COPENHAGEN BUSINESS SCHOOL, DEPARTMENT OF INNOVATION AND ORGANIZATIONAL ECONOMICS

A Paper on the Potential Impacts of an Innovation within Energy Systems

081082: Leth, Jimmy & 300984: Sarup, Dennis Supervisor: Cristoph Hienerth December 17th, 2010

Unit Count: 33.892

081082: Leth, Jimmy & 300984: Sarup, Dennis A Paper on the Potential Impacts of an Innovation within Energy Systems

Content
1 Introduction ......................................................................................................................... 3 1.1 Case Description .......................................................................................................... 4 The Innovation ..................................................................................................... 5 The Process of Innovation: Current Status ........................................................... 5

1.1.1 1.1.2 1.2 2

Empirical Considerations ............................................................................................ 5

Field of Research ................................................................................................................ 6 2.1 2.2 Research Question ....................................................................................................... 7 Theoretical Approaches ............................................................................................... 7

Analysis............................................................................................................................... 8 3.1 Macro Level Analysis: Market Conditions to Utility Companies ............................... 8 The Production Challenge .................................................................................... 9

3.1.1 3.2

Micro Level Analysis: Value of Collaboration ......................................................... 10 Unique Value Propositions to GreenWave Reality ............................................ 11 Unique Value Proposition to Utility Companies................................................ 12 The Smart Grid ................................................................................................... 12

3.2.1 3.2.2 3.2.3 3.3 4

Meso Level Analysis: The Collaboration, Purpose and Challenges ......................... 13

Conclusive Discussion ...................................................................................................... 14 4.1 4.2 4.3 Scenario 1: Price Information; Non-available ........................................................... 14 Scenario 2: Price Information; Available and Non-Comparable............................... 15 Scenario 3: Price Information; Available and Comparable ....................................... 15

References ......................................................................................................................... 17 5.1 5.2 5.3 Curricular References ................................................................................................ 17 Extra-Curricular References ...................................................................................... 18 Empirical References ................................................................................................. 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems

1 Introduction
When studying the industrial and economic dynamics in a historical perspective, the works of Kondratiev (1935), and Schumpeter (1939) offer explanations as to what causes industrial revolutions. The answer is not to be found in growth within individual industries but rather in the qualitative transformation of the economy by new technologies (Freeman & Soete 1997: 20). Investigating the development of, and subsequently the economization upon technology could thus lead to an understanding of how industrial revolutions may be born; through innovation. This is, however, under the circumstance that innovation as a concept could be defined as the process of generating novel, commercially viable solutions. In this interpretative framework novelty refers to the invention, and commercialization to the economizing upon such invention. If this circumstance is to be accepted, innovation, if concerning technology, could be an epicenter of industrial revolution(s). The aim of this paper is to explore the possible outcome(s) of a technological innovation, which addresses one of the key features of dominant infrastructure; energy systems (ibid: 19). Industries constituting the contemporary energy system are submitted to substantial research and development in the quest of supplying electricity to a continuously increasing demand. As this pursuit of energy has progressed over time, a distinct industry has come to condense; green tech1. This field of innovation is concerned with the challenge of exploring new platforms of technology to generate, and subsequently supply electric energy. The success criteria to green tech could be simplified into; a) increased efficiency, and b) less environmental risks2. These criteria are to be viewed in comparison with the existing conventional fossil fuel combustion technologies. The efficiency criteria derive from an acknowledgement of scarcity in fossil fuel sources, as well as being linked to b), which refers to an acknowledgement of the consequences following emissions of greenhouse gasses in the atmosphere, which so far remain an inevitable effect of the fossil fuel combustion platform. As the green tech industry has not yet come to succeed, the need of solving the issues addressed has spawned another industry; clean tech3, and hence could be said to have created

1 2

For further clarification, see Leth & Sarup (2010a). Risks are distinct from danger in the sense that risks are calculated and causally related to human behavior, whereas danger is a naturally existing phenomenon, see Beck (1992). 3 For further clarification, see Leth & Sarup (2010b).

