Adoption of disruptive technologies: Lessons from history, Part II

In Part I, I described how Studebaker successfully made the transition from being the largest maker of wagons in the US to a successful car manufacturer (at least until 1966). In Part II, I want to describe the Curtiss and Wright companies as they competed to develop the modern aviation business.

At the beginning of the 20th century, Glenn Curtiss operated a motorcycle factory in Hammondsport, NY, where a museum stands today in his memory. The museum is well worth a stop if you are in the area; allow at least three hours as the 60 minute documentary is well worth the time. It is also possible to visit the restoration shop out back where a WWII fighter is currently being rebuilt.

WWII fighter rescued from the bottom of a lake and undergoing restoration in the museum workshop. 

Ask anyone who invented the airplane, and the answer will be the Wright brothers, Orville and Wilbur. Certainly they developed an understanding of forces acting on a wing, and how to control those forces, well beyond what any other person or company was capable of in the years from 1900 to their first flight in 1903 and the granting of their patent on control methods in 1906. They were excellent experimenters and craftsmen, and while the patent proved to be overly broad, it was well deserved.

Glenn Curtiss managed 136.7 mph on this 4.4 litre, V8 motorcycle in 1907. The record stood until 1930. 

1907 Curtiss.  

However, others were perhaps more adept at commercialisation. Glenn Curtiss was one such pioneer, an engineer but also what we would recognise today as an entrepreneur. Initially a builder of bicycles and motorcycles, he built more and more successful airplanes, winning the prestigious Gordon Bennett race in France in 1909. (The Wrights did not enter, but two independent pilots entered Wright planes; neither won any awards). By 1910 he was working in San Diego with the US Navy at launching and landing airplanes on aircraft decks.

In this same period, the Wrights continued to build prototypes and small numbers of commercial planes while engaging in a nasty patent battle with Curtiss. While the Wrights were careful experimenters, it would seem they were not moving as quickly as Curtiss in commercialising, relying instead on their patent and plenty of legal strong-arm tactics to maintain their advantage. The issue addressed by the Wright patent was the method of controlling the wing surface; the patent, which was broad, was interpreted by the courts as describing any control mechanism, not just the method the Wrights developed of warping the wing structure to change the wing profile. Curtiss came up with a method of changing wing characteristics using movable ailerons, which are much closer to modern flaps and other movable parts than the flexing of an entire wing structure. Unfortunately in 1914 a court ruled that the Wright patent covered any method of controlling flight surfaces, and Curtiss was forced to cease operations.

In 1916, Orville Wright retired and sold his interest in the patent to Wright-Martin Corporation, for approximately $1 million. (Wilbur had passed away in 1912). Eager to recoup the cost of the patent, Wright-Martin continued the legal battles. By 1916, the only new Wright plane was a single prototype, and while Curtiss was capable of producing saleable airplanes at close to commercial scale, he was effectively out of business. As a result airplane development in the US had stalled, and the US had no airplanes for the war effort. In 1917, the US government forced all aviation patent holders to share their patents in a pool, and to pay a membership fee to participate in the pool; most proceeds went to Wright and Curtiss, who also had a number of patents of his own. The goal was to get airplanes built, using best available technologies, and stop the legal squabbles. Wikipedia claims no American airplanes were used in WWI, but the Curtiss museum claims that US-made planes were indeed used in WWI, and that they were all built by Curtiss. In any case it is clear that most if not all airplanes used in WWI were of European manufacture, in many cases in violation of the Wright patent as interpreted by American judges.

Replica of the Curtiss America.

Replica of the Curtiss America, designed in 1914 to win a 10,000 pound sterling award offered by the London Daily Mail for the first trans-Atlantic crossing. The eruption of WWI  prevented the attempt and the plane was sold to England for use as a submarine spotter. This replica was built in Hammondsport by volunteers and was first flown in 2008. 

Curtiss America cockpit.

