MIST 7500 - Fall 2013 G1; Trending technology and disruptive innovation

Innovation is the commercialization of an invention. Our society is based on innovation, technological advances and the adoption of these technologies. There have been many theories and models used to analyze innovation over the years. The Austrian economist Joseph Schumpeter pioneered innovation management in the 1930's. He theorized on how the capitalist system was affected by market innovation. His book "Capitalism, Socialism, and Democracy" spawned increased awareness into this theory.

Over the next six decades, more analyses and models surfaced which refined his theories. Incremental vs. Radical Innovation, the Henderson-Clark Model, and the Abernathy-Utterback Model (to name a few) led to the 1997 best-seller "The Innovator's Dilemma" written by Harvard Business School professor, Clayton Christensen. Christensen studied how innovation can lead to a disruption in the marketplace that can either benefit the incumbent (sustaining innovation: improving an existing product) or allow new competitors to gain a foothold in an existing market (disruptive innovation: An alternative, usually cheaper, that brings new customers to the marketplace).

We were tasked with researching a trending technology and applying one of these models. I chose energy storage based on a professional document written by the McKinsey Global Institute (MGI). Scientists have been working on energy storage since the 1700’s (approximately a century before electricity became widely used). Today the technology has grown leaps and bounds since its inception. lithium-ion (Li-ion) batteries have become the mainstay in electric and hybrid vehicles, and mobile electronic devices. Advances in energy storage could bring the cost of electric-powered vehicles (EV) down to a more competitive price point against its internal combustion (ICE) brethren. It could also allow electricity to be offered to remote parts of the emerging world and increase the efficiencies of existing power grids in industrialized society. Energy storage systems convert electricity into a form that can be stored and converted back into electrical energy for later use, providing energy on demand.

The traditional ICE automotive industry stands to be disrupted by breakthroughs in energy storage. Major advancements in battery component technologies are expected to increase storage capacities by 2025. Next generation cathodes (the positive terminal on the battery) incorporate a “layered-layered” structure which will increase chemical efficiencies within the battery as well as voltage outputs. Cell capacity could increase by 30-50%. Total cost of ownership is expected to drop from $560 kWh (in 2011) to $165 kWh. Also, more efficient production processes will lead to the reduction in cost to manufacture EV cars. Based on these efficiencies, future EV cars could have a break-even point with their ICE counterparts when gas prices are at $2.85/gallon. Given these factors, the potential economic impact in the automotive industry could be approximately $415 billion up from the current $20 billion market.

I used Christensen’s Disruptive Innovation model to analyze energy storage. I feel that once the energy storage costs drop and performance levels increase to eclipse the efficiencies of ICE vehicles, customers will flock to the reduced total cost of ownership that will be realized from an EV. It will be a “low end disruption”, because the shift will occur as the improvements are proven to the mass consumer.

Our grandchildren’s generation could very well be the last generation to utilize ICE technology in their daily-driven vehicles. All we have to do is embrace the technology and shift our confidence in proven energy storage technologies to those of the EV.