Tackling the Grand Challenge of Climate Change with Ecosystem Innovation

Abstract

Reflected in the United Nation’s Sustainable Development Goals (SDGs), global climate change is one of the grand challenges faced by humanity. While substantially more progress is required, technological developments in renewable electricity generation and complementary digital technologies in the electricity sector are opening up a path towards reaching climate-related SDGs. Yet, how heterogenous actors innovate and coordinate to translate these interdependent technological developments into value propositions at the necessary speed and scale remains elusive. To make sense of this puzzle we introduce an ecosystem innovation perspective incorporating multiple interdependent dimensions at both the technology and strategy level, enabling us to better capture the complex structural changes within the electricity sector. We calibrate our analysis through the study of 57 different collaborative pilots between 10 large international incumbent electric utilities and startups over a four-year period, in which they collaboratively experiment with different alignments of technologies and strategic roles adopted by incumbents, startups and customers (i.e. ecosystem configurations). Using Qualitative Comparative Analysis and additional interviews we identify three ecosystem configurations that contribute highly to climate-related SDGs: (1) digital platform innovation enhancing resource efficiency, (2) physical complementor innovation enabling renewable generation scaling, and (3) new orchestrator innovation allowing actors to share, trade and leverage information and resources. In a complementary analysis we further illuminate trade-offs that incumbents face between allocating resources towards ecosystem innovation for grand challenges versus linear value chain enhancements for capturing short term economic value. This study contributes to the literature by elaborating on (1) how ecosystem innovation may help to tackle the inherent interdependencies of grand challenges (2) the role of incumbent firms and their approach to innovation for managing grand challenges, and (3) the management of platform-based ecosystems in infrastructure-intensive settings. For managers we offer insights regarding how to innovate ecosystems for tackling grand challenges.