Strategic Management of Innovation: the Case of Clean Automobile

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Strategic Management of Innovation the Case of
Clean Automobile

• Professor J.J. CHANARON
• 17 September 2009

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ASSESSING THE VARIOUS TECHNOLOGICAL OPTIONS
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Conditions for Innovation

• Innovations are successful when they are
  simultaneously
• Scientifically and technically possible, i.e.
  when they have the technical performances
  expected by customers and users
• Commercially vendible, i.e. when their price
  meets the demand as well as the after sale and
  maintenance costs
• Industrially feasible, i.e. when their
  manufacturing costs and quality are satisfactory
  to all stakeholders
• Politically, socially and culturally acceptable,
  i.e. when they get political support and full
  customer acceptance

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Required Success Factors
SALES
Economically Vendable
CUSTOMS
IDEOLOGIES
PRICE
Socially and Culturally Acceptable
SERVICES
Business Model
SOCIAL PRACTICES
INNOVATION
MARKETING
Scientifically Technically Possible
ENGINEERING
METHODS
Industrially Feasible
MANUFACTURING
COSTS
RESEARCH DEVELOPMENT
DESIGN
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Available Options
ICEV Internal Combustion Engine Vehicle Vehicle powered by a gasoline or diesel engine
AICEV Advanced Internal Combustion Engine Vehicle Vehicle powered by ICE using bio-fuels, natural gas or hydrogen
HEV Hybrid Electric Vehicle Vehicle powered by both ICE and electric power trains
PHEV Plug-in Hybrid Electric Vehicle HEV with plug-in rechargeable batteries
ERHEV Extended-Range Hybrid Electric Vehicle Vehicle powered by electric power train and batteries recharged by a small ICE
FPBEV Full Performance Battery Electric Vehicle Full electric vehicle powered solely by batteries
FCEV Fuel Cell Electric Vehicle Full electric vehicle powered solely by fuel cell
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NGV
Factor Degree of achievement Current Status Long Term Perspective
Political, social and cultural acceptability CO² performances Very good Excellent Excellent
Fossil fuel dependence Total Total Reserve for 100 years but geographically distributed
Infrastructure Excellent Different according to countries Relatively easy and cheap to develop
Technological Possibility Overall Total Total Excellent
Safety Good
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NGV
Factor Degree of achievement Current Status Long Term Perspective
Commercial vendibility Customer acceptance Relatively good Still some resistance over safety Resistance will disappear
Pricing Correlated to oil pricing trend Subsidized by governments
Industrial feasibility Cost Good Small premium Will vanish with economies of scale
Engineering Good Good Will improve
Component supply CNG kit available Fully available
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Bio-fuel Vehicle
Factor Degree of achievement Current Status Long Term Perspective
Political, social and cultural acceptability CO² performances Very good Excellent Excellent
Fossil fuel dependence None None
Competition food/transportation Bad Bad Progress in output/ha and efficiency
Infrastructure Good Good Relatively easy and cheap to develop
Ecology Require genetically modified seeds Poor
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Bio-fuel Vehicle
Factor Degree of achievement Current Status Long Term Perspective
Technological Possibility Overall Total Total Excellent
Safety Not an issue
Raw materials Limitations Limitations Opening to new sources straw, exotic plants, garbage
Commercial vendibility Customer acceptance Relatively good Good
Pricing Good Subsidized by governments Will improve with economies of scale
Industrial feasibility Cost Relatively cheap Will decrease with economies of scale
Manufacturing New infrastructure to be built up Under construction in Brazil, USA and Europe Will expand rapidly in some countries
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HEV
Factor Degree of achievement Current Status Long Term Perspective
Political, social and cultural acceptability Environmental friendship Slightly better Might be improved with new generations downsized gasoline engine better batteries
Fossil fuel dependence High Reserve for 40-50 years but could be extended with downsizing
Infrastructure Excellent Total availability Not an issue
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HEV
Factor Degree of achievement Current Status Long Term Perspective
Technological possibility Overall performances Good Similar to current ICE Should not change substantially
Range/autonomy Limited lt20km on electric drive Lithium-Ion battery will improve
CO² Performances Limited 10-15 improvement
Fuel consumption performance Limited 5-10 in Europe 15-30 in the US Should improve slowly
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HEV
Factor Degree of achievement Current Status Long Term Perspective
Commercial vendibility Customer acceptance Relatively weak Customer preference for mono-energy power train Might benefit from change in behavior
Pricing Relatively weak Premium of US2,500 Price will decrease with volumes
Industrial feasibility Cost Higher gt10-15 Will decrease with economies of scale and scope
Engineering More complex Under control of very few OEMs Will improve rapidly
Manufacturing Easy Electronic module is the key component
Quality Equivalent Equivalent
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FPBEV
Factor Degree of achievement Current Status Long Term Perspective
Political, social and cultural acceptability Environmental friendship Excellent Excellent
Fossil fuel dependence None Excellent
Infrastructure Weak Weak Recharging stations, national grids to be adapted
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FPBEV
Factor Degree of achievement Current Status Long Term Perspective
Technological possibility Overall performances Very poor, far from expected levels Limited mileage autonomy Must improve substantially
Range/autonomy Limited lt100-150km Lithium-Ion battery will probably improve but alternatives should be investigated
Durability/Number of recharging cycles Relatively good Still in question for real use conditions Must improved
Recharging time Long Too long Consumers want the ability to be able to do a quick recharge Must improve radically
Recharging infrastructure Not available To be extended Grid to be up-graded Must be improved and expanded
CO² Performances Limited when electricity is produced from fossil fuels (oil and coal) Poor in North America and Japan, Better in nuclear energy oriented countries
Energy consumption performance Good Good Should improve slowly
Technological options Prototypes Very few Basic research and applied development are required
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FPBEV
Factor Degree of achievement Current Status Long Term Perspective
Commercial vendibility Customer acceptance Relatively weak Customer preference for petrol Might benefit from change in behavior thanks to hybrid technology
Pricing Relatively weak Very high premium Price will decrease with volumes
Maintenance/Repair Good Costly if change of battery stack required Should be improved
Industrial feasibility Cost Much higher No reliable data so far 7,000 for 120 km range Will indeed decrease with economies of scale and scope
Engineering Simpler than ICE Under control of some OEMs and battery manufacturers Will improve rapidly
Manufacturing Relatively easy Still limited for high volume and high performance batteries Battery manufacturing is the key element
Quality Equivalent Equivalent
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Issues

