Which Entrepreneur Will Transform the Auto Industry?


Some of the biggest entrepreneurial fortunes have accrued to people who have started businesses to take advantage of a radical technological change.

Google is probably the most notable recent example — Internet search clearly was a radical change in the way people look for information and Google’s founders certainly have made a lot of money from their business.

Identifying a radical technological change and capitalizing on it with a start-up isn’t easy to do. You need to find a radical technological change that disadvantages incumbent firms. If a new technology comes along, but existing firms are able to transition to it fairly easily then you aren’t going to be very successful as an entrepreneur. We saw a lot of Internet start-ups fail when the existing firms they were founded to compete against figured out how to migrate some portion of their businesses to the Web.

Even if you know that radical technological change is coming and will some day transform an industry, you will only be successful as an entrepreneur if you can figure out when that change will occur:

  • If you start too early, you will be saddled with an inferior technology that hasn’t yet reached the point where it is competitive with existing alternatives and probably run out of cash before it does, as happened to the first generation of entrepreneurs in VoIP.
  • If you start too late, other people will move up the learning curve, develop a first mover advantage, and get the prime customers before you.

Then there is the problem of picking the right technology. We all know that something will replace the internal combustion engine as the technology to power cars. But what will it be? Electric cars? Plug-in hybrids? Fuel cell-powered vehicles? Biofuel-powered cars running on excess grease from fast food restaurants? Something else?

The Buddy electric car, available in Norway

Buddy electric car, available in Norway

According to VentureBeat, there are 30 companies that have been founded to sell electric cars. According to Wikipedia, at least two start-ups are investigating or producing plug-in hybrids. Other entrepreneurs have started companies to make fuel-cell powered and biofuel-powered cars.

And then there is the issue of incumbent firms. The major automakers all have programs in place to come up with vehicles powered by these and other technologies.

I don’t know when the gasoline-powered car will be replaced, which technology will replace it, or what company will be the one that succeeds at this effort. I don’t even know if an entrepreneur starting a new company or a major automaker will be the one to lead this change.

All I know is that if an entrepreneur picks the winning technology, gets the timing right, and makes a lot of money off the transition, he or she will be put on the cover of Fortune, Forbes, and BusinessWeek and will be hailed as a business visionary.

Of course, identifying entrepreneurial visionaries after the fact is easier than identifying them in advance. Anyone want to try predicting who he or she is today?

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About the Author: Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of eight books, including Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.

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Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

15 Reactions

  1. There’s always that one problem with pretty much any concept electric car I have seen so far. They all look like they were designed by some engineer from 80s who have been brought into our days and forced into taking some heavy substances and therefore suffers twice.

    I do care about environment, MPG, and other cool stuff. I also want to drive a nice looking car, not some squashed matchbox on tiny wheels from a shopping cart.

  2. Martin Lindeskog

    Scott, I will keep you posted on the development of the auto industry. I will get some insight in new alternative ways of transporting a motor vehicle. I think that small electrical cars like the one in the picture will be used more and more in the city traffic. The crux is the battery life and how often you have to recharge the battery.

  3. “The crux is the battery life and how often you have to recharge the battery.”. That sounds exciting Martin. I’ll be eyeing for updates too.

  4. Martin Lindeskog

    Rose Anderson,

    It is exciting times right now. Maybe a paradigm shift is on its way? One thing that could pop up, is electrical bicycles. I read about this in the Wall Street Journal not long ago. In Texas they have started to drive “golf carts” on the roads! “You Know Gas Prices Are High When Texans Start Driving Golf Carts.” http://choez.notlong.com

    The battery is pretty expansive nowadays, so they have to come up with a solution for that. You don’t take the electrical car for long commute trips. Instead it will be used more as an extra car for the family members or the pick for city slickers. The time will soon come when you could buy a electrical car at the same standard as a regular car for about $10,000. It doesn’t take too long time until you have saved money on the fuel cost with today’s high petrol price level.