The patent pool was not meant to last beyond the end of the war, but manufacturers did not resume legal hostilities in 1918, so the patent war came to an end with the end of World War I. Ironically, the Wright and Curtiss companies merged in 1929 to form Curtiss-Wright, which still operates today. To his dying day, Wright felt that the Wright name should have come first.

So what can we learn from this? First, a patent that stifles innovation is a problem for all. The US aviation industry was held back by this nasty little feud, and no one really gained from it (except, perhaps, the lawyers). Second, patents can have unexpected side effects, especially in the case of new or emerging industries where the full importance of something may not be fully understood until later. Many technologies in use today work the way they do for reasons that have nothing to do with adoption of the 'best' technology, but because one side won a legal battle, or had better marketing or better licensing terms. (VHS versus Beta, anyone?). Third, the experimenter who does superb ground-breaking work needs to be recognised and encouraged, but the skills of the entrepreneur in getting things built quickly and efficiently is equally critical in getting a new industry up and onto its feet.

Oh, and the museum has lots more: wooden boats, motorcycles, cars, weapons and other bits from the dawn of the 20th century. Plus the town of Hammondsport is delightful. Drop in!

Adoption of disruptive technologies: lessons from history, Part I

I had the opportunity earlier this summer to visit a couple of museums focused on the early years of the automotive and aviation industries. It strikes me that there are some parallels with the new bioeconomy. In the spirit of the old saying that those who ignore history are doomed to repeat it, I offer some thoughts that might be relevant, based on a couple of case studies.

My first stop was at the Studebaker museum in South Bend, Indiana. If you know anything about Studebaker, you'll recall that production ended in South Bend in December 1963, and that the last car rolled off the assembly line in Hamilton, Ontario, in 1966.

The last Studebaker, produced March 17, 1966. This car is currently in the Studebaker museum.

The main reason was a failure to compete with the Big Three in the so-called pony car wars (the Mustang being the initial entrant and leader of the pony car class). Studebaker built solid, dependable and somewhat boring cars at a time when the American public wanted vavoom; the inability to build competitive vehicles was partly if not completely due to poor finances.

Innovative, but not a sales success: The Avanti. After Studebaker closed its doors, a consortium of Studebaker dealers purchased the Avanti name, spare parts and tooling, and continued hand-building cars in very small numbers. Since then, the company has had multiple owners, and has moved several times; the last car was made in Cancun, Mexico, in 2006. The then-current owner's arrest on fraud charges was certainly a contributing factor, but the niche automobile business is a very difficult one at the best of times, even without legal problems.

So why is a failed company like Studebaker a relevant case study for the bioeconomy? To answer we need to go back to the beginnings of the automobile, and look at the innovators. The big names include Henry Ford, Walter P. Chrysler, Louis Chevrolet, Gottlieb Daimler, Karl Benz and others. None had any background in the horse and buggy industry: Ford worked as an engineer with Edison Illuminating Company, who supported his early work; Chrysler and Benz worked for various railways; Chevrolet essentially worked exclusively for the automotive industry from a young age; Daimler and his colleague Maybach designed steam and gas engines from the 1870's. All founded new companies to develop and market their new inventions.

In contrast, two of the five Studebaker brothers, Clement and Henry Jr., set up shop in South Bend in 1852 to build horse-drawn carriages. The firm was incorporated in 1868. According to Wikipedia, half of the wagons used during the height of westward migration were Studebakers; they also supplied the Union forces with wagons during the US Civil War.

1857 (back) and 1919 (front) Studebaker buggies. The 1919 model is the last buggy built by Studebaker and went directly to the company's museum.

1910 Studebaker dump wagon, 1 ton capacity. Trap doors in the floor serve to empty the load. Presently in the Studebaker museum. 

By 1885 they were exporting carriages around the world, and annual revenue was $2 million, a huge amount at the time when the sturdy dump wagon shown in the figure sold for $202.78; many of the majestic homes built by the brothers and their partners are still to be seen in beautiful South Bend neighborhoods.