Page 3 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems another pool of opportunities (Klevorick et al 1995). The objective in the clean tech industry is not the exploration of technologies concerning energy production, but is focused on developing solutions to increase distribution and consumption efficiency. This could lead to a decreasing level or need of surplus in energy production necessary to avoid shortages in supply. In this way success in clean tech could extend the timeframe in which green tech are to succeed, due to a decrease in consumption and production of conventionally produced electricity. The empirical case investigated in this paper is an innovation addressing the issue of consumer efficiency, and has been developed by a company called GreenWave Reality [GWR]. At the present time, the innovation is on the threshold of reaching the market. The following section will contain a case description, which accounts for the most relevant information regarding the company, the innovation, and the process. The case description will be concluded with methodological considerations regarding the use of empirical data, as the rest of the paper is determined by these considerations.

1.1 Case Description

GreenWave Reality is a privately held US-based company founded in 2008 (Leth & Sarup 2010e). The company was co-founded by former entrepreneurs in the field of consumer electronics, Martin Manniche and Peter Wilmar Christensen, who also founded KiSS Technology4 in 1994 (Leth & Sarup 2010c). The company has developed a solution, which is to be intermediately connected with existing outlets and in-house appliances. When installed, the product allows users to monitor the power usage of the connected appliances. In addition to the surveillance feature, the product also enables the user to control the appliances via wireless network. This wireless interaction is made available to users through a graphic user interface [GUI] designed to both computer5 and smart phone6 based Internet applications (Leth & Sarup 2010e). The next section will illustrate how GWRs innovation could be perceived as a combinatorial design (Hargadon 2003), by decomposing the product into existing general purpose technologies (Bresnahan & Trajtenberg 1995).

KiSS Technology was acquired by Cisco Systems in 2005 to be merged with the Linksys division of Cisco, focusing on Small Offices and Home Offices (SOHO) (Leth & Sarup 2010c). 5 There is no evidence as to which operating systems the solution is applicable to, e.g. Apple (Mac OS), pc (Microsoft Windows or Linux/Unix based operating systems). Thus, computer is used as a comprehension of a composition of physical machinery with the purpose of and ability to perform binary data processing regardless of hardware infrastructure or software programming language. 6 Smart phone is used as a distinction to comprehend the platform of cell phones with Internet connectivity.

Page 4 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems
1.1.1 The Innovation

Without having had the opportunity of exposing the product to a closer examination, it is on the basis of functional description stated that the product could be perceived as a combination of 1) a power socket, 2) a controllable switch, 3) an ampere meter, and 4) a Wi-Fi7 device, which enables communication with 5) a computer or a smart phone making the information delivered by the ampere meter, and the control feature delivered by the switch available through 6) a GUI, which is accessible via 7) the Internet. With this brief deconstruction of the functionalities as well as the technicalities constituting the innovation, the product could be said to depend on at least four general purpose technologies being 1) computers, 2) software, 3) wireless communication, and 4) Internet. Each of these technologies are expected to come with various sets of standards (Tassey 2000), and hence leaving the novelty of the innovation, from a technological perspective, to be a matter of the unique selection and composition of existing technologies and standards.
1.1.2 The Process of Innovation: Current Status

The company is currently engaged in various tests of their product in collaboration with utility companies8 worldwide (Leth & Sarup 2010d), and the product is at the present time not available to private users due to the awaiting of an outcome of this test phase. The immediate incentive reasoning this collaboration could be found in the business model (Kim & Mauborgne 2004) of GWR, since the company is targeting utilities as their market, instead of directly targeting the retail market of consumer electronics (Leth & Sarup 2010e).

1.2 Empirical Considerations

The methodology intended in this paper on the topic of retrieving empirical data was originally based on the qualitative research interview (Kvale 1996), but at the initial meeting9 with the company it was announced that the interview was not to be recorded on tape. This change of premises has lead to some considerations in regards to the legitimacy of using any information gathered in an unrecorded conversation. These concerns were based on the assessment of limitations, since such information is a) not possible to account for in any regards, b) exposed to a risk of individual interpretation without the opportunity of conferring the record7 8

Wi-Fi is an abbreviation for Wireless Fidelity. In this paper, utility companies refers to companies producing electric energy and distributing it to private users in exchange for financial compensation. Furthermore utility companies will also, in this paper, sometimes appear as utilities. 9 Initial meeting took place November 11th 2010, contact person: Bo Lustrup. Second interview took place November 30th 2010, contact person: Bo Lustrup. Third interview took place December 1 st 2010 as a Skype interview, contact person: Karl Jnsson.

