A citizen of a better place
Shai Agassi was hit by a car as a young man, and has suffered from chronic back pain ever since. In 2007 he left SAP and he is now bringing large numbers of electric cars onto the road. An inside look at best practice
How can the world be made into a better
place by 2030? This short question was
all it took to fundamentally change Shai
Agassi's life. Klaus Schwab posed it to the
first intake of Young Global Leaders at the
inaugural meeting in January 2005 in Davos,
Switzerland. At the time, Agassi was one
of the most prominent members of the YGL
group. The business sections of practically
every major newspaper worldwide had reported
on the Israeli, who originally studied IT.
They discussed how he collected punch cards as a five-year old and learned the 'Fortran' programming language aged just eight at a computer course for children, run by the University of Tel Aviv. How, in his early 20s he worked with his father - a former colonel in the Israeli army - to found and successfully develop a number of software and multimedia firms. How SAP bought two of the companies, one which developed portal software and the other which developed ERP software for mid sized businesses. They also discussed, how SAP cofounder Hasso Plattner supported him on the executive board and treated him as a future CEO of what is by far Europe's largest software firm. And finally how, in 2003, at just 36 years old, Shai Agassi was featured in Time Magazine and on CNN's list of the 20 most influential business people worldwide.
Two years later, at a workshop in Davos, Agassi tried to frame Schwab's question regarding a better world by asking another one: "How could an entire country get by without the use of oil by 2030?" The question, however, still seemed a little too broad for the Israeli, and so instead he decided to ask this one: "How could a country's automotive industry become independent of oil?" Agassi has since worked day and night on developing an answer to this question; and the pioneering yet simple idea of his company Better Place has also been reported on by the global press. The idea is a system-wide approach to electrification that makes electric cars more affordable and more convenient than cars fueled by oil.
According to predictions, however, the range of electric cars will remain limited for many years to come. At present, it will also be difficult to make major cuts to the time period required to recharge batteries. The message from Better Place is that this is not a problem. At automatic battery exchange stations, drivers can simply swap their empty battery for a full one. The company aims to attract customers through a business model based on subscription-based services for transport. Instead of buying petrol kilometers with every fill up, drivers will sign up for a four-year contract for electric kilometers and infinite range through complete access to the Better Place network of battery switch stations and charge spots.
The path leading from an initial concept to its eventual realization is a long one. Here, Shai Agassi summarizes the key hurdles that he has managed to overcome, and those obstacles that still lie ahead:
Have faith in yourself
The first and perhaps most difficult stage in this kind of project is convincing yourself. That might sound strange, but it is a crucial part of the process. You can only successfully drive a project forward if you are 100% convinced that an idea of any magnitude can actually work in the real world. At Better Place, a white paper provided this persuasion. Version by version, it was checked and improved by a YGL sounding board. Eventually, a system was developed on paper that I knew would work.
Convince others (particularly investors)
We have successfully raised around 700 million dollars in capital in what has been a difficult period for the market. How has this been possible when undertaking a project that has no precedent? Well, essentially all we are doing is combining existing technologies and business models in an innovative way. We were able to demonstrate early on that an exchange station for batteries would be technically feasible, and we backed this up by showing that the figures behind our project add up.
It is cheaper to run a Better Place car than to run your own gasoline vehicle. Our potential is the world's largest market that of oil and gasoline, worth three quadrillion dollars annually. In other words, we are replacing the world's most expensive product. Even if we capture just a small share of this market, this business venture can therefore be enormously profitable. As such, we were able to convince a large number of investors.
Tests and proof
Our fleet of taxis in Japan proves how well our technology functions, while our field tests in Israel and Denmark demonstrate the huge interest that exists among the public. People want electric cars on the road, and they want to literally be part of a new movement. The system and the cars themselves should, therefore, be accepted and well received by the public. Such prognoses have also been validated in field tests, with the electric cars made by our partners, Renault, proving extremely practical.
Implement and scale up
Once some experts gave us their vote of confidence, we were able to acquire financing and investors faster. This capital helped us avoid the classic chicken-and-egg problem. We knew from the start that we had to have our infrastructure in place before producing the first cars, which in turn would bring the money in. We thus included all of this information in our business model. The best aspect of our model is that time works in our favor. Oil will continue getting more expensive - there is no way around it. If some people are unimpressed by the figures at present, it really isn't a problem as in a year's time (or in two or three) they will be.
Our biggest challenge in the coming years will be meeting demand. I have no worries about vehicle supply. In the first few years Renault-Nissan will certainly be able to provide sufficient cars. Additionally, we have gone into partnership with Chinese automotive manufacturer Chery, and other partnerships will inevitably follow. Infrastructure, however, is a much larger test, as every year we must increase the number of exchange stations ten fold. In 2009 we had one, in 2010 there were ten, this year there will be 100, and next year there will be 1000. By 2013, the total should stand at 100,000. No other company has overseen comparable growth in history. Though that certainly does not mean that it's not possible.