Thursday, July 01, 2010

The Relative Advantage of Solar

Most business schools still refer to Everett Rogers and his theory of how and why new ideas and technologies are adopted by a population.  In his book called Diffusion of Innovations, Rogers introduces five main dimensions that influence the adoption of an innovation: complexity, compatibility, observability, trial-ability, and relative advantage.

An examination of the factor called "relative advantage" reveals why there are so many challenges associated with making solar more widespread.

Relative advantage is the extent to which solar is viewed as better than the method in current practice.  Fundamentally, a new product or service will be successful if it does a better job than existing products at satisfying the needs of a targeted customer group.  But according to diffusion theory, "doing a better job" actually has four components. If a new product or service can surpass existing offerings across all four of these components at once, then we can guarantee that the targeted customer group will purchase it.

The four components expressed in terms of solar electric power are:

- solar must be less expensive than power from a utility (lower price).

- solar must provide better features or functionality than power from a utility (greater benefits).

- solar must not have any switching or adoption costs (easy to use).

- solar must be readily available (easy to buy).

Customers for whom all four conditions apply will purchase solar because there are only benefits and no barriers. And the closer a solar product comes to succeeding in all four dimensions, the greater the chance that the product will be a success.  And, of course, the new solar product will be a financial success if these conditions can be met at a profit.

The convenience and reliability of electric power from a utility makes it very difficult for solar to meet all four criteria.  And notice we haven't even talked about "trial-ability" yet.

Warren Schirtzinger advises solar companies on how to: differentiate their products, grow during an industry shakeout or consolidation, and thrive without government subsidies. He has authored articles as a "Renewable Energy Insider" on and writes about marketing strategies on the solar strategies blog.  Contact him via e-mail (warren["at"] or follow him on Twitter @SolarStrategies.