If you want to know why large companies — telecom companies and utilities in particular — are very slow to adopt new products that appear far more superior than what they currently use, here’s why: When cool products go bad, or when the companies behind them go out of business, you’re screwed.
Take the recent example over at AT&T. The telecom giant had purchased lithium-metal-polymer batteries a few years back from a promising Quebec City company called Avestor. AT&T was using 17,000 of those batteries at sites throughout the country to provide back-up power for equipment that runs its U-verse TV service. In fact, AT&T appears to have been Avestor’s largest customer, having deployed about 85 per cent of all batteries sold by the small company.
But Avestor locked its doors in October 2006, citing its inability to attract investment and customers for its telecom back-up battery. Perhaps not so concindentally, that’s when one of these Avestor batteries sold to AT&T exploded. Since then, a number of them have blown up or caused fires. As AT&T said in a statement: “Normally we would work with a vendor to diagnose problems and develop solutions. We can’t do that in this case.”
And one wonders why telecom companies and utilities are risk-averse, lending support to the adage: “Nobody ever got fired buying _____” — usually, it’s Microsoft or IBM, but in this case you could fill in the blank with lead-acid batteries. Now, think of the risk the big automakers are taking by wanting to put a lithium-chemistry battery into plug-in hybrids or electric vehicles? In fact, nobody ever wants to see these kinds of accidents/explosions happen because it does make decision-makers take a sober, second look when they’re considering taking a chance on a new technology. Bless them when they go for it. It takes guts, and we need this kind of risk to bring these innovations to market, whether it’s an EEStor ultracap or a VRB Power flow battery or a A123 lithium-ion battery. Unfortunately, some startups bite the bullet and it’s a risk that has to be considered, and accepted.
This makes me worry about agreements like the one Malcolm Bricklin’s Visionary Vehicles signed this week with Mississauga, Ontario-based battery maker Electrovaya Inc., a maker of lithium-ion superpolymer batteries. It’s great news for Electrovaya, a company that appears to have a great technology but is nonetheless a money-losing penny stock that has struggled to keep its head above water. Bricklin, who has made clear his intentions to bring a full line of plug-in hybrid-electric cars to market, is a good, high-profile partner to have. In a statement, he admitted there will be challenges ahead. “This is a complex new terrain and the methodology and science that Electrovaya has developed stands apart from the others,” he said, adding that his company selected Electrovaya after a comprehensive review of battery manufacturers in the United States, Europe and Asia.
A memorandum of understanding has been signed to create a joint venture, which will be established as a standalone company — owned equally by Electrovaya and Visionary Vehicles — whose purpose is to develop and manufacture batteries and battery-management systems. R&D will also be a strong focus. As part of the joint venture, Electrovaya would receive royalties and license fees and each company would have the option to purchase shares in the other. Strangely, the deal has done nothing to lift Electrovaya’s shares.
Time will tell whether this will be Electrovaya’s big break, or whether a few years down the road it will be a train wreck for both companies. But the experience over at AT&T should be a lesson to those, including myself, who get over-excited about the prospects of a new technology but underestimate the time it takes to get it right.
I guess in this market — in the rush to please “green” consumers, tackle climate change, and put a lid on skyrocketing energy costs — getting new, exciting and in some cases disruptive technologies to market requires a little bit of “Go faster!” and a little bit of “Slow down!”