Check Your Assumptions

In any strategic problem, the first step is always to gather as much information as possible. Failing to see something that is going on in front of you can destroy your best efforts before you even recognize the problem, but reacting to something you believe is there that really isn’t can be even worse. On the asset utilization side failing to understand what you have to work with, and the limitations of those assets can be fatal, and on the competition side, it’s not really possible to fight against an opponent you don’t know you have. But the one that can really kill your enterprise is when something that you knew about all along turns out to be something you didn’t realize it was…

All of that might seem obvious, especially if you have read about or studied strategy formulation, or if you have a decent grasp of competitive situations in history, but it continues to amaze me how often people and organizations get beaten by things they didn’t take the time to understand. Consider, if you will, the growing market for electric vehicles and the rise of companies like Tesla Motors that are building products in response. As recently as the turn of the Century, even analysts within the Automotive industry were still dismissing the electric car as a novelty item, or at best, a golf cart with delusions of grandeur. The sort of thing that might sell a few dozen units in environmentalist bastions like California, but would never have any real impact on the international market for combustion-engine vehicles…

Since then, of course, we’ve seen the rise of hybrid vehicles like the Toyota Prius and Honda Insight, the appearance of plug-in hybrids like the long-delayed Chevy Volt and Bolt projects, and the surprising persistence of Tesla itself. One might still forgive the casual observer for failing to realize that the demand for electric vehicles has risen from almost zero to the vicinity of 2.5 million units per year world-wide, but according to the story running this week on the Bloomberg site, that’s exactly what has happened. Increasing demand from China is driving a lot of the increase, but the ability of fully-electric cars to reduce any given country’s carbon emission totals are making this class of vehicle attractive to every country that is still in the Paris Accords (which is all but three of them as of this writing)…

Now, I would be the first to admit that 2.5 million doesn’t sound all that impressive when you consider that in 2016 (the last year for which figures are available) world-wide production of cars exceeded 72 million units according to the OICA – it’s a bit under 3.5%, if you care. But those numbers are still rising, as VW claims to be preparing to launch an entire line of electric vehicles in the US and EU markets, with the goal of selling at least 2 million units per year by 2025, and Mercedes-Benz has already announced its intentions to bring out 10 new electric vehicles by 2022. And there’s no telling what might happen if the Big Three ever start taking this new threat seriously and get their own offerings into the market…

Personally, I do still believe that the folks over at Bloomberg may be a little premature when they declare that the dominance of fuel-burning engines is fading. Until such time as it becomes possible to drive long distances without having to wait for an hour or two every 200 miles while your batteries are recharged, it’s hard to see the American consumers (among others) giving up vehicles that can just be refueled in a few minutes. But I can still remember when GM brought out the EV-1 concept vehicles (essentially a small fleet of prototype electric cars) in 1996, only to see them dismissed with a collective sneer, as a curiosity that would never lead to a viable product, let alone a product class that is already accounting for 2.5 million years and growing…

Check your assumptions constantly, people, because it’s the threat you never recognized that can kill your company before you know to worry about it. In fact, it might save a bit of time if we all just stop making assumptions about strategy…