Page 5 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems ings to ensure the validity of such interpretation, and c) limitations of memory in relation to what exactly was mentioned during the interview. The result of these considerations affects the methodological approach, and hence also the structure and aim of the paper, since the ability to argue from an intra-organizational perspective is critically diminished, if such arguments derive from an unrecorded interview. Instead this paper will perform the exercise of the hypothetical-deductive-method on the selected case. The empirical sources applied are available outside the organization, and are listed as empirical references in the end of this paper.

2 Field of Research
When attempting to speculate or perform the exercise of heuristics, as it is intended in this paper, the forward argumentation is not applied in order to excavate the truth, but rather to render the main hypothesis probable by making use of three different theoretical approaches. These approaches will be presented after the research question, and are applied for two reasons; 1) illustration of context, and 2) supporting of the main hypothesis. Drawing on the explanatory works on industrial revolution(s), as described in the introduction, it becomes an axiom to this paper, that a technological innovation could give rise to industrial revolution(s). Examining the possibilities for such revolution might be rather speculative to explore within the scope of this paper, and hence a limitation on assumption is made, which state that technological innovation could lead to industrial change(s), thus being a disruptive technology (Adner 2001). The main hypothesis in this paper then becomes: The innovation performed by GreenWave could cause industrial change(s) within the energy industry. In addition to this, another hypothesis is formulated, due to the present state of collaboration between GWR and utilities. This second hypothesis resumes that such cause to industrial change(s) depends on the outcome of the current collaboration with utilities: The potential industrial change(s) to be caused by the innovation performed by GreenWave Reality depend on the outcome of the collaboration with utilities.

Page 6 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems

2.1 Research Question

In order to render the main hypothesis probable by deduction, the research question is designed as follows: How can the innovation performed by GWR implicate industrial change(s) depending on the outcome of collaboration with utility companies? To answer this RQ the methodological approach becomes a matter of demonstrating at least one potential implication of this technological innovation in regards to industrial change(s) within the energy system, and subsequently how such change(s) depend on the outcome of the collaboration.

2.2 Theoretical Approaches

Dealing with the process of bringing an idea to market; as innovation could be described as (Kline & Rosenberg 1986), sometimes may give rise to a need of interaction with other organizations (March 1991, Pisano & Verganti 2008). This is the case in the empirical context investigated in this paper, therefore the theoretical approaches must be able to comprehend the occurrence of collaboration. In order to address the topic of potential industrial change(s), caused by this innovation, an understanding of the current market conditions is necessary. This necessity occurs since there must be an ex ante introduction of innovation foundation if any ex post introduction of innovation change(s) are to be formulated. To perform such an account, however brief, the theory of industrial organizations [IO] is applied (Porter 1979, 1980), as the purpose is to understand the conditions concerning the market for energy. Two of the main principles from IO are applied, being structure as well as conduct, since these lead to performance, which in the end determines the industrial dynamics. This account is the macro level of analysis. Subsequently an investigation of the collaboration is necessary in order to give any support to the second hypothesis, since it is stated that the outcome of the collaboration would influence on the innovation, and hence also on the influential potential to be exercised upon the industry at the macro level. In this sense, the collaboration becomes the meso level of analysis, as it would explore the purpose of the collaboration in relation to the innovation. At this meso level an understanding of risk(s) and incentive(s) is relevant, since the innovation is expected to depend on the outcome of such collaboration. This dependency on utilities are found with two empirical facts; 1) the product is not targeted to the retail market for consumer electronics Page 7 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems (Leth & Sarup 2010e), as it could have been considering it is targeting private users, and 2) the product has not yet been marketed due to the dependency or expectancy of utilities distributing the product (ibid). In order to perform such analysis of risk(s) and incentive(s), concepts from transaction cost theory [TCT] are applied. In opposition to IO, TCT offers the analytical tools to focus on collaboration paying special attention to the phenomenon of risk. Such risk may occur as organizations interact, thus making outcome of collaborations a rather uncertain phenomenon. Finally an account of each of the collaborative forces must be made, to support any speculation made on the base of findings in the meso level analysis, in order to support the second hypothesis. This micro level of analysis refers to the organizational level, in this paper being 1) GWR, and 2) a collaborating utility company. A general distinction is made in regards to utilities. In this paper it is considered that all collaborating utility companies have the same incentive(s) as well as being exposed to the same risk(s). For the purpose of analyzing incentive(s), perceptions from the resource based view [RBV] are found most useful. This is due to the linkage between both TCT and IO since RBV is open to organizations collaborating as such collaboration could be an indication of resource acquisition, thus offering suggestion(s) as to which incentive(s) may define the collaboration. Furthermore the comprehension of competencies (Griffith & Boisot 2000) could correlate to the concept of conduct from IO.

