The Low tech, high stakes world of innovation

A few recent and distantly related events have strong implications for our thinking about fostering revolutions in energy.  In particular, the challenge of pushing old and large industries to adopt new technologies in hopes of making widespread change.

The first incident was PayPal's recent global service outage.  It lasted only about an hour:

"About an hour ago, PayPal started experiencing site issues
that affected the ability to send and receive money. We have all hands
on deck to get this fixed," said PayPal spokesman Anuj Nayar in a blog post about noon PDT. "We're really sorry for the inconvenience."(CNET)

According to PayPal executives, the company processes $2,000 in transactions every second, so an hour outage cost vendors who rely on PayPal about $7.2 million. PayPal's Total Payment Volume in 2008, according to the company, was $60 billion—"nearly 9 percent of global e-commerce and 15 percent of US e-commerce."

The second incident came in a distinctly different field.  This May, Lennar Homes, acknowledged its use of a new and defective Chinese-made drywall.

Lennar Corp. has identified 400 homes in Florida that have confirmed
problems with defective Chinese drywall, and it has set aside $39.8
million to repair the homes, the Miami-based home builder said in a
securities filing Friday. (WSJ, 5/31/09)

The drywall problem has affected more than just Lennar Homes, estimates of 100,000 houses built in 2006 and
2007 with the suspected Chinese
drywall.  According to the Wall St Journal (WSJ, 8/06/09):

Experts estimate it costs about $100,000 to pull out bad drywall and
replace corroded electrical wiring and appliances in an average-sized
home, and the problem is shaping up as a costly disaster for homeowners
and the battered housing industry. Many homeowners are hoping the
federal government will step in with some sort of aid similar to that
provided for victims of hurricanes and tornados, as well as a
moratorium on mortgage payments.

If proven a health hazard, the total cost to the construction industry for removing the tainted drywall adds up to approximately $10 billion in repairs.

For the small business owners relying on PayPal, an hour of lost revenue is costly.  But to the small contractors and drywall subs who may have to replace existing drywall, this kind of problem can put many of them out of business altogether.

Really sorry for the inconvenience

The two incidents together highlight a particular problem when thinking about the stakes of innovation.  High technology generally has an aura of high risk, of bold visions and big leaps.  And yet the real risks—the stakes—may have less to do with the innovation and more to do with where it's going.

As central as PayPal and other recent computing and internet innovations have become in our lives (think iPhones, Blackberries, Apples, Google, and Amazon), they're no match for the ubiquity and taken-for-grantedness of so many technologies that have become invisible and embedded in our lives. Think drywall, and then insulation, lighting, electricity, gasoline, internal combustion engines, tires, and on and on.

The risks of adopting a new product or technology are very different when it's a new behavior and relatively distinct from so many other aspects of life. While it seems as though they have become central to our lives, we're actually quite resilient when our computers crash, our internet access goes down, our cellphones drop calls.  We can manage. And anyway, why worry?  A few years down the road and we'll have moved on. Our biggest concern is whether we can keep our email address of cell number.

So a small business adopting Paypal is very different, in other words, from a small business adopting a new brand of drywall, putting it up, and then putting over that drywall the household electrical outlets and light fixtures, the trim, the paint, the finished flooring, the furniture, and a real live family. The low-tech product requires a larger commitment because the contractor (and home-owner) have to live with it for decades and, should it fail, has considerably more costs than simply replacing it. 

And that's just drywall.

Consider today's headlines around the energy revolution. Utility-scale solar and wind sound like technological breakthroughs, as does the smart grid.  But the utilities adopting them take the same risks as the contractor: they have to live with their choices for decades, indeed they are liable for those choices. 

At 34 years old, Microsoft is long past a start-up. It's operating systems are running approximately 90% of all personal computers, and yet the public has been relatively tolerant of the bugs, incompatibilities, and poor performance of its latest version, Vista (which to date has over 360 million users).  Imagine waking to find that your utility has installed an upgraded version of your power meter, and half of your appliances are no longer compatible. Or worse, imagine that your new Microsoft CE power meter has a virus (questions about the security of the smart grid are finally starting to surface).

Now imagine you're the utility. Would you bet your company on someone's high tech product when mistakes in low tech choices carry high stakes?  The moonshot and Manhattan project were high-tech, but these projects never faced the challenge of adoption by a reluctant market.  Investing in the next energy revolution requires accounting for the market: those who would commit their businesses to adopting, installing, and standing behind the new technology for decades. 

Are we designing solutions low-tech enough for them?

1 thought on “The Low tech, high stakes world of innovation

  1. Those paypal outrages happens more often than that. I have noticed it a couple of times so far this year, and for people like me that largely relay in paypal as payment processor cost me good money. An excuse will not do it, but what will we do?

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