Prof Melissa Schilling | Faculty Insights: Current and Future Trends

[Music] welcome everyone i am professor elise leslie and i want to welcome you today's faculty insights event i am delighted to be hosting the father insight series this spring along with my colleague professor julian you the theme for the spring faculty insights series is current and future trends each week we invite one to two faculty experts to talk about important business trends where it's been and perhaps even give us some bold speculation about where it might be going i am delighted to news today's faculty expert professor melissa schilling who will be talking to us today about batteries electrification platforms and data how convergence and new technologies will change the world president schilling is the herzog family professor of management here at stern she's a phd in strategic management from the university of washington her research focuses on innovation and strategy in the high-tech industry she's the author of the number one textbook in the world on innovation strategy she also recently published a highly successful popular press book called quirky on breakthrough innovators who have changed the world in terms of format professor schilling is going to present for about 15 or 20 minutes after that i'll moderate 10 minutes of q a from the audience so if you have a question while professor schilling is speaking please i encourage you send that to me directly in the chat i'll select a few questions from professor schilling when she's finished after that we're going to provide some discussion questions and we'll have a chance to talk about them and socialize with some of your peers in breakout rooms i'll say a little more about that part of the session when we get to it so without further ado i will turn things over to professor schilling we are absolutely delighted to have you here and are excited to hear what you have to say about the future of new technologies so thank you so much for having me this is really exciting and it was really fun as your names were popping up really quickly on the screen i saw a few familiar names there uh so good to see you virtually again uh okay without further ado i'm gonna pull up my screen here okay i'm going to talk about batteries electrification platforms and data and we're going to think about how the trajectories and these in these uh technologies are changing over time and what that means for the future but to start we're going to start with a couple of fundamental principles just so we're all on the same page about uh patterns and innovation because one of the great things about studying innovation strategy is that you learn to understand the patterns underlying the phenomenon that are actually much more reliable than a lot of people think so let's start with two basic okay we're going to start just with the s curves and performance so technologies tend to improve in an s curve and i have a video here which doesn't seem to want to move oh shoot well anyway there should be dots populating this line coming up as we go and what this means is that as you invest in a technology whether that be man hours or dollars or whatever kind of effort measure you want to use it improves over the that investment but it does so in an s-shaped curve and that happens because in the beginning down here performance improvement is really slow and hard you don't know what you're doing it's relatively new you don't have good suppliers you may have weak enabling technologies you make a lot of mistakes you're still figuring it out right so in the beginning you're working really hard and you're failing a lot and and your performance improvements are relatively slow relative to the amount you're investing but then at some point you might start to get things sorted out you might have adopted a dominant design everybody's kind of figured out what design of the technology we want and the performance improvements start coming on much faster and they're much more efficiently with respect to your investment um so for examples you you might have better suppliers now you might have stronger enabling technologies you might have multiple producers all on the same learning curve pushing that technology forward so you have much more steep improvement during this period here and then at some point very often you start to reach the limits of the technology it starts to flatten out and that means it starts getting harder to improve the technology you've picked all the low hanging fruit and now it's getting harder to figure out how to solve the problems that might remain okay so we often see these s-shaped curves and um you know something's going wrong with my there we go uh different technologies might be on different curves different shaped curves that start and stop at different points in time so one of the things if you're a person who studies innovation strategy one of the things you're going to do is you're going to try to plot out these curves and sometimes the challenge is finding good measures but you want to plot out these curves to see if one curve is steeper than the other or if it has a higher maximum than the other because if it has a steeper or higher maximum than the other you know that at some point you're likely to see a technological disruption all right so i hopefully you can see my cursor usually when i teach on zoom you can see my cursor so at the point where these lines cross now every dollar or or unit of effort invested in the orange curve actually has a bigger payoff and improvement than in the blue curve so if you're a new firm you're probably going to choose the orange curve but if you're an existing firm uh you're already on the blue curve and you're going to face some dilemma about whether to switch to the orange curve so let me go to to this slide this is showing a series of curves so we've got those first two curves we looked at we've also got a new technology that comes in and when it first comes in it's initially lower performing than the existing technologies but it's on a steep curve and eventually it's going to end up much higher than these