    I will keep you updated… 🙂

  5. It will be the entreprenuer who is most passionate about their dream of alternative fuel cars that will win out. . .methods vs. methods be damned. Whoever has the biggest vision and the biggest drive (no pun intended). This is almost always the case when something spectacular happens.

  6. Martin Lindeskog

    Jakzon454: I agreee with you. Then I think the entrepreneur I am in contact with here in Sweden will have a good chance. He his passionate about alternative fuel cars and renewable energy alternatives, e.g. wind power, solar cells, etc.

  7. IN ORDER TO UNDERSTAND WHAT” THE WINNING TECHNOLOGY AND GETTING THE TIMING RIGHT”, ONE MUST GRASP THE OBVIOUS TIE IN TO THE CONTROL FREAKS WHO HAVE BROUGHT THIS WORLD TO THE BRINK OF WORLD WAR III TO CONTINUE OIL PROFITS. TAKE A GOOD LOOK AROUND YOU, WE RANDOMLY CARPET BOMB THE THIRD WORLD AND INVADE THE MIDDLE EAST, WHILE WE SUPPORT GEORGIAN PUPPETS TO CONTROL THE CASPIAN OIL PIPELINES THAT PRESS THE RUSSIANS TO DEFEND THEIR INTERESTS. AS THIS PLAYS OUT, IN INDIA, TATA INDUSTRIES ROLLS OUT THE NANO, AN AIR COMPRESSED CAR THAT WILL TRANSPORT WHAT IS LEFT OF MANKIND WITHOUT THE NEED FOR GASOLINE, OIL, FUEL CELLS, BATTERIES, PLUG IN HYBRIDS OR ANY CONTRIVED WESTERN SOLUTION. THEN ADD THIS INSANITY TO THE EQUATION–, FORD, GM AND CHRYSLER GO BEGGING THE FOREIGN OWNED FEDERAL RESERVE BANK OUR GOVERNMENT HAS SUBCONTRACTED TO REGULATE OUR CURRENCY, FOR $50 BILLION DOLLARS TO RETOOL AN ANCIENT 100 YEAR OLD INTERNAL COMBUSTION ENGINE IN ORDER TO AVOID TOTAL INSOLVENCY. THE AMERICAN OIL SLAVES, NOW FORCED TO PAY FOR THIS BAILOUT AND HUGE FUEL BILLS, ALSO WATCH AS THE CRIMINALS IN WASHINGTON SQUANDER WHAT REMAINS OF OUR TREASURY ON USELESSLY COLLECTING ROCKS FROM MARS AND THE MOON, WHILE DECEITFULLY RETARDING ANY NATIONAL EFFORT TO FUND MASSIVE ENERGY AND TRANSPORTATION TECHNOLOGY LEAPS FOR ANOTHER FULL CENTURY TO KEEP IN PLACE THE LARGEST, MOST CORRUPT CASH FLOW DEMON THIS WORLD WILL EVER KNOW. THE GREATEST EFFORT TO FREE THE AMERICAN PEOPLE FROM THIS TYRANNY OF THE STATUS QUO, WOULD BE AN ALL OUT EFFORT TO REPORT ON THESE FACTS AS THEY NOW THREATEN OUR VERY LIVES.
    WE HAVE THE SOLUTIONS, THE PATENTS AND THE KNOW HOW, WE HAVE HAD THEM FOR YEARS.
    THE ENTREPRENEUR WILL HAVE TO FIRST, KILL THIS BEAST IN ORDER TO SAVE OUR NATION FROM THIS MADNESS, AND MAKE SURE WE STILL HAVE A COUNTRY REMAINING, TO DRIVE AROUND IN.

  8. Martin,

    I’m interested to know how your entreprenuer in Sweden would respond to the comments left by Paul Leo Faso. How does one leap the global hurdles of support for oil by governments and businesses pandering (GM)? Does he attack it or ignore it and simply make something better that people will want?

  9. Martin Lindeskog

    Jakzon:

    I will not use my valuable time to respond to Paul Leo Faso’s rambling. First of all, he has to learn how to use the keyboard and turn off the caps lock function.

