Water-Energy-Food Nexus

Innovation Ecosystems at the Water-Energy-Food Nexus

Innovation ecosystems conjure up the image of fast-paced, high-growth entrepreneurial ventures thriving around angel and venture capital networks and universities where a lot of new ideas are generated. Such ecosystems are populated by ICT, biotech, internet and social media start-ups. These sectors have timeline drivers like Moore’s Law[1] and Metcalfe’s Law[2] denominated in months, not years. The installed base of information technology is 3 years, therefore, 5-10 year venture capital fund lifecycles work with the industry dynamic. Although getting a new drug to market has high capital requirements and a much longer timescale for clinical development and licensure, there are intermediate exit opportunities and the roadmap for doing so is well defined. In biotech, the fall in the cost of DNA sequencing is outpacing Moore’s Law[3]. New drug development results in high value added, differentiated products with monopolies ensured through patent protection.

Water, Energy, Food and the Environment

In contrast, products at the water-energy-food nexus are commodities (water is H₂O[4]; electrons are electrons, whether they’re ‘green’ or not). The scale, scope and time horizons of technology development and deployment at the nexus, however, are capital intensive with timelines for adoption of innovation measured in decades (for example horizontal drilling was 25 years to adoption). The installed base in energy is decades, and is, hence, largely incompatible with venture capital cycles. It is because of the timelines for exit that VCs have moved strategically from renewables to energy efficiency, or simply ignore the most pressing needs of humanity at the nexus. Water and energy are characterized by exquisite supply chains and infrastructure, which leads to it being a system with considerable inertia and aversion to risk.

Inclusive, Sustainable International Development

Products at the water-energy-food nexus are often public goods that are necessities for human life, and innovations in this space are often related to processes rather than products, themselves, or business model innovations in their delivery systems. Customers having the greatest unmet market need for these products are often at the base of the economic pyramid, the four billion people who live on the equivalent of less than $2 per day. They live in countries having the greatest need for resilience to climate change. Thus, there is a humanitarian dimension to innovating and realizing the nascent value of innovation in this space.

Given planetary boundaries, robust innovation ecosystems at the water-energy-food-environment nexus are essential for sustainable international development. Innovation ecosystems at the nexus are more challenging to architect, as they involve engaging new partners that have not traditionally played a major role in such ecosystems, including philanthropic organizations, development agencies, grass-roots stakeholders and innovators. They also involve traditional actors such as academic institutions and multinational corporations playing expanded and different roles, and startups evolving in the direction of social enterprise.

This begs the question of what the next generation of innovation ecosystems will look like, and how to build them at the water-energy-food-environment nexus.

References:

[1] The number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years.

[2] the value of a telecommunications network is proportional to the square of the number of connected users of the system (n²)

[3] National Human Genome Research Institute http://www.genome.gov/sequencingcosts/

[4] the notable exception being the $60 billion, 200 billion unit (annual, global) bottled water industry, which is riddled with environmental and socioeconomic injustice