Introduction

The sailing ship effect happens when a new technology enters an industry, that prompts advancement in the existing technology. As the existing technology is now challenged by that new technology, the older technology – in a final push – tries to improve in one last effort to stay meaningful.

Why the sailing ship effect is important? Because it is applicable to the craft distilling industry, with the iStill technology rapidly replacing the old and traditional potstill and plated still technologies.

This iStill Blog post investigates how the sailing ship affects new and old technologies, and if the efforts of the older technology to start innovating will make a difference. First with some examples, then with some lessons learned, and then onwards to a solid prediction of how the sailing ship effect will play out in the craft distilling industry as that can inform us on the futurology of distillation technology!

Historic example of the sailing ship effect: steam locomotives

Railroads were an amazing innovation. They helped unlock whole countries, by improving logistics and enabling trade. The first trains, we are talking early 1800’s here, had steam engines, because that was the only engine option available. But the beginning of the 1900’s saw the introduction of new propulsion systems. Electric and diesel train propulsion systems were more efficient, safer, and had less environmental impact.

As the new diesel and electric (and diesel-electric) technologies ingressed in the railway industry, we saw a short revival of steam locomotion innovation. The steam locomotives became more efficient and more aerodynamic, but of course not enough to off-set the huge deficiency it started with: steam locomotives were only 11% efficient, where electric and diesel locomotives offered much higher efficiencies of 20% and 28% respectively.

A late design steam locomotive, that – via aerodynamica – tries to keep up with newer technologies …

Another example of the sailing ship effect: record players

The late 1800’s saw the invention and introduction of the phonograph, AKA the first record player. Over the century that this technology ruled, record players slowly became better and better. Until the year 1982, when Sony introduced the first CD player.

As the CD player rapidly replaced the record player in the 1980’s, record player producers augmented their rate of innovation in an attempt to turn the tide. They improved the ease of operation of their record player, and even added CD player-esque options such as front loading. But in the end it was trivial and futile. By the 1990’s the new CD player technology had almost completely replaced the older record player technology.

One of the last generic attempts to innovate on record players …

A final example of the sailing boat effect: wooden shoes

The Dutch, up until 60 years ago, mostly walked on wooden shoes. They were cheap, the wood was readily available; wooden shoes were the go-to choice of footwear for the lower and middle classes. The higher classes walked on leather shoes, as they could afford the expensive, hand-made, often one-off pairs of them. It for sure helped distinguish them from the working classes!

Due to industrialization, relocation, and ready-made standardization and scaled-up production processes, shoes became very affordable almost over night. Guess what the lower and middle classes in the Netherlands all of a sudden could wear? Yes, leather shoes instead of wooden shoes! How the wooden shoe industry reacted? By designing wooden shoes that looked like leather shoes. See underneath for an example …

Cause and effect

Why did the builders of steam locomotives and record players go on an innovation frenzy? Because they saw the markets for their products being replaced by newer, more capable products rapidly. Under great pressure everything becomes fluid. Even big, mature industries, with well-divided markets, and just a few oligopolistic providers, all of a sudden – due to a technological break-through they did not invent and didn’t expect – could be disrupted.

A higher rate of innovation was needed for the existing technology to keep up with the newer and better technology. So we understand the cause of the sailing boat effect, but how about the effect? How come we do not see much improved steam locomotives reigning the railways as a century and a half ago? Why do we not still have access to amazing, mass-produced and low-priced record players that won the battle against CD players? And why did wooden clogs go out of fashion?

That has everything to do with Van Eijk’s Amended Law of the Diffusion of Innovation. Let’s dive in deeper!

The Amended Law of Diffusion of Innovation (TALDI)

TALDI teaches us that any technology has a 30% innovation potential at every doubling. As the production of a car doubles, the engineers learn so much that they can apply what they learn in order to make that car cheaper, better, or a combination of both. In other words: the 30% innovation potential, that results from doubling the production of that technology, can be used to drive production costs down for that technology, or to further improve upon the technology, or a combination of both.

Newer technologies in general already provide innovations that result in either lower production costs (CD’s versus records) or better features (electric locomotives are much stronger than steam locomotives). But that’s not why they win in the long term. Or why the old technology, that’s starting to innovate, now that it is under pressure, looses out eventually. The real reason has to do with the number of production doublings they can generate … in order to harvest the benefits of multiple of those 30% improvements!

TALDI: an example

Cars with petrol engines have been around for over a century. During that time, about 1,450 million of them have been produced. The first car produced was followed by the second, resulting in the first doubling and a 30% improvement potential. The third car yielded learnings too, but less significantly so. It took until the fourth car was produced, that another doubling was achieved … and another potential 30% improvement potential was unlocked. The third doubling was at eight cars, the fourth at 16 cars, and the fifth at 32 cars.

This implies that the 32nd car had an improvement potential of 5*30% = 150%. It could be made 150% better or a whole lot cheaper or any combination of the two. And in reality the improvement potential is even bigger as a new 30% builds on previous 30% improvements. The trend of growing innovation potential is not lineair but exponential!

How many doublings does it take to get to 1,450 million cars? It takes 31 doublings, resulting in a huge improvement of the end product (or the efficiency with which it is produced). Today’s cars are 10 times better than the first ones, and their addressable market is – due to continuous cost cuts – a 1000 times bigger.

Now, let’s introduce the electric car. Let’s say that so far 5 million have been produced. They are pretty good. More efficient than their petrol counterparts, but also more expensive to build or buy. Let’s call it a draw for now, where both score one point. An ex aequo at the moment.

