Matching Collaboration and Conformity
Horace Dediu, 11/3/2016
(This is Part 4 of a multi-part series by Horace entitled "Modular Revolution." The first entry is here, the second is here, the third is here.)
Rather than looking at the problem from the top-down, let’s examine it from the bottom-up. In reality, being “good” isn’t part of the adopter’s or producer’s decision process. The process of producing and purchasing is not judgmental, it is however logical.
Let’s break the problem of adoption into two sub-problems. One from the customer's point of view and the other from the producer’s point of view.
From the customer, we need to ask if what is on offer is easy to accept. Goodness is on offer all around but because buyers with the means to buy are usually fully allocated time to use and time to learn is scarce. In other words, we have to ask whether hybrid technology is “conformable” to existing, manifest behavior. Buyers typically accept complex solutions slowly and only if they have dramatic (systemic, or across-the-board) positive impact on their lives. These complex, system-wide solutions come at typically high costs. Conversely, buyers accept simple solutions quickly when they have minimal negative impact on their lives even if they have marginal positive impact.
For example, education is complex, time consuming and inflexible. It also has systemic impact and transformative power. Customers therefore shop for education rarely and only obtain the minimum amount necessary. Alternatively, television programming is simple, conforms to their schedule and is flexibly delivered. It has mild effects but does not change lives. Customers therefore absorb hours of it every day and would be uncomfortable doing away with it for even a few days. TV conforms while education doesn’t. TV is quick to be adopted, education is irritating.
From the producer, we also need to ask if what is on offer is easy to accept. Does this technology present itself in a way that it is easy to adopt into an existing production or distribution network. In other words, is hybrid technology easy to build and easy to sell? Is it delivered through a value network that enables plug-compatible sourcing? Producers typically accept technology solutions slowly if they have to do the development themselves or if they have to build new supply chains, or if they have to insource problem solving, or if they have to create new distribution networks. Conversely they accept technology quickly if it’s “on-the-shelf” and provided by existing suppliers and sold through existing distributors, delivering similar margins through similar cost structures.
As we desire rapid adoption for hybrid technology, we have to ask if it’s conformable or systemic. Is it delivered through a collaborative network or as an integrative leap? In other words, it easy to buy and easy to sell? Is it essentially modular?
In studying over one hundred technology adoptions, our research has shown that conformable and collaborative solutions expand industries and are quickly adopted while systemic integrative solutions create industries but are slowly adopted. So much so that we have not found any slow modular technologies or any fast integrated ones.
Through this lens we can ask what are the attributes of hybrid technologies which cause it to be slow.
From the consumer’s point of view, hybrid cars are eminently conformable. Far more than electric cars and, at least in the US, more even than diesel cars. There is no change in behavior necessary to use one. It takes no more time to learn, no more space to park, no further to travel to fuel it, no more money to own it and no more anxiety to live with it. The car slots perfectly in the existing way people live their lives. This conformability allowed the hybrid car to be “a module” in the way it fits with the potential buyer’s intentions. The car has natural, well understood interfaces to the buyer’s other considerations. High grades then on conformability.
It’s when we look at the offering from the producer’s point of view that the problem appears. Recall that hybrid technology was under development by Toyota and Honda for decades. The reason is that the addition of an electric motor to the gasoline powertrain is non-trivial and has consequences throughout the vehicle’s design. The transmission has to be re-designed. The starter, the accessories and the control systems have all to be re-designed. Toyota even eventually styled the car in a unique way. As a result, hybrid is anything but plug-and-play for a manufacturer.
The problem for the average automaker is that if they don’t have the technology in-house they cannot source it. If they can’t buy it then they can’t build it. There aren’t any suppliers they can turn to who have this technology on the shelf. Contrast this with the high speed adoption of disc brakes, air conditioning, in-car entertainment, radial tires, electronic ignition. and even diesel technology. Suppliers quickly built capabilities to deliver these components as “modules” to manufacturers and allowed them to be inserted into an existing production and distribution system. Hybrid technology has “systemic impact” within the whole value chain. It is integrative and it is not modular.
Toyota has developed this technology at great expense in time and money and is, understandably, unwilling to license it. In the US, Toyota has approximately 80% market share in hybrid technology (See Graph 4).
Any other manufacturer who climbs the hybrid learning curve is similarly protective of their results. This concentration of learning also explains why in Japan hybrid technology has taken off. Toyota and Honda have far greater market share there and are able to saturate the sales channels with it. Even so, after 18 years only 30% of sales are hybrids.
Rapid adoption of a technology requires a modular approach. This is nothing more than stating that it requires collaboration. Collaboration not just in terms of supplier components but also in manufacturing, distribution, sales and support. Collaboration is exhibited in the creation of ecosystems and in the post-sale network effects. Collaboration can reach extreme degrees where the more you look the more you see. It recurses and fragments problems into atomic parts.
The absence of modularity does not mean that adoption fails to happen, just that it does not happen quickly. Modularity is a qualification of speed.
We also take the point of view that modularity spans into two domains: the supplier and the consumer. As supplier collaboration couples with customer conformability, modularity exhibits the essential push and pull which drives adoption.
By observing the causal forces acting on a technology we can be more precise about how quickly it will be adopted and also identify the impediments to that adoption. If the problem to be solved is important enough, energy should be applied to overcome these impediments and not wasted on ineffectual incentives.