Driving the last automobile revolution: Where the right business model is?

Type de publication:

Conference Paper


Gerpisa colloquium, Paris (2018)


Business Model, Innovation openness


The automobile industry is in a transition prompted by digital technologies, environmental and institutional pressures that enable old and new players to envision more efficient ways of mobilizing people and goods. While it is growing agreement on this, a debate evolves as its depth, breadth, content, driving factors, players, geographies, as well as its direction and likely outcomes, winners and losers, pace and rhythm of change, etc.
This paper focuses on the business and innovation models both established automakers and ICT newcomers are putting in place in the race to transform and lead a new mobilities transportation sector. This is a pertinent focus as it is not only under question who is driving the change but how they are doing or at least attempting to do so. As Gerpisa (2018) points out: 'Two worlds are colliding: on the one hand, the traditional world of carmakers, OEMs and car related distribution and services, which is dealing with the electrification and digitalization of cars, the digitalization of production and value chains, the transformations of mobility systems and more constraining environmental and transport regulations; on the other hand, the world of ICT, which is entering the automotive sector in many different ways (Tesla, Uber, Google, Amazon, Cisco, Huawei, etc.) and could change its structure and the very nature of its business.'
A research in progress (Covarrubias, 2018) has identified that automakers are well involved into a phase of strategic diversification while struggling in the search for anew business-balancing act of value propositions, alliances, and organizational structures. By contrast, newcomers are working mostly through E-mobility and connectivity services and deploying them not only as technological devices but also as new business models made up of value architecture of horizontal, light and highly flexible structures and fabless approaches --features all that connect them to the so-called gig economy (Hathaway and Muro, 2016; Bostman, 2015).
The clash of business models goes hand in hand with a confrontation of two innovation systems, namely closed and open. While leading automakers accelerate innovation processes within their own boundaries, newcomers seek actively innovations and applications beyond any brand name.
Yet at this point it is not clear who and/or what business/innovation models will prevailed. The financial situation of these players is telling in this respect. Despite record revenues some incumbent OEMs are experiencing waning stock prices and profits. By contrast, the flagships of e-mobility services have become some of the fastest growing and valuable brands globally. Uber has taken six years to become the world most valuable startup (at $70 billion: The Economist September 3, 2016). Tesla with a $61.1 billion market value as of June 2017 has become more valuable than Ford, GM and BMW (Sparks, 2017). Though, they are not making money as yet (in fact they are losing it: 2.8 billion and 773 million net loss last year, respectively), whereas, in stark contrast, GM, VW and Ford, just to mention a few, registered profits of 9.4, 5.4 and 4.6 billion, and revenues of 166.4, 253 and 140.6 billion, respectively.
This paper postulates that all the above reflect the fact that neither established automakers nor new entrants have gotten their business models right. It builds its argument drawing on Christensen (2006) and Christensen et al. (2015) theory of disruption, Chesbrough (2003-2010) theory of open innovation and others salient business model and technology innovation perspectives (Habtay and Hómen, 2014; Markides, 2006, Jacobides et al., 2015; Heidenreich, 2012; Teece, 2010). While the paper deals with facts related to many firms, it is based on primary evidence of Ford, Google/Waymo, Tesla and Uber.

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