California Gas-Only Ban Should Prompt Industry Health Check

Following more than two years of turbulence, sourcing challenges, inflation and other disruptions for many in the automotive space, the news that California is set to ban gasoline-only car sales by 2035 could not have come at a worse time. This news was not totally unexpected, as over the past 15 years the trend toward an electric-vehicle-centric automotive world has become increasingly clear.

While OEMs have continued to boast about their new EV models and future EV plans, the underlying innovation gains underpinning it all have been meager, at best.

For decades, all signs have pointed to the fact that if EVs were ever to hit the mainstream, a serious boost in innovation output would be needed to help keep up with demand. But as evidenced by the current race to secure rare-earth metals, the automotive industry has not acted nearly quickly enough to get out ahead of the familiar issues that encumber EV production today.

As such, the industry finds itself having to fight over scarce materials while simultaneously trying to figure out how to be a force in the “EV future.”

And as California’s 2035 legislation has laid bare, time is running out.

Now is the time for automotive OEMs to do a comprehensive health check of their innovation ops so they can make the adjustments needed to keep pace with aggressive regulatory timelines. Here are the key questions they need to ask of themselves: 

The automotive industry has long approached innovation in a “bolt-on” fashion – where small, incremental “innovations” are stuck onto existing models in order to meet immediate business objectives and return on investment. However, with automotive OEMs now on the clock to deliver, the need for an operationalized bigger-picture strategy has never been more important.

Enter “strategic innovation.” Simply put, this approach allows businesses to build toward long-term actions that are capable of generating paradigm-shifting results. To accomplish this, OEMs need to think about their innovation in a whole new way that prioritizes portfolio growth and holistic end-goals versus chasing small win after small win with no overarching end in sight. If consensus on this approach is in place, automotive OEMs can then begin to push forward toward the meaningful outcomes that are needed across the short, medium and long term.

Arguably the biggest operational failure organizations make as it pertains to innovation is not having specific workflows and metrics for their innovation ops. Because innovation requires heavy investment, businesses often default to using measures deployed by CFOs and financial teams. This means immediate ROI is prioritized above everything else. On the surface, this seems to make sense. However, given that innovation takes years to get right – see the Nespresso coffee maker, which took over 10 years of R&D – this myopic approach can be a catastrophe for sustainable innovation growth as promising innovation projects are scrapped too early or don’t even get off the ground to begin with.

Virtually every business arm has its own set of metrics – except for innovation. Until this is rectified, businesses will continue to undercut their chances of success and lose ground to competitors that have an industrialized measurement framework for their innovation operations.

As often as companies talk about the importance of innovation, many continue to lack the fundamental visibility into their innovation ops, as well as their ecosystem partners and collaborations that are needed for success. Without knowing exactly what holes, opportunities or hurdles exist in their innovation ecosystem, it is impossible for businesses to deliver a return on innovation investment. Perhaps more than any other business arm, innovation ops is a living, breathing thing. Each component, from the front of the funnel where new opportunities enter, through the discover-incubate-accelerate phases, to the eventual creation of a new offering, requires careful nurturing. Yet, once budgets are set at the beginning of the year, businesses often have very little visibility about how their innovation operations are progressing, what barriers are precluding success and what improvements need to be made.

The days where companies navigated their business operations by intuition and educated guesses are long gone. Instead, everything is meticulously planned and tracked. Yet, innovation remains a major blind spot for many organizations. And this is something the automotive industry can ill afford at this moment.

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Electrification is just one of the technological forces set to disrupt the transportation industry. Autonomous driving technologies, new forms of transportation, a changing customer landscape and new business models around the use of vehicles, to name a few, are all areas ripe for disruption and innovation. By taking a step back and thinking deeply about a long-term strategic innovation strategy, automotive OEMs can lay the framework that is needed to achieve success.

Vinny Kaimal (pictured, above left) is vice president-Customer Success for Wellspring, a developer of innovation management software for corporations, universities and government agencies.