INNOVATION LESSONS LEARNED FROM THE JOULE EV DEVELOPMENT
GerhardSwart3
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International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 1 of 19
INNOVATION LESSONS LEARNED FROM THE JOULE EV DEVELOPMENT
GERHARD SWART
Alphadot (Pty) Ltd, South Africa
[email protected]
ABSTRACT
The establishment in 2005 of Optimal Energy, a start-up business with the objective of “establishing
and leading the Electric Vehicle industry in South Africa and expanding globally”, was considered by
many as too ambitious in the African context. The company flourished however, and by December
2010 had four road-worthy prototypes and an astonishing success in the global media. The Joule
Electric Vehicle was a “born electric” 5-seater passenger car, sporting a totally new vehicle design
incorporating locally developed battery, motor and software technologies.
Despite the technical and marketing success achieved Optimal Energy was liquidated in June 2012.
Even with a rigorous and successful development process, a strong team of 108 people, substantial
in-house technology and an impressive network of partners and suppliers, the company lacked local
funding and had to close. This paper outlines some of the Innovation lessons learned by the author,
previously a co-founder and the Chief Technical Officer of the organisation.
An overview of the Joule concept and its innovation process is given, bringing together aspects of
Systems Engineering, the development process and the funding challenges. Several innovation and
commercialisation challenges are discussed, particularly those that are most often missed in the
South African context. The conclusions presented will hopefully help level the path for other start-up
companies, particularly those relying on government funding.
Key words:innovation, process, Joule, funding, lessons, development
INTRODUCTION
The “Innovation Chasm” is defined as “the gap between knowledge generators and the market”
(Vutula, 2009). This hindrance in the process of innovation has been identified as one of the main
causes why South Africa only spent about 0.92% of its National GDP on research and development
in 2005/6 (Vutula, 2009). The South African government also identified it as a hurdle to job creation
and economic growth in its National Survey of Research and Experimental Development (DST,
2005/2006). This is echoed by global research directly linking successful technology innovation to
economic growth (OECD, 2007).
Optimal Energy was conceived in 2004 with the purpose of developing a South African Electric
Vehicle (EV). Although not yet acknowledged by main-stream scientists there was already a debate
on Global Warming and it seemed clear that fossil fuels would become scarce and expensive.
Whereas the 1990’s were marked by the proliferation of the internet and became known as the
“information age”, it was apparent that an “energy age” was dawning. This would be an age where
energy would be expensive, efficiency important and sustainability a key to business success. Now,
ten years later, it seems obvious that EV’s are part of the future. The 75% efficiency of their drive
train when compared to the 15% of a conventional internal combustion engine would propel them
to success in a fuel-scarce world. In addition, the advances in Lithium-ion batteries would make it
IAMOT 2015 Conference Proceedings
Page 1 of 19
INNOVATION LESSONS LEARNED FROM THE JOULE EV DEVELOPMENT
GERHARD SWART
Alphadot (Pty) Ltd, South Africa
[email protected]
ABSTRACT
The establishment in 2005 of Optimal Energy, a start-up business with the objective of “establishing
and leading the Electric Vehicle industry in South Africa and expanding globally”, was considered by
many as too ambitious in the African context. The company flourished however, and by December
2010 had four road-worthy prototypes and an astonishing success in the global media. The Joule
Electric Vehicle was a “born electric” 5-seater passenger car, sporting a totally new vehicle design
incorporating locally developed battery, motor and software technologies.
Despite the technical and marketing success achieved Optimal Energy was liquidated in June 2012.
Even with a rigorous and successful development process, a strong team of 108 people, substantial
in-house technology and an impressive network of partners and suppliers, the company lacked local
funding and had to close. This paper outlines some of the Innovation lessons learned by the author,
previously a co-founder and the Chief Technical Officer of the organisation.
An overview of the Joule concept and its innovation process is given, bringing together aspects of
Systems Engineering, the development process and the funding challenges. Several innovation and
commercialisation challenges are discussed, particularly those that are most often missed in the
South African context. The conclusions presented will hopefully help level the path for other start-up
companies, particularly those relying on government funding.
Key words:innovation, process, Joule, funding, lessons, development
INTRODUCTION
The “Innovation Chasm” is defined as “the gap between knowledge generators and the market”
(Vutula, 2009). This hindrance in the process of innovation has been identified as one of the main
causes why South Africa only spent about 0.92% of its National GDP on research and development
in 2005/6 (Vutula, 2009). The South African government also identified it as a hurdle to job creation
and economic growth in its National Survey of Research and Experimental Development (DST,
2005/2006). This is echoed by global research directly linking successful technology innovation to
economic growth (OECD, 2007).
Optimal Energy was conceived in 2004 with the purpose of developing a South African Electric
Vehicle (EV). Although not yet acknowledged by main-stream scientists there was already a debate
on Global Warming and it seemed clear that fossil fuels would become scarce and expensive.
Whereas the 1990’s were marked by the proliferation of the internet and became known as the
“information age”, it was apparent that an “energy age” was dawning. This would be an age where
energy would be expensive, efficiency important and sustainability a key to business success. Now,
ten years later, it seems obvious that EV’s are part of the future. The 75% efficiency of their drive
train when compared to the 15% of a conventional internal combustion engine would propel them
to success in a fuel-scarce world. In addition, the advances in Lithium-ion batteries would make it
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 2 of 19
possible to store enough energy to travel hundreds of kilometres on a single charge, more than
adequate for a typical daily commute.
Taking on the automotive industry however, seemed very ambitious and mainstream automakers
seemed to have rejected the idea of electric mobility. Although there were several small EV start-ups
in the world (e.g. Tesla Motors had just started), most mainstream automakers had abandoned their
previous attempt at commercial EV sales in 1999, apparently because they proved less profitable
than the conventional vehicles. A Wikipedia article on the demise of the General Motors EV1
summarises the sentiment as follows:
“The EV1's discontinuation remains controversial, with electric car enthusiasts,
environmental interest groups and former EV1 lessees accusing GM of self-sabotaging its
electric car program to avoid potential losses in spare parts sales (sales forced by
government regulations), while also blaming the oil industry for conspiring to keep electric
cars off the road.” (Wikipedia, 2015).
In December 2005 the Innovation Fund (a funding agency of DST), after 18 months of consideration,
finally approved an investment
1
in Optimal Energy of R15m over three years to complete the first
prototype vehicle. The work was done in a consortium formed between Optimal Energy,
Stellenbosch University, University of the Western Cape and University of Limpopo. The project was
aligned to the prevailing government priorities and it seemed clear that the potential job creation,
technology innovation and economic potential of the project justified the investment risk.
Unlike most innovation projects where technology is invented and then developed further, Optimal
Energy started with the market, social and economic needs for their product, and then determined
what the required technologies were. A top-down, user-centric, Systems Engineering approach was
followed, where new technology would only be developed where it presented a clear strategic
opportunity. The conventional vehicle engineering (body, chassis and interior), for example, would
use mostly existing technologies and off-the-shelf components in partnership with existing
automotive suppliers. The unique EV systems on the other hand, such as the Battery System, Electric
Drive System and Vehicle Control, required new technologies and significant system development.
The Joule EV (as it later became known), was not intended to remain a technology demonstrator,
but from the onset was planned to be a commercial success through manufacturing in South Africa.
Only then would the full potential of new jobs and economic development be achieved.Optimal
Energy’s mission was formulated accordingly: “To establish and lead the Electric Vehicle industry in
South Africa and expand globally”. After all, “Research turns money into knowledge, whereas
innovation turns knowledge into money.” (van Zyl, 2011).
This would require a great breadth of activity, built up through partnerships and selective personnel
appointments. Not only was a product and the related technology to be developed, but the entire
supply chain had to be established, the vehicle had to be tested to meet legal and customer
requirements, the market and an operational business had to be established, and a vehicle assembly
plant and support infrastructure were required.
1
The Innovation Fund normally provided grant funding with royalties payable on project success, but in this
instance an equity stake in Optimal Energy was taken, giving government direct shareholding in a private
company, which would lead to several difficulties later.
IAMOT 2015 Conference Proceedings
Page 2 of 19
possible to store enough energy to travel hundreds of kilometres on a single charge, more than
adequate for a typical daily commute.
Taking on the automotive industry however, seemed very ambitious and mainstream automakers
seemed to have rejected the idea of electric mobility. Although there were several small EV start-ups
in the world (e.g. Tesla Motors had just started), most mainstream automakers had abandoned their
previous attempt at commercial EV sales in 1999, apparently because they proved less profitable
than the conventional vehicles. A Wikipedia article on the demise of the General Motors EV1
summarises the sentiment as follows:
“The EV1's discontinuation remains controversial, with electric car enthusiasts,
environmental interest groups and former EV1 lessees accusing GM of self-sabotaging its
electric car program to avoid potential losses in spare parts sales (sales forced by
government regulations), while also blaming the oil industry for conspiring to keep electric
cars off the road.” (Wikipedia, 2015).