    My business contact has to answer for himself, but I let the market decide. It is all about supply and demand. The GM and other car companies will come up with alternatives when they see it is profitable to start. Here is Sweden, Volvo Cars company has a tough time and they have to come up with new car models, and increase sales, otherwise the company has to cut down on the amount of employees.

    Here is an interesting person, who is an old oil billionaire who has started wind wind power in Texas: http://www.pajamasmedia.com/instapundit/archives2/023645.php

  10. I have to agree with Vlad here. I’m all about new fuel alternatives but these cars are not only unappealing to me, they also seem incredibly unsafe. I can’t imagine what a broadside collision in one of these would result in. Even if everyone drove one of these, I still think there would be severe injuries suffered in the event of a collision.

    My second concern is towing power. Not only are you limited by battery life, but the power is just not there. I don’t know about the rest of the world, but here in the U.S. there are many who need towing capabilities to earn their living. Farmers who need to transport livestock, machinery and equipment, contractors hauling equipment, people who earn a living through the racing industry, people who earn their living as vendors at craft shows and flea markets . . . there are many who must have towing capabilities in order to survive. It doesn’t seem as if anyone in the alternative fuel industry is thinking along these terms.

    I think the entrepreneur that will win is the one who sees the big picture and can look 30 years into the future. One that will fullfill the needs of safety, power, towing and hauling capabilities – and one the recognizes the need for space within the vehicle combined with an appealing look.

  11. I agree that I think to appeal to a mass market you need to offer a product that is not only functional but appealing. There has got to be a way where they can make an energy efficient car that doesn’t look like a box with wheels. There is no way that these square cars will appeal to the majority of the US population. We are a nation of consumers who base judgements on looks alone.

  12. FOR THOSE STILL ASLEEP;

    ”COLLAPSE OF WESTERN CAPITALISTIC CIVILIZATION”
    http://www.marketoracle.co.uk/Article6259.htlm

    ”AMERICANS ARE ENERGY IGNORANT”
    http://www.rense.com/general83/dtfe.htm

  13. Maybe here is a good example where the focus should be on: “what makes sense locally.” To imagine playing the “David vs Goliath” game with GM and/or fighting to establish a new global or national infrastructure seems wildly unproductive.
    Just as dwellings should be designed and built with local climate/economic considerations, transportation should be designed and built to solve local needs. We already have oil-fueled vehicles to serve as trans-local vehicles.
    If one of the resulting designs makes sense to other localities, economies of scale can be realized by some remarkable entrepreneur(s).

  14. I think we just need to be patient. With time, these car companies will develop more attractive and functional vehicles that are fuel efficient. My job requires me to have a truck to tote tools to job sites. I can only hope that in the future a company will come up with a way to still provide vehicles for hauling and towing while being fuel efficient. Time will tell….

  15. Using electricity to power automobiles is nothing new. But the same problem that short-circuited electric cars at the dawn of the 20th century remains virtually unchanged, and unresolved some 100 years later – better batteries.

    Budding entrepreneurs would be best advised to direct their efforts at solving the age-old problem of building a better battery, and toward systems that optimize battery performance, rather than focusing their limited resources on producing an electric car. The world’s automakers have already figured out how to do that on a scale that makes it next to impossible to successfully compete against them; but build a better battery? They too, will come knocking at your door!

    The Chevrolet Volt, the plug-in hybrid concept moving quickly from the drawing board to the production line at General Motors is likely the groundbreaking design needed to move electrically powered cars into the mainstream. Simply put, until we get vastly improved batteries (if ever) we simply can’t rely on them as the sole source of power for a vehicle. However, using an on-board internal combustion engine to generate electricity that can in turn recharge a run-down battery without interrupting vehicle drivability – or the need for very long extension cord, field replaceable batteries, etc. – makes for a compelling value proposition.

    Perhaps in a much smaller geographic and less populous area, an all-electric car will work. Thus, electric car proponents are carefully watching and rooting for the ambitious plans to do just that, in Israel, by entrepreneur Shai Agassi.

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