This summer Renegade Inc. went on the road to the Port Eliot Festival in Cornwall in search of new ideas great, speakers and those people who are thinking differently. Genuine entrepreneurs visualize their goal then reverse engineer their business model to achieve it often overhauling whole industries in the process. Hugo Spowers is one of those entrepreneurs. He left motor racing because of the environmental damage it caused and he started Riversimple, a car company that won’t ever sell you a car. As a Senior lecturer in entrepreneurship at Exeter University Adam Lusby became so interested in Hugo’s approach because he sees it as a blueprint for building new industries and a new economy.
The Riversimple mission is straightforward, to turn sustainability from a bottom-line cost into a source of competitive advantage so we can all begin to eliminate the environmental impact of our personal transport.
Renegade Inc. caught up with Hugo and Adam to talk cars, entrepreneurship and building the companies of the future.
Hugo Spowers explained that the environmental concerns which prompted his move away from the motorsport business was not a Damascene moment but, rather, part of a gradual process:
“I lucked upon a five week course at Schumacher College with Fritjof Capra studying the manuscript to what became the web of life. And so I used that as a deadline date to get out of my business. On Friday I left and sold it to people who work there. On Sunday I started the course with him. If I didn’t have a deadline like that it would never have happened, it would have just trickled on”, says Spowers.
During his time in the motorsport game in which he burned fossil fuels and flew around the world, the entrepreneur had to defend himself to friends against these kinds of environmentally destructive practices. Spowers says that his interest in the environment preceded his interest in motor racing. He argued then, as he does now, that motorsports are the quickest and cheapest way to improve the efficiency of combustion engines, but concluded that prolonging their tenure was no longer an option.
Confronted with the above quandary, and unsure of his next course of action, Spowers finally set on a career path away from cars. He concluded that the only solution for sustainable transport was better batteries. “The breakthrough”, says Spowers, “was not through building a better fuel cell, the technology already existed” but rather, a recognition of “the need for a wholly different sort of car.” So he ended up producing a systems integration case study for one – Riversimple, a UK based car manufacturer of hydrogen-powered fuel cell electric vehicles.
This is where Adam Lusby comes into the picture. Lusby worked on the case study for the Riversimple car as part of his academic work. “The Ellen MacArthur Foundation, says Lusby, “had done a piece of work looking at the Riversimple model that I had been privy to. The car is the tip of the iceberg [overlaying] this incredible amount of thinking that’s gone on to produce the car, the business model and everything that radiates around it”, says Lusby.
The senior Exeter University lecturer continued:
“At the moment we have two cycles on the circular economy. One is the biological cycle where nutrients return safely back to the biosphere and the technical cycle where we capture high value products and components and use them for as long as we can within the economy. And what Hugh’s built is the best example of a business model of the technical cycle. And at the end of it there’s this beautiful car. So I’ve been using that very compelling case with our MBA students at Exeter University.
Lusby met Spowers during the launch of the former’s MSC programme on entrepreneurship at the aforementioned university. “It was purposeful to have that attached to the masters and entrepreneurship because if we’re going to create new businesses, they’ve got to mitigate the risk of current businesses. So they’ve got to have that built in from the start”, says Lusby.
It’s the notion of minimizing risk by creating a form of entrepreneurship that runs counter to the prevailing business model orthodoxy that’s indicative of the duo’s innovative holistic approach. For Spowers, his concept of the car is encapsulated by the need to take into account the broader environmental issues. This involves the nurturing of long-term sustainable systems. To this end, Spowers worked with Karl-Henrik Robert who developed a back-cast, as opposed to, a forecast strategy. Spowers has been putting into practice this strategy for the last 20 years.
“I like to think of it as a tree with a whole lot of branches”, says Spowers.
The entrepreneur added:
“If you start at the bottom. You want to do things that are better and you can very easily go off on a branch and you end up at a dead end – which is really bad news because you can’t get to where you want to go and you’ve got to write off all the investment you made in getting to the wrong place and start all over again. But if you back-cast from the top of the tree 50 years ahead, you can’t fail to get to where you are now. You end up with a completely different strategy as a result.”