In December 2005 the Innovation Fund (a funding agency of DST), after 18 months of consideration,
finally approved an investment
1
in Optimal Energy of R15m over three years to complete the first
prototype vehicle. The work was done in a consortium formed between Optimal Energy,
Stellenbosch University, University of the Western Cape and University of Limpopo. The project was
aligned to the prevailing government priorities and it seemed clear that the potential job creation,
technology innovation and economic potential of the project justified the investment risk.
Unlike most innovation projects where technology is invented and then developed further, Optimal
Energy started with the market, social and economic needs for their product, and then determined
what the required technologies were. A top-down, user-centric, Systems Engineering approach was
followed, where new technology would only be developed where it presented a clear strategic
opportunity. The conventional vehicle engineering (body, chassis and interior), for example, would
use mostly existing technologies and off-the-shelf components in partnership with existing
automotive suppliers. The unique EV systems on the other hand, such as the Battery System, Electric
Drive System and Vehicle Control, required new technologies and significant system development.
The Joule EV (as it later became known), was not intended to remain a technology demonstrator,
but from the onset was planned to be a commercial success through manufacturing in South Africa.
Only then would the full potential of new jobs and economic development be achieved.Optimal
Energy’s mission was formulated accordingly: “To establish and lead the Electric Vehicle industry in
South Africa and expand globally”. After all, “Research turns money into knowledge, whereas
innovation turns knowledge into money.” (van Zyl, 2011).
This would require a great breadth of activity, built up through partnerships and selective personnel
appointments. Not only was a product and the related technology to be developed, but the entire
supply chain had to be established, the vehicle had to be tested to meet legal and customer
requirements, the market and an operational business had to be established, and a vehicle assembly
plant and support infrastructure were required.
1
The Innovation Fund normally provided grant funding with royalties payable on project success, but in this
instance an equity stake in Optimal Energy was taken, giving government direct shareholding in a private
company, which would lead to several difficulties later.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 3 of 19
These activities span the “Innovation Chasm”, and involved moving from the technology
development activities all the way into full-scale product development of a complex product. It
would require significant funding and the development of new engineering expertise which was new
territory for potential funders and government. So although the Joule EV project presented a
strategic opportunity for the country to join the ranks of the full-blown automotive industry, it was
difficult for the funders to grasp the value of the opportunity as it was unlike typical innovation
projects they had backed in the past.
The reasons for the lack of funding and liquidation of Optimal Energy in June 2012 are complex, but
it was undoubtedly another casualty of the Innovation Chasm. Many hard lessons were learned, a
few of which are shared below in the hope that the chasm will eventually be filled permanently by a
vibrant product development industry linked to a growing manufacturing and support industry that
receives appropriate government funding and policy support. The resulting new products developed
will help give the industry a much-needed competitive advantage that would ultimately lead to
greater job creation and economic growth in South Africa.
ANATOMY OF A START-UP COMPANY
Starting up a new business and growing it over six years to have 108 people and an annual budget of
more than R50m, is a huge task. This involved more than 1000 staff interviews and the
establishment of company procedures for financial control, procurement, staff contracting, quality
management and product development. Although the core technical work was considered the main
mission of the organisation, a major portion of the resources were applied simply to build the
business and keep the investors’ money safe. An important “noncore” activity was to do continuous
fund raising and build potential investor relationships.
Funding and Shareholders
In 2007 the Industrial Development Corporation (IDC) purchased a significant stake in Optimal
Energy and was keen to see the start of commercialisation activities.
By end 2008 the first prototype Joule (PT1) was complete and was unveiled by then Minister of
Science and Technology, Mosibudi Mangena, who
“described the development and launch of the Joule as a watershed moment in the
country’s National System of Innovation… Mangena lauded Optimal [Energy] for creating the
Joule on ‘practically a shoestring budget’. He added that government believes the car has
special attributes that make it valuable to South Africa’s motor industry.” (Erasmus, 2008).
Sound progress had been made by early 2011 - four third-generation roadworthy prototype Joule
EV’s were being tested, Joule had been a success at several European motor shows, detailed
business, industrialisation and manufacturing plans were developed and technically it was going
well. An impressive group of international partners had been drawn in, adding significant
automotive engineering, testing, manufacturing, shipping, distribution, and retail and marketing
expertise to the business. This had all been achieved for R250m, a fraction of what European and
American EV start-ups were spending to reach comparable stages in their development.
The Optimal Energy business plan was attracting a mixed response. It required an additional R9.8b
investment over four years to take the Joule into volume production of 50 000 per year, primarily for
IAMOT 2015 Conference Proceedings
Page 3 of 19
These activities span the “Innovation Chasm”, and involved moving from the technology
development activities all the way into full-scale product development of a complex product. It
would require significant funding and the development of new engineering expertise which was new
territory for potential funders and government. So although the Joule EV project presented a
strategic opportunity for the country to join the ranks of the full-blown automotive industry, it was
difficult for the funders to grasp the value of the opportunity as it was unlike typical innovation
projects they had backed in the past.
The reasons for the lack of funding and liquidation of Optimal Energy in June 2012 are complex, but
it was undoubtedly another casualty of the Innovation Chasm. Many hard lessons were learned, a
few of which are shared below in the hope that the chasm will eventually be filled permanently by a
vibrant product development industry linked to a growing manufacturing and support industry that
receives appropriate government funding and policy support. The resulting new products developed
will help give the industry a much-needed competitive advantage that would ultimately lead to
greater job creation and economic growth in South Africa.
ANATOMY OF A START-UP COMPANY
Starting up a new business and growing it over six years to have 108 people and an annual budget of
more than R50m, is a huge task. This involved more than 1000 staff interviews and the
establishment of company procedures for financial control, procurement, staff contracting, quality
management and product development. Although the core technical work was considered the main
mission of the organisation, a major portion of the resources were applied simply to build the
business and keep the investors’ money safe. An important “noncore” activity was to do continuous
fund raising and build potential investor relationships.
Funding and Shareholders
In 2007 the Industrial Development Corporation (IDC) purchased a significant stake in Optimal
Energy and was keen to see the start of commercialisation activities.
By end 2008 the first prototype Joule (PT1) was complete and was unveiled by then Minister of
Science and Technology, Mosibudi Mangena, who
“described the development and launch of the Joule as a watershed moment in the
country’s National System of Innovation… Mangena lauded Optimal [Energy] for creating the
Joule on ‘practically a shoestring budget’. He added that government believes the car has
special attributes that make it valuable to South Africa’s motor industry.” (Erasmus, 2008).
Sound progress had been made by early 2011 - four third-generation roadworthy prototype Joule
EV’s were being tested, Joule had been a success at several European motor shows, detailed
business, industrialisation and manufacturing plans were developed and technically it was going
well. An impressive group of international partners had been drawn in, adding significant
automotive engineering, testing, manufacturing, shipping, distribution, and retail and marketing
expertise to the business. This had all been achieved for R250m, a fraction of what European and
American EV start-ups were spending to reach comparable stages in their development.
The Optimal Energy business plan was attracting a mixed response. It required an additional R9.8b
investment over four years to take the Joule into volume production of 50 000 per year, primarily for
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 4 of 19
export to the European market. A third of this investment was expected to come from government
2
,
and their 2010 Industrial Policy Action Plan (IPAP) made this seem likely. This document expressed
their intended industrial intervention as follows:
“The automotive sector will be profoundly affected by the long-term shift from the internal
combustion engine to cleaner technologies, such as electric vehicles. Initiatives to
commercialise a domestically developed electric car are set out in the Automotive section
[of the IPAP]. This project [the IPAP intervention] will have broader spill over effects not
least of which will be the creation of a legislative and regulatory environment to allow the
operation of electric vehicles, relevant testing infrastructure for electric vehicles, local
manufacturing for domestic and global markets, initiation of charging infrastructure and
educational campaigns on electric vehicles.” (DTI, 2010).
In the quoted “Automotive section” of the IPAP a specific milestone was provided, indicating that
government would provide “approval of investment support measures for the manufacture of the
electric vehicle and components” by end 2010 (DTI, 2010).
The second third of the required Joule funding was to be raised internationally, and this also seemed
likely, considering the interest shown in the project abroad, however, many potential funders
indicated that their funding would be dependent on realisation of the promised government
financial support. The final third of the funding would be loans, to be used primarily for production
inventory and operational start-up costs just before production commenced.
From 2010, changes within the funding shareholders lead to conflict in business strategy and budget
priorities. The Innovation Fund had been dissolved and incorporated into the new Technology
Innovation Agency (TIA), who became the government shareholder of Optimal Energy.
TIA came into being in accordance with the so-called TIA Act, with the object to
“support the state in stimulating and intensifying technological innovation in order to
improve economic growth and the quality of life of all South Africans by developing and
exploiting technological innovations.” (SA Government, 2008).
