Checks and balances. Many small companies lack clear separations of power between board, management, and shareholders. "They don't have the necessary checks and balances," says SatCon's Eisenhaure. If board members are passive investors or friends of the founder, with little expertise in what the company does, management tends to be less accountable. When Dave Giddings became the chairman and CEO at Diametrics Medical Inc., a newly public company specializing in medical diagnostics, he joined a board that had recently shrunk in size from nine to seven people--and raised the qualifications of those seven people. "Each board member has occupied a CEO-level position on the customer or supplier side," says Giddings. "These people are not only knowledgeable about the industry, but they are also accustomed to making decisions within operating companies."
Keep things separate. Dave Giddings says that many young technology companies suffer from "an embarrassment of opportunities." They have to be disciplined enough to figure out which research projects are worth doing. Dave Eisenhaure says that although SatCon's research budget is less than $10 million, R&D has already been separated into three divisions, each of which must submit budgets and business plans routinely. SatCon distinguishes its various research initiatives from one another and institutionalizes accountability. "Otherwise," he warns, "you can end up with a real mess."
Right mission, right needs. Eisenhaure believes that early-stage companies face a simple and clear-cut choice: management must ask if it is running a lifestyle company or a company whose mission is to build shareholder value. Often overlooked is that a small entrepreneurial company inevitably reflects the needs of the entrepreneur, according to H. Irving Grousbeck, a consulting professor of management at Stanford University's Graduate School of Business. And founders frequently have very different agendas from the rank and file. Moreover, they resist change. "The key is to have an open discussion about the needs and the objectives of the people in the company," says Grousbeck. Otherwise, he says, there is no "congruence of goals," which results in a loss of direction for the company.
Why the Buzz?
One distant day, much of the world's electricity will probably be generated by solar energy. Sunlight will be the energy source of choice because it is abundant, long-lived, and nonpolluting. Trouble is, right now it's not economic. The company that can make solar energy cost competitive with other fuels will reap the bounty of a market measured in the trillions. Right now, the leader in the quest for that bonanza is Solar Cells Inc.
Two decades ago electricity generated by solar energy cost more than $100 a watt by the time it was installed and producing power, making it suitable for only the most exotic, cost-insensitive uses such as solar panels on spacecraft. The figure has since fallen to an average of $7.50 per watt (installed), and SCI's recent breakthrough will at least halve that figure. But that's not enough. For solar energy to be used on a broad basis, the number must fall to around $1 a watt. (A watt is a unit of measure of the power available at any point in time. For example, a 100-watt lightbulb requires 100 watts of power to light.)
For SCI to reach the magic $1 figure, it must improve in three areas: cost of manufacturing, conversion efficiency, and stability.
Cost of manufacturing: SCI's breakthrough last fall allows it to coat a panel with PV cells nearly 600 times faster than its rivals. While SCI's process requires depositing 4 layers of semiconductor material on a panel, most competitors need 11. Having more steps entails more capital costs, more manufacturing time, and a greater likelihood of error, leading to lower manufacturing yields.
Conversion efficiency: This measures the amount of solar energy hitting the panel that can be converted to electricity. Working with cadmium telluride, Solar Cells has already achieved a 9.1% conversion-efficiency rate with its full-size modules. After two decades of R&D, solar companies using amorphous silicon have struggled to reach 7.5%. That is not good enough. At an 8% conversion rate, cadmium telluride begins to compete with other solar technologies. SCI projects reaching 10% within four years, which would make it "a world beater" in the words of vice-president of business development Steve Johnson. Ultimately, Johnson expects SCI to raise its conversion efficiency to 12% or 13%.
Stability: This measures how fast the solar panel degrades--that is, loses its ability to convert sunlight to electricity. In effect, it's another way of projecting the failure rate in a field of panels. Amorphous-silicon panels currently lose 25% of their conversion efficiency in the first six months of use and stabilize thereafter. SCI's cadmium-telluride panels, in the field for three years, show no loss and are projected after 20 years to still have 100% of their original conversion efficiency. They seem to be more reliable.