other curves so if you're an incumbent firm and you're on either the blue or the orange curve you're going to face some conflicting incentives because you've already got assets invested in your technology you might have union commitments you might have supplier relationships and customer relationships you have a lot of switching costs or depending what you're doing you probably you probably have a lot of switching costs that are going to make you stay on your curve beyond the point at which the gray curve is actually better and this is one of the things that might give new entrants an advantage so sometimes new entrants have an advantage um when technology is changing rapidly because they don't face the switching costs and so they're going to adopt that usually they're going to try to adopt the curve that has the the best payoff the technology that has the the highest long run potential so this is the whole phenomenon disruptive innovation now we're going to talk about a different kind of curve but it's going to look similar it's related to these curves but it's fundamentally different and we need to understand that it's fundamentally different so that we don't blur them up on our heads this is the curve that's related to a consumer's payoff from different technology dimensions so when we i'm going to go back to this one when we map a technology's performance here we're kind of treating it as if the technology only has one dimension of performance we can measure in reality technologies have lots of dimensions of performance like if i'm looking at a car for example i could be measuring speed or power i could be measuring fuel efficiency i could be measuring economy like how much car i get from my dollar i could be measuring safety so actually each technology is a composite of multiple dimensions and each of those dimensions has a payoff for the consumer and how much those dimensions pay off for the consumer is a function both of its sort of intrinsic utility in general like how much do consumers care about safety how much do they care about the environment how much do they care about economy and it also depends on how far we are up on that curve so let's look at a couple of curves here just so that we understand this if we think about music like recorded music technology if we go back to when it was first invented in the very late 1800s that the early phonographs those very first records that were produced actually the first things were foils of sheets of foil of tin people were amazed the quality of them wasn't great the selection was really minimal but it was something we had never had before as we started to get more units of albums like records available songs available the the utility that to consumers was rising super fast it became worth getting a photograph machine for your home and then getting a record player for your home it was super super exciting but today now that we're up in the the millions or the you know multiple millions of songs you could dial up at a moment's notice the incremental utility payoff of an additional song is probably smaller than it was back here in other words we might be approaching satiation now we may never be fully satiated because we like to hear new music over time but the payoff per unit the payoff per song of additional song is significantly less than when we had fewer songs to choose from so so i'm modeling this as a parabolic utility curve this middle one is even easier to understand this is speed all right so the very first cars that were introduced uh went about five miles per hour the very first ones were steam engines and electric and electric cars the very first cars were actually electric or steam and the only depending on what you want to call the first car you can get the big arguments with car guys about that uh but the only one about five miles per hour which was significantly slower than a horse and it was more expensive than a horse and less reliable than a horse and harder to use than a horse so there were lots of reasons that people thought that's a stupid thing it's not useful to me it's just like a toy for for technophiles to have money to burn and then as the speed of the cars increased to about 15 miles per hour people started to pay attention because now that's about the same speed as a horse and as soon as the speed got above like 20 miles per hour suddenly the utility of cars for each unit of speed was shooting up each unit was was really valuable at increasing the value of cars at this point because now you're significantly faster than horses right so you can go farther and faster and and uh people give up their horse and they adopt cars then when you get to about i'm going to say 90 miles per hour is kind of where i ball parked it up here you're starting to satiate your need for speed in our existing technology of cars and we'll talk about i'm going to talk about what changes that but first let's start with our existing cars if you go out and look at your speedometer right now maybe your speedometer shows that your car can get up to 125 miles per hour mine does something like 125 miles per hour but i've never driven my car at 125 miles per hour i've probably only once or twice driven it above 90 miles per hour and that's because the speed limit you know throughout most of the us is you know between 55 and 70 miles per hour on the even on the big highways so you know it's it's illegal to get to go faster and it's also not so safe and also the roads aren't so great so if you hit a pothole at 100 miles per hour that could be a really dangerous thing so for most people 90 miles getting above 90 miles per hour you're getting really small if any you marginal payoff for each of those incremental moves now that can change when we get autonomous cars right because atoms cars are going to have better reflexes than us and they're going to have you know a dozen eyes all the way around the car they'll be able to parallel process all that information better than i can and thus they'll be able to go faster safely if we make the roads better and so we'll have to make the roads better that's another thing