This change had great promise, as TIA was designed to address the Innovation Chasm. In fact, the
acting TIA CEO, in an early presentation to the NEPAD-OECD Africa Investment Initiative, introduced
the TIA mission with the phrase: “Bridging the ‘Chasm’ through local technology commercialisation
and diffusion” (Msomi, 2009). Unfortunately their inexperience and determination to “start afresh”,
led to the death of many Innovation Fund projects during 2010/2011, as summarised by the
Stellenbosch University Vice Chancellor:
“So far the effect of TIA on the innovation landscape has not been apparent. On the
contrary, quite a number of funding initiatives incorporated into the TIA have been abruptly
ended, leaving research institutions responsible for personnel and running costs and in some
cases even resulting in the loss of highly skilled personnel. In addition, the payments of many
research contracts are in arrears, leaving institutions liable for payments to subcontractors
and international collaboration partners. Apart from the financial implications, this situation
2
R3.2b over four years is not a large investment for government in the context of their MIDP/APDP scheme,
with which they subsidise the foreign automotive companies through tax and other incentives. The annual cost
to the taxpayer is difficult to calculate, but in 2003 alone, it was estimated at R15b (Flatters, 2005).
IAMOT 2015 Conference Proceedings
Page 4 of 19
export to the European market. A third of this investment was expected to come from government
2
,
and their 2010 Industrial Policy Action Plan (IPAP) made this seem likely. This document expressed
their intended industrial intervention as follows:
“The automotive sector will be profoundly affected by the long-term shift from the internal
combustion engine to cleaner technologies, such as electric vehicles. Initiatives to
commercialise a domestically developed electric car are set out in the Automotive section
[of the IPAP]. This project [the IPAP intervention] will have broader spill over effects not
least of which will be the creation of a legislative and regulatory environment to allow the
operation of electric vehicles, relevant testing infrastructure for electric vehicles, local
manufacturing for domestic and global markets, initiation of charging infrastructure and
educational campaigns on electric vehicles.” (DTI, 2010).
In the quoted “Automotive section” of the IPAP a specific milestone was provided, indicating that
government would provide “approval of investment support measures for the manufacture of the
electric vehicle and components” by end 2010 (DTI, 2010).
The second third of the required Joule funding was to be raised internationally, and this also seemed
likely, considering the interest shown in the project abroad, however, many potential funders
indicated that their funding would be dependent on realisation of the promised government
financial support. The final third of the funding would be loans, to be used primarily for production
inventory and operational start-up costs just before production commenced.
From 2010, changes within the funding shareholders lead to conflict in business strategy and budget
priorities. The Innovation Fund had been dissolved and incorporated into the new Technology
Innovation Agency (TIA), who became the government shareholder of Optimal Energy.
TIA came into being in accordance with the so-called TIA Act, with the object to
“support the state in stimulating and intensifying technological innovation in order to
improve economic growth and the quality of life of all South Africans by developing and
exploiting technological innovations.” (SA Government, 2008).
This change had great promise, as TIA was designed to address the Innovation Chasm. In fact, the
acting TIA CEO, in an early presentation to the NEPAD-OECD Africa Investment Initiative, introduced
the TIA mission with the phrase: “Bridging the ‘Chasm’ through local technology commercialisation
and diffusion” (Msomi, 2009). Unfortunately their inexperience and determination to “start afresh”,
led to the death of many Innovation Fund projects during 2010/2011, as summarised by the
Stellenbosch University Vice Chancellor:
“So far the effect of TIA on the innovation landscape has not been apparent. On the
contrary, quite a number of funding initiatives incorporated into the TIA have been abruptly
ended, leaving research institutions responsible for personnel and running costs and in some
cases even resulting in the loss of highly skilled personnel. In addition, the payments of many
research contracts are in arrears, leaving institutions liable for payments to subcontractors
and international collaboration partners. Apart from the financial implications, this situation
2
R3.2b over four years is not a large investment for government in the context of their MIDP/APDP scheme,
with which they subsidise the foreign automotive companies through tax and other incentives. The annual cost
to the taxpayer is difficult to calculate, but in 2003 alone, it was estimated at R15b (Flatters, 2005).
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 5 of 19
has serious international reputational risks for the South African innovation system.” (van
Zyl, 2011).
Whether by conscious decision or due to slow process, the anticipated government industrial
funding had still not materialised by end 2011. The IDC had provided most of the funding up to that
point and, mindful of the losses they had recently incurred from the government’s cancellation of
the PBMR nuclear project, decided to halt any further investment in Optimal Energy. In the absence
of cash to pay employee salaries and with no alternative funding plan, the company closed
voluntarily in June 2012. TIA and IDC together owned 80% of the Optimal Energy shares, making
them heirs of the Joule Intellectual Property (IP).
Company Management
The executive management of Optimal Energy were experts from industry, each selected with a
particular portfolio and focus in mind, as seen in Figure 1.
Figure 1: Optimal Energy executive management
The actual development of the Joule vehicle and systems was managed in a matrix management
structure, with the Project Management organisation having firm control of the project budget and
schedule, whilst the Engineering organisation (under the management of the CTO) performed the
actual engineering and prototyping work with the support of various partners and suppliers.
THE JOULE ELECTRIC VEHICLE
The initial EV concept developed by Optimal Energy was minimalistic and not particularly attractive,
but as the real customer needs of the automotive market were realised, the Joule emerged as an
attractive mid-sized passenger car, with competitive performance and features (see Figures 2 and 3
below).
CEO
Strategic
leadership,
funding,
investors
Project
Manager
Project
schedule
budget &
Management
CTO
Technology
development,
Manage
engineering
team
Marketing
Manager
Brand
development,
customer
profiling
Purching
Manager
Supplier
contracting,
volume cost
forecasting
Quality
Manager
Quality
procedures,
inspections
and audits
Production
Manager
Production
planning,
development,
operation
HR Manager
Personnel
planning &
contracting,
BEE, admin.
CFO
Finanical
control and
reporting,
facilities
IAMOT 2015 Conference Proceedings
Page 5 of 19
has serious international reputational risks for the South African innovation system.” (van
Zyl, 2011).
Whether by conscious decision or due to slow process, the anticipated government industrial
funding had still not materialised by end 2011. The IDC had provided most of the funding up to that
point and, mindful of the losses they had recently incurred from the government’s cancellation of
the PBMR nuclear project, decided to halt any further investment in Optimal Energy. In the absence
of cash to pay employee salaries and with no alternative funding plan, the company closed
voluntarily in June 2012. TIA and IDC together owned 80% of the Optimal Energy shares, making
them heirs of the Joule Intellectual Property (IP).
Company Management
The executive management of Optimal Energy were experts from industry, each selected with a
particular portfolio and focus in mind, as seen in Figure 1.
Figure 1: Optimal Energy executive management
The actual development of the Joule vehicle and systems was managed in a matrix management
structure, with the Project Management organisation having firm control of the project budget and
schedule, whilst the Engineering organisation (under the management of the CTO) performed the
actual engineering and prototyping work with the support of various partners and suppliers.
THE JOULE ELECTRIC VEHICLE
The initial EV concept developed by Optimal Energy was minimalistic and not particularly attractive,
but as the real customer needs of the automotive market were realised, the Joule emerged as an
attractive mid-sized passenger car, with competitive performance and features (see Figures 2 and 3
below).
CEO
Strategic
leadership,
funding,
investors
Project
Manager
Project
schedule
budget &
Management
CTO
Technology
development,
Manage
engineering
team
Marketing
Manager
Brand
development,
customer
profiling
Purching
Manager
Supplier
contracting,
volume cost
forecasting
Quality
Manager
Quality
procedures,
inspections
and audits
Production
Manager
Production
planning,
development,
operation
HR Manager
Personnel
planning &
contracting,
BEE, admin.
CFO
Finanical
control and
reporting,
facilities
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 6 of 19
Figure 2: Joule in Cape Town
Figure 3: Joule interior, showing the central console with advanced control and display functions
A detailed description of the Joule and its technologies is beyond the scope of this paper, but Figure
4 below provides an artistic rendering of the vehicle and its major parts based on an actual CAD
model of the vehicle.
5-seater C-segment city vehicle
0-60km/h in less than 5s
Max Speed 135km/h
Designed for NCAP 5-star
Luxurious interior
EV-specific Telematics
Normal comfort features
Airbags
IAMOT 2015 Conference Proceedings
Page 6 of 19
Figure 2: Joule in Cape Town
Figure 3: Joule interior, showing the central console with advanced control and display functions
A detailed description of the Joule and its technologies is beyond the scope of this paper, but Figure
4 below provides an artistic rendering of the vehicle and its major parts based on an actual CAD
model of the vehicle.
5-seater C-segment city vehicle
0-60km/h in less than 5s
Max Speed 135km/h
Designed for NCAP 5-star
Luxurious interior
EV-specific Telematics
Normal comfort features
Airbags
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 7 of 19
Figure 4: Joule layout and key technical parameters
Four roadworthy prototype vehicles (called PEV) were built, incorporating the key Joule features and
technologies, allowing validation of the target market, aesthetic and technical concepts. They were
housed at the Optimal Energy vehicle test centre pictured in Figure 5 below. By the closure of
Optimal Energy, the vehicle test fleet had driven more than 38 000km.
