BMW Is Spending Money On Pet Technology Projects Not On Solving Customer Problems

Corporate Explorer
BMW Is Spending Money On Pet Technology Projects Not On Solving Customer Problems

This article was originally published on Forbes.

Big news at this year’s Consumer Electronics Shows was BMW’s i X Flow technology. This allows the driver to adjust the external color of a car in a matter of seconds. My heart sank. Could BMW, a brand I’ve been attached to for decades, be another of those firms that lose when markets shift? The famous disruption research of Clayton Christiansen demonstrated that the leader in one technology is rarely the leader in the next, with sometimes devastating consequences. Will BMW’s failure to prioritize electric vehicles over the internal combustion engine (ICE), lead it to join Nokia, Blockbuster, and Kodak on the list of firms that lose to disruption?

You see, it is time to replace my beloved BMW 4 series with an electric alternative. My wife has a Ford Mach E, so I am sold on the electric experience, it’s just I suffer from range anxiety. I am worried that I’m not organized enough to have it charged every time I need it. I want the new electric vehicle to be a BMW. That is not because I am obsessed with cars, what the British call a “petrol-head.” I just enjoy driving BMWs.

The challenge is that BMW’s electric range is meagre at best. They just about squeak into the top 10 electric vehicles on the market in the USA, however there is a big range delta from top to bottom. Lucid and Tesla are pushing beyond the 500-mile barrier. Chinese firms like Neo are promising 600 plus. My beloved brand is stuck in the low 300s and that’s for a rear-wheel drive car unsuited to the Massachusetts winter.

Until recently, I was telling myself, “Okay, BMW will catch up, all I have to do is wait. The company is an innovation machine.” I really expected a breakthrough product from BMW that would put Elon Musk back in his box. Then news of the color changing car came along. This is an extraordinary piece of technological engineering. More than simply changing the color of the car, the X Flow’s 240 panels show facial expressions, giving vehicles character and personality.

That’s a serious wow, but it is all about continuing to innovate around the vehicle as it is today. It tells me that BMW is so relaxed about the electric vehicle revolution, that it still has resources working on optimizing the vehicle as it is today. This incremental innovation is incredibly important when you are operating within a relatively stable market – like automobiles with internal combustion engines twenty years ago. However, when the market starts to shift, the more focus you put on reinventing for today, the fewer resources there are to commit to meet the challenge of the coming revolution.

There is a popular misconception that firms like Nokia fail to see disruption coming. That they are blindsided by a shift in technology or business model that they hadn’t anticipated. Nothing could be further from the truth. It isn’t that they don’t see disruption coming, it’s that they failed to act. When the iPhone was launched, the Nokia CFO told the financial markets, “its very much a validation of what we’ve been doing.” The problem was the scale of action, they saw smart phones as just another product, perhaps 5% of the market, and continued to plough money into optimizing their current handset portfolio. Apple coded it as a revolution.

This is one of those “silent killers” of innovation that I write about in Corporate Explorer. These are the unconscious behaviors that favor the status quo. They assume the new markets will develop at the same rate as the old and so they invest in disruptive innovation as they would a product line extension. That’s why Nokia was always playing catchup with Apple, just as BMW is with Tesla, who now enjoy a massive profitability premium versus other EV auto companies (even if its stock is overvalued).

I am certain management at BMW believes it is fully committed to leading the transition from ICE to electric vehicles. However, what we see from studying firms like Nokia is that when successful organizations encounter a threat, their usual response is to work very hard to stay the same. They become “dynamically conservative.” My bet is that any BMW executive reading this article will have a hundred reasons why I am wrong, based on their knowledge of the product roadmap. However, they will also recognize the signs of dynamic conservativism: continuing to fund pet projects that do not address the threat or opportunity of disruption (X Flow), over-investing in spectacular early ventures and then killing them when they fail to deliver (i3 and i8), and doubling down on the current product range, making the new technology conform to old rules (i4 and i5).

Last month, I visited UnternehmerTUM, the astonishingly successful startup accelerator built around Munich’s technical university. I talked to the young entrepreneurs there about their attitude toward BMW. They viewed the company the same way they do oil companies, complicit in the destruction of the earth, unwilling to take seriously the scale of the threat from global heating. The message that the X Flow technology sends is “let’s build a car that can change color, never mind that it isn’t competitive against the best EVs, you can always have it with a gasoline engine!” It’s a turn off to technical talent and to consumers like me.

This is not a tirade against BMW. I want them to succeed. I do truly love my BMW. I will likely wait for that great new long-range BMW electric before trading in my 430xi. I just need them to survive long enough. I really do want to buy an electric BMW. I am just worried that they don’t believe there is a problem and so will continue to be too slow to act.