energy storage industry. Over the past ten years, the majority of research and innovation has taken place in the Lithium Ion (Li Ion) space. Li Ion is a tremendous chemistry with a unique combination of long life and high energy density, but it comes at a cost. Li Ion, by its very nature, requires thin cells and an organic electrolyte, raising the cost per kWh stored. Customers are effectively paying a premium for the small size and portability of the batteries.
The Future of Energy Storage Innovation
This is great for portable applications, such as cell phones, laptops, and electric vehicles. Unfortunately, it overserves stationary storage customers by delivering a smaller, lighter technology than they need, and at a higher price. Though there is much research in this space, the fundamental truth behind the chemistry is that Li Ion batteries must have a polymer electrolyte, which requires them to be extremely thin, raising the materials and assembly costs for each kWh stored. Changing this principle requires using a different chemistry.
This is exactly what is needed in the energy storage industry. Battery manufacturers need to develop new chemistries that are cheap, simple, and safe. Li Ion batteries are great, but they won’t change the way the world uses energy.
How can energy storage manufactures better meet your needs? Which organizations inspire you to innovate? Let us know by leaving a comment below.