September 2017 | Strategy
Auto sales are slowing, the rideshare industry is experiencing explosive growth, momentum is building for electric and driverless cars, and a new engine improves standard fuel efficiency by 20 to 30 percent. It’s an incredible understatement to say that the auto industry has never faced more formidable, transformative threats and opportunities. What should companies’ strategic priorities be, and how can they create value for the future?
Concerns over these questions were cited as key reasons Ford CEO Mark Fields was ousted in May. Executive Chairman Bill Ford said the company needed to “accelerate a strategic shift to capitalize on emerging opportunities.” Taking a look at Fields’s successor is illustrative about just what kind of shift Ford envisions.
Jim Hackett was previously the head of Ford’s Smart Mobility subsidiary in Silicon Valley. In that role, he collaborated with start-ups and tech companies, and led a team of business and technology leaders from inside and outside the company. That experience coordinating the efforts of multiple and diverse players, says Wharton management professor Nicolaj Siggelkow, is critical. “Today, strategy goes beyond what the firm can do by itself. Strategy has to involve outside partners.”
The academic director of Creating and Implementing Strategy for Competitive Advantage says there is an increasing need for connected strategies, and firms that are able to figure out with whom and how to connect are creating advantages that others will find difficult to replicate. “Disruptive technologies have long been part of the conversation in this program,” he notes, “but today they are at the heart of strategic decisions in most industries. The big players — Google, Amazon, Apple — are spending heavily to make technologies better. You have to ask yourself whether it makes sense to go it alone or to build an ecosystem of strategic partners.”
There are significant tradeoffs inherent in both options. Keeping everything in-house means greater control at the expense of speed of development. Partnering means giving up some autonomy while potentially getting a quicker ROI. To help executives grapple with these complex choices, the program now includes a session with Wharton management professor Rahul Kapoor, a global thought leader on business ecosystems.
Kapoor says even firms that develop ground-breaking products or services are dependent on the broader ecosystem to create value. “It’s very important to move away from a focus on the firm or a specific partner. Value is created when you build and manage ecosystems. That is essentially what I have been doing my research on for 14 years.”
During his session, Kapoor helps participants map the ecosystems that their firms are a part of, and identify the critical players and interdependencies in those ecosystems. “There are typically many players,” he says, “so it’s important that you know which ones are the most critical and why. You also need to be clear about the growth challenges of your ecosystems, and understand how to navigate and orchestrate them.”
Siggelkow says while business ecosystems are not new, their importance and complexity are growing. “Today, creating strategy for competitive advantage involves outside partners. It’s easy to see how this is working in the auto industry, but this is happening in many other industries as well. To stay competitive and create value, you should be looking for strategic partners outside your firm.”
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