Startups lead the way to crack the 'unsolvables'

In the current century, we have become accustomed to thinking of certain sectors as being too big to fix (such as banking) or too difficult to change (cultural polarization, for example). The breakneck pace of technological advance notwithstanding, the category of "unsolvables" is growing, and rather disturbingly includes segments vital to human survival, or at least to the stability of civilization as we know it: energy, water, air, food security, public health.

As each segment becomes increasingly more fraught, and as some efforts to reinvent them have stumbled, one school of conventional wisdom has formed around the notion that the challenges posed by these sectors are simply intractable. That thinking has some justification behind it, but misses an entire class of potential for transformative change.

Looking beyond justification

Let's start with the justification. These sectors are considered intractable because each is characterized by vast, rigid structures with densely complex and sometimes perverse dynamics, wracked with deep tensions among individual, government and commercial interests. Each sector also has seen some public black eyes in the form of failed enterprises, derailed policy initiatives and damaged personal reputations, not to mention humanitarian disasters. In light of so many deterrents, it seems quite rational to consider any attempt to take on any of these sectors to be quixotic at best, at least in a frontal assault.

However, that is only part of the picture. Those vast, rigid, complicated sectors that are often seen as impervious are nonetheless riddled with stress concentrations — weak spots, or if you prefer, tears in the fabric — that invite disruption, innovation and transformation. Picture each segment as a Death Star, seemingly unassailable. But here, instead of a single vulnerable target, each segment has hundreds or thousands of tiny entry points. These entry points come in the form of unsolved problems, underserved demands or unfulfilled desires. In many instances, they are overlooked because they have become part of the background: They have gone unattended for so long that they are understood to be unavoidable — the accepted cost of doing business.

What does it take to exploit these stress concentrations? First, identifying them. Some are truly esoteric and require shrewd industry expertise to identify, while others are hiding in plain sight. The key characteristic they all share in common is that a class of business, individual or government customers wants to buy a better solution but has no good option available. Once the stress concentration or entry point is identified and understood, solutions can be devised and tested with actual customers. This is not a trivial proposition, but it is certainly feasible.

This is not an empty assertion. Numerous startup companies currently exploit stress concentrations they have identified, and launch entirely new solutions with outsize value creation potential. 

Solutions in the works

By way of example, here are two companies going to market with very targeted solutions designed to address underserved demands (or opportunities, if you prefer) in the energy sphere:

Recognizing that the lack of low-cost, secure, reliable meters impedes the development of otherwise viable power delivery projects in the developing world, Lumeter Networks developed a series of affordable electricity meters to enable renewable energy partners in developing countries to supply electricity to the rural poor.

Project developers can deploy off-grid, renewable power projects ranging from a few rural households to dense neighborhoods including businesses, schools and clinics, with secure transactions and tamper proofing to guarantee accurate accounting and prevent electricity theft. Customers can use cell phone text message service (SMS) to purchase safe, clean electricity on pre-paid and pay-as-you-go terms that cost less than kerosene. Lumeter's solution benefits all parties: end-users, kiosk owners and local utilities. 

At the other end of the energy sector spectrum, eCurv (full disclosure: eCurv is a Vodia portfolio company) identified a significant stress concentration around the cost associated with momentary spikes in electric power consumption in developed markets: Both commercial customers and utilities dislike the spikes, but although there are increasing options to manage power consumption on a 5- to 15-minute, hour, four-hour or 24-hour basis, until recently there were no good options to reduce or eliminate momentary demand spikes.

ECurv adapted subsecond-timescale signal queueing methods from the communications field to eliminate demand spikes on the customer side without incurring any equipment performance degradation. This saves commercial customers money in demand charge markets and reduces demand variability for utilities in both demand charge and non-demand charge markets.

Clearly, neither company is attempting to reinvent the energy sector from whole cloth — both companies are working to deliver extremely narrowly targeted solutions to specific unresolved frictions. It is because they are so targeted that they will be exciting to watch: Already both companies have received strong expressions of interest from customers and partners alike. To the extent companies such as these two are successful in exploiting their chosen niches, they will create value for their customers, partners and investors.

Value creation potential

If either Lumeter or eCurv realizes even modest success, it will have the potential to exert transformative influence over significant swaths of the energy sector. We are self-conditioned to attribute transformational potential to highly innovative and protectable solutions. But true transformations are catalyzed by innovative companies specifically because they are anything but unique. One company can only do so much, even if (or because) it is the prohibitive technology giant of its era, such as AT&T, IBM, Sony, Apple or Google.

The crowd of startups working in related fields gives rise to rapid transformation, because transformational potential is at least partly attributable to the combined action of competitors and collaborators. In the case of the unsolvables, there are lots more where Lumeter and eCurv come from — countless startups already identifying and going about exploiting stress concentrations in the intractable sectors, proving that they are anything but unsolvable.

Also, even where such companies are not able to fully capitalize on their insights, to the extent they are able to demonstrate that the problems/opportunities they identified were (a) real and (b) addressable and monetizable, they will attract still further innovation and investment around these and adjacent challenges. If that projection seems overly rosy, think back over the pattern of emergence for each major technology wave of the past decade: This is exactly how new technology-driven and -enabled sectors coalesce. A few startups develop novel offerings with very targeted solutions that "nobody" realized anyone wanted. Many fail, several catch fire and get acquired, a few become titans, and within a few years a whole new industry exists that was previously inconceivable.

The future of unsolvables

To be sure, just as in every other startup category, many companies launched to crack the unsolvables will fail. But also just as in other startup categories, each company that succeeds in addressing a neglected stress concentration serves to open new possibilities, creating outsize value for its stakeholders and exposing still more opportunities for others to exploit as well. In the segments most vital to human well-being and social stability — energy, water, air, food security, public health — those gains could reshape our lives as profoundly as air travel or the Internet did in the 20th century, perhaps even more so.

If a significant few of them take hold to even a fraction of the degree that social, entertainment or device technologies have done, by the end of this century our current notions of what is unsolvable may seem as quaint — and as terrifying — as life before antibiotics.

Rubik's cube photo by Popartic via Shutterstock.