we have to think about the adoption of autonomous cars means we'll go faster but we'll need better roads so following that trajectory out it's just an implication of understanding these trajectories so we want to have two notions in our head that performance of a technology tends to improve in an s-curve and that customer utility of a performance has some sort of curve it could be parabolic it could be s-shaped in some instances it could be linear and we want to know the shape of that curve and where we are on it once we understand those things it helps give us a lot of insight it gives us a lot of tools for taking apart other technologies so let's talk about some technologies let's start with batteries okay so there's a lot of different kinds of batteries we've had a lot of improvement in batteries but the truth of the matter is we're still pretty low on the battery utility payoff curve because if i ask most of you how long do your batteries last are you satiated your batteries last more than long enough for what you would expect are they more than light enough are they more than efficient enough are they small enough no the answer to all these questions is no you know batteries don't last long enough and they're too heavy and there's a lot of things that are constrained in using battery power because batteries despite all their improvement uh haven't we haven't satiated any of those curves yet and we'll know when we've satiated all those curves because almost everything will be cordless who wants to be connected to a power cord connected to your house you don't actually want that you do that right now because you can't rely on batteries for very many things so let's talk about the progress we've had so far we've had a lot of progress right here's mapping out some of the key renew rechargeable battery technologies that have happened and right now we've we've gotten up to lithium ion which looks pretty terrific on this chart until you see it but until you understand i have to understand is we sort of matured lithium-ion technology and we're still not to where we want right so if we think about the range on a car right now there you know the range on a model 3 tesla might be 220 miles it's really not far enough and you're not going to go all the way to the edge of that battery because you're going to be worried about whether or not you can get it charged and that car costs more because the battery is significantly more expensive than an internal combustion engine so there are a lot of things that tell us that there's a lot of room for improvement in battery still well the good news is there are some really cool new battery technologies being percolated and being developed i'm going to move i have to move the pictures that i have a view here so i can see this so what i want to show you is that this graph is log scale specific energy down here is gravimetric energy density it means how much power per kilogram or you could be thinking in pounds but in the battery well we usually use kilograms but how much how many watt hours per kilogram we can get into the battery all right which it has to be really high if we're going to use batteries for things like electric vertical takeoff and landing devices like electric uh drones for humans that can move humans around for air taxis even for delivery we need we need really lightweight energy dense batteries if we want to have battery operated aerospace we need really high density in terms of specific energy batteries um okay and then this is volumetric energy density which means how much space the battery takes up that's going to matter a lot for things like cargo vehicles or anything where space is constrained like maybe your iphone or your hearing aid so we're seeing this sort of diagonal line but what you might notice is that actually we're making bigger improvements in gravimetric density than volumetric density and what you want to notice here in particular is that lithium ion right now if you look like a tesla is about 250 watt hours per kilogram and and you know that's considered pretty close to state of the art and lithium ion but when we we move up to lithium sulfur they're actually we're actually looking at you know about 2600 watt hours per kilogram so that's 10 times the gravimetric density that's a big big deal that's going to help us do things like flight with batteries and then lithium air has even higher theoretical energy density and one thing that's also worth knowing is that none of these still get close to gasoline gasoline has an incredible is incredibly energy dense product so you can see here how far we've come and how far left we are to go and right away you know that okay so batteries are sort of the bottleneck and a bunch of different technologies but these technologies are getting developed right now so right now there's already prototypes for lithium silicon and lithium sulfur batteries the lithium sulfur batteries have about double the energy density of lithium ion batteries companies are working on how to bring those to commercial scale when they come to commercial scale they're probably going to wipe out lithium-ion batteries because the other great thing about lithium sulfur in addition to being incredibly light and energy dense it's incredibly cheap so lithium sulfur batteries don't require any of those special metals like cobalt and nickel and manganese you they're sulfur is an incredibly abundant product that's a byproduct of the petroleum industry so we actually have big piles of sulfur sitting around that we need to do something with um it could be it could be a really great solution so i'm going to argue we can expect huge changes to happen in batteries over the next 10 to 20 years and that's going to have implications for lots of other products once you cut the cord for electricity you can actually electrify a whole lot more things and you can do it better faster cheaper which is going to really facilitate this sort of everything connected model that you're hearing about internet of things from your medical devices to satellites to your car everything will be connected and it's