Creating a ‘Ripple in the Force’ of the Power Industry

Working with many early stage inventors, I often have the privilege of seeing some truly remarkable inventions and innovations. A few days ago I was shown a technology that snugly fits into that remarkable category, one that has the potential to radically transform the way cars and other vehicles are powered. In fact, vehicles using this power source will never need to stop and refuel.

I’m not at liberty to explain this technology in detail, but using this power source to fuel what is otherwise an electric vehicle, these cars will have 70% fewer moving parts – no ignition, gas tank, oil filter, catalytic converter, or muffler – and in this case, a highly efficient, non-traditional battery that will outlive the life of the rest of the car.

The best part is that it emits as close to zero pollution as we may ever hope to get.

After seeing this stunning new technology I had to take a step back and assess its true potential. It provides tremendous advantages on every front. Easy to manufacture, simple to understand, while being less expensive to build and operate, it has the potential to operate virtually maintenance free for decades.

On the surface it sounds too good to be true, but rest assured, it does exist. It offers a breakthrough tantamount to nuclear fusion.

However this is not a column about this particular technology. Rather, it’s about disruption, and whether or not a startup like this can ever hope to dislodge the existing power-brokers in the oil, gas, and automotive industries.

Disruptive Innovations

The term ‘disruptive technologies’ was coined by Clayton M. Christensen and introduced in his 1995 article “Disruptive Technologies: Catching the Wave”.

A disruptive technology is an innovation that helps create a new market and eventually goes on to disrupt an existing market by displacing an earlier one.

As Christensen explains, the automobile was a revolutionary technological innovation, but it was not, in itself, a disruptive innovation. Early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. The market for transportation essentially remained intact until the debut of the lower priced Ford Model T in 1908. The mass-produced automobile became the disruptive innovation, because it changed the transportation market. The automobile, by itself, was not.

Nervous CEOs

We have seen many examples of industries that have had the rug pulled out from under them recently, and virtually every CEO and industry executive has their sensory radar tuned to sniff out anything that may seem even remotely disruptive.

With technology advancing on nearly every front, the nervousness that CEOs now feel is quickly turning to heightened paranoia.

Maximum Freud

In 1972, I was young engineering student at South Dakota State University in Brookings, SD. One of the first courses I was required to take was a short-course on slide rules. For those of you who don’t know what a slide rule is – first came the abacus, then came the slide rule, and then came the calculator.

This was a time when the real “cool geeks” on campus walked around proudly displaying their black carrying case for their slide rule that was attached to their belt.

Early calculators were first showing their face around 1970, but in 1972 they were still pretty expensive. I remember arguing with my teacher about whether or not the slide rule course was necessary and his dismissive response was that “all engineers need to know how to use a slide rule.”

Of course his short sighted thinking couldn’t have been further from the truth. Even though I took the course and passed it with flying colors, I’ve never used a slide rule to do engineering work (or any kind of work for that matter).

Engineers at Hewlett Packard and Texas Instruments who were working on next generation calculators at the time would have laughed at my teacher’s assertion that slide rules were always going to be the centerpiece of an engineer’s tool kit.

Clearly this period of time was the end of an era. It was the end of the slide rule era and the beginning of the calculator era.

As a society we haven’t been a part of ending  too many eras, but we are on the verge of experiencing the disappearance of many societal norms in the near future.

So I sketched out the simple diagram below showing the end of one era and the beginning of another. The point where the two eras overlapped caught my attention. This time period was important to isolate because of the disruptive nature that a collision of business forces creates.

For this reason I came up with the name “Maximum Freud” to describe it. Yes, it’s a rather wacky name, but it makes sense.

Maximum Freud is a period of extreme chaos, but also a period of extreme opportunity. When technologies approach a Maximum Freud cycle,  industry players spend a lot of time on the Freudian Couch to understand what’s going on.

But here’s the most important part to remember: All technologies end.

Each and every technology that we use today will eventually go away and be replaced by something else. Every technology will approach its own period of Maximum Freud. So from the standpoint of making bold predictions, the impending demise of even our most foundational technologies will happen over time.

Our Morale Obligation for Creative Destruction

Taking this discussion of disruptive technologies a few steps further, a growing number of people feel it is our moral obligation to disrupt, even destroy, existing businesses and industries.

This argument focuses on the growing societal debt we are incurring. With the growing debt created by our financial institutions and the rapid depletion of our natural resources, we are mortgaging the future of not only our children, but also many generations to come.

A huge undercurrent of social unrest is brewing, filled with righteous anger, and a growing awareness of corporate misdeeds, waiting for the right opportunity to take action. When this prime opportunity comes along, they intend to vote with their pocketbooks and take action with technology.

This is a generation that is not shy about their intentions. They intend to declare war on the past.

Unfortunately, the Best Technology Rarely Wins

Even with the viral nature of the Internet, rapid communications, and a brewing caldron of social unrest, it is extremely difficult to disrupt an existing industry.

