4 Lessons in Green Product Development from the Failure of Better Place

In 1998, I heard about Shai Agassi for the first time. My roommate back then was working for TopTier Software, an Israeli company Agassi founded, and he told me a number of times about Agassi and what a smart entrepreneur he is.

Fifteen years later, I still believe my roommate was right about Agassi, even after Better Place, the company he founded in 2007 and was considered to have "the potential to eliminate the gasoline engine altogether,” filed a motion in an Israeli court earlier this week to close the company.

“This is a very sad day for all of us. We stand by the original vision as formulated by Shai Agassi of creating a green alternative that would lessen our dependence on highly polluting transportation technologies,” the company’s board said in a statement. “Unfortunately, the path to realizing that vision was difficult, complex and littered with obstacles, not all of which we were able to overcome.”

This is a very sad moment for anyone who believed in Agassi’s vision and in Better Place’s ability to disrupt the car market with electric vehicles and a network of battery swapping stations. Still, this is also an opportunity to learn some valuable lessons that might help other green innovators struggling with similar challenges. We looked at the failure of Better Place from a new product development perspective, and identified four key lessons.

1. There’s always a box – Lester Brown once said: “We desperately need a new way of thinking, a new mind-set. The thinking that got us into this bind will not get us out." When Elizabeth Kolbert, a writer for the New Yorker, asked energy guru Amory Lovins about thinking outside the box, Lovins responded: “There is no box.” That is the mind-set we need if civilization is to survive.

I always thought Better Place was an example for this kind of no-box thinking. Now, if this is the case, it shows that there’s always a box that might stand in the way of even the most disruptive innovations. Take, for example, the bureaucracy in Israel, which caused delays in the commercial launch of the company and was, according to Agassi’s spouse, who responded to some of the company’s critics this week, the main obstacle to adding recharging stations on Israel’s central roads.

Lesson #1: There’s always a box that will stand in your way, no matter how disruptive you are. Be prepared for it!

2. Focus on user needs - A new product will succeed only if it provides some benefit that prospective customers need or want.

If we look back to the beginning of Better Place, the company started because Agassi was looking into climate change, and as Daniel Roth wrote on Wired in 2009, he decided that the problem was oil-consuming, CO₂-spewing cars. “The solution was to get rid of them... The internal combustion engine had to be retired. The future was in electric cars.”

This vision is admirable, but unfortunately it has nothing to do with user needs. In all fairness, Agassi always talked about providing a cheaper alternative for consumers, but he failed to create this value even in Israel where gas is relatively expensive. Once this need wasn’t met it was the end of the story for Better Place.

Lesson #2: User needs should always come before technology and form when developing your concept because if you can’t meet these needs you will fail no matter how advanced your technology is or how good the other components of your value proposition are.

3. Remember the curse – As I mentioned here earlier this month, there’s a phenomenon called “curse of innovation.” According to Harvard Business School Professor John Gourville, it means that innovative new products fail many times because consumers systematically undervalue and firms systematically overvalue the innovation relative to what an objective analysis would suggest.

I think Better Place is an example of the innovation curse. While Shai Agassi was able to create what looked on paper like a very attractive offer for consumers, he undervalues consumers’ inherent resistance to behavior change. His innovation required consumers to shift from the gas pump to battery swapping stations - and give up ownership of their car batteries, a scary proposition. Consumers, explain Gourville, see behavior changes required by innovation as losses, and due to “status quo bias,” these losses “loom larger in consumers’ minds than do the benefits offered by the new innovation.” Better Place customers needed to believe not just in the cars but in the battery swapping network, and this was just too big of a leap for many.

Lesson #3: Be aware of the innovation curse and evaluate your innovations from a consumer’s perspective, not yours.

4. Failure should be an option – “Failure is inevitable in uncertain environments, and, if managed well, it can be a very useful thing,” explains Columbia Business School Professor Rita Gunther McGrath. It shouldn’t surprise anyone, she adds, that under uncertain conditions, failures are more common than successes.

There’s no better way to describe the environment in which Better Place was operating than "uncertain conditions." The company should have taken into consideration that one or more components of its operation could fail and prepared accordingly. Yet, it seems that for the company, learning through failure wasn’t an option.

With only one car manufacturer as a partner (Renault) and one country as its main beta site (Israel), it had a very vulnerable operation. The only alternative to success was failure - which is exactly what happened, eventually.

Lesson #4: Make sure you can fail without taking the whole operation down. As Jeffrey Stibel, Chairman and CEO of Dun & Bradstreet Credibility once said: “Mistakes are the predecessors to both innovation and success, so it is important to celebrate mistakes as a central component of any culture.”

[Image credit: sielju, Flickr Creative Commons]

Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.