New Business Models For IoT and IIoT.

With projections that 6.4 billion devices will be connected by the end of 2016, a 30% increase from 2015, we are fast approaching the point where every device will be connected. “Our device is connected” or “Internet of Things enabled” will no longer count as a value proposition, it will be a base expectation. With this commoditization will come a need for businesses to find new avenues for value creation and capture, new business models. The current IoT business models are borrowing from the traditional retail product or even software-as-a-service subscription models. Even, according to ZPRYME Research, incumbents in the industries that will be most affected by device connectivity expect their business models to change.

Old models

The basic business models that currently exist in the IoT and IIoT space are

Retail sales (the Nest model): Equipment or device manufacturer expends its own money or raises financing to build products which are then sold to customers. The equipment or device manufacturer only captures value during that one transaction, the expectation is that there is a positive margin between revenue and expenses and that customers will buy more of the same product or more products. See my view on its own money or raises financing to build products which are then sold to customers. The equipment or device manufacturer only captures value during that one transaction, the expectation is that there is a positive margin between revenue and expenses and that customers will buy more of the same product or more products. See my view on that here.

Product lease/Subscription (GE model): Instead of selling the machine/device, the vendor leases the product to the customer. This has been around for ages, see your Comcast cable box for example.

It’s imperative that new businesses and startups should explore new models for value creation and capture. The new business models will stem from the increased interactions afforded by IoT and IIoT (Industrial IoT) devices. There are four elements to the interactions;

 

  1. the device owner/user (a person)
  2. the connected machine or device 
  3. flow of data between the person and connected device/machine
  4. improvements to the performance of the person and connected device from the analysis of the data.

Interactions between the four elements provide more combinations of value provision and value capture.

  1. Revenue from Industrial Insights: This is one of the models GE is providing through its Predix Virtual Power plant platform. For example; a startup serving power plants or utilities (say a predictive analytics startup) does not need to rent a turbine to be able to provide failure prediction to the utility. GE, by open sourcing its virtual plant (the cloud in the image above), generates additional revenue from the data. Additional revenue is captured through the use of insights, gleaned from data gathered from the machine/device, to make a service quality promise. This promise could be in the form of machine failure prevention or real-time machine performance improvements. The customer pays at an agreed upon frequency.

2. Capturing value from human factors, analysis and machine interaction: An example will best serve here. Some business models can lie at the intersection of the 4 elements above; A technician (Element 1 in the interaction) is augmented by Artificial Intelligence (Element 2) through a smart device like the Proxxi Safety Band (Element 3) during power line maintenance (Element 4). There is a business model where a customer pays for insights drawn from the interactions. In the case of Proxxi (image below) the device keeps the technician safe by alerting him/her and the control room when unsafe conditions are detected. Call it pay-per-warning.

 

3. Revenue from personal insights: Continuing the example above, with the four interacting elements, there is a business model that is an open and collaborative application platform where a platform (say Fitbit) makes some or all of their data open source and an external party can pull anonymized data and generate insights for the community. Apple is working on this model with Aetna, a partnership announced in a press release declaring 

Aetna’s iOS-exclusive health apps (within the Apple Watch) will aim to simplify the healthcare process through a number of features, including: ..Care management and wellness, to help guide consumers through health events like a new diagnosis or prescription medication with user-driven support from nurses and people with similar conditions.

The aggregate data from the collective goes to improve the health conditions of one individual.

While the personal connected device/IoT market seems to be struggling right now, there is some value to be created and captured as the industry matures and better use cases are defined. On the other hand, the IIoT space is seeing a convergence in interest from the customers and clear use cases that provide value. 

 

We no longer have to be confined to the traditional business models because we have increased interactions between more elements. We made the mistake of copying thenewspaper design when we transferred text to the web. Let’s avoid stifling the IoT and IIoT opportunities because of our own lack of creativity. We can

What new business models do you see in the IoT/IIoT space?

