A Manhattan Project for green innovation? Try open innovation instead!

(Note:  The blog was originally posted by author Jean-Louis Racine here on the World Bank Blog and has been cross-posted with their permission)

Last week the World Bank launched a new approach to fostering green innovation called the Indonesia Green Innovation Pilot Program. Its aim is to learn how open innovation principles can foster the generation of market-based solutions to clean energy.  A core team of designers (Catapult and Inotek) will work  with rural communities, the public and private sectors to design clean energy solutions that can be adopted by the market.  Keeping in line with open innovation, its first activity is to identify challenges or “problems” that will be addressed by the program through a crowdsourcing approach. So if you are in any way familiar with rural communities and energy issues in Indonesia, the program invites you to submit a challenge here until March 17.

But, if you think coming up with the kind of technology required to tackle climate change will require something akin to a Manhattan Project, rest assured, you’re not alone. Googling “climate change” and “manhattan project” returns a whopping 1,540,000 results. But what does creating a “Manhattan Project” really mean? Besides uncomfortable thoughts of human-inflicted destruction, sheer scale is the first thing that comes to my mind. At its peak, during World War II, the US government employed 130,000 people in the Manhattan Project to develop the atomic bomb. The project’s size together with several other features made it a classic case of what I would call “brute-force innovation”: it was centrally-planned, closed, and science-driven. Even though the project included research teams across different universities, public research labs and companies across the United States, nothing was leaked in or out and each team had a very specific assigned task and plan. Through the Manhattan Project the government spearheaded the research, developed, testing and deployment of a revolutionary technology from start to finish over a span of four years. And there were no startups, spin-offs, royalty incentives, public-private-partnerships, venture capitalists, crowdsourcing, first-mover advantage, standard-setting or IPOs. Basically none of the buzzwords we associate with disruptive innovation in the 21st Century.

So the question is, can we just revert to classic World War II state-led innovation to tackle climate change? The answer needs to be nuanced. A key feature of the Manhattan Project was that commercial viability was not an issue. The market consisted of a single producer – the government – and a single buyer  – again the government. The project’s objective was clear and well defined. In that sense, climate change presents a very different challenge. Not only do we not know what mix of technologies will be the most effective in the future to help the world tackle climate change, but many aspects of climate change (e.g. energy efficiency or transportation) entail diffusing technologies across a huge number of private and public entities around the world. Hence, the challenge is not only technological.  Many superior technologies often never make it to the market because they lack an effective business model. In that sense, putting the private sector in the driver’s seat is likely to be more effective for taking new green technologies to the market, than a centrally-planned approach.

But there is also an important fundamental difference between the way new technologies were in the mid 20th Century and the way they are developed now. The closed, centralized and internalized R&D of the Manhattan Project reflected the logic of the times where the most transformational innovations, such as the transistor and the copy machine, came from the large corporate labs of the likes of AT&T and Xerox. The work of Henry Chesbrough and of his school of “open innovation” tells us that sticking to the “closed innovation” paradigm is no longer possible in the 21st Century. The increased availability and mobility of skilled labor, the rise in information and communication technologies, the rise of venture capital, shortening product life cycles, more sophisticated external suppliers and the rise in funding of public research have two implications. First any knowledge developed in-house will easily find its way to other firms and be exploited by new and better business models. Second, the pace of change and amount of knowledge contained outside a single organization is now so great and so accessible that anything developed in a closed environment is bound to lead to inferior results. In sum, creating incentives for the private sector through financing and regulation is likely to yield more results than a Manhattan Project-like approach for many green innovations.

That said, for research that is still at its early stages, massive amounts of government financing for green technology are required. And here we don’t just need one Manhattan Project but many. In 2008 dollars the Manhattan Project cost about $22 billion, or a mere $5.5 billion per year . Estimates for increased investments in energy R&D call for $100 to 700 billion per year.