Figure 5: Joule PEV Prototypes at the Optimal Energy vehicle test centre
COMMERCIALISATION
There are many inter-linked factors that were considered during the establishment of the Joule
commercialisation strategy, but the required end goal was simple: sustainable profitability. Only
then would the other potential benefits such as job creation, reduction in vehicle emissions and less
dependence on imported oil become a reality. Some of these factors are discussed below.
75kW peak STM motor
Large luggage compartment
Optional PV panel roof
On-board charger
Li-ion battery with convection cooling
380V, 36kWh capacity
Swappable from below
Range ~230km (NEDC)
IAMOT 2015 Conference Proceedings
Page 7 of 19
Figure 4: Joule layout and key technical parameters
Four roadworthy prototype vehicles (called PEV) were built, incorporating the key Joule features and
technologies, allowing validation of the target market, aesthetic and technical concepts. They were
housed at the Optimal Energy vehicle test centre pictured in Figure 5 below. By the closure of
Optimal Energy, the vehicle test fleet had driven more than 38 000km.
Figure 5: Joule PEV Prototypes at the Optimal Energy vehicle test centre
COMMERCIALISATION
There are many inter-linked factors that were considered during the establishment of the Joule
commercialisation strategy, but the required end goal was simple: sustainable profitability. Only
then would the other potential benefits such as job creation, reduction in vehicle emissions and less
dependence on imported oil become a reality. Some of these factors are discussed below.
75kW peak STM motor
Large luggage compartment
Optional PV panel roof
On-board charger
Li-ion battery with convection cooling
380V, 36kWh capacity
Swappable from below
Range ~230km (NEDC)
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 8 of 19
Economies of Scale
A basic principle of manufactured products is that the more you optimise the design and
manufacturing process the lower the final cost of the product can be. New technology, such as that
needed on EV’s, is initially very expensive because manufacturing volumes are small. If adequate
investment is made in optimising the design for high volume manufacturing processes (e.g. casting
mechanical parts instead of machining them) and establishing this capacity, the unit cost can be
significantly reduced. It was thus crucial for the Joule, to decide on a marketing strategy and the
equivalent production volumes, as this would determine the amount of engineering required.
Figure 6 shows the approximate relationship between production volume and required unit sales
price for the Joule. The first four Pilot-Production Prototypes (PEV) cost around R1.6m each to build
and this was expected to reduce to achieve a R318k sales price for the Executive version of the
production vehicle, made at 50 000 per year. This price was slightly higher than nonelectric vehicles
with similar features, but considering the prevailing EV subsidies in Europe, Joule would still be
competitive.
Figure 6: Approximate Joule economies of scale
To achieve the required cost reduction it would take a significant amount of engineering by an
extensive team of experienced partners and suppliers over a period of four years. This
“industrialisation” cost was high, but if one did less engineering to suit a market for only 5000
vehicles per year (the estimated SA market
3
), each vehicle would cost an estimated R476k. At this
price Joule was not considered competitive and would probably only be purchased by technology
enthusiasts and perhaps the government
4
.
So, in the light of the significant European market interest and the available EV subsidies, Optimal
Energy based their plan on 50 000 vehicles per year. Clearly this was the “high road” but the
potential national benefits would be huge. SA could follow the Korean automotive industry, that
3
Market research estimated of local Joule sales at 5 000 per year, of a total ~450 000 per year SA new car
market.
4
In retrospect, perhaps the local market would have paid R476k for the Joule - the Nissan LEAF EV was
launched in South Africa at R446k (Lamprecht, 2013).
IAMOT 2015 Conference Proceedings
Page 8 of 19
Economies of Scale
A basic principle of manufactured products is that the more you optimise the design and
manufacturing process the lower the final cost of the product can be. New technology, such as that
needed on EV’s, is initially very expensive because manufacturing volumes are small. If adequate
investment is made in optimising the design for high volume manufacturing processes (e.g. casting
mechanical parts instead of machining them) and establishing this capacity, the unit cost can be
significantly reduced. It was thus crucial for the Joule, to decide on a marketing strategy and the
equivalent production volumes, as this would determine the amount of engineering required.
Figure 6 shows the approximate relationship between production volume and required unit sales
price for the Joule. The first four Pilot-Production Prototypes (PEV) cost around R1.6m each to build
and this was expected to reduce to achieve a R318k sales price for the Executive version of the
production vehicle, made at 50 000 per year. This price was slightly higher than nonelectric vehicles
with similar features, but considering the prevailing EV subsidies in Europe, Joule would still be
competitive.
Figure 6: Approximate Joule economies of scale
To achieve the required cost reduction it would take a significant amount of engineering by an
extensive team of experienced partners and suppliers over a period of four years. This
“industrialisation” cost was high, but if one did less engineering to suit a market for only 5000
vehicles per year (the estimated SA market
3
), each vehicle would cost an estimated R476k. At this
price Joule was not considered competitive and would probably only be purchased by technology
enthusiasts and perhaps the government
4
.
So, in the light of the significant European market interest and the available EV subsidies, Optimal
Energy based their plan on 50 000 vehicles per year. Clearly this was the “high road” but the
potential national benefits would be huge. SA could follow the Korean automotive industry, that
3
Market research estimated of local Joule sales at 5 000 per year, of a total ~450 000 per year SA new car
market.
4
In retrospect, perhaps the local market would have paid R476k for the Joule - the Nissan LEAF EV was
launched in South Africa at R446k (Lamprecht, 2013).
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 9 of 19
grew from a foreign-dominated industry in 1992 to capture 9% of the global market by 2009 (Roach,
Lam, 2010) through strategic government support of domestic companies.
Why not convert a conventional vehicle to electric?
To convert an existing vehicle to have an electric drive train may seem to be a lower-risk option but
many have tried and failed to achieve a sustainable business doing so.
Firstly, the vehicle will always be seen as a product of the original brand. A converted Toyota Corolla
will, for example, always look like a Toyota Corolla and be seen as such by the customer. The unique
advantages of the electric technology, such as silent driving and keen acceleration are masked by the
existing brand perceptions.
Secondly, it means that a small start-up needs to negotiate with a multinational competitor like
Toyota to obtain the donor vehicle at a competitive price. If the cost of the electric drive train, which
is around R180k, is simply added to the donor’s price, the final vehicle will be too expensive.
There are also strong technical reasons to avoid this: a traditional car layout is determined largely by
the presence of the engine. It is hot, noisy and heavy, and must be positioned close to the front
wheels. On the other hand, an electric vehicle’s largest component is the battery, which won’t fit
into the existing engine compartment (the electric motor goes there). Placing batteries into all the
other vehicle spaces (such as the luggage compartment) is unsafe and reduces the vehicle handling
quality. Joule was thus rather designed from the battery up, to have a totally new vehicle platform
which was optimised to be an electric vehicle.
Marketing
The amount of marketing a product needs depends largely on its intended customers and what the
competitors are doing. For the Joule EV, particularly considering its need to develop the export
market, a substantial and well devised marketing strategy was required.
Electric Vehicles are a “disruptive innovation” that threatens the status quo in the automotive
industry by having an entirely different value proposition, different core technologies and an ability
to rapidly adapt to the market needs. This levels the playing field and allows new entrants such as
Tesla and Optimal Energy to compete with a large and established industry, and actually achieve
success.
Part of the marketing strategy selected by Optimal Energy, with the aid of various marketing
consultants, was to start building a brand presence and a customer understanding from the
beginning. The public had to be educated in the benefits of EV’s and the Joule had to be seen as a
vehicle with no compromises made. Over and above their technical role, the various prototypes had
to be available for marketing demonstrations, shows and government events. A consistent
perception of the vehicle and the company had to develop, preparing the way for the eventual sale
of the vehicle.
The Joule was first unveiled to the public at the Paris Automotive Show in 2008 (Figure 7). It was
well-received, with much interest in its unique styling and even several requests for sole distribution
rights from global retail firms. Continuous media and event coverage followed, a highlight being
when the Car Magazine (Figure 8) evaluation team took the Joules for a test drive, and concluded:
“It’s good. Very good in fact.”(Oosthuizen, 2011).
IAMOT 2015 Conference Proceedings
Page 9 of 19
grew from a foreign-dominated industry in 1992 to capture 9% of the global market by 2009 (Roach,
Lam, 2010) through strategic government support of domestic companies.
Why not convert a conventional vehicle to electric?
To convert an existing vehicle to have an electric drive train may seem to be a lower-risk option but
many have tried and failed to achieve a sustainable business doing so.
Firstly, the vehicle will always be seen as a product of the original brand. A converted Toyota Corolla
will, for example, always look like a Toyota Corolla and be seen as such by the customer. The unique
advantages of the electric technology, such as silent driving and keen acceleration are masked by the
existing brand perceptions.
Secondly, it means that a small start-up needs to negotiate with a multinational competitor like
Toyota to obtain the donor vehicle at a competitive price. If the cost of the electric drive train, which
is around R180k, is simply added to the donor’s price, the final vehicle will be too expensive.