Why Apple Is Not Building An Autonomous Car (and what it's building instead).

Barring a horrible spate of autopilot accidents the self-driving car movement is in full swing. The technology is improving at pace with Elon Musk declaring that “worldwide regulatory approval will require something on the order of 6 billion miles (10 billion km). Current fleet learning is happening at just over 3 million miles (5 million km) per day.” Every single one of the big technology and automobile players is plowing money and brainpower into being the company that ushers us into this utopian future where there will be zero vehicular accidents caused by human behind the wheel errors. Only Apple keeps denying that they are working on autonomous cars while hiring some of the best minds

But is Apple really building a car? Why would they? Why are we assuming that all that matters in this push is the actual development of the self-driving car? We forget there are a lot of aspects to the technology that is required to make that future happen. I believe Apple is building something else…

I believe Apple is building the autonomous car Operating System (OS) using the IPhone/Apple Watch as a portable telematic device: knowing where a car is, what condition it’s in and recording that information to make better decisions is something that will be required in every autonomous car. We all know our iPhones are already personal telematic devices (I hope you do). The phone tracks your location and your health (see images below).

Becoming the mobile telematic system OS is the most strategically adjacent move Apple can make. Why would a company ignore it’s most sold asset,surpassing 1Bn iPhones sold this past week, to focus on a product that is capital intensive and not it’s core competence? Why would Apple enter a space where the most talked about company in the space is one that has not sold more than 150,000 cars? Yes, the orders for the Tesla Model 3 has broken records for EVs sold but the real work will be in delivering those cars and that will be interesting to watch.

As we move into a future where fewer people will actually own cars but people will continue to buy IPhones I do not expect Apple to move away from what is working. Imagine an OS that enables any brand of autonomous car to work with the telematic system that is on the riders iPhone? Seamlessly. A standard autonomous car OS (ACOS) on your iPhone will improve routing and getting a car to you regardless of the cab/car service you choose to use — the autonomous Uber cab app will most likely only work with Uber cars — and improve customer service since you’ll get the closest available car/cab regardless of the autonomous car service provider.

Yes Apple is hiring the best automotive engineers. But it isn’t to build a car. It’s to learn from the best in the industry so that it can do to the industry exactly what it did to the music industry with iTunes. An ACOS will iTunesthe industry by

  • enabling each one of us with an iPhone to order any car or cab from any provider where you need it from your iPhone. It’s the a la carte model like the 99c single from ITunes.
  • levelling the playing field and accelerate the shared resource model where anyone with an autonomous car can rent out their own car to anyone without an intermediary and get paid through (you guessed it) Apple Pay.
  • combining with Apple HomeKit to provide a seamless convenience experience across the home and vehicle of the Apple customer unmatchable by no one else in the industry with their siloes of service.

If we accept that Apple cares about design and understands the customer then an autonomous car, with all it’s inherent business risks, is the wrong strategy.

Something else I know about Apple is that the company is too smart to continue to cede leadership in the battle for the future as being defined by Amazon (Alexa), Alphabet and Facebook (Oculus)…an ACOS for the autonomous future of the vehicle and the connected home makes too much sense for it not to happen.

It’s the only way Apple can compete in this fast approaching future...

The Future (utility) is here...

At a conference recently one utility CEO suggested that (like Mark Twain) 'the reports of my company’s death are exaggerated'. Most people in the audience, also utility industry executives, laughed. I believe they laughed prematurely...