Adam Lusby is on board with Spowers long-term entrepreneurial approach that the latter’s analogy implies:
“It’s really refreshing to hear this sort of viewpoint and it’s actually out there, it’s echoed amongst a lot of people who are creating great businesses. Entrepreneurship as a field of inquiry, as a way of thinking – the entrepreneur mindset – has a massive amount of value in reaching the top of the tree. So actually being able to create action and be able to take resources that are near to you and apply it and move forward”, says Lusby.
This is a point the Exeter university lecturer is keen to reiterate to his students:
“I say it quite often that there’s the idea that we’re agnostic to revenue. So we don’t mind where we get funded from. If you want to be the garage Start-Up that exits for 5 billion. Be that. But if you want to go out and create an NGO that’s funded through the UN or through government. Go and be that. The entrepreneurial mindset allows you to do anything on that spectrum. We at Exeter take a sort of concerted effort that we want entrepreneurship for all and we want entrepreneurship to do good. And that good for us is the circular economy.”
This altruistic and philanthropic concept of entrepreneurship is not necessarily at odds with the predominant contemporary model guided by short-term profit:
“The way that we do things is through exchange and how we do things through exchanges is our economy. So entrepreneurship is embedded in the economy. For me it’s the same mindset. What is your purpose? What are you driving towards? I also would argue that the companies of the future will make a lot of money and maybe exit for billions and be circular. So I don’t think they’re contradictions”, says Lusby.
Ultimately, the altruistic and benevolent actions of human beings stem from the motivation to do what’s right. Spowers sums it up well:
“Being amply rewarded and making money is an emergent property of doing things right. If you do something better that is in alignment with everybody’s needs and political aims and environmental needs and so on, then you will make money. So it is not the driver, it’s an outcome, a consequential outcome of doing things right.”
For Spowers, this means nurturing in the public mindset a different conceptual approach to the car:
“We talking about three levels of design in the company. Something we hear talked about a lot more in last couple of decades are things like business models and service design and so on. But there’s also a third level of design which we feel is terribly important – that’s design at the level of ideology; framing, sustainability, governance. And all these three levels of design interact and we’re trying to optimize that whole system.”
This presents some significant challenges because the contemporary model developed in the 20th century has been constrained by climate change, energy security and resource depletion that were barely on the radar of a system predicated on the widespread (and fair) assumption that natural capital is infinite.
“We have a business model that is dominant in industrial society of making and selling product and you’re rewarded for maximizing resource consumption. So how can we ever have a sustainable industrial system based on rewarding industry for the opposite to what we’re trying to achieve? It’s just never going to work”, says Spowers, adding:
“It’s also not good business because you’re betting your future profits against commodity price shocks and increasing consumption of something that you know is running out. I mean, it’s just not very smart, is it? But changing all that is not easy and you certainly can’t go to Toyota and expect them to change.”
What entrepreneurs who think differently are up against, is the inertia of the vested interests resistant to change. Spowers is no exception. “I realized these were the really hard issues to deal with”, says the entrepreneur. “I was doing an MBA by the time I really started thinking about fuel cell cars. So I did a commercial feasibility study as my main project on bringing hydrogen fuel cell cars to market. I did it as an academic study because I thought you can’t do it without the auto support and clout and you can’t do it with them because it would be commercial suicide.”
By the end of his feasibility study, Spowers realized that not only was it easier for him to establish his project from outside rather from inside, but because of the lack of any legacy constraints, it was also easier for him to operate in this way.
As an entrepreneur, one of the very few, but big, advantages of being a Start-Up is the fact that you start from a blank sheet of paper. In other words, there are no legacy or accompanying political constraints attached to it. Neither do you have all the informal feedback loops associated with an existing organization.
It was from this starting point that Spowers realized that in order to make a different sort of car, out of different sorts of materials, you need a different culture to imagine designing it. Moreover, the entrepreneur realized that because his creation was not going to be made out of steel, a different manufacturing facility would be required. Thirdly, he understood the need for a different customer proposition on the basis that it could never be cars that would be sold but only ever a service. Finally, the entrepreneur recognized the need for a different distribution system “because they’re all premised on the massive maintenance costs required of combustion engine cars.”
It is as a result of these transformations that the kind of radical changes to established business models envisaged by Spowers are made possible. For Spowers, engendering the required shifts within a car manufacturer at the wrong starting point has proven to be far more of a challenging proposition than changing the technology. Manufacturers’ prevailing models are counter-intuitive to notions of long term sustainable outcomes that are arguably among the biggest challenges innovative entrepreneurs like Spowers face.
