Intro to respond to the threat. Therefore, disrupting

Intro

The
car industry is under ever increasing pressure from governments and the
emergence of new technologies, forcing it to adapt to new challenges. This has
been highlighted by recent diesel scandals, resulting in future bans. Within
this turmoil, Streetscooter GmbH founded in only 2010 as a daughter company of
Deutsche Post, the German postal service, and has emerged as the largest light utility electric vehicle
manufacturer in Europe, a rise that can be justified by blue ocean
strategy and disruptive innovation. With its rapid growth, manufacturing
approximately 10,000 vehicles a year (Frankfurter
Allgemeine Zeitung, 2016), the company is faced with new strategic
challenges. The basis for these challenges are “the innovators dilemma” (Christensen, 1997), forcing the company to
either attempt to capture new markets or to compete with the existing market.

Disruptive innovation and the creation of a blue ocean

Streetscooter’s rise can be examined using
two theories. Firstly, the disruptive theory developed by Christensen (1997), which
demonstrates effective ways to analyse how innovation can be a driver for
growth. Secondly, through the “blue ocean” strategy (Kim & Mauborgne, 2004), which eliminates zero-sum
competition, a setting in which a company’s gains are attained through another
company’s loss. This strategy delivers an understanding of the advantages
associated with new markets.

According to Christensen there are
several criteria the process must meet to be disruptive. It is based around the
principle of a smaller company, with fewer resources than incumbents, is able
to challenge for market share (Christensen, Horn & Johnson 2009).
Innovation becomes disruptive when new entrants target the overlooked segments
of a market, leading to lower performance levels initially in comparison to
competition (Christensen, 1997). Finally,
to prove disruptive to incumbent firms, innovation must considerably alter the needs
and demands of the market (Christensen & Raynor, 2003).
Forcing incumbents, focused on sustained innovation through the development of
competencies, to respond to the threat. Therefore, disrupting sustained
innovation and challenging the control of market leaders.

The second theory that may be used to
examine Streetscooter, is the blue ocean strategy. It is an analogy for a
potential of market space that has not been explored. A blue ocean is described
by Kim and Mauborgne (2005 p  106) as “untapped market space, demand creation, and the
opportunity for highly profitable growth.” Blue oceans usually arise
through the expanding the market boundaries. 
Within this space competition does not exist and firms are able to
dictate the terms of the market.

Approaches applied to
Streetscooter

These
theories provide suitable frameworks to analyse the climb of a 2010 start-up,
as they are both theories that look at explaining rapid growth. Using these
theories, it can be suggested that Streetscooter practiced disruptive
innovation to create a blue ocean.

At
Streetscooter it was not a case of technological innovation, rather, the
company reshaped existing technologies, to form a lightweight electric utility
vehicle, creating a new market in the process. By focusing purely on environmentally-friendly
electric, utility vehicles, providing the benefits of low fuel costs, longer
lifespans, reduced maintenance costs and no VED tax, the company created a blue ocean where no
competition exists, leaving
them to compete against non-consumption. Streetscooter have changed the
scope of consumers using electric vehicles. The company has transformed non-consumers
into consumers and moved away from the large electric car manufactures focused
on people carriers, including Volkswagen and BWM.

Initially, Streetscooter was only
able to compete at the low-end of the electric car market, as their vehicles
had limited, and only service a single customer, Die Deutsche Post. Due to
this, established manufacturers such as Mercedes, BMW and Renault continued to
focus on the mainstream electric vehicle market, people carriers, and did not
feel threatened the new entrant. Streetscooter maintained the unique
competencies of its product and continued improving traditional parameters,
improving their products performance, and expanded their base with Deutsche
Post, which included the company’s decision to replace their 50,000 vehicles
with electric vehicles in the near future.

Subsequently in 2017, Streetscooter announced its products sale to outside customers matching
the performance and capability of the demands in the mainstream (Reuters
Staff, “Deutsche Post to start sale of electric vehicles in 2017”, 2016), fossil fuel, utility vehicle
market. Customers now having the ability to switch to eco-friendly electric
vehicles. Through the products sale into the mainstream market, Streetscooter
successfully challenged the established companies like Mercedes and Renault.