Three things have happened in in the last few months at the layers of the industry (infrastructure, technology and customer layers) that make me believe that the pace of the change going on within the industry is accelerating. Taken separately they are not insignificant. Taken together, from a systems perspective, they are signs of a seismic (pardon the pun) power shift. The three things 

  1. Infrastructure: This layer of the industry tends to be the source of utility executive confidence about their indispensability in this industry. It’s totally understandable that this would be the case; it takes 7-8 years and billions of dollars to build a power plant. The first signs of a huge crack came in the form of Pacific Gas & Electric’s announcement yesterday that they’d be transitioning their oldest and most popular nuclear plant Diablo Canyon by 2025. The plants being phased out supply 1.7M homes in Central and Northern California homes. 1.7M homes that will now have to be supplied by alternative distributed power generation. 5 years ago the plan would have been to build or recommission the plant. It’s a new day when this is not the case. 
  2. Infrastructure Technology: The second transition happening at this layer requires some systems thinking to connect the dots 
  • A few months ago a research team from the University of Electro-Communications in Japan announced in the Optical Society research journal that they’d passed 60W of power over 300 meters of Fibre cable by modifying the fibre cladding. The team, led by Prof Motoharu Matsuura, had failed at their attempts over several years but finally got their breakthrough in 2015. It’s a short distance and not that much power but the barrier has been broken. Before Roger Bannister broke the four-minute milein 1954 or before it seemed impossible, now pretty much every elite long distance runner breaks it. It will be the same with the power-over-fibre wattage and the distance barrier as researchers will figure out how to increase the distance and power that can be passed over that distance. 
  • In Michael Lewis’ ‘Flash Boys’ Spread Networks laid 827 miles of fibre optic cable between Chicago and New Jersey at the cost of $300M. The cable was supposed to help shed milliseconds off trading times to improve returns for electronic traders. As far as I know those cables are still there.
  • Google continues to roll out fibre across the US announcing more cities at an increasing pace (see image below). 

What am I suggesting here? That the old technology for distributing electricity, transmission wires/lines, might soon lose its place as the only channel. I’m suggesting that disruption is also happening at the level where the utility continued to charge rent (you and I continue to pay the utility for power moving over transmission lines even in deregulated states like Texas where you can buy electricity from alternative suppliers). That should be scary for those laughing executives from the conference I mentioned above. But the smiles are truly about to be wiped off when we consider the customer layer of the industry.

3. CustomerI’ve written about the lack of a brand name company in the utility industry. That is about to change. On two fronts. Tesla, one of the coolest brands in the world, just proposed to buy SolarCity, one of the leaders in the residential solar industry. By combining Tesla will own distributed generation (solar), storage and some demand (Powerwall) and more demand (electric vehicles). Putting aside the likely difficulties of combining businesses and manufacturing the 400K Teslas that were pre-sold a few months ago the utilities should be worried. Bringing a brand play to this staid market will certainly shake things up. Something else missed is that a few months agoSolarCity launched their utility-scale solar (generation) and dispatchable utility scale energy storage products. In layman's terms? SolarCity was already starting to move into the terrain of some of the utilities they have slowly been taking customers from. Between Tesla’s 450K customers and SolarCity's 300K customers all captivegeneration, demand and storage customers the combined company can be considered a sizable utility. The second brand play is by Apple, the company recently applied for a license that allows it to sell excess solar energy from its campuses. Wholesale now, retail electricity to you and I soon? Time will tell.

Granted these are experiments, especially the fibre research and Tesla/SolarCity story, but some of these experiments will succeed. The time between WorldCom building all the infrastructure that laid the groundwork for the high-speed internet we know today and the computer-in-every-pocket-world we have now is a mere 13 years. The infrastructure of landlines (analogous to the infrastructure of the centralized grid) and the steady uni-directional business model (you use the phone and you pay a fee) have given way to free phone calls to my childhood friends in Lagos over WhatsApp. In 13 years business models have been upended. Financial cycles tend to be between 7-9 years so it’s taken about two cycles for phone service provider business models to change. This power shift in the utility industry started roughly around a cycle and a half ago (2006). As the infrastructure layer becomes more distributed, the technology layer becomes more fluid and the customers pay more attention to

This power shift in the utility industry started roughly around a cycle and a half ago (2006). As the infrastructure layer becomes more distributed, the technology layer becomes more fluid and the customers pay more attention to brand at a pace that the utility has up until now never had to deal with. Business models will be forever changed and new utility companies will arise.We’ll see who will be laughing then...

