RDVP Seminar: Peter Hart, Ricoh Innovations (5/18/2005)

Peter Hart, Chairman and President of Ricoh Innovations came to speak to the fellows about globalizing Co-invention. His starting point was the question of non-technical aspects that influenced adoption rates of technical products. He figured that as the fellows are focused on introducing technology solutions into markets where they haven't previously existed, we would be more cognizant than most of this co-invention process, the way that a target customer population takes an invention and uses it entirely unanticipated ways--changing work patterns as they adapt to this new technology. The feedback loops between different parties in the invention process were critical: between the technology provider and the technology integrator, but even more important, between the end-user and the technology integrator.

He cited 3 factors that influenced adoption rates:

1. Network Effects
   
2. The cost of labor relative to the cost of technology
   
3. Complementarities

These bear a bit more explanation:

1. Network Effects: Metcalfe's Law of the value of belonging to a network increasing with the square of its size. So, as more people have fax machines, having one becomes more valuable, because you can send your fax to more places.
2. Relative costs of labor and technology: He showed two historical plots (price of electric motors vs. assembly workers and price of PC's vs. knowledge workers). In each case, the rapid spread of the technology occured during a period where the price of labor was increasing quickly relative to technology. He pointed out that the correlation could be explained either by technology making the labor more valuable/expense (by making it more efficient) or by expensive labor making it wiser to invest in technology to leverage the employees' contributions.
3. Complementarities: From an economics point of view, this refers to a "negative cross elasticity of demand" (or, for those of us that don't speak fluent economics: the goods are used together, so a price increase in one (gas, for example) results in a decrease in the demand of another (SUV's)). The example that he gave was that although cities had been electrified for lighting, once they were, it became cheaper to use electricity for powering individual "unit drive" motors.

Building on the example of the electric motor, he pointed out that the original reason that Westinghouse brought them to market was increased efficiency in power transmission (through electrical wires rather than mechanical belts). In reality, this turned out to be a minor effect compared to the flexibility of adapting the workflow through a factory according to a logical production process rather than being forced to position machines according to mechanical constraints of belt drives. We talked about a couple other instances where novel customer uses resulted in unintended impacts of the original invention: podcasting for iPods, market equalization of prices once cell phones were more widely distributed, etc.

He also talked a bit about the need to carefully understand the user need and make sure that your product and service supports it. He used a couple of dot-com examples here: WebVan, and its failure to recognize that customers couldn't anticipate all of their shopping needs, so still needed to make a trip to the store, eliminating most of the savings of ordering online. His other dot-com example was Stamps.com, the online postage service. Compared to Pitney-Bowes, at first glance, it's a cheaper online solution. But, he argued, when you consider all of the steps required to mail a package, it's actually much simpler to use a Pitney-Bowes machine. Consequently, Pitney-Bowes' market cap is $10B compared to Stamps.com $350M.

During the Q & A session, he talked a bit about the reasons that Ricoh was investing in BOP research, and argued that Ricoh had often taken the "long view". Now, they're reaping the benefits of their "green" investments started 30 years ago.