3 Analysis
The analysis will start with the macro level perspective, then perform the micro level investigation in order to finally have support for interpretations on the meso level. The findings of the analysis will be discussed to conclusions, as the outcomes are listed in scenarios.

3.1 Macro Level Analysis: Market Conditions to Utility Companies

The analysis of the industry begins at looking at how utility companies operate. In order to supply the grid, 1) an energy source is needed, and though it could be of relevance knowing which source that might be, the energy source is in this paper is reduced to being equal to a production facility that generates electric energy on the base of such source. Supplying electricity also needs 2) access to a distribution grid in order to deliver electricity to users. These are the two primary resources needed in order operate as a utility company, or with a term from IO it could be said to be a rather simple illustration of the structures defining the market.

Page 8 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems Electricity could be said to be a homogeneous good which then is perfectly substitutable according to the theory of IO. If this is the case, then the only information needed to customers is price, since a kilowatt hour [kWh] is a kWh with no unique features other than being slightly different in voltage and frequency, depending on which standard is the regional dominant (Tassey 2000). This notion on the characteristics or lack of same regarding electricity raises the question of why numerous utility companies with different characteristics may exist, since customers would prefer the good offered at the lowest price or cost eventually leading to one of two extremes, either a) monopoly or b) perfect competition with the optimum number of homogenous suppliers of electricity. Since this is not the case, one of the possible explanations could be that the market for energy is not perfect. The cause of imperfection could then only be found in opaqueness in price per kWh since customers hold perfect information regarding the features of the good and the good furthermore is perfectly substitutable. To understand how and why this opaqueness is present, a brief account for the challenges to be overcome by utilities is necessary.
3.1.1 The Production Challenge

The challenge to utilities is to scale the production, and hence distribute an adequate supply of electricity on to the grid to an expected but yet uncertain demand. This implicates that the production and distribution10 must always exceed the actual consumption in order to avoid shortage of electricity. This is illustrated in the figure below, where the x-axis represent time, and the y-axis represent amount of megawatts (MW).

Distribution & Consumption

5.00 4.00 3.00 2.00 1.00 0.00 00.00 02.00 04.00 06.00 08.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 Energy Supplied (MW) Energy Consumed (MW)

Note: The numbers used are fictitious and serve only as illustration of the market conditions, and hence not as an actual representation of the market.

10

There could also be a misalignment between production and distribution, but this is not within the analytical scope of this paper to investigate upon, since the innovation is targeting private users distribution and production are viewed as been the actual energy available on the grid.

Page 9 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems The challenge to utilities is to make production and preferably also distribution correspond to, and preferably align with consumption. Because electricity is consumed immediately and demands are not necessarily stable or predictable, there will always be costs associated with meeting uncertain demands if shortages are to be avoided. These costs could be presented as A) production and distribution of energy not consumed, and B) scaling production to meet varying demands. Scaling implicates that production facilities are not operating at maximum capacity, thus not generating maximum value of investment. The scaling cost is further implicated due to the need of still distributing a certain level of electricity in down hours, and correspondingly stress the production in peak hours. To the scaling cost could the costs of interaction also be added, since the continuous surveillance and prediction of grid fluctuations imply costs of conducting analyses, and subsequently costs of interacting or interfering with the production mechanism based on intelligence from such analyses. This misalignment caused by uncertainty in demand and consumption is the cause of the imperfect market, since utilities are to uphold the costs of excess production and distribution in order to stay competitive. This upholding of costs is transferred to the customers in the form of opaqueness in price, since the customers do not hold perfect information regarding alternatives. Even if such information quest should be commenced, the opaqueness in price would render it almost impossible to succeed comparing alternative utilities, but if succeeded eventually would lead to aforementioned extremes. With this brief account of the current market conditions, whether structure (production and distribution resources needed) as well as conduct (capabilities in deploying such resources and upholding of the opaqueness in price) the analysis will continue by addressing the micro level; the individual incentives to GWR and utilities in relation to purpose, and subsequently outcome of the current collaboration.

