About incumbents and challengers

In many industries, incumbents have often been trumped in the new product/technology race by rank outsiders. Will EVs' fate be any different?

A recent statement by Rajiv Bajaj, the gutsy chief of Bajaj Auto, at the launch of the company’s first electric offering got me thinking on the issue of core competence. Bajaj said that he was surprised that battery and motor makers, even “television, fridge, mobile” importers had rushed into the electric vehicles or EV space. And that many industry peers were merely shopping for EV-tech startups unlike his firm, which was doing it in-house, as “we at Bajaj are engineers who do our own jobs”.

Bajaj might have a point here, and we need people of his ilk by the dozen who stick to the knitting so to say, are ready to dirty their hands and invest their money in building technology ground up and are proud of their hard-earned stripes and all. And he may be right that many who are rushing into the EV space may just be gold diggers, looking for a fortune in mere trade/import arbitrage like many did in consumers electronics. In fact, I have a term for it — foreign-made Indian brands. Think of the early days of computers, colour televisions, mobiles et al. We know what happened to most when the tough times and tougher competition arrived — they simply jumped ship to the next “new” product/tech space and many faded into oblivion.

But it is instructive to recollect that global business history is replete with examples of big, successful firms being trumped in their own backyard by uppity new entrants, often with no experience, heritage or money! And it is truer in the new tech businesses. Think EVs itself, and I bet for most, the top-of-the-mind name is Tesla, not the Detroit duo of General Motors and Ford, or even the globetrotting Toyota.

When it came to dominating the internet, it was not the reigning tech monoliths Microsoft or IBM, but newbies like Google and Facebook that stole the march. Walmart dominated the retail world like a colossus, and yet an Amazon was born right under its nose to straddle global e-commerce. And Johnny-come-lately, over-the-top media services players like Netflix and Amazon Prime are dwarfing entertainment biggies such as Time Warner and News Corp.

Businesses are discovering competition and existential threat from unlikely quarters. And challengers, much like Google, Amazon and Tesla, have nothing to lose whilst incumbents have a whole franchise to protect. Rank outsiders like Airbnb and Uber have upended industries as varied as hospitality and automobiles. The script is being played out by homegrown Oyos and Olas in the domestic market. And before it blew it, a Finnish paper-maker turned phone-maker, Nokia had become synonymous with mobile phones. And a rice trader dreamt and won the crown of being the content king of India, yes for a while. So challengers, even in retreat and death, deserve a little more respect.

So is core competence all bunkum? Not really. Once I asked a senior Coca-Cola manager from Atlanta why the firm never extended its brand to other categories. He told me something to the effect that for consumers, Coke can only mean a sugary, brown soda that pours out of a bottle or a can, and that you have to respect the consumers’ understanding of the brand. So there is, after all, some grit in the competence comfort theory. And anyway, such is the impermanence of dominance that Google, which thought it owned the internet, missed out on not one but two subsequent tech waves in social media (Facebook, Twitter, LinkedIn) and e-commerce (Amazon). Surprisingly, in EVs too, it is old-world carmaker Nissan not Tesla that comes top on cumulative non-US global sales for a single model with its Nissan Leaf.