Why global companies must embrace fractal innovation
Summary
This ranking is the polar opposite of the traditional internal combustion engine car market, where nine of the top 10 are global brands (in joint ventures with Chinese partners). It has happened because, as we have argued in previous Fortune articles, the rules of competition have changed as the world fragments from three disruptive forces: the fracturing of the geopolitical consensus; the onward march of digitization,;and the rise of “deep tech” innovation. Then, when they were built with software to improve functionality and performance, they were transformed into “computers on wheels.” Now the most modern cars—and especially electric vehicles—are becoming “smartphones on wheels”: complete “solutions” offering customers an ever-growing range of digital micro-services for personalizing their driving experience. Today, this is the default internet solution for Chinese EVs and, as SAIC says, shifts the car’s role “from simple travel tool to intelligent mobility terminal.” To replicate this kind of success, traditional global companies will need to overcome their fear of losing control (particularly in relation to intellectual property and quality issues), partner with other companies and customers, and decentralize their design teams by sending key personnel to key markets. To hit the target, the central R&D team tries to maximize economies of scale by designing a globalcar with around 90% of the fixed cost spread over the projected number of vehicles sold around the world.