Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

What could be the rationale for establishing a fast-charging

standard through a consortia or a standardization
organization in cooperation with other companies?
First and foremost, one big advantage for companies in adhering to standards is the
fact that it elicits the feeling of safety, reliability and environmental care in the
customer who is willing to buy the product. By knowing that a product fulfills certain
standards to which other companies also adhere to, the user perceives the product to
be more secure. Thus sales can increase. Safety- and environmental Standards
typically belong to the category of regulatory Standards which are determined by
regulatory agencies. The goal is to guarantee uniformity in processes which are not
controlled by market forces (Allen and Sriram, 2000).
Secondly, a further important reason why to follow standards is the interoperability
among systems. The Association Franaise de Normalisation (AFNOR) revealed that
this was one of the main economic benefits of standardization in France (Fiona Stokes;
Hugh Dixon et al. 2011: p. 14) In this case, companies agreed on following certain
standards when producing different products. Thus, it enables different devices that
use the same physical entity or data to smoothly interact which each other (Allen and
Sriram, 2000). Regarding the market of electric vehicles interoperability in the case of
Tesla could help the company to attract new customers whose cars do not support this
technology so far. Furthermore, interoperability lowers the costs as it is not necessary
to e.g. design different fast charging stations for different cars as all electric vehicles
could use the same station. This also is also both beneficial to both the producer and
the customer. The producer can demonstrate that they work together with other
manufacturers and on the other hand it gives the consumer a feeling of safety as the
product conforms to a standard (Fiona Stokes; Hugh Dixon et al. 2011: p. 14).
Standards open up market access. For example, when a company invents a new
technology, it makes it accessible for other corporations by standardizing it.
Furthermore it also provides economies of scale. By reducing variety, standards can
diminish the production costs per unit (Fiona Stokes and Hugh Dixon et al. 2011: p. 14).
For instance, corporate design, products and services of Starbucks are very similar in
the stores all over the world. This standardization of their stores setting helps the
company to reduce its costs in the end as e.g. they do not have to spend time and
money on creating a very different store design. Besides, they reduce production costs
as they can produce a high quantity of the products and sell it in different stores.
As technology develops in a relatively new industry like electric vehicles, standards are
required to ensure performance, conformity, and safety of new products in a new
industry (Allen and Sriram, 2000). In the literature, 4 broad types of standards are
described: metric (or fundamental), process oriented, performance-based, and
interoperability. The metric standards an example of a measurement standard and is
very helpful to the consumer for comparison means. Process-oriented standards are
about creating a methodology so that processes can be performed in a consistent and
repetitive manor. Performance based standards where we measure the performance of
a product after it is complete and measure the experience. Lastly, interoperability
standards refer to systems-based concepts, with the goal of ensuring smooth operation
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Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

