Innovation and Sustainability: Nissan attempts to promote electric vehicles

In the world where people are becoming aware of the impact of global warming, the demand on cleaner and environmental friendly products has pushed automakers to engage in research and development of greener vehicles.

The attempt is not baseless. Information on climate changes, global warming and pollution covered by the media have changed people’s attitude in perceiving environmental issues as crucial subjects even from now. Saving the planet earth is not only a matter of preserving the planet from further disasters but also as a cognizance in promoting social values and responsibilities.

With the price of oil hovering beyond the psychological barrier of 100 dollar per barrel, efforts in commercializing more energy efficient vehicles which do not rely on fossil fuels are emerging. Relying on fossil fuel as the energy sources will not ensure environmental sustainability even if new materials allowing a car to be lighter and has better fuel efficiency are discovered. Excessive demand as a result of improving income is the major reason that such effort will become useless in the future.

As these issues progress, companies are attempting to come up with better solutions to anticipate the possible enactment of environmental regulations. It is obvious that from several options, electric vehicle appears to be the prospective choice for automakers along with hybrid vehicle. Electric vehicle is considered to be the most feasible solution to reduce oil consumption for transportation usages. The vehicle can be plugged in for power. The owner does not have to go to the gas station to fuel the car. The environment will be cleaner since CO2 pollution is reduced. At the same time the business facts suggest on the cons side. While operating electric vehicle seems to be straightforward and economically viable, current sales of the electric vehicle do not seem to be promising. Lack of speed and lengthy time to fuel the car are the main reason hampering the adoption of electric vehicle. California is the only place where electric vehicles are becoming popular.

Zero emission cars, particularly electric vehicle, are perceived to be the trajectory of the car future by Nissan. The company believes that urban people as the major user of the car will shift their preferences to greener cars as the oil price becomes unpredictable. To anticipate this possibility, Nissan and Renault tied up together to develop their first electric car in Israel. It is anticipated that the product can be launched to the market by 2011.

On the other hand, hybrid car is believed to be the dominant platform of the future car. Unlike what Nissan and Renault do, Toyota conceives hybrid car as the future trajectory where the need of a car running at ‘normal’ speed combined with the necessity to preserve the environment intersects at a point called a greener car. Other companies such as Proton capture a different track by promoting biofuel car.

Different tracks on the development of zero emission vehicles make Nissan aware that innovation is currently under the transient phase. On this phase, different technologies exist and each of them is battling to become a dominant platform. While the electric car is the most prevalent prospect seen by Nissan, there is no guarantee that efforts in promoting electric vehicle will turn the competition into an electric vehicle platform. To tackle this issue, Carlos Ghosn, Nissan CEO, iterated that the company is pursuing different technologies to avoid abrupt changes in the trajectory.

Leveraging other technologies during the transient phase is essential to avoid the Not Invented Here (NIH) syndrome undertaken by companies thinking their technologies will become the dominant design. Once other tracks emerge and escalate, companies under NIH syndrome will not be prepared to deploy the emerging technology nor have sufficient time to catch up with those maturing in the trajectory.

Nissan has anticipated different routes in the transient phase to avoid the NIH problem. The company also expands it capabilities beyond electric vehicle to avoid the lock out problem. We will see whether the electric car will become a dominant design in the future. But at least we know that companies such as Nissan and Renault have prepared the capabilities ready to be deployed once different trajectories against their projection emerge.

Innovation: acquiring competencies and extending capabilities to stay in the market

Technological changes have proven again that incumbents may not always the ones that survive given the business uncertainties. Through the lens of innovation, extending capabilities and acquiring new competencies are prerequisites for a firm to maintain its competitive advantage. History has it spelt that companies staying within their competencies get trapped into a so called ‘Not Invented Here’ practices.

To avoid this repetitive failure, a firm must be willing to extend its competencies and capabilities. No firm can survive by offering similar products and services at all times. Technology is changing. So is the market. The way transactions are carried out changes for the sake of cost efficiency. Customers are becoming more prudent on what they buy. The information and communication technology has become pervasive on providing accurate information on what to buy, why one should buy and how much a good costs. Even more, competitors are raising their bets by launching new products and promoting innovative services. New entrants use all possible means to seize the market. They come with new trends. They disrupt the status quo. They can appropriate their costs through efficient transaction mechanisms.

This has created a dilemma for the incumbent. Staying within the existing technology trajectory may trap the incumbent into either a “lock in” or a “lock out” condition. At the same time, developing a totally new product takes time and may not fulfil the expectation. The incumbent may also overlook the imminent returns of appropriating the existing products. Hence, a company should manage its existing businesses while acquiring new competencies to maintain competitiveness in the (near) future.

