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Strategic Management of Innovation: the Case of Clean Automobile. Professor J.J. CHANARON 17 September 2009. ASSESSING THE VARIOUS TECHNOLOGICAL OPTIONS. Conditions for Innovation. Innovations are successful when they are simultaneously:
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Strategic Management of Innovation: the Case of Clean Automobile Professor J.J. CHANARON 17 September 2009
Conditions for Innovation • Innovations are successful when they are simultaneously: • Scientifically and technically possible, i.e. when they have the technical performances expected by customers and users • Commercially vendible, i.e. when their price meets the demand as well as the after sale and maintenance costs • Industrially feasible, i.e. when their manufacturing costs and quality are satisfactory to all stakeholders • Politically, socially and culturally acceptable, i.e. when they get political support and full customer acceptance
Required Success Factors SALES Economically Vendable CUSTOMS IDEOLOGIES PRICE Socially and Culturally Acceptable SERVICES Business Model SOCIAL PRACTICES INNOVATION MARKETING Scientifically & Technically Possible ENGINEERING METHODS Industrially Feasible MANUFACTURING COSTS RESEARCH & DEVELOPMENT DESIGN
Issues • Impact on recharging grid is significant: most countries will not be able to cope with the production and distribution of electricity • Theoretical performances of lithium-based batteries probably not sufficient
Comparing Energy Storage Sources: Syrota, 2008 and press cuttings.
A Scenario of Consensus Improved Vehicle Fuel Economy and Emissions Displace Petroleum Hydrogen Fuel Cell Battery Electric Battery Electric Vehicles Electric Drive Propulsion System Hybrid and Plug-inHybrid Electric Vehicles Mechanical Drive IC Engine and Transmission Improvements t 2010 2020 2030
Characteristics for Scenario • Clean and efficient ICE will be substituted to conventional ICE during the next ten years culminating with a 75% market penetration in 2020 followed by a slow decline up to 2050 • Hybrid solutions (conventional, plug-in or extended range electric vehicle) will progressively see their market penetration growing up to 25% around 2025 • Full performance battery electric vehicles will start being commercialized in 2010 and see a growing but limited market penetration to 20% by 2030 and 30% in 2050 • Fuel cell electric vehicles will not be seriously introduced before 2025 and then see their market penetration growing at a relatively high rate to reach more than 50% in 2050
Impact of the Current Crisis • There is no obvious evidence that the current crisis of the automotive industry would delay or accelerate technical change and innovation in powertrains • The Obama administration is associating financial support to a radical change of the « Big Three » model strategy towards downsizing and innovative powertrains
Impact of the Current Crisis • Financial resources of OEMs will limit their R&D and innovation capabilities for years while priority is on market recovery and profit-loss optimization • Radical innovation on vehicle will need five years for market introduction and ten years minimum before being “visible” and even much more time before a real impact will be significant
Impact of the Current Crisis • European OEMs still do not invest so much on hybrids and plug-in hybrids • Transfer of R&D and innovation expenditures and responsibilities for components on key suppliers will intensify • Downsizing and further move towards low cost and ultra-low cost models is an obstacle to radical change and innovation Tata Nano
Quasi-Standards • Lithium-ion for FPBEV and compressed hydrogen for FCEV are the worldwide quasi-standards • But basic R&D is still deeply needed on these two technologies • Basic R&D is still conducted by public laboratories and private corporations on alternatives to these quasi-standards
Conclusions • No potentially dominant design such was and is probably still ICE • Diffusion curve of radical technologies will be slow • Real impact on pollution and energy will take years since 1 billion vehicles in use in 2010 with ICE • Still unclear industrial organization
Pending Questions • Universal or local options? • Unique solution or concomitant trajectories? • Traditional automotive system or new industry? • Innovative leadership to developed or emerging countries? • Which role for Chinese OEMs or Chinese new entrants?
Pending Questions • Which pricing level and tax incentive? • Recharging of replacing batteries for FPBEV? • Which supply system of energy or “fuel” hydrogen, electricity? • Total well-to-wheel figures to be calculated, up-dated and assessed: electricity generation sources such as coal might be worse than oil for global warming! Nuclear energy has strong opponents!
Pending Questions • Which change(s) in customer behavior? • Which change(s) in customer preferences? And probably the most important question: • Should the entire business model be changed? Vehicle sold with rented batteries, for instance? Rented vehicles?
And what if China? • In China, a national research plan is involving all the best public laboratories - Tongji, Tsinghua, Jiao Tong, Dalian, CAS, etc.) on batteries and fuel cells • Domestic OEMs leading the move forward: is it marketing bluff or real threat? • Weaknesses in designing powertrains and in vehicle integration • Bottlenecks to be resolved: costs, reliability, safety, and distribution infrastructure
And what if China? • As at the end of August 2009, 91 models by 34 corporations with more than 15 millions of kilometers achieved so far • A tough competition amongst Chinese stakeholders • But a national consensus about the opportunity to leap-frog with Japanese and Western competitors • A small level of motorization and a limited number of vehicles in use • A strong political bargaining power capable to impose a solution and an acceleration • High levels of urban traffic congestion and pollution