3.2 Micro Level Analysis: Value of Collaboration

On the notion of the novelty of this innovation, as illustrated in the decomposition of the product in the case description, it could be speculated that a undefined number of imitators could rather easily replicate the technological combination developed by GWR. In this case, GWR would be depended on either a) limited or controlled diffusion in order to minimize risks of imitation, b) maximum diffusion to obtain monopoly, and preferably with highest possible velocity, or c) product diversification by adding a unique feature not easily replicated. Page 10 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems The solution a) could be solved by targeting utilities as customers, since the product then only would be available through the distribution channels provided by utilities. This does not necessarily eliminate the risk of imitation. However it does decrease the maximum potential of revenue since the diffusion would be limited to the number of utilities accepting to diffuse or distribute the innovation, and subsequently the number of users serviced by those utilities. The solution of b) would require the maximum number of utilities to confide to the innovation, thus enhancing the velocity of diffusion compared to a scenario where GWR are to distribute the product to retail markets for consumer electronics. The last solution; c) requires what is of least possible interest to utilities; transparency of price, as it will be demonstrated in the following proposals.
3.2.1 Unique Value Proposition(s) to GreenWave Reality

If GWR is able to acquire exact information on price per kWh from utilities worldwide, this information could be embedded in a feature, offering users real time information regarding power consumption translated into the highest level of abstraction relevant to users (Boisot 1998); specific cost of utilizing connected appliances. If this is actually to happen, then users could experience valuable information and opportunities as to more efficiently manage and subsequently decrease energy consumption thus reducing costs. This user control is of little interest to utilities as it could lead to decrease in demand, thus rendering existing quota of current production and distribution facilities excessive. This leads to the first proposal: P1: Revealing the price per kWh is not of immediate interest to utilities, since it implies a risk of a reduction in profit due to both 1) a decrease in consumption demand, and 2) the costs of excess in existing production facilities. In addition to P1, the risk of transparency in price, made available by using the innovation, could also impose another risk to utilities, as stated in the second proposal: P2: Revealing the price per kWh is not of immediate interest to utilities, since it implies a risk of increase in competition due to transparency regarding price. Since such reluctance of revealing price may be present, this would add uniqueness to the innovation, thus rendering it more difficult to imitate. In this sense, the gathering of price information could add unique value to the innovation, based on the formulations of P1 and P2. This uniqueness occurs, since utilities presumably would be interested in the lowest possible diffusion of aforementioned price information, thus making it more difficult to eventually Page 11 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems later imitators to replicate the exact value proposition as offered by GWR. In this sense price information could be said to become a complementary asset (Pisano & Teece 2007) to the innovation. Currently this asset is controlled by the protective behavior exhibited by utilities. These arguments lead to the formulation of the third proposal: P3: Obtaining and embedding price information, and subsequently price calculation features into the innovation would add unique value to the innovation; as such information presumably would be more difficult for later imitators to obtain. With the formulation of these first three proposals, it becomes possible to establish an incentive to GWR to engage in collaboration with utilities. These proposals do however not offer any suggestions as to which incentive(s) utilities may have to collaborate. The findings of such potential incentive(s) will be addressed in the following section.
3.2.2 Unique Value Proposition(s) to Utility Companies

