For want of a nail, A123 stumbles

EV battery maker A123 hit a new rough patch this week—another example of the “Faster, Better, Cheaper—pick any two” trade-off that affects all companies, but few like clean tech companies. And another warning to those who think innovation is the same regardless of what company or which industry you’re in.

Faster, Better, Cheaper represents one of the defining challenges of sustainable innovation. In this case, the size of the markets, the novelty of the technologies, and the finances associated create a perfect storm pushing companies to go for all three at once: large-scale manufacturing, reliable products, and profitability (or at least solvency). There lies danger.

Yesterday, A123 announced a manufacturing-related defect could affect all of its battery packs produced by its Livonia, Michigan factory—costing an estimated$55 million to replace (see Kevin Bullis’s Battery Maker A123 Faces a Fight for Survival.

The apparent cause was a miscalibrated welder, a machine that welded the contacts between battery cells that are then assembled into packs. In other words, for want of a weld, the kingdom was lost: a relatively low-tech but essential manufacturing step stumbled, was scaled up, and now threatens the company’s future.

The company, which makes lithium-ion batteries for vehicles, backup power systems, and electricity grid storage, has been burning through cash for a variety of reasons—its production capacity is much too large for the demand for its products, it had poor yields at its factories last year, and sales of electric vehicles have been slow. The latest blow would appear to put the company’s future in peril.

Not knowing the intimate causes of A123’s problems, I can tell you what I’ve seen of other companies in a similar position. It already takes very strong and humble leadership to accept the faster, better, cheaper trade-off. Strong enough to accept the “strategic patience” required to bring these solutions to market when they are ready and no sooner. Humble enough to recognize that, no matter how novel your technology, others have been down this road before and from them you can learn to avoid the avoidable mistakes.