Toyota kicked off the green car hybrid movement when it first launched the Prius, the first mass-produced hybrid vehicle, in Japan in 1997.
KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, with Talking Management for The Globe and Mail. Today I am delighted to speak to Andrew Shipilov from INSEAD [business school], just outside of Paris.
Why are portfolios more important these days in the world of alliances?
ANDREW SHIPILOV – If you think about the concept of portfolios – companies are familiar with that when I talk about a portfolio of products, for example, or a portfolio of markets. The idea of an alliance portfolio is similar. You have several alliances, and you extract competitive advantage by finding value across these alliances. A useful analogy could be thinking of alliances as roads, roads connecting a medieval town – think of London, or think of Paris, or think of Moscow – and these towns became prominent because they were at the intersection of multiple roads connecting them to other well-connected towns. Roads are the channels to which information, people travel, resources flow between the towns, and the town which is in the central position can get better information, better resources and better people. The same applies to companies.
KARL MOORE – Andrew, can you think of some companies that are doing this effectively?
ANDREW SHIPILOV – Think of Toyota, for example. So, Toyota is a company which has many alliances, some of them help Toyota reduce their costs, others help Toyota to increase the differentiation.
So, for example, of course Toyota has alliances with companies in China to make cars cheaper and faster, but it also has alliances with companies like Intel, and has alliances with companies like Google. What these alliances allow, for example think of Intel, so what those alliances allow Toyota to do is that they allow them to embed controllers throughout the entire car and the alliance with Google teaches Toyota how to work with the social media world. So in the future what Toyota could hypothetically do is to create the concept of a Social Prius.
Now, this is just my supposition, but if you look at their alliance network they can do that. So the Social Prius would be the car that has a Tesla battery – by the way Toyota has an alliance with Tesla – that car would have multiple controllers on different parts of it so you can actually get realtime information as to how well is the person driving the car – how fast the person accelerates, how hard the person breaks, how fast the person steers, and that information could be fed to some of your friends.
Now, which kind of friends would care about that? Well, the friends who would probably care about that is the insurance company, which could hypothetically create a very personalized insurance policy for someone who is driving the Social Prius. That would be the opportunity for Toyota, on the one hand, to lower the costs by collaborating with partners for the alliance just on the cost reduction, and other opportunities to collaborate with partners to increase the willingness to pay for the customers for the products.