Think Flat

I have tremendous respect for the Global automobile majors, despite the plight that some of them are in today, especially in the US context. However, my strong belief is that the next major innovation in the industry is not going to happen out of Detroit or Tokyo. Not even in Pune or Mumbai, where for example, Tata Motors is planning a 'One lakh Rupees' car for the masses (approximately $2500 and rising, at today’s Rupee- Dollar parity!) and is aggressively bidding for the crown jewels of Ford Motor’s portfolio (Jaguar and Land Rover). The next big innovation in the automobile industry is waiting to happen out of Silicon Valley, California!

I read a recent report in the Wall Street Journal (Read here - subscription may be required) about a ‘just-resigned’ technology executive from SAP-America, Shai Agassi, evincing interest in the technology for hybrid car batteries, the power horses which are at the heart of any electric automobile. This article caps a raft of news that I have been seeing and reading about Silicon Valley’s storied venture capitalists like Vinod Khosla investing in such greener technologies.

What has caught the attention of such hard nosed tech-investors and executives, when, arguably, the closest contact they may have had with the industry during their lucrative careers was probably a handful of visits to the luxury car dealerships that dot Silicon Valley?!

I think that these über-entrepreneurs have spotted an opportunity to innovate and commercialize a complex and expensive technology component; they are leveraging their experiences in the Google and Apple world to the more conventional automobile industry. And I do think they will ultimately succeed, given (as I have often argued in my earlier blogs here) that innovation is not just about purist technology inventions, but more about the strategy to build robust business models to commercialize such inventions.

All of us who use laptops understand the frustrations of battery life; I for one cannot understand how the impact of Moore’s Law has largely bypassed batteries that power everything from the ubiquitous laptop to next generation mp3 players and cellphones! I read somewhere that the battery stack required to power an uninterrupted 200 mile ride on a mid size car would probably end up costing more than all the other components of the car put together! Not to mention the space and the cooling capacity it would demand! It is precisely in such a situation that we need the largely inbred automobile industry to take a leaf out of other industries and find out-of-the-box solutions through business model innovations.

In the report in the Wall Street Journal I alluded to above, Shai Agassi , who was till recently a top ranking executive with SAP in the US, talks about a strategy to ‘unbundle’ the batteries from the car itself. The consumer can buy a car and rent the batteries required from another agency which would set up a network of battery recharging stations. Such an agency or entity would make the investment in innovation required to develop newer and hopefully, superior car battery technologies and derive payback through innovative, ‘pay-as-you-go’ revenue models.

We all know how financial innovation has made ownership of cars so affordable to consumers; extending that concept to leasing or renting hi-tech batteries would unleash more creativity and, in my opinion drive faster adoption of relatively new or unproven technologies. Further, unlike a car lease or a mortgage payment, one cannot drive the vehicle if the batteries are not charged, which creates an automatic incentive for the owner or driver, not to default, while adjusting travel needs to the money one wants to expend!

But wait a moment – why is this concept sounding so creative and cool to me? One always paid for Gas (Petrol) to refuel one’s cars, based on how much we drive, right? So what’s the big deal here?

The big deal is the fact that someone is thinking hard on how to unbundle key, critical components in an automobile and assign different ownership (and hence, risk-reward-payback) models to such components! Today it is for batteries, tomorrow it could be for say, an innovative internal combustion technology engine that fires up on a Gas-substitute. The possibilities are enormous and it requires people from outside the traditional four walls of an industry to come up with such innovations! I am keen to hear from you all on what you think of this, while I go and take a test drive on one of those hybrid cars!