There are also strong technical reasons to avoid this: a traditional car layout is determined largely by
the presence of the engine. It is hot, noisy and heavy, and must be positioned close to the front
wheels. On the other hand, an electric vehicle’s largest component is the battery, which won’t fit
into the existing engine compartment (the electric motor goes there). Placing batteries into all the
other vehicle spaces (such as the luggage compartment) is unsafe and reduces the vehicle handling
quality. Joule was thus rather designed from the battery up, to have a totally new vehicle platform
which was optimised to be an electric vehicle.
Marketing
The amount of marketing a product needs depends largely on its intended customers and what the
competitors are doing. For the Joule EV, particularly considering its need to develop the export
market, a substantial and well devised marketing strategy was required.
Electric Vehicles are a “disruptive innovation” that threatens the status quo in the automotive
industry by having an entirely different value proposition, different core technologies and an ability
to rapidly adapt to the market needs. This levels the playing field and allows new entrants such as
Tesla and Optimal Energy to compete with a large and established industry, and actually achieve
success.
Part of the marketing strategy selected by Optimal Energy, with the aid of various marketing
consultants, was to start building a brand presence and a customer understanding from the
beginning. The public had to be educated in the benefits of EV’s and the Joule had to be seen as a
vehicle with no compromises made. Over and above their technical role, the various prototypes had
to be available for marketing demonstrations, shows and government events. A consistent
perception of the vehicle and the company had to develop, preparing the way for the eventual sale
of the vehicle.
The Joule was first unveiled to the public at the Paris Automotive Show in 2008 (Figure 7). It was
well-received, with much interest in its unique styling and even several requests for sole distribution
rights from global retail firms. Continuous media and event coverage followed, a highlight being
when the Car Magazine (Figure 8) evaluation team took the Joules for a test drive, and concluded:
“It’s good. Very good in fact.”(Oosthuizen, 2011).
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 10 of 19
Figure 7: Joule at the Mondial de l'Automobile (Paris Automotive Show) in 2008
Figure 8: April 2011 Car Magazine reporting the Joule test drive
The Joule marketing was very successful in establishing the brand image, to the extent that in 2011 it
was covered by 40 to 90 international media reports every month. Some may consider the
marketing too much, too early, as it may have led to public and investor disillusion as they battled to
understand why the production vehicle would take another four years in coming.
JOULE DEVELOPMENT PROCESS
The Joule product development was done in five phases, each with different objectives. The result
would be a validated product design, a factory to make it, suppliers to provide the parts, a sales
infrastructure to sell it, a support system for customers, and a business to link it all together. These
phases and some of their specific objectives are shown in Figure 9 below.
Without there being much South African automotive engineering in existence, the first two phases
were largely about establishing the team, the new EV technologies, understanding the vehicle
IAMOT 2015 Conference Proceedings
Page 10 of 19
Figure 7: Joule at the Mondial de l'Automobile (Paris Automotive Show) in 2008
Figure 8: April 2011 Car Magazine reporting the Joule test drive
The Joule marketing was very successful in establishing the brand image, to the extent that in 2011 it
was covered by 40 to 90 international media reports every month. Some may consider the
marketing too much, too early, as it may have led to public and investor disillusion as they battled to
understand why the production vehicle would take another four years in coming.
JOULE DEVELOPMENT PROCESS
The Joule product development was done in five phases, each with different objectives. The result
would be a validated product design, a factory to make it, suppliers to provide the parts, a sales
infrastructure to sell it, a support system for customers, and a business to link it all together. These
phases and some of their specific objectives are shown in Figure 9 below.
Without there being much South African automotive engineering in existence, the first two phases
were largely about establishing the team, the new EV technologies, understanding the vehicle
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 11 of 19
integration and safety difficulties, and getting to know the market. The middle (PEV) phase was
pivotal, being the point where the technology now had to be used in a fully-fledged, road-worthy
vehicle, and be reproducible. The feasibility of the product in the market, manufacturing and
business context also had to be proven.
Figure 9: The Joule development phases and their main objectives
By the fourth phase the “final design intent” of each part and the integrated vehicle had to be
achieved and fully tested. Although some parts would still have been handmade and the vehicles
manually assembled, the final suppliers would be involved and would be preparing for pre-
production. The purpose of the fifth and final developmental phase is to establish the production
and assembly processes and plant, and verify that these can produce products to the required
standard. This pre-production phase would produce several hundred vehicles that would be tested
in the field, subjected to accelerated life testing, and delivered to selected evaluation customers.
The sales, support and business organisations and systems would also be rolled out in this phase.
In effect, this multiphase approach can be seen as a Spiral model. Each phase incrementally develops
a prototype vehicle, but with a new focus. Within each phase, the core process is based on the
Waterfall Model, as seen in Figure 10.
Feeding into this process (from the top in the diagram) is a continuous (multiphase) Market Research
and Development process where the customer needs are determined and incorporated into the
vehicle User Requirement document. Three additional continuous processes run parallel to (at the
bottom of the diagram): 1) a System and Component Development process, where custom systems
were being developed or off-the-shelf-parts were evaluated; 2), the Production Development
process, which was establishing the supply chain, defining the vehicle assembly process and plant,
and ensuring that the developed systems were producible and cost-effective; and 3) a Technology
Development and Filtering process, linked to university partners developing Li-ion batteries, electric
motors and materials.
IAMOT 2015 Conference Proceedings
Page 11 of 19
integration and safety difficulties, and getting to know the market. The middle (PEV) phase was
pivotal, being the point where the technology now had to be used in a fully-fledged, road-worthy
vehicle, and be reproducible. The feasibility of the product in the market, manufacturing and
business context also had to be proven.
Figure 9: The Joule development phases and their main objectives
By the fourth phase the “final design intent” of each part and the integrated vehicle had to be
achieved and fully tested. Although some parts would still have been handmade and the vehicles
manually assembled, the final suppliers would be involved and would be preparing for pre-
production. The purpose of the fifth and final developmental phase is to establish the production
and assembly processes and plant, and verify that these can produce products to the required
standard. This pre-production phase would produce several hundred vehicles that would be tested
in the field, subjected to accelerated life testing, and delivered to selected evaluation customers.
The sales, support and business organisations and systems would also be rolled out in this phase.
In effect, this multiphase approach can be seen as a Spiral model. Each phase incrementally develops
a prototype vehicle, but with a new focus. Within each phase, the core process is based on the
Waterfall Model, as seen in Figure 10.
Feeding into this process (from the top in the diagram) is a continuous (multiphase) Market Research
and Development process where the customer needs are determined and incorporated into the
vehicle User Requirement document. Three additional continuous processes run parallel to (at the
bottom of the diagram): 1) a System and Component Development process, where custom systems
were being developed or off-the-shelf-parts were evaluated; 2), the Production Development
process, which was establishing the supply chain, defining the vehicle assembly process and plant,
and ensuring that the developed systems were producible and cost-effective; and 3) a Technology
Development and Filtering process, linked to university partners developing Li-ion batteries, electric
motors and materials.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 12 of 19
Figure 10: Iterative Product Development Process for the Joule
Optimal Energy completed Phase 3 by mid-2011 and had engaged several global partners and
suppliers for the way forward, bringing to bear several hundred experienced automotive engineers
spread across South Africa, Germany and Spain. Sadly the funding to start the last two phases never
materialised, and the “P50k Project” did not start. Figure 11 shows photographs of the various
systems that were developed and integrated into the various prototypes. By the PEV phase there
were four road-worthy prototypes demonstrating the vehicle concept and various technology
testing vehicles, such a DM1 and DM2, which were used to test various Battery and Drive systems.
Market Research and Development
User
Requirement
Vehicle
Specification
System
Specifications
Design Assemble
& Test
System
Integration
Vehicle
Integration
Vehicle
Evaluation
Procure or
make
Inspect
Analysis &
trade-off
Vehicle-level ATP
Requirement validation
System ATP
Item ATP’s
System and Component Development
Production Development
Technology Development and Filtering
IAMOT 2015 Conference Proceedings
Page 12 of 19
Figure 10: Iterative Product Development Process for the Joule
Optimal Energy completed Phase 3 by mid-2011 and had engaged several global partners and
suppliers for the way forward, bringing to bear several hundred experienced automotive engineers
spread across South Africa, Germany and Spain. Sadly the funding to start the last two phases never
materialised, and the “P50k Project” did not start. Figure 11 shows photographs of the various
systems that were developed and integrated into the various prototypes. By the PEV phase there
were four road-worthy prototypes demonstrating the vehicle concept and various technology
testing vehicles, such a DM1 and DM2, which were used to test various Battery and Drive systems.