going to be generating lots and lots of data all right that electrification with batteries is also going to facilitate some changes in the way we electrify things so traditional power production was centralized and it had this huge environmental impact it was dirty it was reliant upon scarce resources like oil or coal or uranium it just has a lot of bad things going for it and once you have concentrated resources you want that also becomes a bargaining chip that creates political strife it creates inequality it creates conflict right as soon as you have somebody who can control power and other people don't have it it's just a source of power a source of conflict sorry um batteries help you change all that batteries help you decentralize power production you could have residential solar we can have uh tert wind turbines all over the place and batteries help make these things possible by solving for intermittency right batteries help you store the energy so that even when the sun isn't shining or the wind isn't blowing you can store up that energy and use it later so you've got decentralized energy production you can use sources of energy that are clean and renewable and suddenly you're reliant on uh you're not reliant on scarce resources that are have concentration of ownership instead you're reliant on abundant non-owned resources like the sun or the wind so that's gonna really change the way the world works okay let's also go back here oh i'm gonna need my video okay so the other thing you've seen is that as computers have enabled digitization you've seen this rise of platform models of business and this you're going to see how this all connects here in a minute so in platform models of business you have a platform mediating the relationship between some underlying technology and a bunch of users and and third-party compliments okay so like the this is the apple platform ecosystem it's mediating the relationship between consumers and all these different apps all through a platform that's the ios platform on the phone and this is a different business model than a traditional vertical hierarchy or just buying and selling on the market now this was has there been platforms that existed for a long time but digitization really has enabled them to grow a tremendous amount in the last 10 to 20 years and one of the things these platforms have done is created lots and lots of data now combine this mental model of okay platforms are growing this platform business model where we're connecting all different complements third-party complements up with a whole bunch of users and we've got wireless power now that's connecting everything everything's collecting data and you start to see that you could have this pretty major shift in the world where you're getting lots and lots of data medical data geographic data transportation data environmental data financial data consumer data and and we envision this world we have almost frictionless access to masses of data about everything you would want to do with it and you're also developing at the same time algorithms for managing and utilizing and harvesting the data and creating value with it so these these changes are all connected but now let's go back oh and so one of the things this is done right now because we're sort of at the beginning of that huge inflection point is that the companies that have lots of data have lots of power right there's self-reinforcing returns to any technology with network externalities they're self-reinforcing returns to data because as you learn to use it you can sell things better and you can know more about people you can target advertising better you already know all this right so the firm that has lots and lots of data has lots and lots of power right now which has caused lots of worries about whether these tech giants are too powerful because they have these big treasure chests of data all right but then we have to remember at some point data itself will start to be uh satiated we will start to it'll start to be commoditized we'll start to hit some point where we're like well how much more is that additional unit of data worth to me if i have data about a billion consumers from all different parts of the world and i have data about all different aspects of their life and about five years of their purchasing decisions how much more is an additional unit of data gonna be worth to me if i have data about everybody's health uh you know for the last 20 years how much how much do i expect that to change over the next couple years i've seen how they changed their diet i've seen how they changed their exercise i've seen what effect it has on their health it's not the data won't become unvaluable but the marginal utility of each additional unit of data will start to diminish and it'll start to be commoditized lots of people will have access to data and we'll start to think of data as being kind of ordinary and at that point we might see the power of these firms that i showed you back here the power of the firms might actually diminish so uh this is where i want to leave you i'm going to ask you three questions about all of these about these technology trajectories the first one i want to ask you is what things in your life do you think will change when batteries are cheap sustainable and extremely long lasting look around your life right now and think about all the things that are plugged in somewhere and then look at all the things that you would like to run better if they were electrified but are currently manual and imagine that all those things had unlimited energy in them untethered cheap and efficient how much will that change your world it'll change it a lot and it'd be cool to think about what things that will change then i want to if you want you can ask a slightly harder question what how close do you think we are to achieving satiation and consumer data so our start to ask yourself about the different kinds of data streams we're collecting and how where you think we are on those utility curves are we right at the beginning are we somewhere in that rapid increase are we getting close