The Dawn of a New Era : A Case Study of an Incumbent Car Manufacturer’s Transition to Electric Cars

University essay from Uppsala universitet/Företagsekonomiska institutionen; Uppsala universitet/Företagsekonomiska institutionen

Abstract: How do firms tend to their current viability while remaining competitive in the long-term? This question lays out the basis for this thesis by highlighting their conflicting logics through the concept of organizational ambidexterity. Literature makes a distinction between competing in mature markets and existing technologies (exploitation) versus new markets and new technologies (exploration). The preponderance of studies shows that, as firms grow larger, they tend to form core rigidities in their culture, structure and processes that hamper their efforts to adapt to the changing environment. By overemphasizing exploitative activities, future challenges or opportunities remain unexplored which can have a devastating effect in the event of radical, external changes. The cases of Nokia and Kodak should serve as cautionary tales in this regard. The automotive industry is currently undergoing a transition to electric cars. We conduct a case study at Volvo Cars from a senior leadership perspective, to illustrate the importance of exploration and how it can be legitimized during an industry transformation. Our work points to three major findings. First, communicating the importance of the transformation with the rest of the organization is imperative to creating goal alignment. Secondly, interorganizational collaboration in R&D helps Volvo to tap into knowledge that resides outside the organization and thereby increasing the chances of a successful transition to electric cars. Thirdly, agile management contributes to knowledge diffusion and is a powerful tool to counter organizational inertia by adding to firms’ speed and responsiveness, making them act more similarly to smaller, entrepreneurial firms.

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