PERF RMANCE 04 - The Performance Portal - Ernst & Young

Choosing the right technology
6b. Component innovations in portable storage market
Efficiency (miles/kW)
Lead Acid
PEMFC
NiMH
Zinc-air
Many firms were taken by surprise by
the sudden dominance of lithium-ion.
Managers could have predicted the promise
of success of lithium-ion in the auto-battery
market much before 2006 by using our
framework. Lithium-ion batteries were
initially used in portable electronic products
(e.g., laptop computers, cellular phones
or cordless power tools). The demands of
performance and power are less stringent
in these markets than in the auto-battery
Year
6c. Component innovations in auto-battery market
Specific energy (w-hr/kg)
Lead-acid
NiMH
Lithium Ion
Ni-Cd
NaS (ZEBRA)
Lithium Ion
Year
market. The key dimension to evaluate
performance in these markets is specific
energy in watt-hr/kg. Figure 6c shows the
dynamics of technological evolution of
batteries on this dimension. Performance
of lithium-ion batteries improved drastically
in portable electronic markets even though
similar improvements were not evident in
auto-battery markets (see Figure 6b). Thus,
as early as 1997 and certainly after 1999,
firms should have considered lithium-ion
as part of their portfolio of investment
choice for the auto battery. Lithium-ion also
performs well on other dimensions such as
safety, availability and cost. Our framework
can alert firms of such opportunities before
rivals take advantage of them.
GM invested heavily in the hydrogen fuel
cell, probably at the cost of alternate
technologies. Our analysis shows that such
decisions need not be left to gut feelings
or undefined creativity. Rather, they can
emerge from a careful, scientific evaluation
of technology dynamics on multiple
dimensions. For years, GM argued that fuel
cells were the only long-term alternative to
the internal-combustion engine yet ignored
improvements in lithium-ion technology.
However, both fuel cells and flow cells have
serious disadvantages to lithium-ion on
other dimensions of safety, portability, cost
and infrastructure. The following quote
explains the firm’s focus on fuel cells while
competitors were experimenting with
alternate technologies using lead-acid,
NiMH, and lithium-ion batteries. “GM had
the technology to do hybrids back when
Toyota was launching the first Prius, but
we opted not to ask the board to approve a
product program that’d be destined to lose
hundreds of millions of dollars,” said GM
Vice Chairman Mr. Bob Lutz, in a blog post 5 .
“In the end, it cost us much more than that;
it cost us our reputation for technology
leadership and innovation.”
Recently, GM seems to have belatedly
reversed its strategy and adopted a more
multi-technology approach. “We made
that mistake once,” GM Vice Chairman Mr.
Bob Lutz said. “We won't make it again.”
However, he did not specify how or why
he would avoid such mistakes. This paper
offers a framework to do so.
5
Lutz, Bob, (2008), “Thank You, Citizens of Volt Nation,” retrieved 8 June 2008,
http://fastlane.gmblogs.com/?s=Thank+You%2C+Citizens+of+Volt+Nation
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