First let’s start with a quote from Clay Christensen: “93% of all innovations that ultimately became successful started off in the wrong direction; the probability that you’ll get it right the first time out of the gate is very low.”
You cannot consistently predict winners particularly when you are moseying around the innovation field! This is why investors in R&D and Innovation must play a portfolio game; there will be product winners and losers. At the outset, you really don’t know which ones will win, but you can, with the tools of value-based management improve your odds.
When building your portfolio, whether it is to be the next green break through or smashing Internet app, another key is to do the best job you can when selecting where to put your money. This means careful evaluation of fundamental value drivers (there will usually be only three to four) coupled with the uncertainties that impact them, assembling opportunities into a portfolio and managing the mix with an eye constantly on optimizing value.
My guess is that the investment in Solyndra was made too hastily and involved too much of a gamble, i.e., the probability of success vs. the value if successful just didn’t make sense. A deep dive into the influences on value (probability of technical success, commercial factors like price/market share/competitors) would have revealed a highly risky investment. Management and the government rolled big dice and lost; perhaps they could have hedged their bet with a trifle more analysis?
Good decision, based on an assessment of risk vs. reward? — probably not.