In order to speculate on incentive(s) to utilities to collaborate with GWR, the analytical scope has to be pointed back to the current market conditions regarding energy production. As demonstrated in the macro analysis, there are currently two costs linked to production and distribution of electricity; A) production and distribution of energy not consumed, and B) scaling production to meet varying demands. These costs, both A) and B) could however be diminished with the prevalence of the smart grid. To understand the basic concept of the smart grid, the following section will present a brief account of the principles constituting the smart grid.
3.2.3 The Smart Grid

The smart grid is based on the idea of users consuming electricity when it is available instead of utilities having to produce a certain amount of MW per grid unit in order to eliminate risks of insufficiency in supply. This idea, however, depends on two premises being met; 1) the smart grid depends on a large number of users in order to gain any advantage, preferably the vast majority of users, and 2) the smart grid depends on those users changing consumption patterns. Otherwise the costs of both A) and B) will still be present. Ultimately the smart grid would allow utilities to run at maximum efficiency around the clock, without scaling production, since the scaling now is located with the users. This implies that users are able to even out their overall consumption, thus consuming more electrici-

Page 12 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems ty in down hours and lowering consumption in peak hours to even out the need of supply. This would lead to a reduction in both the cost of A) and B) applied to utilities. The fulfillment of these premises could then be argued to be the value proposition to utilities; since the smart grid could lead to lower costs in production/distribution due to a more accurate alignment with consumption. This lead to the fourth proposal: P4: Utilities collaborate with GreenWave Reality to explore the opportunity of cost reduction in both scaling and excess in production through the prevalence of the smart grid, which depends on the level of diffusion of the innovation. It now becomes relevant to investigate on how a price calculation feature embedded in the innovation could lead to the prevalence of the smart grid. The first premise; 1) is a matter of diffusion, which depends on the willingness, which relates to P1 and P2, and distribution capabilities of utilities, as well as the financing of the transaction with GWR; cost to utilities per product acquired and distributed (Leth & Sarup 2010e). The second premise; 2) depends on the potential ability of changing user consumption patterns ex post introduction of the innovation. This lead to the fifth proposal: P5: Utilities collaborate with GreenWave Reality to explore the opportunity of cost reduction in both scaling and excess in production through the prevalence of the smart grid, which depends on potential ability of changing user consumption patterns ex post introduction of the innovation. With the formulation of this five proposals, the analysis will continue on the meso level in order to formulate a potential purpose of the collaboration, the possible outcomes, and thus subsequently answering the research question in the later conclusive discussion.

3.3 Meso Level Analysis: The Collaboration, Purpose and Challenges

If the five proposals formulated so far are found plausible, then the purpose of the collaboration between GWR and utilities could be said to concern the issue of appropriability (Pisano & Teece 2007, Cohen et al 2000). The challenge to GWR could be to convince the utilities that the innovation possesses the potential to change consumption patterns, and even that such changes can only occur if prices are being made available. Simultaneously GWR depends on utilities revealing the detailed price information to render the innovation inimitable, as demonstrated in P3. The technical challenge to GWR would then be to make the innovation reach the highest level of abstraction (Boisot 1998) without diffusing the price information, as Page 13 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems this could execute the risks to utilities as demonstrated in P1 and P2. This has to be done, while simultaneously enabling utilities to explore the opportunities demonstrated in P4 and P5. Without conducting an intra-collaborative analysis, to render either failure or success more probable than the other, the conclusion to this analysis is that the collaboration, purpose, and possibility of success, comes down a question of capabilities in developing a platform to share control over complementary assets (Pisano & Teece 2007), thus being a matter of appropriability (Cohen et al 2000). The objects to share are control over technology with the potential to accelerate the prevalence of the smart grid, and the detailed information regarding price. The presented findings of the analyses will be discussed in the next section in order to answer the research question and thus render the main hypothesis either plausible or implausible.

4 Conclusive Discussion
As earlier stated, the purpose of the discussion is to animate different scenarios based on the findings in the analyses. This section would also serve as a conclusion to the paper and an answer to the research question, as a variety of possible impacts is presented. Finally, the ability to support both the main hypothesis as well as the second hypothesis has been demonstrated, although the validity remain circumstantial and would depend on the degree to which the findings in the analyses are found plausible.