Why Are There No Unicorns In Energy Technology?

Opower, the shining light of energy usage management and behavior modification, is being bought by Oracle for (what would otherwise be) a whopping sum of $532M. Under normal circumstances this would be a great thing for the energy technology industry. But it's not.

See until this morning Opower was a public company with a market cap of $556M. Yes, it's being bought by Oracle for slightly less than its market cap. For technology companies delivering products to some of the biggest companies in the world - there are ~27 publicly traded utilities with over $5Bn market cap - it is rather disheartening to see one of the flag bearers end up this way. Especially when the Snapchats and Pinterests of the world command multi-billion dollar valuations.

For technology companies delivering products to some of the biggest companies in the world - there are ~27 publicly traded utilities with over $5Bn market cap - it is rather disheartening to see one of the flag bearers end up this way. Especially when the Snapchats and Pinterests of the world are commanding multi-billion dollar valuations.

So why is it difficult for energy technology startup companies to grow as big or as fast as their social media counterparts? Why are there no unicorns (companies with billion dollar valuations) in energy technology? 3 main reasons (amongst many) for this:

  1. Policy resistanceThis is a system concept where actors all work hard towards their best interests and consequently diminish the value to every actor in the system. The publicly traded utility is focused on maximising shareholder value, the consumer is focused on paying the least possible for secure and stable power, the regulator is focused on protecting the consumer and the technology providers have focused on serving the utility without disrupting business-as-usual. The outcome is a state of resistance where no one's goals are achieved, a suboptimal outcome. For technology startups' innovative efforts end up being stifled and this puts a cap on how much growth is possible in this market.
  2. Regulation and lobbying: The utility industry is, for the most part, heavily regulated. In an odd twist of business logic, the heightened regulation also provides a barrier to entry for smaller entities thereby entrenching the utilities even more. For example an average utility is required to have cash reserves that most technology startups can only dream of. Like pharma and insurance, also heavily regulated sectors, the utility industry spends a lot of money lobbying to maintain this status quo (image below shows the the top lobbying industries)Source: opensecrets.org). To bring to market a technology that would disrupt the utility business model would require a lot of money and a lot of time. Two things most early stage technology companies do not have are a lot of money or a lot of time. 
  3. Behavioural EconomicsAccenture (and anecdotally Google) carried out some research in 2010 that showed consumers only spend 6-9 minutes a year, outside of paying bills, thinking about their energy. The research also found that most of the interactions with the utility was negative. Opower was early in using social pressure to get consumers to pay enough attention to their bills to reduce their energy usage. But when you are working with just 6 minutes a year of negative interaction you have a long long way to go. Especially considering the number of minutes you and I spend reading memes, watching cat videos and dream boards with pictures of furniture we might never actually buy. The normal rules and expectations for user engagement do not apply when it comes to energy technology and stifles growth for companies in this space.

 

Combine the three conditions above and you see why there are fewer energy technology companies that have achieved unicorn status (1 and that company is Nest) than there are Women CEOs at Fortune 500 companies (20). 

Will this change? Thankfully the answer to this question of whether there will be unicorns in the energy technology space is a resounding 'Yes'. As the utility industry moves to data as the value and energy as the commodity, a distributed structure, where every device is connected/controllable and becomes an industry with empowered and mobile phone enabled consumers, new companies will sprout up across the value chain to provide what the consumer demands and enable what technology wants (progress). Steve Case calls these sorts of businesses and entrepreneurs Third Wave Businesses. It will require entrepreneurs that see the future of technology, are in tune with consumer needs and are savvy in dealing with regulation and government. It will demand a new approach to thinking about the utility industry.

That work has already started.