between systems that are interconnected (Allen and Sriram, 2000). It is important to
consider that standards are not one, unified idea, but different ways of achieving
synonymity. Not only are there varying types of standards, but culture and geography
are influential to the way standards are approached as well. For example, Europe
approaches standardization in a unified, centralized plan and they are government
funded, whereas in the United States, there is no unified plan and they are
decentralized as well as privately funded. This is a significant key to understanding
standardization and making a valid case for it. Indeed, we must consider
standardization contextually- meaning a strong consideration for the industry in
question, as well as the geographic space we are considering. In trying to decide
whether or not standardization is an appropriate strategy, the following case example
demonstrates that standards effectively promote economic growth and knowledge
diffusion in an industry, subsequently promoting innovation while leaving room for
competitive advantage for industry players. We argue that fundamental and
performance-based standardization will benefit the whole industry of fast-charging EV
stations.
In the USA for example, there currently exist three different standards when it comes
to charging your electric vehicle: the CHAdeMO quick charge standard, established by
Toyota, Nissan and Mitsubishi in 2010, the Combined Charging System (CCS) standard
introduced in late 2011 and Teslas own DC quick charge (DCQC) standard. In the
United States at the moment there are 2.200 high speed charges whereas most of
them (1530) support the CHAdeMO standard, 387 stations use the Combines Charging
System standard and the minority (253) supports the DC quick charge standard of
Tesla.
As opposed to the United States, in Japan for example there are more than 6,000
DCQCs although the country is less than five percent the size of the USA. There is one
station available all 245 square miles in contrast to a 2,235 square mile concentration
in the States. In Japan nearly every quick charge station supports the CHAdeMO
standard and all of the DCQCs are compatible with most of the electric cars in Japan.
As one quick charge station is very expensive itself yet it would cost billions just to
cover California with the same concentration of quick chargers as in Japan.
Additionally, the costs of providing all three standards in each station is not included
yet. The concept of using one standard for nearly all electric vehicles like they did in
Japan is much more cost efficient, this is a big advantage (McDonald 2016).
Standards are successful if they spur economic growth and knowledge diffusion in the
industry. Specifically for this context, knowledge diffusion refers largely to technical
knowledge (Jungmittag and Mangelsdorf, 2011). Technical knowledge is critical
industry know-how when innovating in the electric vehicle industry. Consequently,
standards are an excellent indicator of knowledge diffusion in and industry (Jungmittag
and Mangelsdorf, 2011). This is because standards are not normally subject to
intellectual property rights, and so any company can obtain them from a low price and
cover the cost of adhering to the standardization process in question. Therefore, the
industry of fast-charging EV stations can have a low price benefit of standardizing
earlier on, rather than 5 years of a competitive approach and having to bear a massive
cost later on. The risk of assuming that the industry will not standardize in years to
come is an opportunity cost that managers must be willing to potentially incur. Rather
than take that risk, the industry would benefit from standardizing now, rather than
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Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

experiencing the many difficulties associated with intellectual property rights and
inevitably high cost of standardizing later on.
Further, standards are documents developed by industry experts in consensus with
various committees, all of whom bring current and relevant technological knowledge
from their firms (Jungmittag and Mangelsdorf, 2011). These documents are developed
over a thorough and comprehensive consultation process, where the expertise
available makes the agreed-upon standard highly beneficial to industry players and are
an asset overall to the continued growth of the industry as a whole. Internal knowledge
from industry players is thus supplemented by scientific knowledge and research to
deliver the most efficient and effective methodology possible (Jungmittag and
Mangelsdorf, 2011). In the case of a new and innovative industry such as electric
vehicles, the entire industry benefits when firms are able to innovate and create on a
unanimous platform- one that is created only by the use of standards.
In a regression analysis carried out by Jungmittag and Mangelsdorf, a measure of
elasticity in capital and labor is measured relative to technical process in the country of
Germany. The positive coefficient in the analysis demonstrates that patents, license
expenditure, and standards have had a positive impact on economic growth. The larger
the standards collection is, the greater the effect of diffusion technological knowledge
cross industries and then ultimately, the greater the overall German economic growth
was experienced. Past studies on the German economy have demonstrated a 1%
growth of the Gross National Product (GNP), but the study in question demonstrates a
stabilized growth of 0.7%-0.8% of Gross Domestic Product (GDP) in Germany,
indicating a clear stabilized economic growth pattern over time. Specifically, between
the years of 2002-2006, the total economic benefit of standardization in German
manufacturing resulted in approximately 16.77 billion Euros per year, as demonstrated
in figure 1. Thus, the empirical data by Jungmittag and Mangelsdorf, and many others
who have carried out similar studies, demonstrate the firm finding that standardization
has a significant positive impact on economic growth, a very important consideration
for firms in a growing industry like fast-charging EV stations.

Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

Figure 1: Contribution of Standards to the German Economic Growth (billions of Euros.)

Source: Research conclusions by Jungmittag and Mangelsdorf in 2011.
In adhering to standardization among all companies in the EV industry, we argue that a
symbiotic and mutually beneficial relationship can be achieved for industry players. By
considering the aforementioned benefits of standardization, as well as the case
analysis above presenting clear economic benefits for all, we recommend
standardization as the best strategy going forward for the electric vehicle industry.