• Impact on recharging grid is significant most
  countries will not be able to cope with the
  production and distribution of electricity
• Theoretical performances of lithium-based
  batteries probably not sufficient

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FCEV
Factor Degree of achievement Current Status Long Term Perspective
Political, social and cultural acceptability Environmental friendship Excellent Excellent Very likely after 2020
Fossil fuel dependence None Excellent Perfect
Safety Weak Weak due to H2 leaks and refueling risk To be improved
Infrastructure Weak Weak Huge need with high cost of producing and distributing H2
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FCEV
Factor Degree of achievement Current Status Long Term Perspective
Technological possibility Overall performances Still weak, far from expected levels Limited mileage, high temperature, problem in cold weather, life cycle unknown Must improve substantially
Range/autonomy Acceptable lt500-600km for the latest generation Range will probably increase
Durability/Number of refueling cycles Relatively good Still in question for real use conditions Must improved
Anode and membranes Poor Platinum anodes are very expensive Current membrane are not resistant enough to high temperature Basic research and applied development are required
CO² Performances Perfect if H2 is not produced by electrolyze from fossil fuel power generators Good
Energy consumption performance Good 30 to 50 electrical efficiency Should improve slightly
Technological options On-board H2 refining, Liquid H2 Basic research
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FCEV
Factor Degree of achievement Current Status Long Term Perspective
Commercial vendibility Customer acceptance Relatively weak Customer preference for petrol Might benefit from change in behavior thanks to hybrid technology and other electric vehicles
Pricing Relatively weak Extremely high premium Price will decrease with volumes
Maintenance/Repair Good Costly if change of cell and battery is required Should be improved
Industrial feasibility Cost Much higher No reliable data available so far Platinum on anode is very expensive Will indeed decrease with economies of scale and scope
Engineering Simpler than ICE Under control of some OEMs and fuel cell manufacturers Will improve relatively rapidly
Manufacturing Relatively easy Still limited for high volume and high performance cells Cells manufacturing is the key element
Quality Equivalent Equivalent
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Comparing Energy Storage
  Unit Gasoline Diesel Electricity Natural gas Liquified gas Compressed H2 Liquid H2
State   Liquid Liquid Chemical Gas Liquid Gas Liquid
Temperature Centigrade Actual Actual Actual-300 Actual Actual Actual -253
Pressure Bars 1 1 1 gt200 5-25 350-700 5
Energy Wh/kg 11900 11800 30-200 2200 7080 1200 500-1000
Energy Wh/l 8900 9900 70-300 2500 4300 450 1800
Refueling time Minutes 5 5 30-360 5 5 5 5
Battery Exchange Time Minutes     5        
Tank-to-Wheel efficiency 30-35 40-42 80-85 20-38 30-35 50 30-35
Weight for 60 litres Kg 45 50 90-150 70 36 90-100 100-200
Range Km 900 1000 30-120 160 430 200-300 180
Sources Syrota, 2008 and press cuttings.
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BUILDING UP A TENTATIVE VIABLE ACCEPTABLE
SCENARIO
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A Scenario of Consensus
Improved Vehicle Fuel Economy and Emissions
Displace Petroleum
Hydrogen Fuel Cell Battery Electric
Battery Electric Vehicles
Electric Drive
Propulsion System
Hybrid and Plug-inHybrid Electric Vehicles
Mechanical Drive
IC Engine and Transmission Improvements
t
2010
2030
2020
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Characteristics for Scenario

