Businesses Must Always Prepare for Change

Martin Reeves, Rachel Bergman, Antoine Gourévitch, and Miguel Ortiz of the Boston Consulting Group have a fascinating look at disruption in the auto industry:

“Fueled by new technology and consumer needs, nontraditional competitors are entering the auto industry with connected software, artificial intelligence, alternative fuels, and shared mobility networks. For those new entrants—such as Tesla with electric vehicle technology, Uber with its collaborative consumption model, and Google and Apple with autonomous vehicles—industry shifts signal opportunities. But for incumbents, they represent uncertainty and perhaps even an existential challenge.

Maybe we’re headed toward an upside-down world, where attackers with deep pockets take control, offering vehicles that are electric, fully autonomous, and not owned but shared through smartphone apps. Upheaval in other industries reminds us how swiftly incumbents can lose their advantage. Think back to 2007, when Nokia had record sales and more than 50% of the global smartphone market. That same year, Steve Jobs introduced the iPhone. The rest is history. Nokia had missed a crucial inflection point in the smartphone business model—toward connected software and a seamless user experience—and experienced a swift and unstoppable decline.

The authors note that change in the auto industry “could also be much less dramatic” when considering the many other factors that must fall into place for radical new futures to unfold. Examples include future tax credits, regulatory changes and the economics of added infrastructure like charging stations.

While profits in the auto indsutry will continue to flow from the current business model in the near term, existing companies cannot count on this continuing indefinitely. And they cannot necessarily predict which disruption scenario takes hold.

Preparing for the possibility of change will require developing new capabilities and shifting resources away from currently successful business models. Incumbents face a difficult balancing act. In an industry whose dominant model has remained virtually the same for more than 75 years, they must navigate new tradeoffs in resource deployment as they seek to fulfill current demand for profitable core products while preparing for the future.

For incumbents in any industry ripe for disruption, the authors also offer five steps for dealing with change.