When working with new technologies, business risks are not always right in front of you. To see the big picture, you need to use the wide lens.
As I wrote in my blog in June, Solar Foods is one of the most exciting startups to follow. Solar Foods is developing a new kind of food product that is not in the market today. By using gas fermentation, Solar Foods is aiming to bring to the market a new type of protein product. Since June, Solar Foods has made a couple of interesting strategic moves that I think are worth examining in a separate post.
Co-Adaptation and Co-Innovation Risks
One of the major pitfalls of new innovation can be the failure to see how value is created in a supply chain, and who are the critical stakeholders. The world is full of examples where existing structures prevent obvious improvements from taking over even though the benefits would be clear. Why do they still have separate taps for hot and cold water in the UK? Why don’t all cars come with Run Flat tires?
The Run Flat tires, the PAX system, is an especially interesting case. The PAX solution offers better safety and flexibility for the drivers. To fight distribution and adaptation issues, the technology was shared by the inventors with multiple tire and car manufacturers. Market studies showed that the demand is there, but still, the beneficial technology is not in use today.
The reason lies in co-adaptation and co-innovation risks. Co-adaptation means that multiple stakeholders must adapt to new technology at the same time. Co-innovation risk is imminent when the new technology needs other innovations for the new technology to make its entry to the markets.
If there is even one entity in the supply chain that is not benefiting from the improvement, they will not be active in taking it into use, or, even worse, they might fight against the change. In other words, there are situations where a stakeholder is not incentivized to co-adopt or co-innovate. In this case of Run Flat tires, a co-adaptation risk occurred. It turned out that the car service companies did not have high enough incentive to invest in PAX machinery, and cars with these tires could not find a convenient service network.
Examples of co-innovation risks can be found in various areas. One famous case was Phillips’ high-definition tv. Phillips was ahead of its time by bringing an HDTV already in the ’80s, but the cameras and transmission standards did not match the tv’s level. HDTVs became the standard 20 years later when the need for co-innovation was fulfilled.
The two types of risks and the PAX system and Phillips examples are presented in Ron Adner’s excellent book, The Wide Lens.
Solar Foods Looking Through the Wide Lens
In September 2019, Solar Foods announced not only new funding but also a strategic partnership with the food industry company Fazer. Fazer has a strong knowledge of food production, product development, and end-product marketing. This partnership tells of Solar Foods’ understanding that it must focus together with its core technology also to the solutions to commercialize it. This interpretation was further highlighted when Solar Foods posted its first public job ad. The ad was not to get more resources to its core technology, finance, production, or marketing. The opened position is for product development. The role consists of tasks like “Develop methods and specifications together with our customers for integrating Solein (Solar foods’ product) in a variety of food products – Leading the global novel food approval process for Solein,” and to ” formulate and develop foods and supplements.”
By taking these actions, Solar Foods mitigates the risk of ending up in a situation where it’s novel technology is validated and production scaled, but the markets are not able or willing to accept it. By working with its strategic partner and by hiring the Product Developer, the company innovates for its future stakeholders. By helping the supply chain downstream with the adaptation process, Solar Foods is lowering the threshold to enter into business with Solar Foods. The approach is not the most obvious one but makes all the sense. When dealing with a product that has no market in the contemporary environment, the company producing the novel product must take these actions to mitigate co-innovation and co-adaptation risks.
Solar Foods is certainly not alone in their situation. Similar cases can be found, for example, from the synthetic biology field. Synthetic biology companies are brewing up countless new products that will face the same challenges in the coming years that Solar Foods is preparing for already now.
After the impressive new moves, the case of Solar Foods is now even more exciting to follow than before. Together with the exciting new technology, the company will certainly work as a good case study for a wide range of companies that are about to bring new technology to the market.