By Mike Calise
Will electric vehicles reach mass adoption in the U.S.? When and how? What should come first, the manufacturing of more EVs or the installation of the EV charging infrastructure? These are questions that have occupied many people's minds and many newspaper headlines in recent years.
To begin to really answer those questions, we must look to the concept of disruptive innovation. A disruptive innovation is an innovation that helps create a new market and eventually goes on to displace an existing market, or targets the existing market by picking off the least satisfied customers. Disruptive innovations typically describe technologies or business models that improve a product or service in ways that the market does not expect, first by designing for a different set of parameters or customers and, later, by competing in the existing market, thereby displacing the established product or service over time.
The most well-known historic example of disruptive innovation is also about cars: when the Ford Model T reached mass production and eventually went on to displace the horse-drawn carriage. More modern examples are how e-commerce sites have disrupted brick and mortar bookstores and travel agencies, and how downloadable music has replaced CDs and players. Even right now, the e-book is starting to replace the physical book.
Take a closer look and you'll see all disruptive technologies have certain characteristics in common. Initially they often resulted in worse performance than the established product or service and were often rejected as a viable challenger. Here are some classic sayings: "I need the tactile feel of my cell phone keypad." "My personal travel agent is invaluable to me." "But I love to flip the pages of my favorite novel." "I won't give up the sound of my Mustang." I suspect there were more than a few who said: "You just can't replace ol' Nelly with a piece of machinery..."
Which is to say: It takes more than just an innovative device to change the game. People aren't usually excited about change. It takes a supporting cast of integrated complementary technologies and infrastructure build-out. It takes partnerships from vested stakeholders, scalable manufacturing, and favorable policies that when all combined together, ultimately create the disruptive business. They become a game changer because innovative businesses deliver certain benefits that their entrenched competitors didn't have and in the end deliver the basics: The new product is simple to use, cheaper, or more convenient.
In the case of the Ford Model T, it wasn't just the impressive design. It took mass production to bring down prices and increase availability. Roads, highways, and gas stations were built, making car ownership the simple and convenient choice for more of the masses. E-books became accessible once a marketplace was established offering consumers device choices, combined with a robust secure e-commerce system, and partnerships with publishers making more titles available and price points competitive, and even distribution rights laws and settlement agreements. Access became simplified: Why go to a store when you can download a book in seconds? As adoption soars, e-book copies are now starting to displace paper books.
EVs today represent a revolutionary technological innovation, but have yet to reach disruptive status. While early adopters are enthusiastically buying EVs, many other consumers are hesitant to switch from gas-powered, internal combustion engine (ICE) vehicles to EVs due to the upfront costs of the vehicles and lack of availability of a ubiquitous charging infrastructure.
With global energy demand expected to double by 2050, and the need to cut CO2 emissions in half to prevent dramatic environmental impact, cleaner transportation like EVs will play a critical role in creating a more sustainable and energy-efficient future. What will it take to see if EVs are just an incremental technology improvement called sustaining innovation or disruptive for the car market? If we apply historical models, EVs will disrupt the incumbent ICE when the following criteria are met:
Vehicles sit in the "parked state" most of their lives. Once charging infrastructure is everywhere, drivers will be able to easily charge from their homes, workplaces, retail, and virtually all places that cars are normally parked. The concept is simple: Think about coming home and plugging in your car the way you plug in your cell phone, and leaving each morning with a full tank. That works if you live in a single family home with a garage, but many live in apartments or condominiums. Having access to DC Quick charging off major highways will allow confident purchases of pure battery electric vehicles for longer distance drives. Ubiquitous charging and DC quick charging will extend the effective range of EVs. Most consumers will see EV advantages when they see ubiquitous availability of charging.
Not everyone is satisfied with the gas-powered experience. Lately, most drivers are very dissatisfied with the costs to fill up and their car's MPG rating. But the upfront cost of EVs are more than ICE vehicles. Many find it hard to look past the sticker price and do the math for the longer term cost savings of EVs. As more manufacturers enter the market, technology continues to improve, and manufacturing scales, the upfront cost of EVs, will also go down and enable further adoption. EVs will pick off the most dissatisfied consumers first, and then grow from there.
Especially in urban environments, there is a volume of consumers that prefer not to own a vehicle because of the environmental impact, infrequency that they need to drive, or other factors. Many of these drivers turn to carsharing services when they need a car. As carsharing increases in popularity, it provides a new sales platform for EV manufacturers. Fleet owners are another important customer base for EV manufacturers to consider, as cost of operation is the lifeblood of that industry. As more fleet style vehicles are offered as plug-ins, fleet managers will adopt them because the total cost of operation for an EV is highly compelling.
EVs help reduce carbon emissions, which will lead to a more sustainable, energy efficient future while reducing air pollution. They offer longer term cost saving benefits for consumers, and they direct consumer fuel spending to cheaper domestic produced energy vs. foreign sources. They have fewer moving parts so they are cheaper to maintain, very convenient to fill up, often safer, and very fun to drive. As in all disruptive technologies, as more people become more exposed, the innovation will start to gain momentum and challenge the incumbent.
Since all these criteria are gaining momentum, it's clear that EVs are on a trajectory to becoming a disruptive innovation. Electric motors are inherently simpler and there's no need for a traditional transmissions. EVs are already more efficient and increasingly more convenient to fuel up. As more charging infrastructure is installed, EVs' effective range will be increased, and as manufacturing of EVs grow, increased choice will bring prices down.
Once EVs are simpler, cheaper to own, and more convenient, they will almost certainly have a disruptive impact on our society, just as the Ford Model T did. At that point ol' Nelly--the gas powered Mustang--might just be put out to pasture...
Copyright 2012 by Fast Company. Reprinted with permission.