Case Study: PT Telkom

Once was a dominant player in the fixed line service, PT Telkom has enjoyed prosperous growth due to the monopoly practice in the telecom sector. The company barely produced new services except for some service improvements in delivering customers’ line. The notion at that time was that fixed line communication seemed to be the solely local and long distance communication carrier in the country for more than four decades. The only competitor was PT Indosat, offering international long distance call services which did not intersect with PT Telkom business.

In the 1990s, the era of mobile communication emerged. Cellular phones were introduced to the market. However, the mobile market at that time was perceived as a niche one. The mobile device was very expensive and the airtime cost was hardly affordable to most people. Backed up by the president family and cronyism, PT Satelindo was set up as the dominant mobile operator serving the majority of customers in the country. Through the company, combined with the technological progress in mobile devices and networking technologies, the airtime cost started to decline.

The emergence of mobile communication in the country has pushed PT Telkom to enter into the mobile operator arena through setting up PT Telkomsel and later on becoming the largest shareholder of PT Telkomsel. The story went on that PT Satelindo was acquired by PT Indosat. The fall of the new order regime has further benefited PT Telkomsel on profits and market shares.

By contributing nearly 37% of PT Telkom sales, PT Telkomsel appeared to be the cash cow for PT Telkom. There was a notion that PT Telkom and PT Telkomsel would enjoy their prosperous growth in the long run. The only potential competitor that theoretically could outperform PT Telkomsel was PT Indosat. PT Excelcomindo was also considered as a potential competitor. However, frequent changes of the company stakeholder slowed down the company’s growth.

By the early 2000s, deregulations in the telecom sector permitting more players to enter the industry have changed the market structure within the telecom industry. With the new telecommunication bills, new mobile operators entered the telecom industry. They came with either the popular GSM technology or introduced CDMA technology. These players created more pressure to the incumbents. Players using CDMA technology operated with more efficient cost structures. In addition, the technology itself permits more efficient airtime usages. As a result, they came with lower airtime costs. Although PT Telkom set up Telkom flexi in responding the competition, the venture was considered as less successful than these new entrants. Even worse, with the anti monopoly law in effect, PT Telkomsel and other mobile operators were charged with tariff cartel practices.

Such condition created a decisive moment for PT Telkom to move ahead. Through the innovation lens, the company needs to acquire new competencies while looking at its complementary assets to create the maximum business value. Translating this term into strategic management words, the company should embrace a new market close enough to its existing capabilities.

One of the prominent markets rarely explored in the country is the enterprise IT solution sector. Two reasons on why this industry has been rarely levered. The industry requires highly skilled and experience talents. It also charges the customer with a significant cost to invest.

On the positive side, with the better outlook of the economic growth, business sectors requiring a better customer management system through investing on enterprise IT solutions are growing. Telecom industries have experienced a rapid growth, thanks to the declining cost of mobile phones and SIM cards. It is not uncommon to find people with their mobiles in the public spot. While the economic growth spurs people to buy mobile phones and use more airtime, more mobile operator players mean more customer choices and preferences. As a result, airtime costs are declining due to intense competition. Telecom companies are called for finding efficient ways to manage their customers while keeping the airtime price down. This can only be possible by deploying effective enterprise IT solutions.

Another factor that is becoming crucial for large companies handling huge critical data is securing the data integrity. Service industries dealing with large customer data must implement a disaster recovery plan (DRC) as the occurrences of disasters in the country are intensifying and becoming unpredictable.

While in the telecom business PT Telkom may have all technical and managerial competencies in the telecom, entering into the enterprise IT solution business requires additional complementary assets. Developing in-house capabilities may take time. The company may not have all the knowledge in appropriating the development results. Marketing enterprise IT solutions requires in depth technical and commercial knowledge since prospective customers usually have high expectations on the return of investment (ROI) measures.

Therefore, PT Telkom chose to acquire 80% of PT Sigma Cipta Caraka (Sigma) shares. The latter has been engaged in implementing enterprise IT solutions serving banking sectors. The company is also a prominent player in DRC solutions. From PT Sigma perspective, this acquisition opens opportunities for the company to extend their competencies beyond serving banking sectors. In addition, serving IT solutions for PT Telkom can be taken as a stepping stone to access larger market demographics. Through PT Telkom, the company can gain access to serve PT Telkomsel. From there the company can start exploring its services to Singtel, a Singaporean telecom company, as the remaining shares of PT Telkomsel are owned by Singtel.

