Monday, May 14, 2012

What "The Innovator's Dilemma" has to tell us about electric motorcycles...

Last week was a good week for traffic on my blog -- largely because my sarcastic post about the FIM creating a new, one-rider SuperLeague for Casey Stoner got hundreds and hundreds of hits when it became a topic for serious discussion on a big bulletin board. What would I have to write, for people to just know it was a joke?

Anyway, with that many gullible nitwits out trolling the net for motorcycle news, I am probably wasting my time with this serious observation about the emerging electric motorcycle category. (N.B. For once, I used a word other than 'nascent' to describe the e-bike phenomenon.)

Over the last week or two, I've noted the following bits of news from the e-moto world...

  • The Brammo Empulse R was revealed, and it emerges that it will cost about $3,000 more than a BMW S1000RR.
  • The first North American TTXGP race took place but nobody came. OK, two teams entered three bikes. Two bikes started; one bike finished.
  • Daimler has promised to begin producing the Smart electric scooter by 2014

This costs as much as...

...this. The BMW is completely dominant by any measure. Does Brammo really think the Empulse R, at almost twenty grand, can be anything other than a rich tree-hugger's bauble?  
The first two items obviously relate to the high-end sportbike segment of the market -- a segment that, to date, really doesn't exist at all. Still, it's seductive to think of electric bikes coming along and jerking the filthy, polluting rug out from under the hidebound ICE sportbike world. Even I've been caught up in the hype that this will be the year an electric bike laps the TT course at 100 miles an hour.

But. Come on...

Brammo's still talking about 'over 100 mph' and '121 mile city range' in their press releases. Trust me, this will not be the bike that makes range anxiety a thing of the past. Ex-Zero brainiac Neal Saiki has a post on his web site about the skewed results for EVs in 'city' mileage tests.

For the price of the Empulse, you could buy the BMW, and cover all of your operating costs for a couple of years -- years in which you'd have an incomparably superior riding experience in every way. And what will really have been proved when the Mugen laps the TT course at 100+ next month? That it's as fast as a Manx Norton was 50 years ago, with half the range. And that if you could buy it, it would be an order of magnitude more expensive than the Manx was (corrected for inflation.)

Proof that I respect some Mormon Republicans. And yes, I'm aware that adding 'Republican' to 'Mormon' is redundant. 
All this leaps to mind because I was reminded of the theories of management guru Clayton Christensen when I read his profile in this week's New Yorker.

Christensen's book, 'The Innovator's Dilemma' is the most important business book written since the invention of the integrated circuit. Steve Jobs described The Innovator's Dilemma as one of his profound influences. Christensen coined the term 'disruptive technology,' and is -- at least arguably -- the expert on the adoptions of new tech that, uh, disrupts established sectors of the economy.
For the visual thinkers... I'd draw the red line slightly steeper, to acknowledge that at some point in the future it will likely pass, performance-wise, the technology being replaced -- that's true if only because the disruptive technology will, eventually, get the R&D spending. Or, here's a perhaps oversimplified take on it...

Christensen's take on disruption is that it follows a predictable arc, which is not dependent on the category being disrupted. He's studied examples from industries as varied as steel mills and steam shovels to hard drives and transistor radios. (The Honda Cub step-through was one of the disruptive technologies he identified and studied, too.) And in the Christensen model, the way disruption happens is that new technology displaces old technology at the bottom of the market, while it is still clearly inferior to the best of the previous tech.

The low-performance/low-price portion of the market is often happily ceded by established companies dominating the old technology, who think, We don't want to make that crap anyway.

Then, two things happen over time... First, the cheap new products attract a whole new group of consumers to the market. The first Sony transistor radios were cheap and portable, but their reception and sound quality was atrocious. Companies like RCA, that were in the radio business -- where are they now? -- didn't feel threatened by Sony at all. RCA couldn't imagine anyone buying a Sony, no matter how cheap, instead of an RCA tube radio, because the performance gap was so huge.

What RCA didn't see coming was that there was a huge, new market for radios. Teenagers, who were on the move, and wanted to listen to rock and roll music that their parents (who controlled the RCA) couldn't stand. They bought transistor radios by the million. That enabled the second thing to happen, which was -- those new customers funded R&D that enabled transistor radio performance to improve, and supplied a huge pool of consumers who, as they became more affluent, stuck with the technology they were familiar with.

If Sony had decided to go head-to-head with RCA, going for RCA's performance and price right away, it would have failed miserably. Honda, with the Cub step-through, also carefully avoided competing with the likes of Norton. At the beginning, Honda wasn't even going after motorcyclists at all.
At some point in the future, we may look back and say, "Remember when electric motorbikes stole a march on the old fossil-fuel-powered bikes?" The bikes that disrupted the old regime will, I'm betting, be more like this one.
That's why, after mulling it over, I think the news that Smart will produce its innocuous urban runabout is far more significant than the unveiling of the Brammo Empulse R. If Christensen is right, it's vehicles like the Smart that will prove to be the real disruptors. It won't matter that they offer dramatically worse performance than comparable ICE bikes, because they'll create their own completely new market.
I don't know what the Smart will sell for, but you can be sure it will be a fraction of the Brammo's price, and if Daimler is, well, smart, they'll lower performance as far as they need to, to sell it at a price that undercuts every other autonomous, motorized option.

The lesson from The Innovator's Dilemma is that change, when it comes, doesn't come from knocking off the top of the market and trickling down. (Where's Mission, by the way?) Change comes from knocking off the bottom of the market, and bubbling up.


  1. How does Apple fit into that narrative?

    1. Bearing in mind that of the three disruptive products they've introduced in the last decade (iPod, iPhone, iPad), only the iPad can really be described as "knocking off the bottom" of the slate market.

  2. Christensen admits that he predicted the iPhone would fail. Later he said his mistake was, failing to realize the iPhone disrupted laptops, not phones.

    My take on the Apple vs MS dialectic is not that Apple attracts the people who want to pay less money, but rather the ones who want to pay less in time and frustration.

  3. I second that. I bought the I-phone not to use it as a phone, but to be able to work on it (email, reading word and pdf documents, etc.) while traveling. I hate carrying my heavy laptop with me, so the I-phone took care of that. The I-pod also came in creating a new market, which allowed for "free" or cheap downloading from the web to your laptop and carrying a massive amount of music files with you. Only a laptop could do that, so it wasn't a real competition with portable CD players or Walkmen.

    As much as I love the idea of Brammo's Empulse and I think it's a cool product for what it is, I am sure that in most urban centers, a cheap good-looking electric scooter will outsell any electric motorcycle by 10,000 to 1.
    Expensive electric motorcycles are an elite-targeted product, like any other very expensive product (duh!). By failing to include the middle-class in its audience, Brammo might have priced itself out of the larger market. In that case, they would have been better selling the product for huge profit margin, after all, rich people buy curiosities because they are curious, not because it costs $20K or $40K...
    Brammo's Enertia could be a better product, but the Enertia Plus still is overpriced for what it offers, especially without the federal rebate.

  4. I live in Brooklyn, NY, where electric "bicycles" are suddenly disrupting several markets, and likely to continue...