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Let's not wait 50 years

31 August 2017

Recently I read with interest an article by Tim Harford exploring “Why didn’t electricity immediately change manufacturing?”. In it, Harford recalls economists in the 1980s having widely held scepticism about the adoption of computerisation resulting in a positive impact on productivity levels; he likens it to the situation 100 years earlier when the then remarkable new developments involving electricity did not result in the surge in productivity that might have been expected.

In 1881, Thomas Edison, who had already invented reusable light bulbs in the late 1870s, built electricity generating stations in Manhattan and London; within a year, he was selling electricity as a commodity, and a year later, the first electric motors were driving manufacturing machinery. Yet by 1900, as Harford reports, less than 5% of mechanical drive power in American factories was coming from electric motors.

Despite the many, by then obvious, disadvantages of steam engines, very few factory owners chose to replace them with electric motors and draw clean and modern power from a nearby generating station. Looking at the reasons behind this, Harford points to the fact that unless factory owners started to think in a different way, the huge investment associated with replacing steam engines with electric motors actually produced pretty disappointing returns.

Yes, a motor could be made to slot into the old system, but it could also do so much more, delivering power exactly when and where needed. As Harford points out, steam-powered factories had to be arranged on the logic of the driveshaft; electricity meant you could organise factories on the logic of a production line.

However, it wasn’t until the 1920s that productivity levels in the US really took off, and although there were undoubtedly a great many contributing factors, economic historian Paul David gives much of the credit to the fact that manufacturers had finally figured out how to use technology that was nearly 50 years old.

Harford’s article got me thinking about today’s disruptive technologies, and whether it is possible to draw comparisons with the challenges faced by manufacturers at the end of the 19th century. Then, in order to take advantage of the electric motor, factory owners would have to completely change the production process. In contrast, today it is possible to implement the latest Industry 4.0 technologies in just a small part of the production process – effectively enabling potential users to begin with a small step. And often, just one small step can reap big benefits. That’s not to say a complete overhaul and adoption of smart technologies doesn’t have its place, it’s just that total process change is not always necessary in order to reap the benefits.

While any new, or indeed evolving, technology is always going to need adopters to start thinking in different ways, I am hopeful that we won’t have to wait nearly half a century before today’s amazing developments are fully embraced!

 
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