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[Inventions That Changed the World] The Niagara Falls' Victory over Thomas Edison

[Inventions That Changed the World] The Niagara Falls' Victory over Thomas Edison

KIM Jae-Yun

June 17, 2011

Transcript

Welcome to our video program. I'm Jae-Yun kim from the Industry and Strategy Department I.

Passengers on Seoul subway line 1 can sometimes experience a sudden power outage between Namyeong Station and Seoul Station. This is caused by the shift from alternating current (AC) to direct current (DC). Today, I'd like to talk about the standards war between AC and DC, triggered by the invention of electric light bulbs. The emergence of electric bulbs gave rise to a new industry: electricity. Time-honored, large companies like GE, Philips, Siemens, Toshiba and Panasonic that are over 100years- old were all created in the process of industrializing electric bulbs and electricity. Electricity also gave birth to the home appliance and machinery industries using motors. This means electricity, an infrastructure industry, had greater potential than electric bulbs. In the “War of Currents” era in the mid 1880s, George Westinghouse and Thomas Edison became adversaries due to Edison's promotion of DC for electric power distribution, over AC as advocated by Westinghouse and Nikola Tesla.

Direct current (DC) is the unidirectional flow of electric current. Direct current is used to charge batteries, and is used in nearly all smaller systems like generators, motors and lamps. On the other hand, in alternating current, the movement of electric current periodically reverses direction. The advantage of AC for distributing power over distances is due to the ease of changing voltages using a transformer.

The “Battle of Currents” can be defined as a fight for lower costs. DC power was difficult to transmit over long distances, and required power plants to be built near cities, or else required huge copper wires to prevent power losses during transmission.

For example in DC, the economically viable transmission radius was 0.5 miles and the optimum voltage was 110V, which is still in use. Thus, many power plants were needed in many different places. Urban land prices and copper prices were variables that strongly affected its viability. In remote areas, building of power plants simply was not profitable. In contrast, AC power can be transmitted over long distances, so one large power plant can serve many different areas. As a result of the standards war between AC and DC, a water power plant was built in the Niagara Falls area 120 years ago that brought victory to AC in the Battle of Currents.

The key was distance and copper prices. Since the distance from Niagara Falls to Buffalo was 5 km while the distance from Niagara Falls to New York City was over 700km, long-distance power transmission was necessary. With rising copper prices, AC emerged as an attractive alternative to DC.

Standardization is often considered as competition among technologies, but the total cost, namely economic feasibility, usually chooses the final winner. No matter how advanced a technology might be, if it lacks economic feasibility, it will be weeded out of the market. Ultimately, technologies live or die based on their economic benefits rather than their technical merits.

Another noteworthy point is inertia. It is often said that failure of an established company is caused by inertia. This means established companies tend to stick to their usual ways of doing business rather than make changes. This was true of DC. Existing success from the invention of light bulbs and the already complete electricity infrastructure became an obstacle that stifled incentives for change.

Judging from historical records, Edison seems to have had many opportunities to shift to AC. The Father of AC, Nikola Tesla once worked as an assistant researcher under Edison. As a result, the success of the invention of electric bulbs and the DC electricity system created inertia, putting up obstacles against change.

On the same note, businesses leaders need to think about whether they are seeing the forest for the trees, or the trees for the forest. During the early or transitional stages of businesses, when technologies change rapidly, business leaders should take a big picture, or forest approach.

Edison was focused on commercializing his business model and technology when electric technology innovations were rapidly taking place. He paid attention to the details and established plans as an on-the-ground commander. Rather than seeing the “forest” of the industry, Edison took care of each and every tree. Thus, he failed to sense the important challenges posed by AC technology.

Generally speaking, when technology innovations take place rapidly, companies need to pay attention to larger trends in their industry. When technology innovations slow down, however, they will need to pay attention to details. Focusing solely on day to day matters when the industry is changing fast can deny businesses an opportunity to leap forward.

AC's victory over DC resulted in Edision GE merging with Thomson-Houston to form the General Electric Company. After AC became mainstream in the market, Edison strenuously researched electric vehicles powered by batteries in the hope of reviving DC. In the early 1900s, Edison's ambition for electric vehicles seemed to take off, but oil field exploration in Texas ushered in the gasoline era. The war between AC and DC came to an abrupt end.

Ironically, however, the DC and electric vehicles that Edison envisioned 120 years ago have recently returned to the spotlight. With the growing popularity of renewable energy, decentralized power generation has started to gain attention and battery- powered EVs are emerging as a promising industry.

Some say business is all about timing. The revival of Edison's 120-year-old ideas is one of the ironies of industrial history, and stresses the importance of timing. Electric bulbs gave rise to various industries and companies, and well timed entry allowed a few companies to succeed.

To sum up, first, decisions on technologies should be made from the perspective of cost- i.e. economic feasibility. Second, the more successful a company is, the more they should be wary of inertia. Last but not least, businesses need to pace their changes in line with the speed of technology innovation.

Thank you for watching. I'm Jae-Yun kim.

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