New Industry Paradigms May Overwhelm Dynamic Capabilities: Different Competitive Dynamics Around Tesla and Chinese EV Start-Ups

Abstract

This is a follow-up discussion about the Chinese electric vehicle (EV) sector, in particular the relative prospects of traditional automotive manufacturers and new ‘species’, four years after our last conversation on this topic (Jiang & Lu, 2018). It is also a response to Murmann and Vogt's (2022) latest article, which goes beyond Teece's (2019) focus on dynamic capabilities and constructs a systematic framework of firm capabilities to understand the competitive dynamics during a transformational shift of products.

Comments on Murmann and Vogt ‘A Capabilities Framework for Dynamic Competition Assessing the Relative Chances of Incumbents, Start-ups, and Diversifying Entrants’

“…These factors suggest that start-ups and diversifying entrants are in a stronger position than Murmann and Vogt (2022) propose, but for reasons different than those suggested by Jiang and Lu (2022). Our observations flow from a recognition of the panoply of individual and organizational skills now needed, given technological evolution in recent years.…”

“…Paths for that evolution will differ markedly, however, depending on those firms’ ordinary and dynamic capabilities. As Murmann and Vogt (2022) observe (with respect to Google), and Jiang and Lu (2022) observe (with respect to Tencent and Alibaba), some DSP entrants into vehicles are faltering or already have been abandoned; those firms’ disadvantages in EV Drive Platforms are even more clear. They will, however, claim significant margin and revenues over vehicle lifetimes by providing DSP services to Vehicle OEMs.…”

“…[1]Here, we differ from Jiang and Lu (2022) with respect to the importance of autonomy in any areas outside long-distance trucking. Useful autonomy remains an undefined and unsolved problem in any areas outside disciplined, monitored, and regulated roadways.…”

“…Murmann and Vogt's (2022) analysis of the automobile industry using a capabilities framework that integrates both dynamic and ordinary capabilities supports an informative table which sets out the major relevant capabilities that incumbents, start-ups, and diversifying entrants would need to develop or access via contract (see Murmann & Vogt, 2022, Table 3). Jiang and Lu (2022) have further discussed new industry paradigms which they suggest will greatly challenge – and perhaps overwhelm – automotive industry incumbents.…”

“…ABSTRACT Murmann and Vogt's (2022) analysis of the automobile industry using a capabilities framework that integrates both dynamic and ordinary capabilities supports an informative table which sets out the major relevant capabilities that incumbents, start-ups, and diversifying entrants would need to develop or access via contract or other arrangement (see Murmann and Vogt, 2022, Table 3). Jiang and Lu (2022) have further discussed new industry paradigms which they suggest will greatly challenge – and perhaps overwhelm – automotive industry incumbents. We believe that their insights can be taken a step further by focusing on two areas: first, the greatly increased availability of outsourced manufacturing driven by the shift to electric vehicle (‘EV’) powertrains; and second, the ongoing transformation of the driver and passenger experience that is driven by software–user experience software integrated with networked consumer service ecosystems. …”