Future of the Power Sector in Nigeria (A Response to the Minister)

The transparency that the Minister of Power, Works and Housing provided in the Q&A session on the electricity industry published in Vanguard newspaper is commendable. There was a time when things happened and no one knew why or why not. We truly live in a new Nigeria. The candor shown is also worthy of commendation. Unfortunately, as I read the article I could not help but share my thoughts on some of the responses and hope to contribute my voice to this conversation, one that has never really happened regarding the moribund state of the power industry in Nigeria. 

I write this from a place of hope and a desire to see things change for my family and the millions of Nigerians who have gone from a world where there was power to one where people go weeks without a blink of electricity. There are complaints from the populace but I choose to believe that these complaints come from a place that recognizes that once the power issue is solved there is no way but up for Nigeria. This is how critical power is, it drives the economy. I also write this from a place of experience having worked in every segment of the power industry from power plant operations and distribution (Barking Power Station a 1000MW Gas plant that supplied 400k homes in london), trading (Energyquote a wholesale power brokerage firm acquired by Accenture), investments and consumer services (Power2Switch in the US, serving ~40k customers with energy purchasing and management, and on the board of 2 energy technology companies) for 14+ years.

So what parts of the Minister’s response do I want to address? Unfortunately I will have to frame this from a perspective that suggests that the DISCOs, a central player in the Minister’s Q&A, should not play as critical a role in the future of Nigeria’s power sector. In an industry, across the world, where the incumbent utilities are all currently working on figuring out a minimized role for the DISCO it seems Nigeria is still trying to fix what was instead of recognizing and tapping into what will be. There are three main issues to focus on here

  1. The future of the utility will be distributed and not centralized: The utility industry is made up of 3 layers. The infrastructure layer (generation plants, wires and lines, transformers, meters), a technology layer (the software that runs the operations of all the infrastructure and customer interactions) and the customer layer (metering, billing and payments). Every one of those layers used to operate on the premise that there was generation in a location that is far from the customer and the power is then transmitted to the consumer. In the future of the industry, one that was not mentioned in the Ministers response, generation of electricity will be closer to the location of the consumer. The future of the utility industry is already playing out in countries across the world in the form of incentives provided to consumers to purchase solar panels and geothermal generation at a cost that makes it lower than the cost of power obtained from the grid. Unfortunately this means that the customer is the one who enjoys the benefit and obviously (a point the Minister kept making) the DISCOs are left holding on to assets that are not as valuable as they thought they were when they got into this business of privatizing the Nigerian power market. The tariff increases compensate the DISCOs for a business model of the past when the government (and customers money) should go into building the utility industry of the future. Embracing solar generation and providing rebates and incentives to consumers will enable Nigeria meet the shortfall in power generation quicker than we would by building huge plants in remote locations to help the DISCOs. Building those solar panels in Nigeria, since we will not be reinventing the wheel on a manufacturing process that is relatively straightforward, would create thousands of technical jobs and consequently improving the lives of thousands of Nigerians creating a cycle of jobs-income-spending and a boost to the economy. The part of the Ministers response that mentioned this future reality spoke about the high cost of solar and I address this in point 2 below.
  2. Technology prices will surely drop once mass adoption takes place: The Minister talked about Solar prices being higher than the current price of electricity (N34/kWh for solar compared to tariff of N24) and I will suggest that there is no technology where this has not been the case in the early days of introducing the technology to the market. I will use an example that is familiar to almost every Nigerian; the mobile phone. When I was growing up in Nigeria in the 80’s landline telephones where for the few and the management of those phones were centralized (similar to the centralized nature of the power industry of today). In the late 1990’s and early 2000’s when mobile phones started getting into the market it was still for the educated and slightly well off. I remember holding my fathers bulky Motorola mobile phone and wondering when I would get one of my own (and that future felt very far away). Today, April 2016, there are more mobile phones in Nigeria than there are automobiles and it has become the engine of trade empowering tens of millions of Nigerians, this at a cost that is affordable for most people. People get a phone that is most affordable for them and get credits to use as much as they can afford to. The industry is distributed and no longer centralized. That is the reality of most technologies; they are expensive at the beginning and as time goes on they become affordable to the masses. This will be the case with solar energy if we realize that it has a big role to play in the future of the power sector in this country. The price of solar will drop in the same way the price of mobile phones dropped and even right now with $20M we can supply ~5000 homes with power from solar for (at least) 10 years. Considering the money we are recovering from our past ‘leaders’ this is a small price to pay to start to head in the direction we need to go. This decentralization of the technology addresses one of the other issues that the Minister highlighted; the issue of gas distribution across long distances and sabotage. Very few people, when they start benefiting from distributed solar on the roof of their homes, will sabotage their own electricity supply. People, for the most part, are not self destructive and this is evident as shown in the third and final point I make below.
  3. That future is already here and the cost will be less than fixing the mistakes of the past: Driving through Lagos and even some of the most remote locations in Nigeria what we see is generators managed by businesses and individuals who can afford them and small generators and even smaller lamps being run by individuals who have a need for power to run their lives. This is the future that we are talking about; one where power generation and management is done at the individual level. Again, this is not something that is hard to envision because it is already here and it takes away the need to buy or replace infrastructure that is best suited for the past and instead focusing on adopting technology that serves our future needs. So what is the role of the DISCOs you ask? Their role will be whatever they decide they want it to be. There will still be a need to provide infrastructure as the transition will take time and there will always be a need for some level of centralization even in a localized and distributed grid, the DISCOs can do this. There will still be a need for technology to manage this distributed grid and the DISCOs can play that role and of course there will be a need for customer billing and payments management and this also solves one of the issues the Minister mentioned of fewer users being measured than the number that actually uses the electricity currently generated. When there is a solar panel on your roof or community solar in your neighborhood there is nowhere to hide.