Destruksi Kreatif, Busway dan Ekonomi Informasi

Dalam landasan ekonomi yang didasarkan pada pemberdayaan teknologi baru, gagasan destruksi kreatif Joseph Schumpeter sangatlah relevan dalam mengatasi problema aktual di masa kini maupun masa mendatang.

Pemberdayaan teknologi baru bahkan dapat merubah perilaku masyarakat dalam melakukan aktifitas sehari hari.

Dengan sendirinya pemberdayaan teknologi baru dapat merubah pola perekonomian, sosial dan budaya masyarakat menuju bentuk bentuk yang tidak terpikirkan sebelumnya.

Melalui perubahan perubahan tersebut manusia telah memasuki perubahan budaya dimulai dari budaya agraris menuju budaya industrialis bermula dari ditemukannya mesin uap.

Selanjutnya dengan perkembangan dibidang elektronika dan otomatisasi, manusia dibawa menuju perubahan budaya yang berlandaskan pada industrialisasi modern.

Demikian juga halnya dengan perkembangan dalam teknologi informasi. Dengan adanya kemajuan dalam teknologi informasi dan komunikasi, budaya baru yang mengandalkan aliran informasi mulai menggantikan pola pola industrialisasi.

Dengan sendirinya model bisnis yang sedang berjalan mau tidak mau harus mengubah diri karena mata rantai pasokan (supply chain) industri telah bergeser dengan dipotongnya jalur jalur intermediasi pasar seperti distributor dan agen.

Penggunaan teknologi informasi dan komunikasi bahkan telah memungkinkan untuk melakukan pekerjaan 24 jam terus menerus tanpa hentinya dengan penyebaran aktifitas kerja pada lokasi geografis yang berbeda.

Namun, sebuah kondisi yang pasti terjadi dengan adanya inovasi dan perubahan teknologi adalah adanya pihak pihak yang akan lumpuh menghadapi perilaku aktifitas yang sangat berbeda dari perilaku yang telah berjalan.

Perubahan inilah yang dimaksud oleh Joseph Schumpeter sebagai destruksi kreatif.

Perubahan pola industrialisasi menuju era informasi telah nampak dengan mulai lunturnya budaya “berpindah tempat” dalam melakukan aktifitas ekonomi maupun produksi.

Karenanya, menerapkan budaya “tidak berpindah tempat” untuk aktifitas yang dapat dilakukan tanpa perlunya moda transportasi merupakan gagasan yang dapat dijadikan solusi untuk menekan kemacetan.

Bahkan melalui pengunaan media teknologi informasi dan komunikasi sebuah perusahaan swasta asing di Jakarta telah menerapkan praktek bekerja dari rumah untuk para karyawannya dalam menjalankan sebagian dari aktifitas aktifitas perusahaan.

Kemajuan teknologi informasi dan komunikasi untuk menjembatani pertemuan antar individu tanpa berpindah tempat dilakukan oleh perusahaan tersebut melalui media call maupun video conferencing.

Piranti keras maupun lunak untuk melakukan kedua aktifitas tersebut bahkan sudah tersedia dengan harga yang sangat terjangkau.

Melihat permasalahan busway dari sisi inovatif melalui paradigma yang berbeda melalui kacamata teknologi informasi dan komunikasi alih alih berpaku dalam moda transportasi, justru akan menimbulkan dampak yang lebih produktif dan kompetitif.

Pertama, para pelaku di sektor telekomunikasi dan jaringan informasi akan dirangsang untuk berkompetisi dalam menyediakan jasa dengan harga yang jauh lebih terjangkau sejalan dengan tumbuhnya permintaan untuk penyediaan jasa dial up maupun broadband internet.

Disamping itu, harga tarif operator seluler yang selama dikeluhkan tinggi beserta praktek fixed pricing oleh operator tertentu, akan turun dengan tingginya waktu bicara dan bertambahnya pelanggan seluler untuk melakukan aktifitas yang produktif.

Kompetisi antara operator seluler dan fixed line akan kembali tumbuh dan hal ini justru akan menguntungkan konsumen untuk mendapatkan pilihan layanan yang lebih baik.

Kedua, dengan turunnya harga untuk mendapatkan akses informasi, masyarakat akan dipicu untuk memanfaatkan teknologi informasi dan komunikasi baik untuk aktifitas produksi maupun untuk aktifitas lain yang dapat memberikan nilai tambah secara ekonomis.

Budaya self entrepreneurship melalui penggunaan media berbasiskan teknologi informasi elektronik akan berkembang sehingga tercipta sektor industri baru.