4.1 Scenario 1: Price Information; Non-available

Assuming that the outcome of the collaboration would be that GWR does not succeed in obtaining and embedding the price information in the innovation, the product will be exposed to the risk of imitation, as demonstrated in the argumentation leading to P3. If such imitation is to occur, this will not only affect GWR but also utilities. The argument is that if a large number of users were to obtain the opportunity of gaining detailed information on power consumption as well as opportunity of controlling power consumption based on such information, whether in kWh or price, it could lead to a decrease in demand, thus realizing the risks demonstrated in P1 and P2, without the benefits demonstrated in P4 and P5. Such decrease in demand could imply competition amongst utilities, without necessarily leading to radical change(s). The market could experience a temporary state of enhanced competition until the point in time when supply and demand correlate to a degree that compels stability. This leads to the first outcome: Page 14 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems O1: If GreenWave Reality fails to obtain and embed the price information in the innovation, the company could be exposed to an increased risk of later imitators. Simultaneously utilities could be exposed to a risk of enhanced competition due to a decrease in demand, caused by improved information and opportunities of control amongst users utilizing either the innovation or potential later imitations. This outcome is obviously of lowest interest to both GWR and the utility companies, as both parties could experience increased risks without experiencing any of the benefits demonstrated in P3, P4, and P5. Another set of outcome rests on the degree to which the collaboration will actually be successful. Depending on the degree to which the price information is made available, transparent, and perhaps even comparable, the outcomes could then be divided into the two following scenarios.

4.2 Scenario 2: Price Information; Available and Non-Comparable

Assuming that the outcome of the collaboration would be that GWR succeeds in obtaining and embedding the price information in the innovation, the company could experience the benefit of P3, thus creating a monopoly in their respective market. Simultaneously utilities could benefit from users having not the information feature, but rather the control feature, since users could then adjust the consumption to fit a less fluctuating distribution curve. This would lead to the benefits of P4 and P5, though the fulfillment of P4 and P5 still depends on users changing consumption patterns to utilize more energy in usually occurring down hours and less in peak hours. This is formulated into the second outcome: O2: If GreenWave Reality succeeds in obtaining and embedding the price function in the innovation, the company could be exposed to reduced risk(s) of imitation, while utilities could experience the benefits of more stable consumption, depending on users ability to or interest in changing consumption patterns, thus allowing utilities to perform non-scaled distribution, and hence increase effectiveness. The last outcome stated in this paper will be demonstrated in the last scenario.

4.3 Scenario 3: Price Information; Available and Comparable

Assuming that the outcome of the collaboration would be that GWR succeeds in obtaining and embedding the price information in the innovation, the company could still experience the

Page 15 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems benefit of P3. Simultaneously utilities could be exposed to the risks of P1 and P2, but also experience the benefits of P4 and P5. An interesting area of research would address the ability issue of users, as the concept of ability is also present in O2. This ability issue refers to the development of complementary technologies, as the smart house has not yet come to prevail. Unless other innovations developed for use with the smart grid come to realization, the control feature of the innovation performed by GWR would be limited; as it cannot configure or program the individually connected appliances, but only control the power supply to those appliances. If this development is to take place, then the studying of such, could eventually lead to the perspective not addressed in this paper; the economizing upon this innovation, which is the piece missing, in the errand of investigating, if an actual industrial revolution is to be present. Is such development not to happen, then both O2 and the later O3 would solely depend on users ability and interest to be transformed into willingness to interact since appliances do not yet act autonomous or intelligent to an extent valuable to either users or utilities. The last perspective to be mentioned is of ultimately speculative character, as it states that comparability in price and development of other smart house technologies could lead to new market conditions assimilating those of markets for stock exchange. This is formulated in the third outcome: O3: If GreenWave Reality succeeds in obtaining and embedding the price function in the innovation, the company could be exposed to reduced risk(s) of imitation, while utilities could a) experience the benefits of more stable consumption, depending on users ability to or interest in changing consumption patterns, thus allowing utilities to perform non-scaled distribution, and hence increase effectiveness, or b) depending on the development of complementary technologies experience new market conditions assimilating those of markets for stock exchange. These three provisional animations of outcomes may serve as a foundation for further investigation in the field of consumer electronics regarding both the development of complementary technologies, and subsequently the economization upon such technologies, as well research of the socio-behavioral dynamics to be observed amongst users experiencing the innovation addressed in this paper.

