At every other Research meeting in Marcellus, the late Clayton Christensen and his theory of the “Innovator’s Dilemma” is evoked. Christensen described “how large incumbent companies lose market share by listening to their customers and providing what appears to be the highest-value products, but new companies that serve low-value customers with poorly developed technology can improve that technology incrementally until it is good enough to quickly take market share from established business.” (Source: https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma)
In this context Toyota’s struggle to figure out its EV strategy (which is not dissimilar to Maruti’s struggle) seems like a classic case study of the Innovator’s Dilemma as Nitish Pahwa says in this article:
“If there’s one thing Toyota and its executives have made clear over the past 20 or so years, it’s that they aren’t too keen on electric vehicles.
This may seem at odds with the perception of the automaker as a green-car pioneer. As Toyota likes to point out, its 1997 introduction of the Prius was a watershed moment, the first mass-produced hybrid battery-and-gas vehicle option for environmentally conscious drivers, which spurred competitors like General Motors and Honda to get their own electrified motors to market.
Yet more than 25 years later, Toyota has largely remained stuck in gear. The automotive giant had invested in Tesla back in 2010 to spur EV development, only to begin selling off its Tesla shares a few years later. It also sold 100 models of a battery-powered microcar in 2012 before “discontinu[ing] it due to concerns over the limits of EVs,” as Reuters reported. Only recently has Toyota appeared to take EVs seriously. In December, the company announced a plan to launch five new zero-emissions models in the European market by 2026; earlier this month, the company introduced a fully battery-powered retro concept car alongside a new hybrid model at the Tokyo Auto Salon. But if you want to buy an EV from Toyota right now, the company only offers one of them, and sales are miniscule. Competitors like Hyundai are seizing on Toyota’s slowness on EVs to play up their own clean-car successes, cutting into the Japanese juggernaut’s domination of the global automotive market.”
Even now – even as rivals pull ahead of Toyota with their large scale sale of EVs – Toyota is struggling to join the dots: “…Toyota doesn’t plan on ramping up bZ4x production until 2025. Perhaps counterintuitively, the auto manufacturer now plans to halt its current EV projects and reboot its overall strategy in the sector, looking to cut production costs and seek inspiration from Tesla’s approach to manufacturing.”
As the Innovator’s Dilemma predicts and as case studies like Kodak and Nokia show, Toyota was until 20 years ago ahead of the race to make cars cleaner: “A generation ago, Toyota was ahead of most automakers in researching and deploying clean-energy tech, and it gradually electrified some of its biggest models while expanding its fleet of hybrids, both plug-in and not. Yet, as the ever-warming atmosphere and the ever-boiling chargers-versus-gas-pumps battles demonstrate, there’s a key difference between electrifying and going fully electric. Toyota’s focus on the former at the expense of the latter may have made sense previously thanks to its domination of the hybrid market, but as those sales plummet, it increasingly looks like a mistake.”
Basically, as Christensen said a generation ago, if you are the leader in a certain tech, you attempt to deal with the disruption of that tech by launching a hybrid between the old tech and the new tech (read: Prius from Toyota). But the incumbent leader lacks the financial incentives to completely disrupt its traditional product. This is where the entrant surges ahead and eventually finishes off the incumbent:
“Toyota head Akio Toyoda, heir to the family dynasty that launched his company nearly 100 years ago and current chair of the powerful Japan Automobile Manufacturers Association, has consistently pooh-poohed EVs while doubling down on his beloved hybrids. That’s not to say he dismisses all energy innovations—his company loves it some hydrogen, though its fuel-cell fleets haven’t quite taken off. But to hear it from him, an all-EV transition would be as apocalyptic as a future in which we don’t attempt to clear up transportation emissions. When the Japanese government considered a California-style future ban on gas cars in late 2020, Toyoda went off at a JAMA press conference, denouncing EVs as a bunch of hype while warning that expanded use would lead to lost jobs and reduced power capacity. Toyoda’s successful pushback was in step with EV-related remarks he’s made over the years as the voice of both JAMA and Toyota. In 2021: “Carbon is our enemy, not the internal combustion engine.””
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