When Ford announced that it would separate its business in two, focusing one unit on electric vehicles and the other on its gas-engine division while keeping both operations in-house, the news should have caused ripple effects across the traditional automotive industry.
It represents a major overhaul that requires significant reorganization towards separating the names and leadership structures of these divisions, and thereby places the OEM in a position to compete with “newer” EV startups like Tesla. It also shifts the company in a position to remain relevant, rather than lose market share and/or disappear like the Blockbusters, Polaroids, and Kodaks the world was once so fond of.
Andrew Binns, Director of Change Logic and author of Corporate Explorer: How Corporations Beat Startups at the Innovation Game.
This in part is how companies can ensure they remain competitive and alive as disruption attempts to gnaw at their heels, according to Andrew Binns, Director of Change Logic and author of Corporate Explorer: How Corporations Beat Startups at the Innovation Game, is: how do we stop this from happening?
“Part of this is about having the ability to separate the business you do today from the business of tomorrow, because the reason that these companies fail is not because they don’t see disruption coming,” said Binns in an interview with Canadian auto dealer. “The reason why they fail is because the core business—the existing business—keeps operating the way it’s always done.”
Many companies see disruption coming, according to Binns, who notes that Polaroid had the world’s first digital megapixel camera, while Nokia had all the assets of touch screens and productivity tools on their phones. “They could have done the iPhone,” he said. But the inability to alter the way the core business operates “will always squash the new.”
He said this happens, not because people are bad or ill-intentioned or mischievous, but because “it’s just the logic of it.” Moving to a new set of habits is difficult for anyone and for organizations are no exception, which is why they need to create new habits—and that is exactly what Ford is trying to do.
“We need to wake up and see the way the world is, not the way you wish it would be. And to do that, sometimes you need to separate the existing or core business and explore the new, and that’s what I think I see Ford doing, is realizing they’ve got to function at a different speed in the electric business from the combustion engine business,” said Binns.
Ford splitting its business in two and the impact this will have on its business now and in the future should be news to the automotive retail community, which is seeing companies like Tesla and Rivian nibble away at their market share, while some OEMs consider shifting to an agency model to keep up—or ponder how to create a different option altogether that maintains its dealer networks.
“If I owned a dealership network right now, I would be trying to find out what the big customer problem is that the people who are buying on my forecourt are now dealing with and will have in the future with electric vehicles? What can I solve for them?” said Binns.
Dealers are successful in solving the problems of today, in finding the right vehicle for a customer and in servicing and repairing vehicles (among other things). But in the electric and autonomous world, all of these things will change and they will need to consider what their world will look like, and what their processes will look like.
“Dealers have tremendous reputations, tremendous connections with local communities. All of these things are assets that they can use. And they shouldn’t allow themselves to get taken out of the equation by the Teslas and directly by the OEMs, because the OEMs will be looking for opportunities to take them out,” said Binns.
Even with the legal restrictions making it difficult for OEMs to do this, Binns said they will not save the dealerships in the long run. If dealers want to reinvent, they will need to start thinking about what consumers most need, and then start small—which many dealers have been doing.
“Who is going to be the first dealer network to go to an OEM and say, let’s blow up what we’re doing for you today and find a different way that really works?” said Binns, adding that “I’m not sure what the model will be, but if you think that the way to survive or to prosper is to defend what you’ve got, there’s no evidence that this works in any other industry in the world.”
He said that dealers can start by ensuring someone in their team is solely focused on how the business can reinvent itself for an electric or autonomous (or semi-autonomous) world. “Go find somebody who knows your business, but has the right mindset of the corporate explorer,” said Binns. “And then, just start small.”