Hal ini telah dibuktikan oleh seorang pengusaha muda dari Bandung dengan menjalankan usahanya dengan menggunakan e-commerce. Demikian juga di Bali dengan sebuah perusahaan yang menawarkan jasa reservasi secara on-line.

Ketiga, sejalan dengan ketidak pastian pasokan minyak dunia yang menyebabkan fluktuasi harga minyak yang diperkirakan mendekati 100 dolar per barel, penerapan aktifitas tanpa penggunaan moda transportasi akan menekan pengunaan energi baik untuk konsumsi industri maupun pribadi.

Disamping itu melakukan aktifitas tanpa berpindah tempat seperti praktek bekerja di rumah justru akan meningkatkan produktifitas, mengurangi beban psikis karyawan serta menjaga keseimbangan hidup.

Tentunya hal ini akan berdampak pada lumpuhnya mata rantai industri otomotif, bahan bakar, suku cadang, asesoris kendaraan dan lainnya.

Penerimaan secara besar besaran pada sektor ini akan jatuh mengingat perkiraan akan masih banyaknya ketergantungan pada penggunaan kendaraan pribadi.

Namun justru disinilah gagasan destruksi kreatif itu. Industri industri yang sedang berjalan akan dipaksa berubah kalau tidak ingin lumpuh dalam menghadapi industri industri baru yang menawarkan perilaku ekonomi, sosial dan budaya baru.

Kalau demikian, sangatlah absurd jika kita masih terjebak dalam retorika transportasi busway dan tidak memikirkan gagasan gagasan yang lebih inovatif untuk menyelesaikan masalah kemacetan.

Innovation and the economic of technological change

Observing recent opinions in the national mass media associated with the economic growth, there appears that the paradigm in creating sustainable growth has been changing.

The new dogma of exploiting knowledge has become a factor mandatory to make a country stay within the circle of economic competences rather than just relying on foreign direct investments.

Of course this idiom is somewhat different from the neo classical economic mainstreams drawn as old as the Adam Smith and David Ricardo.

The basic tenet of this new growth theory is about technological changes. It is believed that with scarce resources and the unexpected population growth, the Malthusian theory will face a serious threat if no radical changes are made.

With technology, the limit to grow now has its room to expand. Consider the use of biotechnology and modern agricultures in cultivating a large number of seeds. These were not in mind many decades ago where lands were required to expand to be able to plant more seeds.

However, what make it interesting are changes in the industry level because of the impacts technology offers.

Well, let us see the simplest case. How many of us now see the typewriter in our office? Or how many of us use calculator instead of using Exce or our mobile phonel?

Technological Changes

Technological changes may have not been thought as threats to many incumbent firms until they suddenly realize that their time is running out and there are little or even nothing to do other than just becoming thrown away from the market.

A simple example, some of us may still remember those walkmans with their lace hanging around our neck with the headphone in our ears.

Have you seen it lately?

What about the golden era of Betamax and VHS video? I have never seen a video rental in the city other than cheap pirate DVDs and reasonable price of Chinese DVD players which can play us all (that what they say) DVD movies, genuine or pirate.

Though it emerges without our will, yet we buy these products and fill the company’s pocket producing such gadgets. They become more prosper through innovative products.

Not to Innovate Problems

At the same time, incumbents resisting to innovate are, time and again, struggling to regain their market share. Although they may have seen the potential threat of new products, because of their unwillingness to invest in new product developments they are facing market declines.

Make it worst, they don’t acquire necessary knowledge to extend their products. The incumbent stays with their comfort zone thinking that their specialties and comparative advantages are enough to retain a strong market share.

This is what called as the “Not to Innovate Here” problems. Many incumbents are lack of perceiving even the weakest signal that may change the direction of the market demand.

IBM did not think the threat from personal computer (PC) and stayed in producing main frame computers just to realize that PCs were becoming dominant throughout the 1980s and 1990s.

Why? Because they believed they had their market base so strong that even the smallest change in the computer industry was ignored.

Another reason is because they had a solid distribution network that they were ignoring a new channel of distributing computers through retailers.

Interestingly, the one that started innovative ideas and capitalized them to their benefits made the same mistake with the ones they outperformed.

When Yahoo emerged as a new browser replacing Netscape and successfully outperformed Internet Explorer, no one would have thought that this company would suffer from competition.

Years later, Google dominates the information economy with its arsenal and now they are capitalizing their market share while Yahoo can only see Google's progress wondering why their market was slipped.

To stay competitive one must innovate continuously. Technology is changing and the market is competing. Once the market saturates, companies cannot stay competitive just by relying on low cost products. History has it that the one that comes up with innovative products and processes will sustain longer in the industry.