1. Clean and efficient ICE will be substituted to
   conventional ICE during the next ten years
   culminating with a 75 market penetration in 2020
   followed by a slow decline up to 2050
2. Hybrid solutions (conventional, plug-in or
   extended range electric vehicle) will
   progressively see their market penetration
   growing up to 25 around 2025
3. Full performance battery electric vehicles will
   start being commercialized in 2010 and see a
   growing but limited market penetration to 20 by
   2030 and 30 in 2050
4. Fuel cell electric vehicles will not be seriously
   introduced before 2025 and then see their market
   penetration growing at a relatively high rate to
   reach more than 50 in 2050

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Impact of the Current Crisis

1. There is no obvious evidence that the current
   crisis of the automotive industry would delay or
   accelerate technical change and innovation in
   powertrains
2. The Obama administration is associating financial
   support to a radical change of the  Big Three 
   model strategy towards downsizing and innovative
   powertrains

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Impact of the Current Crisis

1. Financial resources of OEMs will limit their RD
   and innovation capabilities for years while
   priority is on market recovery and profit-loss
   optimization
2. Radical innovation on vehicle will need five
   years for market introduction and ten years
   minimum before being visible and even much more
   time before a real impact will be significant

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Impact of the Current Crisis

1. European OEMs still do not invest so much on
   hybrids and plug-in hybrids
2. Transfer of RD and innovation expenditures and
   responsibilities for components on key suppliers
   will intensify
3. Downsizing and further move towards low cost and
   ultra-low cost models is an obstacle to radical
   change and innovation

Tata Nano
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Quasi-Standards

1. Lithium-ion for FPBEV and compressed hydrogen for
   FCEV are the worldwide quasi-standards
2. But basic RD is still deeply needed on these two
   technologies
3. Basic RD is still conducted by public
   laboratories and private corporations on
   alternatives to these quasi-standards

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Conclusions

1. No potentially dominant design such was and is
   probably still ICE
2. Diffusion curve of radical technologies will be
   slow
3. Real impact on pollution and energy will take
   years since 1 billion vehicles in use in 2010
   with ICE
4. Still unclear industrial organization

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Pending Questions

1. Universal or local options?
2. Unique solution or concomitant trajectories?
3. Traditional automotive system or new industry?
4. Innovative leadership to developed or emerging
   countries?
5. Which role for Chinese OEMs or Chinese new
   entrants?

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Pending Questions

1. Which pricing level and tax incentive?
2. Recharging of replacing batteries for FPBEV?
3. Which supply system of energy or fuel hydrogen,
   electricity?
4. Total well-to-wheel figures to be calculated,
   up-dated and assessed electricity generation
   sources such as coal might be worse than oil for
   global warming! Nuclear energy has strong
   opponents!

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Pending Questions

• Which change(s) in customer behavior?
• Which change(s) in customer preferences?
• And probably the most important question
• Should the entire business model be changed?
  Vehicle sold with rented batteries, for instance?
  Rented vehicles?

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And what if China?

• In China, a national research plan is involving
  all the best public laboratories - Tongji,
  Tsinghua, Jiao Tong, Dalian, CAS, etc.) on
  batteries and fuel cells
• Domestic OEMs leading the move forward is it
  marketing bluff or real threat?
• Weaknesses in designing powertrains and in
  vehicle integration
• Bottlenecks to be resolved costs, reliability,
  safety, and distribution infrastructure

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And what if China?

• As at the end of August 2009, 91 models by 34
  corporations with more than 15 millions of
  kilometers achieved so far
• A tough competition amongst Chinese stakeholders
• But a national consensus about the opportunity to
  leap-frog with Japanese and Western competitors
• A small level of motorization and a limited
  number of vehicles in use
• A strong political bargaining power capable to
  impose a solution and an acceleration
• High levels of urban traffic congestion and
  pollution

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Thanks for your attention