In 1895, a younger generation of sons and son-in-laws, led by Frederick S. Fish, began asking whether the company should look at this newfangled self-propelled device called the automobile. The discussion was apparently heated, and an engineer was assigned to this only in 1897 after the passing of one of the remaining brothers who felt that wagon sales were strong and the company should not lose its focus. The first automobile, made in 1902, was electric; the company made $4 million selling wagons that year. Gasoline-powered cars, built in partnership with other automobile firms, came along in 1904, and the last electric was built in 1911. Early teething problems were sorted out using cash from the wagon business, which continued to be strong, but this was a declining market; by 1918 sales of automobiles had reached 100,000 units while horse drawn unit sales had dropped to 75,000 from 467,000 in 1911. Studebaker finally sold the wagon business, to a firm in Kentucky, in 1920, replacing the wagons with a line of commercial vehicles.

1937 Studebaker Coupe Express pickup truck. Presently in the Studebaker museum.

1933 Studebaker President. Presently in the Studebaker museum.

The company survived the Depression, partly due to its reputation for solid and dependable vehicles. It is, if not the only one, certainly one of the rare cases of a firm successfully making the transition from horse-drawn carriages to the automobiles. While the firm was unable to navigate the rapid changes in the post-war automotive market, the decision to adopt a disruptive technology in 1897 led to almost 70 more years of commercial activity. This contrasts with most other players in the early automotive industry, who were overwhelmingly outsiders, often railway engineers already comfortable with the concept of a self-propelled vehicle.

What can we learn from this? A few things. First, you need a successful business with decent cash flow to support a move to a new field. The Canadian pulp and paper industry, by and large, is finding the existing business challenging, and free cash flow is in short supply. Second, partnerships can be a good way of distributing risk, although they need to be selected carefully; Studebaker's partnerships with existing automotive firms were at best unsuccessful, and at worst almost destroyed the new business due to poor product quality. So picking a technology provider, rightfully, requires a painful amount of due diligence for the technology provider, if not for the sponsoring company. In my former life as a research manager, this was a difficult lesson to learn. Third, vision starts from the top; the transition at Studebaker only started in earnest once board members opposed to the change passed away or moved on.

In Part II of this post, I'll look at the effect of patent wars on the adoption of new technologies. Spoiler alert: it wasn't pretty.

References: The Studebaker museum in South Bend, Indiana; Wikipedia; http://www.stude100.com/stu/Pg1/pg1.php

Upcoming conferences in the forest biorefinery area

I see it has been ten months since I posted here. I spent a large portion of that time moving all the contents of my home into storage so I could move out for three months while the place was renovated; I'm now moved back in and things have settled down enough to allow me to pick up the biorefinery file once again. Time flies when you are having fun!

I am very excited about a couple of upcoming conferences in the forest biorefinery space.

The first is the PAPTAC International Lignin Conference, to be held in Edmonton the week of September 17, 2018. As a member of the program committee, I can say that the selection of proposed abstracts is of very high quality, and cutting it down to a three-day conference will be very challenging. If the existence of a wide range of papers from the academic, vendor and lignin producer worlds is any indication, we now have a robust ecosystem of players which bodes well for this new and growing industry.

This remarkable boot-strap effort has overcome, to a significant degree, the old chicken-and-egg problem: No one will build a plant to make lignin if there is no customer for the product; but no customer will sign any kind of a commitment to purchase from an as-yet unbuilt plant, which will make a product of unknown properties and price. Today we have three full-scale plants producing softwood kraft lignin, with more in the pipeline. This affords customers the opportunity to work with multiple suppliers; conversely there are multiple buyers, so no plant is at the mercy of a single customer. The story of how we got to here is a fascinating one that I hope to be able to address in a keynote speech.

Click here for conference details.

The second is the 8th Nordic Wood Biorefinery Conference, set for Helsinki the week of October 22. The last seven editions of this conference have all been excellent, partly due to the 18 month gap between editions, and I do not expect this year to be any different.

Click here for conference details.

See you there!