The real question the Minister should be helping the DISCOs answer is what role do they want to play in serving a country of consumers that are yearning for a world where the naturally abundant sources of energy that they can use is not being provided to them? Customers will always want electricity and, as technology improves and the situation continues to get worse, what customers will ask is ‘who can give us power?’ The role of the government should be to help customers answer that question instead of trying to help a soon to be obsolete business model to survive against the tide of change. It is what consumers and technology wants.  

SunEdison Bankruptcy? Nothing To Worry About!

I read the news of the SunEdison bankruptcy and @Jigar Shah’s gracious note to his old team from the offices of a nano-grid development company in Lagos Nigeria (picture below). Like everyone who is working, investing and hoping on the impact that renewable energy can have on our lives I asked the question ‘what happened? How does a company, any company, go from a stock price of $34 to (technically) $0 in about a year and a half? 

So what went wrong? The common understanding, at this point, is that SunEdison fell for three main reasons. The company

  1. spent too much money on acquisitions
  2. placed bets on Yieldcos (special vehicles that were essentially holding companies for renewable investments) but raised about 30% less funding than the $1Bn it intended to raise selling more shares in the Yieldco than it intended to sell.
  3. spent way more money than it was making. Much more. In Nov 2015 the company was $11bn in debt, was generating $2.4Bn in revenue and had net income of $536M.

Summary? Icarus flew too close to the sun (hubris), lost the wax in his wings (money) and fell to his death (bankruptcy).But things are not as bad as it seems.

We have seen this before and things actually turned out great for you and I. It is the story of  WorldCom in the early days of the current telecommunications industry. WorldCom, which started off as a small long-distance telephone company, followed the same strategy of growth through acquisition completing 

  • a mind-boggling 65 acquisitions in 6 years
  • to the tune of $60Bn
  • incurring debt of $41Bn! 

The company bought MFS/UUNet and got into internet service provision to businesses (see where I’m going here?). The acquisitions came with managerial problems for the company and the high flying stock price led to hubris in decision making (more acquisitions and a feeling of invincibility). Like Worldcom SunEdison found accounting issues but unlike WorldCom, which gave loans to executives to load up on company stock, found no fraud.