to the top or or does data not have a utility curve that's diminishing at some point and then if you want to ask a different kind of question you could ask yourself how descent decentralized energy production like solar panels on your roof local wind firms and frictionless energy trading are likely to affect things like inequality poverty and political conflict so if i were you i'd just pick one of those and i would dig in and have a conversation about it and hopefully get some traction and i will leave it there this is if you want to reach out to me my email address is here on the left this is my twitter handle if you want to send me a tweet i also make a series of instructional videos that i post on youtube which are they're meant to be pretty easy to understand short and fun so you could check those out by just googling my name and thank you for listening and i hope you enjoy thinking about these concepts thanks so much melissa that was wonderful i'll thank you on behalf of all our other participants um we've gotten a few questions uh so i'd love to just take a couple minutes and and talk about some of those so your presentation was really interesting in the context of our faculty insights event last week when professor adam alter was here uh he also talked about the future of technology but his focus is more on social media and sort of tech aspects of our lives and the impact on consumer well-being and he made the case to us that all of this new technology and social media you know could be moving us towards a tech utopia but also could be moving us toward a tech dystopia and he actually came down on the side they were actually closer to that dystopia right now than that utopia in terms of the impact on on things like well-being among consumers um so i was just curious what you think about that um you know overall the presentation i think is much more an optimistic tone of how these things can can help and improve our lives but you also see any you know any downsides unintended consequences um are there things about these trends that maybe keep you up at night yeah yeah i think one of the big differences in whether someone's going to see something uh pessimistically or optimistically has to do with how far out they look and how much faith they have in the world adapting and finding a new equilibrium right i tend to i come from an economics background and i tend to believe eventually we'll find our equilibrium um and i tend to look really far out so sometimes i'm going to see something a little differently from other people will i think in the short term so so so when you have a major technological change you have frictions and you have switching costs and adaptation costs and initially you you don't know how uh the world is going to look with this new technology and you don't know how it's going to fit into your life and the best way for it to fit into your life so sometimes when we get these big changes initially there's a lot of downsides and there's also a lot of inequality and we you know because things aren't being distributed equally and um yeah and this is you can get this dystopian effect i think in the long run uh having more knowledge and more connectedness we if we don't want it we won't use it and if it values us we will use it and we'll find ways to use it in ways that we like and appreciate and feel good so that's why i tend to be optimistic i'm just looking further out than adam you know i do think that in the short run you know as a parent i got a kid who's video gaming all day long and i've got a teenagers on instagram and i'm like ah i don't know how to deal with these things and they're seeing things i don't want them to see and sometimes they're feeling negative emotions or you know having strange signs of like game addiction for example um it's because it's a disequilibrium phenomenon right the same way television was you know when television was invented people said this is going to destroy our youth this is going to be terrible people will sit around in the living room watching all this garbage that'll shape their minds in ways we don't like and then we figured out how to kind of bend television to the will of our families we imposed laws and rules we created uh you know differentiation in channels we have parental supervision so i think the same thing will happen in any social media technology we're just not there yet you know we will we will we will eventually know how to manage these things or we'll get rid of them you know these things it's it's it's voluntary the use of these technologies yeah that's that's a great insight i love that comparison the short term versus long term that makes a lot of sense another question that someone asked that i think is you know on everyone's mind these days has to do with coven and the implications of you know this radical forced uh innovation that we've all done you can call it i guess i'm gonna put an optimistic spin on it and what you know either about the specific trends we talked about or other technologies you know what do you see as being the sort of recent technological advances that are going to stick with us as we hopefully move back into a more uh normal world over the summer and in the fall versus which ones you think are really gonna gonna stick and become much more of our our daily lives yeah cool cool question um so again probably won't be surprised you i'm more optimistic about the outcomes of kova then than a lot of people and and part of the reason is that um as human beings sometimes we're reluctant to change and we're afraid of change because we perceive change as risk and we don't know where we're gonna fit into that into the new world once things have changed and that can make us a little bit inert right and as a result we we can be sort of resistant we tend to reinforce the things we already know and we tend to be reluctant to take on things we don't know because just like those s curves and technology we could initially pay a performance penalty of moving on to a new performance curve right but what clove it has done is it's shaken up the world right it forced us