Challenges at Streetscooter

Although Streetscooter has successful
performed disruptive innovation, become the largest manufacture of electric
utility vehicles in Europe, and challenged the fossil fuel based utility
vehicle manufacturers, it is now faced with further challenges. The company’s
current strategic position in the market suggests that it will now be face with
the “Innovators dilemma” (Christensen,
1997). A theory based on the idea that a company must capture new
markets or continue competition within the present value network. In the highly
competitive environment of the car industry, the approach to this challenge
could determine the company’s survival. In 2017, Nissan released their first
electric utility vehicle (“Nissan World Premiere of New Longer range
e-NV200 van”, 2017),
along with this Volkswagen (VW) and Mercedes have both announced to launch
electric utility vehicles in 2018 (Hubbard, “New Mercedes-Benz electric van confirmed for 2018”, 2016).
This increase in product competition puts Streetscooter’s current market share
at high risk if it cannot exploit new markets.

Recommendations

Streetscooter has successfully
created an “attacker’s
advantage”, defined by Christensen
and Rosenbloom (1995 p 256) as “the ability to identify and make strategic commitments to attack and
develop emerging market applications, or value networks.” The continued
success of their advantage depends on more successful adaptation of strategies than
the incumbent firms. Competitors
are closing in fast on Streetscooter. However, there are strategic approaches
that can be taken to avoid being outperformed or disrupted.

Structural Ambidexterity and Strategic Alliances

Firstly,
the organisation could create structural ambidexterity, this structure allows a
company to “explore new
opportunities even as they work diligently to exploit existing capabilities.”
(O’Reilly & Tushman, 2004 p 74). This approach is advantageous in
hyper competitive market such as the automobile industry (Dover & Dierk, 2010). To survive
in this industry and maintain market share companies must maintain uphold their
levels of growth and simultaneously aim to expand to new markets. By adopting
this approach, Streetscooter would be aided in sustaining growth and moving up
the market while at the same time developing new technologies simultaneously. Along
with this, the different units dissolve barriers that may hinder innovation. (Chesborough, 2010)

Within the ambidextrous firm the
explorative unit will be focused on creating new value networks by finding new
markets, aimed at preventing the company’s disruption by other competitors. Streetscooter
is currently faced with innovative technologies. These mainly include progress
in, more efficient motors, battery, charging, alternative fuel technologies.

The
majority of these technologies represent incremental sustained innovation, yet
still pose serious threats due to their rapid advancement that has a potential
to redefine the products within the market. In the near future, there will be
some innovations that could prove to be disruptive to the market. These include
new fast battery charging technologies and wireless charging, yet these
products are still a step away from being introduced. The more contemporary
disruptor could be alternative fuels to power utility vehicles including hydrogen
vehicles, these technologies have not yet made the jump from people carriers to
utility vehicles, but have potential to disrupt. Therefor the creation of new
value networks and exploration of new markets is vital for the company. This
may be aided through the development of an explorative strategic alliance (Koza & Lewin 1998). For
Streetcar, this could be an alliance with a company that has a foothold in
different market that could be suitable for the competencies Streetcar offers.

While the explorative unit is in
charge of discovering potential markets, the exploitative unit will promote Streetscooter’s
growth in their current market, by further developing their existing capabilities
and competences. These developments should satisfy the higher end of the value network.
This will be essential for the company to remain competitive within their
market. By examining Streetscooter’s competitors it is apparent that there is opportunity
for incremental advancement up the market serving a wider customer base. The
exploitation process could be aided by an exploitative strategic alliance (Koza & Lewin 1998). Streetscooter
could form an alliance with a company that features a product, or features of a
product, with similar capabilities and competences therefor ensuring joint
maximisation.

Conclusion

By simultaneously exploiting and
exploring, the ambidextrous structure will circumvent risk that ensue from
taking uncertain market opportunities. This will prevent Streetscooter from
trapping themselves in their value network and make further use of the “attacker’s
advantage” (Christensen & Rosenbloom (1995 p 256). It will be crucial in the near future for
Streetscooters to remain aligned with its focus and also adaptable to changes
in the business environment. Without this the firm will have no clear
organisational goals leading to the firm being unable to compete in the,
technological innovation driven, automobile industry. Therefore, the approach
of a structurally ambidextrous organisation remains an excellent solution to
the challenges Streetscooter is faced with as it will ensure cohesion between
the exploitative and explorative units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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