Internal combustion engine manufacturers are starting to feel the heat from electric cars, and start to rapidly innovate. But what significant improvements can they make in an industry that already saw 31 doublings of their innovation potential? For internal combustion engines to improve by 30%, another doubling needs to take place. In other words: another 1,450 million petrol cars have to be build and sold! If that is to happen at all, it will take the better part of another century for sure … resulting in an annual innovation level of 30% divided by 100 years = 0,3% per year only.

Let’s compare that to the 5 million electric cars. They can improve by 30% when 10 million cars have been produced and sold. That will probably take place in a year from now, opening up another 30% improvement potential for electric cars. If electric car manufacturers use that potential for price reduction, all of a sudden the electrical car is 2-0 ahead, relative to the internal combustion car.

Do you see what’s happening here? New technologies win out not so much based on their initial improvements, but especially as they have much more room to improve at a much faster rate for a prolonged period of time! New technologies win out because they improve much faster than the old ones.

Intermezzo

A case can be made not only that the innovation frenzy of older, threatened technologies is futile, but that no actual real innovation takes place at all. Given the 0.3% annual innovation potential, that we calculated above, that would make sense. So what DO we see happen, if it is not really any substantial innovations from threatened yet established technologies?

A deeper dive into the innovation frenzy of dying technologies, teaches us that most of what – at the surface – appears to be innovative, is actually simply copy-cat behavior. Look at the last innovative steam locomotive, for example. They changed the look to make it appear closer to the more aerodynamic diesel and electric locomotives. Yes, it improves efficiency a bit, but not because of an innovation inherent to the steam locomotive industry. Instead, they simply stole a technological advancement from the new technology (improved aerodynamica) and – with very limited success – added it to their own technology, hoping that the superficial (instead of structural) change would stem the tide!

Did you take a closer look at the picture of the last innovative record player, that I shared above? Is it truly innovative, or have the engineers simply tried to add the front/top loading design that already existed for stereo cassette players and CD players to their outdated record players? The “innovations” that the older record player technology invents, isn’t really an invention, but an adaptation of an innovative design that belongs to the newer replacement technology.

Wooden shoes are the easiest to interpret situation. Their only “innovation” is that they started painting the clogs to resemble leather shoes. Again: imitation instead of real innovation. All in line with the very, very limited 0.3% annual innovation potential that older, established technologies have.

A deeper dive on the craft distillation industry

We have seen our “competitors” add PLC’s to their traditional potstills and plated stills, as a way to innovate and counter the new distilling technology that iStill introduced to the craft distilling industry. But that is quite an in vane kinda move, because trying to automate an inaccurate solutions doesn’t make the inaccuracy, that is inherent to the still’s design, go away. In summary? In summary, this means that their units do not get better, but they do get more expensive. PLC’s on traditional stills serve only one goal: they allow these manufacturers to have their stills look more like iStills. They can pretend they are now automated too.

We have seen another “competitor” add our copper foam technology to further enhance the surface area of their already copper columns. A certain amount of copper may catalyze the sulphuric compounds that result from poor fermentation protocols, but more copper is not better. More copper is simply more toxic, more expensive, and more hours of cleaning. In summary, this attempt at innovation results in this still producer’s units becoming more expensive, but not better. And again: it is copy-cat behavior that allows this manufacturer to say they have complied to (one of) our technological break-throughs.

There is even an example of pure mimicry, that I can share. As you know, the iStills are insulated and our insulation is black in color. One Italian still manufacturer decided, just like the wooden shoe manufacturers in the Netherlands did, some 60 years ago, to make their stills look more like iStills … by painting their boiler black!

The reason why manufacturers of traditional stills want to mimic our innovations is because the new iStill technology takes over their market shares. It is basically their admission that we are winning and that they are failing!

The reason why they do not succeed at achieving any real-world innovations, is because of the huge amount of traditional stills that have already been produced. It would take another century or more to double total production just once, resulting in the aforementioned 0,3% improvement potential per year, where iStill will probably double its production again in the next three years, giving us (and you) a 10% improvement rate every year.

We are already the best distilling technology out there. Our iStills can make any drink to perfection, in stead of just one to mediocracy. The iStills can even mash and ferment. They use 75% less energy and 80% less manual labor, while producing a bigger portfolio of better quality spirits at much lower costs. The iStills are designed to last a lifetime; they do not need maintenance or replacement parts, like traditional stills do. And iStill – as a company – is uniquely set-up as an innovation organization, rather than a production organization, so that we can fully reap the benefits of our higher rate (about 30 times higher per year: 10% vs 0,3%) of innovation!

The effect of our new technology on the craft distilling industry

The Amended Law of the Diffusion of Innovation learns us that iStill is already better, far better than the older and still existing technologies of plated stills and potstills. But more importantly: a simple calculation shows that the degree of annual innovation the iStill technology can benefit from, while moving forward, is 30x that of the competing older technologies.

As the new iStill technology is already much better, and will improve even more at a much faster rate, the certainty of this new technology taking over and completely replacing the existing technologies is pretty much 100%.

Any new distiller should know this. In fact, any craft distiller – new or existing – should contemplate the implications of this outlook into the future. The single positive outcome of that contemplation is this: “With the new iStill technology, I can produce a wider variety of spirits at a better quality for a lower price, taking the fight to Big Alcohol, while growing my revenue and profit!“

Another outcome of that contemplation can be defined negatively, for those unwilling to change from records to CD’s or from steam to electric locomotives: “If I do not change to the new iStill distillation technology soon, the craft distillers that did, will come after me, as they can produce a wider portfolio of spirits that are of higher quality then mine, yet cost much less to produce!“

If you want to discuss your future in the craft distilling industry with me personally, please reach out via Odin@iStillmail.com

http://www.iStill.com