Market Research and Development
User
Requirement
Vehicle
Specification
System
Specifications
Design Assemble
& Test
System
Integration
Vehicle
Integration
Vehicle
Evaluation
Procure or
make
Inspect
Analysis &
trade-off
Vehicle-level ATP
Requirement validation
System ATP
Item ATP’s
System and Component Development
Production Development
Technology Development and Filtering
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 13 of 19
Figure 11: Three generations of completed Joule prototypes and their developed EV technologies
FILLING THE CHASM
Although not many innovation projects will span the scope and depth of the Joule project, there are
several observations that are shared from personal experience in the hope that they may help fill the
chasm for other entrepreneurs.
Who innovates?
If innovation is really about making money from knowledge, it clearly requires a wide range of skills
beyond an understanding of the technology. The perception that universities should take the lead
and innovate on their own is hampering technology commercialisation. In fact, a 2012 study done by
Skopus Business Consultants reports that “Scientific output [from universities] as related to
innovation has been on a constant worsening curve (from 58
th
to 78
th
[in the global ranking]) in the
same time [2008 to 2011].” (Skopus, 2012).
For a technical product, there are many elements relating to the product commercialisation that are
needed: technology, product development, manufacturing, business, marketing/sales and product
support. But the technology need not be totally new. The OECD states that
“an innovation is the implementation of a new or significantly improved product (goods or
service), or process, a new marketing method, or a new organisational method in business
practices, workplace organisation or external relations.” (van Zyl, 2011).
IAMOT 2015 Conference Proceedings
Page 13 of 19
Figure 11: Three generations of completed Joule prototypes and their developed EV technologies
FILLING THE CHASM
Although not many innovation projects will span the scope and depth of the Joule project, there are
several observations that are shared from personal experience in the hope that they may help fill the
chasm for other entrepreneurs.
Who innovates?
If innovation is really about making money from knowledge, it clearly requires a wide range of skills
beyond an understanding of the technology. The perception that universities should take the lead
and innovate on their own is hampering technology commercialisation. In fact, a 2012 study done by
Skopus Business Consultants reports that “Scientific output [from universities] as related to
innovation has been on a constant worsening curve (from 58
th
to 78
th
[in the global ranking]) in the
same time [2008 to 2011].” (Skopus, 2012).
For a technical product, there are many elements relating to the product commercialisation that are
needed: technology, product development, manufacturing, business, marketing/sales and product
support. But the technology need not be totally new. The OECD states that
“an innovation is the implementation of a new or significantly improved product (goods or
service), or process, a new marketing method, or a new organisational method in business
practices, workplace organisation or external relations.” (van Zyl, 2011).
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 14 of 19
The focus is the output, being the product, process, marketing methods etc. The technology itself is
perhaps the element that provides the “new or significantly improved”, but most often the lowest
risk/cost route to achieve the innovation is to re-package or buy existing technology. A new
invention or patent is not a prerequisite to the existence of true innovation. Using existing
technology does not diminish the socio-economic value of the innovation, seeing that it can still lead
to job creation and industrial activity. Any new product or service that leads to greater profit is
valuable to the country, but when it requires a new factory or sales and service infrastructure then
the benefits start to multiply. It is sad to see funding agencies dismiss innovations that are new
applications of existing technologies as “not inventive enough”.
In fact even the Joule was at times not considered a real innovation by some of its funders, who
continued to seek greater levels of new invention, whereas the business need was to rather
minimise the risk, preferring the use of mature technologies where possible. Although the entire
vehicle was unique, incorporating hundreds of man-years of new know-how and producing several
registered designs, trademarks and patents, the lack of blue-sky technology was considered
problematic.
Understanding the Chasm from an industrial perspective
In the introduction, the term “Innovation Chasm” was defined as “the gap between knowledge
generators and the market” (Vutula, 2009). This is an observed phenomenon that has come to be a
major driver in the government’s South African National System of Innovation (NSI), as documented
in their ten-year innovation plan (DST, 2008). It seems that the misbelief of new invention being
prerequisite to innovation prevails in their plan and is reflected in its implementation.
If one starts from the perspective of the manufacturing industry rather than academia, and
examines the need for Research and Development in support of new innovative product or process
development, the chasm is still observed but looks different. Business, entrepreneurs and investors
seek new innovative products, however they will only invest in innovation that makes business
sense: increasing market share, reducing risk, reducing cost or providing a strategic advantage. A
conundrum exists where we have a mix of locally grown industries and large multi-nationals with
very different innovation needs. The multinationals that are manufacturing or assembling their
product in South Africa would typically do their entire R&D at their foreign home base and not easily
take the risk of incorporating South African innovations. Domestic manufacturing companies on the
other hand, most often don’t have much R&D capability and tend to fully import technology and
equipment, thus also not stimulating local innovation.
In addition to this, the innovation and industrial funding sources seem totally disconnected. Where,
on the one hand, the DST understands the need for innovation and is supporting it through various
funding mechanisms, it is only industry players with the support of the government’s Department of
Trade and Industry that have the business, manufacturing and service ingredients that required to
complete the innovation. Unless these players are drawn to willingly participate in significant
innovation because the real business/economic benefits are within reach, the chasm will remain.
Figure 12 presents a schematic view of the chasm along two dimensions: the innovation process on
the horizontal axis, with the product hierarchy and value chain on the vertical axis.
IAMOT 2015 Conference Proceedings
Page 14 of 19
The focus is the output, being the product, process, marketing methods etc. The technology itself is
perhaps the element that provides the “new or significantly improved”, but most often the lowest
risk/cost route to achieve the innovation is to re-package or buy existing technology. A new
invention or patent is not a prerequisite to the existence of true innovation. Using existing
technology does not diminish the socio-economic value of the innovation, seeing that it can still lead
to job creation and industrial activity. Any new product or service that leads to greater profit is
valuable to the country, but when it requires a new factory or sales and service infrastructure then
the benefits start to multiply. It is sad to see funding agencies dismiss innovations that are new
applications of existing technologies as “not inventive enough”.
In fact even the Joule was at times not considered a real innovation by some of its funders, who
continued to seek greater levels of new invention, whereas the business need was to rather
minimise the risk, preferring the use of mature technologies where possible. Although the entire
vehicle was unique, incorporating hundreds of man-years of new know-how and producing several
registered designs, trademarks and patents, the lack of blue-sky technology was considered
problematic.
Understanding the Chasm from an industrial perspective
In the introduction, the term “Innovation Chasm” was defined as “the gap between knowledge
generators and the market” (Vutula, 2009). This is an observed phenomenon that has come to be a
major driver in the government’s South African National System of Innovation (NSI), as documented
in their ten-year innovation plan (DST, 2008). It seems that the misbelief of new invention being
prerequisite to innovation prevails in their plan and is reflected in its implementation.
If one starts from the perspective of the manufacturing industry rather than academia, and
examines the need for Research and Development in support of new innovative product or process
development, the chasm is still observed but looks different. Business, entrepreneurs and investors
seek new innovative products, however they will only invest in innovation that makes business
sense: increasing market share, reducing risk, reducing cost or providing a strategic advantage. A
conundrum exists where we have a mix of locally grown industries and large multi-nationals with
very different innovation needs. The multinationals that are manufacturing or assembling their
product in South Africa would typically do their entire R&D at their foreign home base and not easily
take the risk of incorporating South African innovations. Domestic manufacturing companies on the
other hand, most often don’t have much R&D capability and tend to fully import technology and
equipment, thus also not stimulating local innovation.
In addition to this, the innovation and industrial funding sources seem totally disconnected. Where,
on the one hand, the DST understands the need for innovation and is supporting it through various
funding mechanisms, it is only industry players with the support of the government’s Department of
Trade and Industry that have the business, manufacturing and service ingredients that required to
complete the innovation. Unless these players are drawn to willingly participate in significant
innovation because the real business/economic benefits are within reach, the chasm will remain.
Figure 12 presents a schematic view of the chasm along two dimensions: the innovation process on
the horizontal axis, with the product hierarchy and value chain on the vertical axis.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 15 of 19
Figure 12: The Alphadot Innovation Matrix (AIM)
5
– a two-dimensional view of the Innovation Chasm
The figure explains a perspective that is not apparent in the typical linear view of innovation - the
difference between simple and complex
6
products. Although much government attention is, for
example, given to materials development and industrialisation for greater mineral beneficiation,
there are even larger socio-economic benefits achievable when moving up the product value chain.
The Innovation Chasm is even deeper for these complex products, like the Joule which was primarily
in the lower, right-hand quarter of the picture.
If greater government support were provided for the development of these complex products there
would be a significant spin-off in the entire manufacturing industry. Doing this is actually within the
reach if the manufacturing industry could use more lessons from the aerospace and defence
industries.
The author believes that a major ingredient in achieving seamless communication and greater
innovation success in the present chasm is the acceptance of a unified innovation process. This
process will serve to unite the roles and expectations of the technology providers, the industry and
various funding role-players. It would also establish greater collaboration, thereby stretching
activities and funding across the chasm.
5
The AIM view of the Innovation Chasm is used by Alphadot (Pty) Ltd, the author’s consulting firm, to help
businesses understand their innovation needs and the establish appropriate strategies and processes.
