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Interview: Will electrical propulsion be disruptive?

Interview: Will electrical propulsion be disruptive?

Portrait of Robert Thomson
Managing Partner United Kingdom
Londen Office, Western Europe
+44 20 3075-1100
6 juni 2019

An academic view on electrical propulsion

Under the strict academic definition of disruption, aircraft electrification will probably not be disruptive. Any changes it brings about will be slow. But proponents of the technology should not worry – there is no doubt there will still be far reaching impacts, and moreover it means big companies have the luxury of time to adapt.

To pull apart claims of disruption surrounding electric propulsion, we spoke to Harvard Business School Associate Professor, Thales Teixeira.

Thales Teixeira, Harvard Business School Associate Professor and author of Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption.
Thales Teixeira, Harvard Business School Associate Professor and author of Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption.

Roland Berger: How do you define disruption?

Thales Teixeira: Disruption is a term that is possibly over-used, and one that different people understand very differently. Purely theoretically, and in terms of how I use the term, disruption is defined as when the incumbents in an industry lose significant market share in a short space of time to newcomers. Now "significant" market share loss could be anything from 10-40%, or more. A short space of time could be anything up to a decade, but it really depends on the industry.

Another important thing to get right is that technologies do not cause disruption, for the most part – changing customer behaviour does. This can happen due to a variety of reasons, and can be spurred on by a new technology, for sure – but until customers change their behaviour and decide to adopt it, there will be no disruption.

Roland Berger: Will electrification cause disruption in aerospace?

Thales Teixeira: Probably not. As history has shown, changes such as electrification are platform changes, impacting many different aspects of society. Due to the number of stakeholders involved, such as producers, users, distributors, regulators, these changes will occur slowly. These are not disruptive changes by nature – typically in these situations, big companies are able to adapt and maintain most of their market share.

Disruption in aerospace is hard and electrical propulsion may require system level changes. This is different from technological innovation that can be adopted easily without the system changing. As electric aircraft become available, a slow adoption can be expected, with a long period of co-existence: aircraft with both electrical and conventional tech being used together.

Roland Berger: Does the same go for Tesla in the automotive industry, a company often touted to be disruptive?

Thales Teixeira: Tesla’s product is not disruptive; its business model might be. All the major auto companies have been working on electric vehicles. Tesla’s market share is tiny, though its market cap may be big due to inflated investor expectations. It’s impactful, but it is not disruptive – large companies are not losing significant market share due to Tesla yet.

Admittedly, within its niche market (high end, luxury, and electric), Tesla is very impactful. This is very much due to its innovative sales model (online and in shopping malls) and its service model (remote and wireless). But there remains the question whether they will threaten the market shares of the bigger market players.

Roland Berger: Which companies do come to mind when you think of disruption in the auto industry?

Thales Teixeira: Uber has been incredibly disruptive, and the reason is because consumer behaviour has changed dramatically. They started asking the fundamental question of what consumers really value when it comes to transport, rather than just trying to upgrade the existing privately-owned passanger car eco-system.

So, it wasn't just their technology that disrupted the market – it was the consumers behaviour and spending changing quickly. In fact, around the time of its launch in 2008, Uber had no innovative technology that was not available to other businesses “off the shelf.” Start-ups happen to be good at adapting faster to consumer needs and thus often become disruptors.

Roland Berger: How could electrification end up being disruptive?

Thales Teixeira: If somehow carbon dioxide emissions become a top priority for consumers, then this could cause a disruption. We are starting to see changes, but in truth low emissions are not anywhere near a top priority for most consumers.

Conversely, something that consumers really care about is cost reduction – monetary cost, time cost, effort cost. A business that can reduce one or more of these costs suddenly becomes very attractive, put simply. Amazon, for instance, has been ruthlessly reducing these three consumer costs in all industries it has entered. That is what it means to be customer-centric, its not about being nice to your customers. If electrical propulsion can do that, by making the commute cheaper, quicker or easier for passengers, it could be prove to be extremely disruptive.

Roland Berger: Could Urban Air Mobility/the 'flying car' phenomenon become disruptive?

Thales Teixeira: Currently, automobiles are relatively cheap per mile driven and fairly convenient, but the time cost has been increasing due to traffic in large cities. Between cities, commercial airplanes are fast, but the total time cost to go to airports and board flights makes it only a viable option for larger distances. There is an opportunity gap for either within-city or city-to-city air travel for distances up to 100 miles or so that bypasses airports. There are currently a myriad of R&D efforts going into small urban passenger air transportation that can fill this void. We do not yet know which product-technology combination will win out and get mass adoption. Based on looking at other industries, what we do know is the winning solution will have the best monetary-time-effort cost combination for customers, being “cheaper,” on the aggregate, than cars or planes for a certain use case.

Read Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption here.

Contact our experts

How will the industry evolve due to electric propulsion? How will electric propulsion impact your company?

We invite you to contact us at EP@rolandberger.com, or connect with Robert Thomson or Nikhil Sachdeva via LinkedIn to discuss your thoughts.

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