Did you know that in Germany (the birthplace of the car industry) car sales in the future may drop by as much as 50%? Did you know that predictions in the luxury car industry show that there may only be one big player in the future? As we consider how car makers are deliberating over how to “future proof” their companies, perhaps it’s a reminder of the need to consider a proactive approach to change management.
When is a car company not a car company?
Disruptive innovation is making its mark in yet another industry: this time in the car industry. Or to be more up to date, in the area of “mobility” – “the car industry” is now an outdated concept.
New terms are constantly emerging in the attempt to capture the latest vision of the industry, including phrases such as “the emerging autonomous vehicle technology sector”, and “connected vehicle technology”. The concept of being just “a car company” is so outdated that a headline in The Verge this month revealed that McLaren, once known as a racing car producer, is now calling itself a tech company. The article went on to say that, “Adding the word “technology” at the heart of McLaren’s corporate identity underscores the growing importance of the company’s operations outside of racing. “Technology drives everything we do,” says CEO Ron Dennis… Three-quarters of McLaren’s 3,000 employees are now working on projects that aren’t directly involved in motorsport.”
Redefining the industry
At this year’s Consumer Electronics Show (CES) earlier this month the major automotive companies were out to demonstrate how they are redefining the industry. Many are emphasising the concept of the self-driving car in their drive to build safer and smarter modes of mobility. Ford focused on autonomous cars for the average person, and Daimler focused on premium autonomous cars – while Google (a new-comer in the field) focused on pod-like appliances. Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, Dr. Dieter Zetsche, presented a futuristic Mercedes prototype. This unique car runs on auto-pilot, and passengers can use hand gestures to perform tasks en-route. “We should be defined by our future,” Zetsche said, “not by our past.”
Why are the traditionally conservative automotive companies like Mercedes Benz becoming so proactive? A quick glance into the future suggests that while transport is important, cars as we know them are becoming less so. This will impact companies in the industry at all levels. The luxury market, for example, currently appeals to people who wish to pay for an emotional experience, but new research reveals that the younger generation have been shown to be more emotionally attached to their smart devices (eg phones) than to their cars. This is making the concept of a luxury brand less important for the consumers of the future.
Comedian Conan O’Brien points out a few possible bugs in the self driving car from 2014
All this points to the possibility that there may be room for only one emerging leader in this market, leaving behind the others. But whilst sales of normal cars might drop and the industry may narrow down, proactive companies will recognize that self-driving car technology will be the way of the future. This technology will add more than $31 billion in revenue for Google by 2040, and all competitors now want a share of this pie.
Cathie Wood, chief executive of Ark Investment Management LLC, says that as a result “You will see the Old Guard lose its (share price) multiples and the New Guard valued at crazy levels.” This is disruptive innovation at its most powerful. All industries will face this sort of disruption going forward, so it will be important to innovate faster in order to anticipate future needs and keep up with the pace of growth.
Banking is necessary, banks are not
Bill Gates has made a simple comment that should redefine the way we think about the future. “While banking is necessary, banks are not”. Each time we present this disruptive concept in our workshops, people’s initial responses are inevitably, “This doesn’t apply to our industry!” Yet as we’ve worked with a range of organizations, including with hotels, food companies, education, and IT – along with the “mobility” sector (car companies), people soon realise that the statement does in fact apply to them.
Try it for yourself.
- Accommodation is necessary… hotels are not.
- Education is necessary… schools are not.
- Food is necessary… MNCs are not.
- Our industry is necessary… our company is … ???
How does this impact the way you think about your business? Perhap’s time to start identifying what is core to your business, what is really necessary, and to be focusing on that – rather than trying to hang on to some outdated structure or system that may not be relevant in the future. This will be the only way to survive going forward.
How will your organization be defined by the future? What can you do to ensure your organization is “future-proofed”?
About the authors
Gaia Grant and Andrew Grant are the authors of The Innovation Race: How to change a culture to change the game (Wiley August 2016) along with a number of other international bestselling books and resources. As the Directors of Tirian International Consultancy they help to create innovation cultures for a range of international organisations (from Fortune 500 companies through to NFPs). The Grants are top-ranking keynote speakers, and Gaia is an HD researcher and lecturer at Sydney University Business School. For more information see https://the-innovation-race.com.
- Savov, V. (2015). “McClaren is now a tech company”. Retrieved from http://www.theverge.com/2015/1/13/7536501/mclaren-technology-group
- Lienart, P., & Klayman, B. (2015). “Race to define future car shifts into high gear”. Retrieved from http://www.reuters.com/article/2015/01/07/us-autos-ces-analysis-idUSKBN0KG2BS20150107
- According to the Research firm IHS Automotive, in Lienart & Klayman.