What could be the rationale for introducing, controlling and

operating your own fast-charging technology?
Even though the electric vehicle history starts at the beginning of the 19 th century and
has a strong growth around 1870 with the discovery of rechargeable batteries
(Guarnieri, 2013), in this paper, we analyze the EV industry starting with the late
2000s, when Tesla Roadster was announced and is considered to be the first serial
production electric car, using a lithium-ion battery and which can drive about 320 km
on a single charge. That model was considered to be a game changer in the industry
and made other automotive companies start developing electric vehicles (Shahan,
2015).
We can state that the industry as we know it today is in its incipient phase and
respectively, so is the fast-charging technology which is strongly interconnected with
the EV development. To take a more in depth look, fast-charging stations are only 9%
of all stations (Anon., 2016) with some players just recently entering the market, as
Combined Charging System (CCS) did in 2013 (McDonald, 2016). Not to mention, that
the EV are just 0.1% of the global car market (Randall, 2016) and there is an enormous
space to grow.
Until today, no dominant designs or standards were established. One of the main
characteristics of dominant design is its durability or persistence of its architecture
(Gallagher, 2007), which have not been spotted in the fast-charging technology, as
there are multiple players who try to push their different products to the market and
they dont give any signs of signing a truce or accepting competitors standards. On the
other hand, neither the government, neither international organizations have not yet
proposed a global or regional standard, to highlight the importance of one of the
existing networks (Gallagher, 2007). Though we can see local success cases of
Japanese government trying to intervene in the game and establishing private-public
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Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

partnerships, which led to CHAdeMO stations growth four times in less than two years
(McDonald, 2016), we dont see a general directive from EU or USA, but again, only
small, trial moves that promote all charging systems, as for example EU sponsoring
Denmark to install charging stations for all type of vehicles (Anon., 2015).
As the EV industry is only forming and there arent any signs of a dominant leader on
the market, the timing is favorable for entering the game with your own fast-charging
technology. As Gallagher has stated, in order to introduce a dominant design, a
company doesnt have to be necessary the first mover (Gallagher, 2007). Also we have
numerous cases in history, when the first mover advantage wasnt decisive, as it was
in the standards war between RCA and CBS in color television (Shapiro & Varian, 1999).
The financial benefits of establishing, controlling and operating your own network, may
be exponential higher in case if you introduce a wining technology that afterwards will
be adapted by the whole network. The future of the electric cars is extremely
optimistic, as Li-ion batteries are falling in cost by 8% annually (Nykvist & Mns, 2015)
and by 2040 EV may cost about 22000$ (in todays rate) and will have a share of 35%
of all car sales, figure 2 (Randall, 2016).

Fig. 2 Sales of EV cars by 2040

Standards can belong to a firm that developed it and therefore owns it (Gallagher,
2007), examples can be Matsushitas VHS or the compact disc created by Sony and
Philips. Introducing a new technology of fast charging systems for electrical vehicles, at
this point in time may be an extremely successful strategic movement, as the
company will reap generous financial benefits in time, by selling their patents to
competitors, in case the technology will be adapted by the industry as a standard.
Another way of exploring revenue streams for a company that launched its own
charging systems may be of launching and marketing complementary products.
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Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

Probably one of the most historic cases is that of Gillette's razor and blade (Picker,
2010), which successfully operated a network of two complementary products. EV
producing companies as Tesla are already using this opportunity by selling products
mobile connectors, adapters or batteries (Anon., 2016). This will not only bring a new
financial income, but as well help the company win the standard war, (Shapiro &
Varian, 1999)as it will motivate you more to fight for establishment of your technology,
as the standard on the market.
More than the financial aspects and benefits of succeeding in implanting, controlling
and operation its own fast-charging technology, it is an outstanding opportunity for a
company to build a customer experience around it and take a serious advantage over
its competitors.
Adam Richardson defines the customer experience as the sum-totality of how
customers engage with your company and brand, not just in a snapshot in time, but
throughout the entire arc of being a customer (Richardson, 2010). In the carmanufacturing industry, customer experience is especially relevant since cars is one of
the largest investment a customer will make in its lifetime and this investment has to
be renewed every ten years in average (Deloitte & Adobe, 2015). Thus, a customer
buying a Mercedes, or a traditional car, will engage in a traditional five step journey
that includes (Deloitte & Adobe, 2015):

