The last automobile revolution: disruptors, trends, and likely outcomes. A business model, organizational and issue life cycle approach

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Abstract:

For now, there is widespread agreement that a transition of the automobile industry (AI) is underway. While nobody disputes that fact, a debate starts to boil as its depth, breadth, driving factors, players, geographies, as well as its direction and likely outcomes, winners, and losers, pace and rhythm of change, etc. It is telling that some leading authors of the major scholarship networks of the AI have been raising quite different perspectives. For instance, as early as 2009 Gerpisa’s Freyssenet announced that a second automotive revolution was in the making, while as recent as 2015 PVMI’s (the previous IMVP) MacDuffie and colleagues point out that a dynamic of change and stability pervades the industry (Jacobides, MacDuffie and Tae, 2015). In the other extreme, those advocating a transition towards the electromobility industry of tomorrow (also termed electromobility 2.0 industry and e-Mobility) speak of a strategic paradigm shift meant to disrupt the whole transportation industry (Donada, 2013, Donada and Pérez, 2015; Naranjo et al., 2014). Though, the fact is that –as an Electrical Vehicle Initiative’s study underscores: EVs ‘sold worldwide represent 0.02% of the total passenger car stock’ (EVI/IEA, 2013:8) , and there are many variations in offer and demand across jurisdictions (Clark-Sutton et al. readiness index, 2016)
This paper wants to join the debate of the transition contributing a different angle to grasp the problem. While accounts seem to agree on the fact that at the core of the transition lies a disruption of the industry’s technological paradigm, there is no a comprehensive analysis of how this shift has evolved and which pillars of the old one are disrupting. Likewise, even when it is apparent that the introduction of alternative drive systems is progressing slower than expected and --as Dijk et al. (2016) posit in the case of EVs-- their niche is still insufficient to displace the internal combustion engine regime, there is not a clear account where the transition is right now and the factors that are either backing it or blocking it.
Working with disruptive innovation, strategic management, and organizational perspectives and using the socio-technical transition model on dialectic issue lifecycle (DILC), the paper heads to contribute to filling these gaps. It develops its case through tracing the evolution of Information and Communications Technologies (ICTs) in the industry from the last four decades and identifying the way they have been influencing on–and being impacted for both business models and organizational structures of incumbent and entrant players. It also elaborates on the firms’ strategic responses and struggles to negotiate the terms and institutional parameters of the transition. To this end, the paper builds an analytical approach drawing on Proff and Fojcik (20015) and Habtay and Hómen (2014-2015) perspectives where the business models critical components to look at are: value proposition, resource allocation (or market target), profit model, strategy (or competitive advantage source) and value architecture (or value network configuration). In this last dimension, I stress the organizational features structuring value chain and core capabilities. The DILC model of Geels and Penna (2015) and Penna and Geels (2012) provides the socio-technical perspective to assess the transition and show that firms’ strategic responses to disruptive innovation evolves not just a technical solution but also from social and political pressures in the middle of conflict and tensions to “frame” the terms of the new paradigm and dominant business model.
The paper’s findings show that after more than three decades of evolution and penetration by information and communications technologies (ICTs) in the whole sector, the transition has reached a turning point where:
a) Electrical, connected, digital and automated drive systems are leapfrogging, enabling incumbent firms to move from speculative and exploration strategies to strategic diversification positions;
b) New entrants progress and/or take the lead in emergent mobility services segments based on fabless, non-employment business models and organizational structures;
c) This puts under question two critical pillars of the traditional AI paradigm. They are the ownership of fabrics and technologies to manufacturing and sell cars as the most appropriate business model to generate value and reap benefits, and the multinational global corporation as the fittest organizational form to couple resources and know how to design, produce and market those highly valued goods.
d) The transition to disruptive innovation is entering a DILC’s fourth phase. Even when traditional AI is growing backed in market highs of ICEs for nine straight years, the institutions of an anew-industrial regime are progressing. The industry beliefs and identities, regulation and policies, are moving towards a narrative that supports the remake of the industry. Particularly the value proposition and value architecture of both incumbent and entrants firms are together interacting to develop mobility services models that depart from the traditional transportation systems mindset.
e) Nevertheless, it is still long ahead of the tipping point where firms’ capabilities and technological knowledge matches public infrastructure and regulation to incentivize the offer and demand of alternative mobility systems so they can capture most of consumer preferences and displace ICEs’ markets. It is understandable. Disruptive innovation of the leading technologies is a long process that takes decades before market saturation occurs –i.e., the point when everybody who wants an alternative good or service can have it.