How long can Ford, Mercedes, BMW, Toyota, and VW last?

If you realise your business model is doomed, when is the right moment to panic?

Is it when a known disruptor and proven competitor announces that they are on track to halve their manufacturing costs?

Is it when you find out that a competitor has margins that are 5 times the next most profitable rival and you know that you are operating on wafer-thin margins or even at a loss?

Is it when legislation and customer demand mean you will be obliged to technically reinvent your product within 7 years?

All of these things are true of the conventional automotive sector right now.

Tesla have changed the paradigm – what do the conventional OEMs do now?  What do all of the ecosystem of parts suppliers, dealers and fuel companies do now?

It is not hard to copy the product at least superficially. Car manufacturers have been doing it to each other for years.  But I am reminded of the scene in Chitty Chitty Bang Bang, where the Baron, having failed to steal Chitty, demands that his assembled (and imprisoned) engineers create one for him – a task which they only achieve at the most superficial level.

Copying the product, which most of the OEMs have already done with varying degrees of success, is very far from enough.

The next challenge is to copy the vertically integrated, hyper-efficient manufacturing processes, which the manufacturers could conceivably do.  I am sure that some have already experimented in this direction, but is still not enough.

The real challenge is the multi-level mindset shift that is required at a leadership level to go from conventional to post-conventional car manufacture and sales.  Let’s look at some of the more fundamental differences.

The ability of conventional car companies to survive will depend entirely on leadership. Can they adapt or attract the type of leadership necessary to lead in a sufficiently post-conventional way as to out Tesla, Tesla? 

Let’s explore what that leadership might look like:

Vision – the new post-conventional leadership will need to have a very clear and compelling vision for the future.  A vision that is inspiring to all stakeholders, a clear and specific destination and will be beyond what they currently know how to do.

Alignment – the new post-conventional leadership will need to have the influencing skills to inspire and align the vast majority of the workforce and all of the leadership behind the vision.

Culture – the new post-conventional leadership will need to be able to identify, articulate and reliably role model the new “target culture” that will enable the vision to be achieved given the context they are operating in.

Commitment – the new post-conventional leadership will need to have the energy, will, stamina, resilience, emotional regulation and courage to create and curate the new culture and pursue the vision through all of the challenges and barriers they will face.

System Thinking – the new post-conventional leadership requires a paradigm shift in viewing the system as a whole. The efficiency of a system is not the sum of all its parts; it cannot be broken into smaller parts. The efficiency of a system is a product of its interactions as a whole. Post-conventional leadership is the fuel for its interaction.

Let’s also explore what that culture might need to look like:

The culture will be defined by high levels of honest and transparent collaboration especially at senior levels in the organisation.  Silos will have to be banished.  In order to achieve this there will need to be strong psychological safety and trust, which in turn will require skilful authentic leadership.

Will it happen?

Probably, but only a bit. 

I predict that the larger part of the automotive industry will respond conventionally, they will consolidate.  A bit like the carnivorous dinosaurs after the asteroid strike.  The potential exception is VW.  VW very wisely brought Mate Rimac into the business with a majority stake in Bugatti Rimac as the carrot.  Mate Rimac may be the only person capable of leading an automotive business in a way that could out Tesla, Tesla.

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