Existing industries have an employee base, investors, vendors, customers, and users that may consist of millions of people. These are people who are comfortable enough with where they are today and have formed a natural resistance to change.

This change-resistant population creates a formidable inertia to maintain the status quo. For this reason, even holy-grail technologies like superconductors, cures for cancer, anti-gravity, or human teleportation will go through a somewhat lengthy adoption curve.

In addition to natural resistance, we also see aggressive tactics used to bolster a company’s current position. Welcome to the world of so called free enterprise.

Much like a messy political campaign, well-established companies resort to a number of “dark side” business practices to keep an upstart at bay:

• Discredit the technology
• Discredit the company
• Pose counter-claims
• Use credible people to “say it ain’t so”
• Distract people from the truth
• Discredit or dislodge the founders
• Use legal maneuvers to keep them tied up in court for decades

The startup company I referred to above is currently looking for a CEO to help guide their efforts and steer clear of these “dark side” pitfalls. They are looking for someone who has guided a rapid, high-growth company from zero to a billion dollar industry. Only a handful of these wunderkind currently exist and if an added criteria is that this person has to have done this in the power industry, the number of viable candidates drops to zero.

Up till now, no one has been able to dislodge the existing power structure of the power industry. It is entrenched, ingrained and the infrastructure is in place.  But how long will can they hang on to this dominance in the future when companies start thinking outside of the existing lines of power?

When will some new technology become the silver bullet that causes the industry giants to collapse?

Giants are Falling

Twenty years ago it seemed inconceivable that any of the major newspaper companies  could fail, yet that is exactly what happened.

In a similar fashion, book publishing, big tobacco, major retailers, the auto industry, and the Yellow Pages have all been severely wounded by a new breed of visionaries.

Thinking about it though, is the big differentiator the technology or the people driving it?

If Steve Jobs had never lived, would we still have the iPhone and iPad today? Similarly, if Walt Disney, George Lucas, and Pete Diamandis had all taken jobs on Wall Street instead of living their lives as true innovators, would we still have Disneyland, Star Wars, and the X-Prize Foundation today?

To put it more succinctly, if the visionary never existed, would we still have the industry?

Certainly, if Edison hadn’t invented the light bulb, someone else would have. In many cases, inventors have lost out on a patent because of mere minutes separating the timestamp on a patent. So the invention was destined to happen regardless of whose name showed up on the patent, right?

Not so fast.

The systems we create help define the kind of people who will naturally rise to the top. And these leaders of innovation have decidedly different approaches for making things work.

So who’s next?

The most entrenched industries today are what I call “the big eight” – banking and financial services, big pharma, healthcare, higher education, insurance, telecom, oil and gas, and the power industry. The number of laws and systems used to bolster their position make them far more difficult to disrupt.

However, difficult does not equate to impossible. Over the next 20 years every one of these industries will inevitably see the rising tide of disruption reach their doorsteps.

In fact, society now feels it has a morale obligation to disrupt each of these industries.

Niche Markets to Start

Even with a massive wall of change-resistant inertia, a disruptive new technology can find a lucrative niche to begin with.

When the two-wheeled Segway came onto the scene in December 2001 with much fanfare, the upstart company was quickly confronted with a wall of resistance that would keep them in the novelty product category until they were able to find viable niche markets selling to police departments, security companies, and golf courses.

Today, even though they remain a tiny segment of the transportation industry, they are a profitable company.

Going back to the tiny startup mentioned above that is threatening to disrupt the entire auto industry, they too will initially need to search for niche markets that are accessible, profitable and open to change.

Here are a few that might fit in that category:

• Electric RVs – For an industry that epitomizes the squandering of natural resources and is highly susceptible to volatile gas prices, any new innovation that would cause operational costs to plummet would be welcomed with open arms and create an industry renaissance.
• Electric Mail and Delivery Trucks – Vehicles that spend their day negotiating through stop and go city traffic to deliver mail, pizza, and other supplies are also a prime target for this technology.
• Electric Boats – Traveling across the water in a loud and noisy, highly polluting boat is already an unwelcome intrusion to the tranquil nature of open water. Adding a silent, pollution free alternative would be quickly embraced by the industry.

This is but a short list of possibilities, where many more are likely to exist.

Final Thoughts

Regardless of your thinking, whether disruptive technology is more about declaring war on our past, simply a golden opportunity for the moment, or part of our larger quest for creating a better future, we have a morale obligation to disrupt the status quo.

In much the same way our legacy systems create an ongoing toll on society, the inefficiencies of our past, and the excessive cost of doing business that they represent, keep us anchored to a former life we desperately need to escape.

Will the technology I talked about at the beginning of this article, with its massively disruptive potential for reforming the entire power industry, ever see the light of day? The short answer is yes.

It certainly won’t happen as quickly as it needs to from an ecological standpoint, but from an economical, industry-disrupting, old-jobs-destroying-new-jobs-creating standpoint, it may happen too quickly for the world to properly shift gears. Therein lies the dilemma.

In the mean time, I’ll be rooting for the little guys.