6
A “Complex Product” is one “consisting of many different and connected parts”. Due to the many parts that
require manufacturing if multiplies the manufacturing opportunities whilst the need for system know-how
makes it difficult for competitors to copy the product.
IAMOT 2015 Conference Proceedings
Page 15 of 19
Figure 12: The Alphadot Innovation Matrix (AIM)
5
– a two-dimensional view of the Innovation Chasm
The figure explains a perspective that is not apparent in the typical linear view of innovation - the
difference between simple and complex
6
products. Although much government attention is, for
example, given to materials development and industrialisation for greater mineral beneficiation,
there are even larger socio-economic benefits achievable when moving up the product value chain.
The Innovation Chasm is even deeper for these complex products, like the Joule which was primarily
in the lower, right-hand quarter of the picture.
If greater government support were provided for the development of these complex products there
would be a significant spin-off in the entire manufacturing industry. Doing this is actually within the
reach if the manufacturing industry could use more lessons from the aerospace and defence
industries.
The author believes that a major ingredient in achieving seamless communication and greater
innovation success in the present chasm is the acceptance of a unified innovation process. This
process will serve to unite the roles and expectations of the technology providers, the industry and
various funding role-players. It would also establish greater collaboration, thereby stretching
activities and funding across the chasm.
5
The AIM view of the Innovation Chasm is used by Alphadot (Pty) Ltd, the author’s consulting firm, to help
businesses understand their innovation needs and the establish appropriate strategies and processes.
6
A “Complex Product” is one “consisting of many different and connected parts”. Due to the many parts that
require manufacturing if multiplies the manufacturing opportunities whilst the need for system know-how
makes it difficult for competitors to copy the product.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 16 of 19
Alignment of Research, Development and Industrial funding instruments
There are several funding sources available for innovation projects, but their source and nature will
differ depending where on the AIM the project lies. TIA, for example, operates primarily in the
“Technology Development” space, whereas the IDC requires lower risk, thus investing mostly in late
“Industrialisation” and “Manufacturing”, when the product is already proven. The government
incentives available from DTI are also mostly suited to the “Manufacturing” phase, except their SPII
fund which, until it was halted in 2013, provided modest funding for innovation.
Most Venture Capital funders would typically desire a high-fidelity business plan and a likelihood of
high returns within two to five years, also pushing them towards the right of the AIM.
Joule encountered difficulty as its maturity progressed from left to right on the AIM. Initially the
funding was geared towards technology development, but it withered in the gap as DST considered
it ready for “Industrial Funding” whilst the DTI was confused by the level of industrialisation still
needed.
Government as shareholder
Although the Joule development required government support to achieve such a significant
transition in the industry, it was a mistake for them to become shareholders, for (at least) four
reasons:
i. This created political difficulty for them and Optimal Energy, as the existing automotive
industry accused government of competing with them and created a conflict of interest.
ii. Optimal Energy was a private company and thus had a profit motive and fell under the
governance of the Companies Act. Government employees on the Board of Directors
had great difficulty in applying business principles and acting in the interest of the
company (as required by the Companies Act). Their frame of reference was the Public
Finances Management Act (PFMA) which regulates government spending and is not
suitable for conducting business.
iii. The business became a political tool and lost its initial purpose. Decisions, particularly at
the Shareholder level became influenced by the prevailing political agenda and were
often delayed by government indecision.
iv. Government is a Goliath, and other businesses and individuals that wanted to invest or
collaborate became afraid of the power imbalance. In additional, the media reports of
corruption, sporadic nationalisation threats and polarising rhetoric by a main
shareholder did little to attract potential partners for Optimal Energy.
Founder participation and passion
Establishing a new business is a very personal and intense journey, in which the founders pay a high
price to further their ideals. The value of the initial idea, their expertise and this “sweat equity” is
difficult to measure and is easily dismissed when investors need to provide all the funding. However,
it is their passion, vision and entrepreneurial skills that make the venture possible at all, and if they
withdraw before enough momentum is achieved, all is lost.
IAMOT 2015 Conference Proceedings
Page 16 of 19
Alignment of Research, Development and Industrial funding instruments
There are several funding sources available for innovation projects, but their source and nature will
differ depending where on the AIM the project lies. TIA, for example, operates primarily in the
“Technology Development” space, whereas the IDC requires lower risk, thus investing mostly in late
“Industrialisation” and “Manufacturing”, when the product is already proven. The government
incentives available from DTI are also mostly suited to the “Manufacturing” phase, except their SPII
fund which, until it was halted in 2013, provided modest funding for innovation.
Most Venture Capital funders would typically desire a high-fidelity business plan and a likelihood of
high returns within two to five years, also pushing them towards the right of the AIM.
Joule encountered difficulty as its maturity progressed from left to right on the AIM. Initially the
funding was geared towards technology development, but it withered in the gap as DST considered
it ready for “Industrial Funding” whilst the DTI was confused by the level of industrialisation still
needed.
Government as shareholder
Although the Joule development required government support to achieve such a significant
transition in the industry, it was a mistake for them to become shareholders, for (at least) four
reasons:
i. This created political difficulty for them and Optimal Energy, as the existing automotive
industry accused government of competing with them and created a conflict of interest.
ii. Optimal Energy was a private company and thus had a profit motive and fell under the
governance of the Companies Act. Government employees on the Board of Directors
had great difficulty in applying business principles and acting in the interest of the
company (as required by the Companies Act). Their frame of reference was the Public
Finances Management Act (PFMA) which regulates government spending and is not
suitable for conducting business.
iii. The business became a political tool and lost its initial purpose. Decisions, particularly at
the Shareholder level became influenced by the prevailing political agenda and were
often delayed by government indecision.
iv. Government is a Goliath, and other businesses and individuals that wanted to invest or
collaborate became afraid of the power imbalance. In additional, the media reports of
corruption, sporadic nationalisation threats and polarising rhetoric by a main
shareholder did little to attract potential partners for Optimal Energy.
Founder participation and passion
Establishing a new business is a very personal and intense journey, in which the founders pay a high
price to further their ideals. The value of the initial idea, their expertise and this “sweat equity” is
difficult to measure and is easily dismissed when investors need to provide all the funding. However,
it is their passion, vision and entrepreneurial skills that make the venture possible at all, and if they
withdraw before enough momentum is achieved, all is lost.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 17 of 19
Investor confidence and communication
Perhaps the common thread through all the factors that contributed to the demise of Optimal
Energy is communication - communication about process, communication about strategy and
communication about successes and failures.
At some point, whatever the reasons may be, the investors lost confidence that the Optimal Energy
plan was executable. A common understanding and agreement of the risks, company strategy and
budget priorities are critical in any business. This is particularly difficult with a mixed bag of Directors
and Shareholders, ranging from junior account managers, accountants, engineers, businessmen and
civil servants. Although Optimal Energy submitted a Monthly Report, it did not seem to be read and
did not achieve real communication.
An agreed strategic plan, with a progress reporting mechanism, covering the progress against
schedule, risks and their mitigation, and budget status, are a minimum. There also needs to be a
mechanism for the funders and Board to communicate frequently with the company without the
heavy-handed protocol associated with formal Board and shareholder resolutions. Frequent and
informal interaction between the key decision makers and the company would have gone far to
build confidence.
CONCLUSION
The Joule Development was an ambitious project with significant depth and breadth. In seven years
Optimal Energy grew from the initial four founders to 108 people and had contracts and
collaboration agreements to draw in tens of companies spread across the globe. Four fully
roadworthy prototypes were being tested and had passed the critical scrutiny of the motoring
journalists. A detailed business plan and industrialisation plan had been developed with the aid of
international consultants.
Yet this project died in the Innovation Chasm.
On the surface, this may appear to be caused by the significant budget required to complete the
project, but the author contends that even this was feasible if the other factors were addressed.
South Africa has great potential to innovate technology to develop new world-class products and
manufacture them. It is hoped that the lessons that have been shared will indeed help others move
towards that goal.
ACKNOWLEDGEMENTS
Optimal Energy was staffed by a remarkable group of passionate pioneers, set on changing the way
the world works. Your dedication made Joule possible – thank you!
The author also acknowledges DST, IDC and TIA for funding the Joule for nearly seven years and also
those who wanted to fund but were prevented from doing so.
It has been the author’s privilege to work alongside likeminded people in industry, universities,
science councils, media and government. The Joule was not simply a product of one company, it was
a dream that could have created 10 000 jobs and changed the face of South African industry. It is
IAMOT 2015 Conference Proceedings
Page 17 of 19
Investor confidence and communication
Perhaps the common thread through all the factors that contributed to the demise of Optimal
Energy is communication - communication about process, communication about strategy and
communication about successes and failures.
At some point, whatever the reasons may be, the investors lost confidence that the Optimal Energy
plan was executable. A common understanding and agreement of the risks, company strategy and
budget priorities are critical in any business. This is particularly difficult with a mixed bag of Directors
and Shareholders, ranging from junior account managers, accountants, engineers, businessmen and
civil servants. Although Optimal Energy submitted a Monthly Report, it did not seem to be read and
did not achieve real communication.