So what's the lesson from similar paths between two businesses in different industries in different eras but with the same outcome? The similarities are that all the work that WorldCom (better known to you and I as Verizon) did in the 1990’s had a hand in you streaming Netflix and binge-watching Transparent on Amazon this morning. Yes, the wires that were laid, towers that were built and the infrastructure that was put in place during those early days of the telecomms industry as we know it now are critical to the benefits we enjoy close to 20 years later.

And that is the lesson here. The renewable energy sector is in it’s very early days. The bankruptcies and confusion come from the search for business models that will work in a new paradigm of energy provision. We will figure it out. But there will be blood. A lot of money will be spent, made and lost as we wade through the murky waters in the early stages of this industry (the same way it works for the early days of any business). We, as an industry, will figure it out and the world will be better for it.

So whenever you doubt whether the renewable energy will survive just glance at your mobile phone and remember that the companies that laid the foundation for your enjoyment of Beyonce’s visual album mostly no longer exist. SunEdison may be struggling now but hundreds of businesses will take it’s place and ensure the adoption of renewable energy continues.

Here I’ll make a pitch for investing in renewable energy in Africa; The average cost of commercial power in the USA is ~12c/kWh, in Nigeria the average is ~36c/kWh (I’m looking at data from hundreds of commercial locations as I type this) and rises to closer to ~50c/kWh if you factor in diesel generators (which is a big part of the mix). With ~8 sun hours/day solar generation, at 12.2c/kWh, makes so much sense that it’s surprising there aren’t more investors diving into what is a ripe market. Reach out if you are interested...the adoption of renewable energy across the world is inevitable. SunEdison has been a big part of that revolution.

Seyi Fabode is an author and Partner at Asha Labs consulting with power industry executives to develop and implement strategic plans for technological change. Seyi writes about energy (future utility), technology (smart cities) and people (systems thinking) at www.asha-labs.com/blog. Follow@Seyi_Fab.

Why I Won't Live In Google/Alphabet's TechUtopia

The news is that Alphabet/Sidewalk Labs is looking to build a city from the ground up. My first reaction when I heard this was ‘Sign me up!’ 

And then I started to read more speculations and the proposition became less desirable with every word. Why you ask? Well, I’ll share the things that Sidewalk Labs can do to avoid making the mistake of building a city the way one builds a company and consequently dooming the city before it even starts.

It shouldn’t be a surprise to most, considering how ambitious Alphabet is, that the idea of building a city would be one under consideration. I wrote about the ambition to own our energy and cities a few months ago. Larry Page (and Sergey Brin) is a student of company evolution and the organic nature of cities. But all the articles are stating that the project, codenamed Sidewalk, will be used as a testbed for self driving cars, high speed internet, smart connected devices and maybe even some of the scary robots that Alphabet has in its portfolio. Reports claim that 100s of city planners and technologists have been hired to design and build this techutopia. All this under Sidewalk labs, the Google project that became a company focused on ‘working with cities to build products addressing big urban problems’. So what is the problem with this approach to building a city from the ground up? Three systems issues

  1. A city is not just a collection of things: I can safely say that you have never had a conversation about the city you grew up in that ended with the statement ‘I miss the buildings that we lived growing up’? That’s not how or what we think about when we think about cities. It’s not the things/buildings. A city is a combination of all the elements (buildings, streets and infrastructure), interconnections (relationships with your hairstylist/barber, local deli and the parks) and the purpose (why did people settle along thebanks of the river?) of that city. To throw technology and things to build a city is to ignore the purpose. To think technology is the solution is to miss the purpose.
  2. The areas of highest leverage are often the least obvious: From all indications, the reason for building this city, according to The Information, is that ‘building cities from the Internet up is compelling’ and ‘the technology ultimately cannot be stopped’. Statements like this say nothing about the real issues that we have in our cities and are all about technology for its sake. Since we are being ambitious, building cities from the bottom-up, why don’t we go all the way and solve the real issues we have with our cities? Why don’t we address the lack of empathy in our cities and society? Since we are taking moonshots, that might be something to embed into this utopian city we are building. Technology fixes are obvious and simple (for the most part) but that’s not where the most impact can be made in moving us into the future.
  3. A city is not a problem to solve: This approach to building a city, using technology to solve it as a problem, stems from the same approach that helped companies like Alphabet succeed; to build a great technology company is to find a large enough problem(s) and apply creative or advanced technology to solve said problem. A city, in fact every city, has problems. But a city is not a problem. A city is an organic entity that scales according to the needs of the dwellers, increase in resiliency regardless of the setbacks it faces and evolves enough to be recognizable as the city it once was but continues to grow into the city the next set of dwellers fashion it into.

