Technology 377 days ago

Like a Phoenix from the Ashes

LEDs, smartphones, nanoFlowcell® - what disruptive innovations do best.

Disruptive innovations start out as small, niche innovations and often go on to spark a market revolution. The success stories of disruptive innovations are not written by the large, established corporations, but by small, young companies such as nanoFlowcell. They are flexible and free from rigid, innovation-adverse hierarchies. How does the approach of nanoFlowcell Holdings Ltd differ from that of Tesla Motors?

A disruptive innovation is a technological innovation that could possibly force an established product completely from the market. One example of this is LED lights, which have replaced conventional light bulbs on account of their better energy efficiency, pretty much "destroying" the market for light bulbs. Then there's mobile phones, which were initially inferior in performance to landline phones, but have been technologically improved to the point that today's smartphones have replaced landline telephony almost entirely.

Martin Cooper, the inventor of the mobile phone with a DynaTAC prototype from 1973 (taken in 2007) (image: Wikipedia) and a current Apple iPhone (image: Apple)

Established firms can be hugely jeopardised by new arrivals forcing their way onto the market with an innovative, disruptive technology. In the worst case scenario, they could lose their entire customer base and thus the basis of their business.

Established manufacturers may well have the expertise in their core business and the resources to drive forward innovations, but these companies are mostly striving purely to further the development of their existing products and services (sustaining technology), thus orienting themselves around the needs of existing customers. After all, steadily evolving products and a fixed customer base are a safe and ongoing source of turnover.

In contrast, a disruptive innovation is generally inferior in performance to the current, competitive technologies when first introduced to the market. However, it displays new product attributes that, although not necessarily compelling for customers of established manufacturers, can nevertheless be all the most interesting to smaller customer segments. These small customer segments hold little attraction for the market leaders as they are often not particularly lucrative.

Ford Model T: The first mass-produced, affordable car, which, in contrast to the elite vehicles of the early days of the automobile, revolutionized the transport market. FORD Model T - a disruptive Innovation.

But for new entrants to the market, these small customer groups are highly interesting, as competition for these buyers is not well defined and access to customer groups of established companies is difficult on account of higher entry barriers (marketing, sales, service etc.). If newcomers then succeed in developing their new technology over time to the point that they start winning over loyal customers from established firms, what can take place is a migration of customers from those established companies to the newcomers. The more fervent this process, the fewer options there are for established firms to react to the threat posed by a disruptive innovation. The newcomer is thus able to establish itself.

As for the automotive business, has this kind of disruptive innovation process already been initiated by Tesla?

The theory of disruptive innovation was proposed by Clayton M. Christensen (>), a Professor at the Harvard Business School, whose research focus is on innovation-driven corporate growth.

Prof. Clayton M. Christensen from the Harvard Business School

Christensen was asked whether Tesla represents a disruptive technological advance that could eliminate the business base of established vehicle makers. Christensen tasked his research assistant Tom Bartman and his team to examine this thesis. Is Tesla to the manufacturers of millions of automobiles with internal combustion engines what the LED was to the light bulb?

Following detailed studies, the research team at the Harvard Business School came to the conclusion that Tesla had achieved a technological advancement (sustaining technology), but that it does not represent a disruptive innovation. Tesla is completely correct in its assumption that customer demand for electric vehicles will increase. Bartman and his team forecast that, in this case, established manufacturers such as GM, Toyota, Nissan, et al. will very rapidly restructure their existing production capacity, supply base and sales network to accommodate electric vehicles, thus evading the possible threat posed by Tesla. (>)

Elon Musk at the launch of the Tesla Model 3 on 31 March 2016 in Los Angeles.

Incontrovertibly, as a newcomer in the automotive market for high earners, Tesla has succeeded in triggering a certain degree of hype for electric vehicles, but no great sense of fear among the established car makers. The industry is well aware that lithium-ion technology is neither sustainable nor is there sufficient raw material available to serve a mass market. Nonetheless, established manufacturers have not completely ignored the market for electric vehicles. So far, the Nissan Leaf and Chevy Volt/Opel Ampera have sold in greater numbers than all the Tesla models together. Almost all other manufacturers have at least one token electric vehicle in their line-up. But measured against the market as a whole, the proportion of electric vehicles is vanishingly small.

The market for electric vehicles is thus modest, with just a few competitors serving nominal demand. For the team at nanoFlowcell, the question is: Is there no market or are there simply no products on the market to suit the demand?

The performance of current electric cars is not yet at the level of comparable vehicles with internal combustion engines. Car makers are struggling with what they see as the mediocre performance of currently available battery technologies. Consumers are put off not only by the high cost of electric vehicles, but more so by their restricted range, limited speed and long charging times, citing these as the greatest purchasing obstacles. Buying incentives and state subsidies of the kind currently under discussion in Germany will not change this.

If Tesla is not sparking demand-oriented change within the industry, who or what now?

Based on Clayton Christensen's criteria, nanoFlowcell® could be sucg a disruptive innovation. (>) The company is unsettling entire industry sectors with its invention of a new kind of energy storage technology. Analysts, scientists and consumers are fascinated by the technical possibilities of nanoFlowcell®, especially as discussions on the feasibility of "modern" electric mobility and its chances of sustainable success are proving particularly controversial.

The QUANTiNO nanoFlowcell development vehicle with nanoFlowcell® drive on a test drive in the centre of Zürich.

The Swiss R&D company is certain that the flow-cell based nanoFlowcell® will free mobility from its dependence on fossil fuels and current battery systems, both of which demand too many compromises from drivers and manufacturers alike as energy sources for electric vehicles. With nanoFlowcell®, electric mobility is therefore not simply a "cool" gadget for the premium segment, but also a feasible and affordable technology for use in everything from city cars to heavy trucks.

Will this disruptive process help electric mobility achieve a breakthrough? At least the nanoFlowcell® drive system offers a performance-equivalent alternative to modern internal combustion engines in cars, ships or trains, as well as a safer, more user-friendly and environmentally responsible technology than the lithium-ion batteries currently used in modern electric vehicles.

Yes, nanoFlowcell® is a disruptive technology impacting the market for mobile energy storage, fossil fuels and internal combustion engines. A Tesla with nanoFlowcell® drive would be lighter and safer; it would have greater range and be more affordable, too. Yet the company would not be a "disruptor".

nanoFlowcell® is not a technology that forces car makers from the market, per se, nor one that wishes to compete with them. Rather, nanoFlowcell® presents car makers with the opportunity to meet the needs of their customers for vehicles that are environmentally friendly, innovative and affordable, without the need for compromise in performance, safety and comfort.

Just as a phoenix rises from the ashes, electric mobility as we know it today will be replaced by a nanoFlowcell®-based electric mobility that actually meets the needs of the market.

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