An agreed strategic plan, with a progress reporting mechanism, covering the progress against
schedule, risks and their mitigation, and budget status, are a minimum. There also needs to be a
mechanism for the funders and Board to communicate frequently with the company without the
heavy-handed protocol associated with formal Board and shareholder resolutions. Frequent and
informal interaction between the key decision makers and the company would have gone far to
build confidence.
CONCLUSION
The Joule Development was an ambitious project with significant depth and breadth. In seven years
Optimal Energy grew from the initial four founders to 108 people and had contracts and
collaboration agreements to draw in tens of companies spread across the globe. Four fully
roadworthy prototypes were being tested and had passed the critical scrutiny of the motoring
journalists. A detailed business plan and industrialisation plan had been developed with the aid of
international consultants.
Yet this project died in the Innovation Chasm.
On the surface, this may appear to be caused by the significant budget required to complete the
project, but the author contends that even this was feasible if the other factors were addressed.
South Africa has great potential to innovate technology to develop new world-class products and
manufacture them. It is hoped that the lessons that have been shared will indeed help others move
towards that goal.
ACKNOWLEDGEMENTS
Optimal Energy was staffed by a remarkable group of passionate pioneers, set on changing the way
the world works. Your dedication made Joule possible – thank you!
The author also acknowledges DST, IDC and TIA for funding the Joule for nearly seven years and also
those who wanted to fund but were prevented from doing so.
It has been the author’s privilege to work alongside likeminded people in industry, universities,
science councils, media and government. The Joule was not simply a product of one company, it was
a dream that could have created 10 000 jobs and changed the face of South African industry. It is
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 18 of 19
hoped that sharing this tiny fragment of an incredible journey will somehow transfer some of the
value that was created to those that follow.
The author also acknowledges the South African Institute of Advanced Materials Chemistry at the
University of the Western Cape, who have demonstrated that Technology Innovation can indeed
succeed when industry is a collaboration partner in the process.
The seven-year journey with Optimal Energy was very difficult at times and the author’s wife and
children provided immeasurable support. Thank you also to extended family and friends that shared
the journey.
Looking back, it is possible to see God’s guidance, love and provision on this journey, giving first-
hand experience to the Truth expressed in the Bible: “we know that for those who love God all
things work together for good, for those who are called according to his purpose” (Romans 8:28).
Thank you!
REFERENCES
Department of Science and Technology (DST), (2005/6), National Survey of Research and
Experimental Development (R&D) 2005/2006 Fiscal Year.Available from www.dst.gov.za [31 August
2014].
Department of Science and Technology (DST), (2008), Innovation towards a knowledge-based
economy – Ten-Year Plan for South Africa.Available from www.dst.gov.za [31 August 2014].
Department of Trade and Industry, (2010), 2010/11 – 2012/13 Industrial Policy Action Plan.
Economic Sectors and Employment Cluster, Department of Trade and Industry. Available from
www.thedti.gov.za [31 August 2014].
Erasmus J., (2008), Electrifying SA’s motor industry. Media Club of South Africa. Available at
http://www.mediaclubsouthafrica.com/tech/756-electriccar300908#ixzz3OhcGmMrM [13 January
2015].
Lamprecht I., SA’s first electric car goes on sale. Moneyweb. Available at
http://www.moneyweb.co.za/moneyweb-south-africa/sas-first-electric-car-goes-on-sale [accessed
16 January 2015].
Msomi N., (2009), The Technology Innovation Agency (TIA): Mobilising resources for R&D led growth
and development. Presented to the NEPAD-OECD Africa Investment Initiative High-level meeting,
available from http://www.oecd.org/investment/investmentfordevelopment/44171210.pdf [13
January 2015].
Flatters F., (2005), The Economics of the MIDP and the South African Motor Industry. Queens
University, Canada. Available from http://www.tips.org.za/files/ff_economics_of_midp.pdf [15
January 2015].
Organisation for Economic Development (OECD), (2007), Innovation and Growth – Rationale for an
Innovation Strategy. Available at http://www.oecd.org/science/inno/39374789.pdf [12 January
2015].
Oosthuizen H.,(2011), Nothing Ventured, Nothing Gained. Car Magazine April 2011, Ramsay Media.
IAMOT 2015 Conference Proceedings
Page 18 of 19
hoped that sharing this tiny fragment of an incredible journey will somehow transfer some of the
value that was created to those that follow.
The author also acknowledges the South African Institute of Advanced Materials Chemistry at the
University of the Western Cape, who have demonstrated that Technology Innovation can indeed
succeed when industry is a collaboration partner in the process.
The seven-year journey with Optimal Energy was very difficult at times and the author’s wife and
children provided immeasurable support. Thank you also to extended family and friends that shared
the journey.
Looking back, it is possible to see God’s guidance, love and provision on this journey, giving first-
hand experience to the Truth expressed in the Bible: “we know that for those who love God all
things work together for good, for those who are called according to his purpose” (Romans 8:28).
Thank you!
REFERENCES
Department of Science and Technology (DST), (2005/6), National Survey of Research and
Experimental Development (R&D) 2005/2006 Fiscal Year.Available from www.dst.gov.za [31 August
2014].
Department of Science and Technology (DST), (2008), Innovation towards a knowledge-based
economy – Ten-Year Plan for South Africa.Available from www.dst.gov.za [31 August 2014].
Department of Trade and Industry, (2010), 2010/11 – 2012/13 Industrial Policy Action Plan.
Economic Sectors and Employment Cluster, Department of Trade and Industry. Available from
www.thedti.gov.za [31 August 2014].
Erasmus J., (2008), Electrifying SA’s motor industry. Media Club of South Africa. Available at
http://www.mediaclubsouthafrica.com/tech/756-electriccar300908#ixzz3OhcGmMrM [13 January
2015].
Lamprecht I., SA’s first electric car goes on sale. Moneyweb. Available at
http://www.moneyweb.co.za/moneyweb-south-africa/sas-first-electric-car-goes-on-sale [accessed
16 January 2015].
Msomi N., (2009), The Technology Innovation Agency (TIA): Mobilising resources for R&D led growth
and development. Presented to the NEPAD-OECD Africa Investment Initiative High-level meeting,
available from http://www.oecd.org/investment/investmentfordevelopment/44171210.pdf [13
January 2015].
Flatters F., (2005), The Economics of the MIDP and the South African Motor Industry. Queens
University, Canada. Available from http://www.tips.org.za/files/ff_economics_of_midp.pdf [15
January 2015].
Organisation for Economic Development (OECD), (2007), Innovation and Growth – Rationale for an
Innovation Strategy. Available at http://www.oecd.org/science/inno/39374789.pdf [12 January
2015].
Oosthuizen H.,(2011), Nothing Ventured, Nothing Gained. Car Magazine April 2011, Ramsay Media.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 19 of 19
Roach S.S., Lam S., (2010), The resilient economy.McKinsey & Company, available from
http://www.mckinsey.com/insights/winning_in_emerging_markets/south_korea_finding_its_place_
on_the_world_stage [16 January 2015].
Skopus Business Consultants, (2012), The Entrepreneurial University – Bridging the Chasm? Available
from http://skopus.co.za/wp-content/uploads/2013/07/Entrepreneurial-University-Bridging-the-
Chasm.pdf [13 January 2015].
South African Government, (2008), Technology Innovation Agency Act. Government Gazette No.
31634.
Van Zyl A., (2011), Innovation in South Africa – The role of the Technological Innovation Agency.
South African Journal of Science, 107(1/2) [13 January 2015].
Vutula N., (2009), The scope and functionality of the National Innovation Competition as an
instrument to promote academic entrepreneurship in South Africa. Unpublished masters
dissertation, University of Stellenbosch, Department Sociology and Anthropology.
Wikipedia, (2015), General Motors EV1. Available at
http://en.wikipedia.org/wiki/General_Motors_EV1 [13 January 2015].
IAMOT 2015 Conference Proceedings
Page 19 of 19
Roach S.S., Lam S., (2010), The resilient economy.McKinsey & Company, available from
http://www.mckinsey.com/insights/winning_in_emerging_markets/south_korea_finding_its_place_
on_the_world_stage [16 January 2015].
Skopus Business Consultants, (2012), The Entrepreneurial University – Bridging the Chasm? Available
from http://skopus.co.za/wp-content/uploads/2013/07/Entrepreneurial-University-Bridging-the-
Chasm.pdf [13 January 2015].
South African Government, (2008), Technology Innovation Agency Act. Government Gazette No.
31634.
Van Zyl A., (2011), Innovation in South Africa – The role of the Technological Innovation Agency.
South African Journal of Science, 107(1/2) [13 January 2015].
Vutula N., (2009), The scope and functionality of the National Innovation Competition as an
instrument to promote academic entrepreneurship in South Africa. Unpublished masters
dissertation, University of Stellenbosch, Department Sociology and Anthropology.
Wikipedia, (2015), General Motors EV1. Available at
http://en.wikipedia.org/wiki/General_Motors_EV1 [13 January 2015].
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