The Information reports that Denver and Detroit are being considered as test beds. If that is the case then this city will not be built from the ground up (phew!). It will just be the next stage in the evolution of a city, the one selected, that currently exists. Cities are truly just physical expressions of who we are and the things that matter to us as human beings. We still have a ways to go before technology fully replicates that…

Quick Guide To Nanogrids and Minigrids

One of the ongoing issues with the transition to a new utility paradigm, for both consumers and providers, is the required change from a centralized to a distributed framework. Utilities are worried that consumers will abandon the power coming from a big power station far away in favor of the solar panel on their roofs, the tesla powerwall in their homes and the extra power from their neighbor. At the same time consumers are worried that the new forms of energy will cost them more than they currently pay and not everyone wants to ‘pay a premium to promote renewables’. Good news is that there is a transition opportunity that helps achieve the goals and desires of the consumer for safe (read as clean), reliable and stable power. They are called Nanogrids and Minigrids.

Nanogrids: are considered as discrete loads (the power drawn) that sometimes use direct current (DC) to reduce on energy losses that we normally see in long distance energy transmission. Navigant suggests a 5kW capacity for standalone systems and 100kW capacity if the system is tied to the current grid. Sidenote: think of kW as stock (energy in a tank) and kWh as flow (power used by your ac). The off-grid central Texas farm with its solar panels and its diesel generator on the back of the pickup truck is already operating as a nanogrid.  Why is it less disruptive to the the utility? Because nanogrids, at current scale, do not take too much off the plate of the utility enabling them make the adjustment in a more transitional way. Why is it good for consumers? The ability to manage your own generation, demand and usage using renewable energy is where we are all going so why not get there earlier than others. The fascinating thing is that in African countries, including the one where I was born, either through lack of infrastructure or depreciated assets this is already the case. I wrote about my fathers generation serving as their own Youtility with each home running a nanogrid unto itself with a generator combined with solar energy for power, a borehole dug in the back of the compound for water and gas tanks swapped out at the gas station for cooking gas. A nanogrid…


MiniGrid: So what do you get when you combine nanogrids? Doesn’t take too much of a leap in imagination to see what a minigrid is; in lay terms it is a modular collection of nanogrids. It is often a collection of demand nodes (buildings) all pulling from one or a few distributed energy sources (a solar array and some storage). The difference from the current microgrid or centralized utility structure is in the size. There will be wires required to connect the homes and commercial buildings, which is not the case in a nanogrid, but not at the range that the current grid covers. This structure of grid lends itself to the pay-as-you-go model of electricity usage that is prevalent in the developing countries where this is already in play. This is a model that can be borrowed for low-income areas of most of our fast changing cities, a model that starts to cater to the customization of service that the future utility (customer) will demand.


Nanogrids will play a big role in the smart and connected homes we will all live in in the future and consequently the minigrid system will heavily impact the smart city future that is upon us. It is quite ironic that is a grid system that we in the US will be borrowing from developing countries where the lack of infrastructure is forcing the fast adoption of these systems. The utility, in it’s current state, will play some role in this future.

What is required is for the utility to take their vast reserves of cash and infrastructure and decide which part of the value chain - infrastructure, technology or people - their strengths lie.

It is a decision that needs to be made soon.