Page 16 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems

5 References
5.1 Curricular References
Adner, R. & Levinthal, D. (2001). Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation. Management Science, vol. 47(5): 611-628. Bessant, J. & Tidd, J. (2007). Innovation and Entrepreneurship. Chichester: John Wiley Boisot, M. H. (1998). Knowledge Assets: Securing Competitive Advantage in the Information Economy. Oxford: Oxford University Press. Bresnahan, T. F. & Trajtenberg, M. (1995). General purpose technologies: Engines of growth?. Journal of Econometrics, vol. 65: 83-108. Cohen, W. M., Nelson, R., and Walsh, J. P. (2000). Protecting their intellectual assets: Appropriability conditions and why US manufacturing firms Patent (or not). National Bureau of Economic Research, WP 7552. Freeman, C. & Soete, L. (1997). The Economics of Industrial Innovation. Cambridge, Massachusetts: Massachusetts Institute of Technology Press. Hargadon, A. (2003). How Breakthroughs Happen: The Surprising Truth about How Companies Innovate. Cambridge, Massachusetts: Harvard Business School Press. Kim, W. C. & Mauborgne, R (2004). Blue Ocean Strategy. Harvard Business Review, October 2004: 7685. Klevorick, A. K. et al. (1995) On the sources and significance of inter-industry differences in technological opportunities. Research Policy, vol. 24: 185-205. Kline S. J, & Rosenberg, N. (1986). An Overview of Innovation, in Landau, R. & Rosenberg, N. (1986): The Positive Sum Strategy. Washington D.C.: National Academy Press. Griffith, D. & Boisot, M. H. (2000). Are There Any Competencies Out There? Identifying and Using Technical Competencies, in Tidd, J. (2000). From Knowledge Management to Strategic Competence: Measuring Technological, Market and Organisational Innovation. London: Imperial College Press. March, J. G. (1991). Exploration and Exploitation in Organizational Learning. Organization Science, 2(1): 71-87. Page 17 of 18

081082: Leth, J. & 300984: Sarup, D A Paper on the Potential Impacts of an Innovation within Energy Systems Pisano, G. P. & Verganti, R. (2008). Which kind of collaboration is right for you? Harvard Business Review, 86(12): 78-86. Tassey, G (2000). Standardization in technology-based markets. Research Policy, 29(4-5): 587-602.

5.2 Extra-Curricular References

Adner, R. (2001). When are technologies disruptive? A demand-based view of the emergence of competition. INSEAD working paper, Fontainebleau, France. Beck, U. (1992). Risk Society: Towards a new Modernity. London: Sage Publications. Kondratiev, N. D. (1935). "The Long Waves in Economic Life". Review of Economic Statistics, 17(6): 105-115. Kvale, S. (1996). InterViews: An Introduction to Qualitative Research Interviewing. London: Sage Publications. Pisano, G. P. & Teece, D. (2007). How to Capture Value from Innovation: Shaping Intellectual Property and Industry Architecture. California Management Review, vol. 50(1): 278-296. Porter, M. E. (1979). The Structure within Industries and Companies Performance. The Review of Economics and Statistics, 61(2): 214-227. Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press. Schumpeter, J. A. (1939). A Theoretical, Historical and Statistical Analysis of the Capitalist Process. New York, Toronto, London: McGraw-Hill Book Company

5.3 Empirical References

Leth, J. & Sarup, D. (2010a). http://www.investopedia.com/terms/g/green_tech.asp Leth, J. & Sarup, D. (2010b). http://cleantech.com/about/cleantechdefinition.cfm Leth, J. & Sarup, D. (2010c): http://newsroom.cisco.com/dlls/2005/corp_072205.html Leth, J. & Sarup, D. (2010e). It-teknologi skal f os med til at bruge strm p en helt anden made. Alt om Data, 25.11.2010, 1. Section: 52. Leth, J. & Sarup, D. (2010d). http://www.greenwavereality.com/greenwave-reality-selectedfor-singapore-intelligent-energy-system-pilot/ Page 18 of 18