to try out some new technologies we weren't sure we were ready for most of us like most the faculty i know had to teach on zoom weren't thinking great i was ready to start teaching on zoom instead no we weren't feeling that way we were like holy i have to teach on zoom you know so it forced us on to this new uh technology curve that actually opens up a lot of possibilities so so disruption has a way of breaking through inertia which can actually help new innovations to rise to the surface quicker and i think that what we've discovered is that we have a broader array of options for reaching people than we had considered and now that we've been forced to do something we thought was scary we're sort of past i think most of us are past sort of the scary part and i think in the future we'll get to think about okay what's the optimal optimal mix of online learning online presentations online conferences versus in-person meetings in person classroom in-person conferences uh we aren't going to be forced to do online stuff again it's kind of like social media but now it's an option which is going to help us reach more people more cheaply which is actually going to be good for equality and things like that right like i'm not you know sometimes i give a talk now and i'm talking to people in india or in or in you know abu dhabi hopefully some eventually in in africa and you still have time shift problems because you have time zone problems of doing that but you're reaching a much broader range of people than you would normally reach because a lot of those people couldn't pay to travel to your location you know they couldn't pay to come to the conference so they couldn't pay to come to your school you know so i really am i'm very excited to see what we end up keeping you know and i also want to talk about online learning for a second because i know it at nyu we talked about online learning for the last 10 15 years we kind of knew it was coming but we sort of were resistant we thought you know that'll be for the the that won't be for the top tier that all that's going to shake things up and we're going to resist it but um my phone is ringing and this forced us to to like go full-on online way sooner than we would have and now we're realizing there are some programs that really belong online there are certainly some language classes that will probably stay online because it'll be so much more expedient for the people who take them they're we definitely and have enjoyed having some online conferences on my far side chats because we can just reach so many more people so um covet has sucked but i do think we're going to get some big technological advantages out of it it's going to just increase the range of so i want to kind of mention one more thing i'm taking way too much time but for elementary school kids and and middle school kids you know there were a lot of for a lot of those kids they need to be in person and they've lost out a lot and so it's going to be great when we have in-person school back but there were also kids who were underserved there were kids who were neurodiverse or kids who had physical disabilities or kids who had different learning methods who were really really struggling in the standardized curriculum that works well in person right like our our our school curricula are designed to be um economical to to administer to a large number of people and to be uh standardized so that everybody gets the same education but that means that this humans aren't standardized right the way people learn isn't standardized so that means a lot of people weren't being really well served and one of the things i see online being able to do is perhaps letting some of those kids get to schools that serve them better that maybe aren't in their neighborhood but maybe are taught by someone you know on the other side of the country but taught in a way that is better for them the timing the rhythm the content whatever it is so um i'm exciting i'm excited about uh having more options great uh so we want to be sensitive to your time but i have just one more question i think would be a good one to to end on from a student um who is asking you know for students who are interested in and these topics and more conversations like these are what else other resources would you recommend are there classes here at stern or electives or your videos or what would be some some uh resources you'd suggest yeah so i could definitely take my elective on tech innovation strategy brett prescott also teaches it in the spring i think you must be teaching it right now actually i'll be teaching it in the fall um i mean definitely take as many classes on on these kinds of topics while you're while you're at nyu uh the fubon center also has a series of of online first side chats we've been doing so you know check those out they're free you can just check you can actually watch the recording of them afterwards do if you if it doesn't fit with your schedule uh i think future work program is probably gonna also have some conferences like that that would have interesting interesting sessions um what else i hadn't i hadn't prepared for that question but so i otherwise i would have a list but if you send me an email i will prepare a better answer to that question and and fire it out to you great thank you so much melissa um so that wraps up our q a portion of the event uh thanks so much again for just an interesting and provocative talk so we're now gonna transition into the group uh discussion portion melissa's questions from the slides have already been shared via the chat in just a minute everyone should have an opportunity to open up the to join their breakout rooms and go on ahead and have some discussions otherwise i hope everyone enjoyed our session today uh we will be back uh next week or hear from professor kathleen derose on the future of financial technology thanks so much thank you i think she's gonna talk about robin hood too so that'll be fun should you check that out all right thank you so much good to see you [Music]

2021-10-04 04:00

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