Adam Lusky regards the space Spowers has helped open up as an illustration of the kind of opportunities, indicative of the intricacies of the circular economy, that the best entrepreneurs are able to identify. “They see the opportunity maybe where everyone else has a blind spot. That’s exactly what Hugh has done with a Riversimple. And I think interestingly he has taken a step back and gone, ‘Okay, if this is the goal, what are the ways that we reach that goal?’, says Lusky.
“A lot of traditional businesses”, adds Lusky, “are really struggling because they’ve not got a clean sheet of paper. But they’re also approaching it from a very narrow perspective that ultimately demands a much broader perspective and probably more collaboration, more thinking with others that you’re not used to speaking to. One of the early principles of the circular economy was to build resiliency through diversity. And cognitive diversity is key in terms of looking at these problems and solving them more holistically.”
The traditional notion of entrepreneurship is concerned with rapid churn rates. However, what sets Spowers apart is that the kind of radical step changes in technology and external environmental conditions he is proposing, is indicative of a genuine disruptive technology likely to give birth to a new paradigm. Clayton Christensen wrote a book called The Innovator’s Dilemma all about how new and disruptive technologies cause great firms to fail. He defined the term ‘disruptive’, very specifically, as something where there’s a negative step change on the metrics by which the current model is sold. Christensen revealed the depressing fact that the kind of traditional model of car sold on the basis of what people are buying (ie performance), in other words, is projected to perform better than Spowers’ disruptive technology.
Spowers says that:
“fuel cells, whilst having many virtues, are rubbish at sheer grunt. And so it’s very difficult for existing businesses to focus all their R&D on something that customers are not asking for. The fact that they are market leaders, in a mature sector, is because they do it so well.”
It’s not necessarily the case, though, says Adam Lusky, that the corporate machine extinguishes everything it doesn’t recognize. Currently there are large companies putting circular innovations into certain markets which appear to be indicative of the exceptional epoch in which we live. “I think business leaders are seeing that they are going to have to shift their business fundamentally. So I think it is happening. Maybe some of the big businesses that we know today won’t be here and they will be replaced by more agile, nimble, circular innovations”, says Lusky.
Hugo Spowers asserts that the circular economy “is absolutely at the core of everything in Riversimple and it has been since 1980 when I first started working on it. The great thing about it is that even in our mad current economic system, we believe it is much more profitable than the way in which the industry currently serves the market. That means that we can pursue it unilaterally without any government mandate, without any level playing field or whatever”, says Spowers.
“If we can demonstrate”, adds Spowers, “that we can make more money from doing the right thing then business as usual makes from doing the wrong thing, then you can reasonably expect to expand, grow and get people to copy you. Which is what we’re after as well.”
Spowers’ analysis seems to confirm Riversimple’s model. Following their pilot of 20 cars, Adam Lusky posits that the value they’re producing is going to be much better for the user. If it was to open In Exeter tomorrow, I’d be one of their first customers”, says Lusky, who claims that the business model is more affordable than people’s current mode of transport. “There’s this incredible counter-intuitive thing happening in our economy at the moment and Riversimple will be solving that for transport”, adds Lusky.
Hugo Spowers believes that Riversimple is certain to be a more profitable model than potential rivals within the current paradigm. “The market isn’t going away and it’s enormous. There are a billion cars on the planet. If the model it serves is broken I don’t know what else could be described an opportunity”, says the entrepreneur.
The logical corollary of this approach is that incentives are created in the system encouraging other innovators to do the right thing for the betterment of society by creating their own models. Lusby sees this as a positive for the future of entrepreneurship:
“There’s something really interesting happening with the younger generation. There’s something about the sensitivity to authenticity, to doing the right thing and we’ve seen this rise from that group of students saying, ‘you know, we want to go into the business world but we don’t want to go into this world and have all these problems.’ So there’s a huge driver in the students and the younger people around the world saying, ‘this has to change’ and I think that is extremely encouraging. And we know that the access to markets as being lower than ever before. So the hope there is that, yeah, they do become entrepreneurs. But they become entrepreneurs under the model that Hugo is setting.”
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