Commercializing Disruption & The
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COMMERCIALIZING DISRUPTION & THE POWER OF PASSION In the Emerging Fuel-cell Industry by Amaury Laporte 2001 A dissertation presented in part consideration for the degree of MA in Strategic Management In memory of my father, François Laporte, who dedicated his life to the Third World’s development. May fuel-cells give these countries the boost they sorely need. ACKNOWLEDGMENTS I wish first of all to thank my friends and family, for their patience and their insistence that I not spend my entire summer in front of a computer screen. And a special thanks to Mortimer LeBigre for the picture! I must of course particularly thank my supervisor, Professor Joseph Lampel, for his invaluable guidance and support. Last, but by no means least, my heartfelt gratitude goes out to all those who took the time to answer my questions. I must acknowledge a particular debt to Paul McNeill, of H Power, for his insights on the question of passion. Summary It is suggested that firms commercializing disruptive innovations must address six key needs (the need for merit, the need for government support, the need for champions & visionaries, the need for cooperation, the need for niches and the need for speed) in order to achieve success. The validity of this framework is analyzed using the fuel-cell industry as a case study. The author concludes that though the first five needs are indeed present in the fuel-cell industry, their importance varies, both in relation to one another and with time. The importance of the sixth need, the need for speed, cannot yet be determined, as fuel-cells have yet to be widely commercialized. During his research, the author realized that passion, which is prevalent in the fuel-cell industry, could be considered a strategic resource. The second part of this dissertation thus focuses on elaborating a framework for the analysis of passion as a strategic resource. The author concludes that further empirical research is needed, and emphasizes the need for management scholars to undertake more research on the question of emotions in general, as these are chronically ignored although they are likely to play a crucial role in the business world. TABLE OF CONTENTS I. INTRODUCTION. .............................. -7- 1. The Promise of Fuel-cells .............................. -7- 2. Fuel for Thought ..................................... -9- The Emergence of Welfare-Maximizing? The Influence of Individuals 3. Research Objectives ................................. -11- First Research Objective: Demonstrating the Six Needs Second Research Objective: Exploratory Research - The Power of Passion II. METHODOLOGY ............................. -13- 1. Research Focus ..................................... -13- 2. The Exclusive Use of Qualitative Research. .............. -13- 3. Interviews .......................................... -14- Necessary Trade-offs Contact Procedure Results 4. Press Reviews ...................................... -16- 5. Caveat: Researcher Bias ............................. -17- III. COMMERCIALIZING DISRUPTION & THE SIX NEEDS ......................................... -18- 1. What is radical innovation? ........................... -19- A Variety of Ways to Consider a Complex Phenomenon Competence-Destroying Innovation Synthesizing it All Radical Innovation is Different and Neglecting it is Downright Foolish 2. Obstacles Abound on the Path to Commercializing Disruption ................................................ -22- The Lock-In Phenomenon The Lack of Legitimacy The Six Needs 3. The Need for Merit. .................................. -25- Research Objectives 4. The Need for Government Support. ..................... -26- The Rationale for Government Intervention Two Possibilities: Supply-push And Demand-Pull The Dark Side of Government Research Objectives 5. The Need for Champions and Visionaries ............... -30- Champions & Visionaries: Sharing the Same Spirit but not the Same Goals Three Flows for the Emergence of a Vision Overcoming Inertia Nurturing Champions and Visionaries Research Objectives -1- 6. The Need for Cooperation ............................ -34- A. Incumbents Need to Cooperate ............................ -35- Three Ways for Incumbents to Deal with Radical Innovation B. Innovating firms need to cooperate ........................ -36- Acquiring Legitimacy Enlisting Incumbents C. Everyone needs to cooperate ............................. -38- Technology Can No Longer be Developed by a Single Firm The Tension Between the Need to Cooperate and the Need to Protect One’s IP Research Objectives 7. The Need for Niches ................................. -40- Catch 22 An Abundance of Definitions but an Absence of Empirical Research The Attributes of an Ideal Niche: the Importance of Indulgence The Importance of Careful Market Selection & Discipline Research Objectives 8. The Need for Speed? ................................. -44- A. First-Mover Advantages .................................. -44- Barriers to Entry Branding & Network Effects B. First-Mover Disadvantages ............................... -46- Taking on Most of the Initial Risk and Uncertainty Leads to Pioneer Burnout The Precariousness of First-Mover Advantages (No Guarantees) C. The Need for Speed or Patience’s Payoff? ................... -47- Free-riding Research Objectives IV. A CASE STUDY: THE FUEL-CELL INDUSTRY .................. -49- 1. A Disruptive Technology Seeking to Conceal its True Nature. ................................................ -49- The Radicalness of Fuel-Cell Technology From a Manufacturing Point of View The Radicalness of Fuel-Cells From a Consumption Point of View The Need to Wear Sheep’s Clothing 2. THE NEED FOR MERIT: Do Fuel-cells Merit Commercialization? ................................................ -52- A. Strengths and Weaknesses of Fuel-Cell Technology .......... -53- Strengths Weaknesses The Future is Bright B. The Merit Test .......................................... -55- Inventive & Embodiment Merit Operational Merit Market Merit Conclusion: Undeniable Merit 3. THE NEED FOR GOVERNMENT SUPPORT: Are States Playing their Part? ........................................... -57- A. Pushing Fuel-Cells ....................................... -57- The Early Days: Submarines and Space Shuttles Heavy Funding Continues in the US... ...And in the Rest of the World as Well All the Companies Studied Have Benefitted from These Funds -2- B. Pulling Fuel-Cells ........................................ -61- Government Procurement is Minor at Present, but the Potential is There Generous Subsidies Giving The Invisible Hand a Nudge in the Right Direction Environmental Regulations The Deregulation of Electric Utilities C. Government-led or initiated cooperation .................... -66- D. Government Support Was Crucial - And the State Could do More. -67- Extended Hands What the Government Must Still Do: Five Worthy Policies The Need for Self-Reliance Will Prevail Conclusion 4. THE NEED FOR CHAMPIONS AND VISIONARIES: A Driven Industry. ........................................ -71- A. The Prevalence & Importance of Visionaries in the Fuel-Cell World ................................................... -71- Sprouting Up All Over the Place Consensus on the Importance of Visionaries in the Industry A Selection of Key Visionaries The Heavy-Weights B. All Three Flows of Visioning are Present in the Industry ........ -75- The Second Flow of Visioning: the Vision Comes From Initial Involvement The First Flow of Visioning: the Initial Vision Leads to Involvement The Third Flow of Visioning: Flexibility in Action C. When Vision is Replaced by Reason ....................... -78- Followers are Becoming More Frequent The Search for Synergies D. The Importance of Visionaries Should not be Exaggerated ..... -80- Visioning is a Complex Process but can be Guided by the Analysis of Merit The Importance of Visionaries Varies in Time The Need for Visionaries can be Ignored by Individual Firms Passion and Vision 5. THE NEED FOR COOPERATION but Cut-throat Competition Endures ......................................... -83- A. Times They are a Changin’ ................................ -83- A Previously Close-Knit Community Imminent Commercialization Discourages Cooperation Cut-Throat Competition B. But some form of cooperation remains vital ................. -85- Cooperation is Necessary and Will Undoubtedly Occur Nobody has Everything it Takes to be Successful C. Horizontal cooperation ................................... -87- Not as Prevalent as Suspected Large Companies Favor Joint-Ventures D. Vertical cooperation ..................................... -88- The Importance of Cooperation Along the Value Chain Examples of Vertical Cooperation Comical Complexity E. Industry Associations and Councils ........................ -91- Multilateral Cooperation The US Fuel Cell Council F. Conclusion: Cooperation is Definitely a Critical Need. ......... -93- Innovating Firms Seeking out Incumbents, and Privileging Vertical Cooperation Cooperation is Taken Very Seriously But Competition is Never Far Away -3- 6. THE NEED FOR NICHES: A Bottom-Up Approach ......... -95- A. Thinking Big but Acting Small ............................. -95- Some Companies are Thinking Big But in Reality, They are Targeting Niches as Well B. Five Categories of Promising Niches ....................... -98- Environmental-friendliness Reliable power Remote areas Developing countries Efficiency & heat generation C. PowerTek International, taking niching to new heights ........ -101- An Early, and