1. Information: what the potential customer reads and hears about the car
he thinks buying through advertising, word of mouths etc.
2. Contact: retailer visit and actual test of the car
3. Purchase: negotiation and transaction
4. Handover: waiting period and update regarding the status of the car
5. After-sale, including the maintenance of the car, repair service and
events.
All of these steps have touchpoints where the company has a direct contact with the
customer, hence the occasion to build and enhance its customer experience. Having
its own fast-charging technology for a car manufacturing company is an opportunity to
have regular touchpoints with its customers. Indeed, while this was impossible when
people refueled their cars since car manufacturers do not own the gas station, this
could be possible when people charge their cars if the car manufacturer implements its
own technology. Since these interactions will happen every few days or weekly
(depending on the autonomy and consumption behavior of the customers), it provides
the company an outstanding opportunity to create a community and a way of life
around its cars owners (Manning, 2012). By making this mandatory and often
unpleasant visit a personalized and enhanced experience, a car manufacturer with its
own fast-charging technology will have a competitive advantage on its competitors.
Moreover, through this experience the company has the opportunity to collect data.
With their own fast-charging centers, car manufacturer will be able to collect many
data about their customers, as how often they charge, where they charge and how
long time they spent charging, giving them the ability to better understand them and
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Assignment 2, BUSN11 Strategic Management

Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

prevent problems (Deloitte, 2015). With a standardized system, since every car from
every brand would be able to be charged in these place, the data analysis would
become non-possible and irrelevant.
Data and its related fields have become a strategic field for companies. 70% of the
Fortune 1000 companies declared Big Data as a strategic field for their companies,
up from 21% in 2012 and 27% of them will invest more than $50 million in 2017 (Bean,
2016). Operating its own fast-charging technology allows a car manufacturer to collect
new data about their customers on the use they make of their cars. By knowing where
their customers charge their cars, these companies will be able to visualize the rides of
their customers, their purpose and establish patterns that can be useful in order to
implement new fast-charging terminals or to target advertisement in their charging
centers. Indeed, we can imagine that the car manufacturer will sell space on
advertising hoarding in the charging centers. If the company knows what kind of
customer frequents one of its charging center, it will be able to sell more accurately
space on its billboards, thus increasing its profits.
Nevertheless, car manufacturers could use these data for something greater than a
better targeting of customers for advertising and use it to improve its customer
experience (Niraj, 2016). Indeed, having cars connected to its terminals, the company
will be able to extract data about the car and the way its customers use it. The data
analysis could lead the managers of the company to make recommendations to their
customers on the day, hour and place they should choose to charge their car, thus
control their flux and avoid over-crowded fast-charging center that could harm the user
experience. Tesla is already using GPS coordinates to optimize their customers
journeys and partners with restaurants or shopping center to install its charging
centers (Tesla, 2016). Such a use of data would complete this in order to enhance the
user experience. Finally, data analysis could help companies to prevent problems such
as a bad anticipation of the evolution of fast-charging technologies. Since a dominant
position in a generation of a given technology does not guarantee the leadership in the
next generation, the analysis of consumers insights and market data would help a
company to anticipate new threats (Shapiro & Varian, 1999) (Wessel, 2016).

References
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Anon., 2015. TEN-T : Fast charge of electric vehicles in Denmark to become easier with
EU support. [Online]
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Anon., 2016. Charge Map. [Online]
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Anon., 2016. Tesla Gear. [Online]
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13.09.16

Bean, R., 2016. Just Using Big Data Isnt Enough Anymore. Harvard Business Review.
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Elizabeth Tice, Guillaume Denis, Alex Koziol, Daniel Bilici

13.09.16

http://www.etsi.org/standards/why-we-need-standards
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