{"id":10691,"date":"2016-11-04T01:28:18","date_gmt":"2016-11-04T05:28:18","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/can-volvo-out-innovate-the-competition-again\/"},"modified":"2016-11-04T01:33:41","modified_gmt":"2016-11-04T05:33:41","slug":"can-volvo-out-innovate-the-competition-again","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/can-volvo-out-innovate-the-competition-again\/","title":{"rendered":"Can Volvo Out-Innovate the Competition Again?"},"content":{"rendered":"

\"concept-coupe\"<\/a><\/em><\/p>\n

Image Credit: Volvo Car Group, \u201cConcept Coupe,\u201d <\/em>http:\/\/www.volvocars.com\/us\/cars\/concept-cars\/concept-coupe#, accessed November 2016.<\/em><\/p>\n

In 2015, H\u00e5kan Samuelsson, the President and Chief Executive Officer of Volvo Cars, made a commitment that by 2025, Volvo will have delivered one million electrified cars to the global market and achieved climate neutral operations.\u00a0 \u201cWe are placing electrification at the centre of our product and sustainability strategy\u201d [1].\u00a0 This was a strong proclamation from a company that had been on the brink of bankruptcy only a few years before.<\/p>\n

Early Innovation <\/strong><\/p>\n

Volvo started from humble beginnings, first making cars in 1927.\u00a0 The company grew modestly by focusing on manufacturing quality vehicles for its loyal customers.\u00a0 It wasn\u2019t until 1959, however, that the company gained worldwide recognition when Volvo engineer Nils Bohlin introduced the three-point safety belt, a revolutionary innovation.\u00a0 The three-point safety belt has since gone on to save over one million lives, a result of Volvo waiving its patent rights so that the general population could benefit from its invention [2].\u00a0 Volvo went on to be the first to introduce numerous other safety innovations, including rearward-facing child safety seats (1972), side-impact airbags (1994), and an oxygen-sensing probe that reduced harmful exhaust emissions by 90% (1976) [3].<\/p>\n

Stymied by Detroit<\/strong><\/p>\n

In 1999, Ford bought Volvo for $6.45 billion and was added to Ford\u2019s Premier Automotive Group (PAG), which included Jaguar, Aston Martin and Land Rover.\u00a0 Ford increased Volvo\u2019s range of vehicles by leveraging Ford chassis designs and parts.\u00a0 Volvo struggled under Ford\u2019s ownership, however, as the brand attracted little investment from its parent.\u00a0 When the global recession hit in 2008, Ford, who was already shedding non-core assets, decided to sell Volvo, whose losses were mounting, to Geely Holding Group, a Chinese automotive company.\u00a0 The deal closed in 2010 and was valued at $1.8 billion.<\/p>\n

With its acquisition of Volvo, Geely hoped to emulate Tata Motors\u2019 successful acquisitions of Jaguar and Land Rover, British brands that had regained their lost luster [4].\u00a0 As part of the deal, Geely invested $11 billion in Volvo, strategically deciding to keep Volvo\u2019s headquarters in Sweden and allowing management to operate autonomously.<\/p>\n

New Beginnings: A Shift in Strategy<\/strong><\/p>\n

\"concept-xc-coupe\"<\/a><\/strong><\/p>\n

Image Credit: Volvo Car Group, \u201cConcept XC Coupe,\u201d <\/em>http:\/\/www.volvocars.com\/us\/cars\/concept-cars\/concept-xc-coupe#, accessed November 2016.<\/em><\/p>\n

With a clean slate and a significant capital infusion, Volvo\u2019s management had the rare opportunity within the automotive manufacturing industry of being able to decide on a new path forward.\u00a0 As the company pondered its future, Volvo knew it operated in a highly regulated industry with a constantly increasing focus on emissions standards.\u00a0 In fact, the U.S. Environmental Protection Agency had recently adopted California’s emissions standards, which were the most stringent in the U.S., as the national standard [5].\u00a0 These EPA standards were to be established in two phases, the first that ran from 2012 to 2016 and the second from 2017 to 2025 [6].<\/p>\n

In conjunction with its analysis on emissions standards, Volvo additionally studied how humans interacted with their cars. \u00a0It concluded that most drivers rarely pushed their cars past 4,000 RPMs, and thus did not actually experience the peak performance of their powerful V6 or V8 engines.\u00a0 Drivers did, however, experience the peak gas consumption associated with these engines.\u00a0 Volvo therefore determined that the only path to take was to abandon V6 and V8 engines and only produce four-cylinder drivetrains that delivered better fuel efficiency and matched the driving behaviors of the population [7].<\/p>\n

Re-Innovating Again<\/strong><\/p>\n

\"drive-e\"<\/a><\/p>\n

Image Credit: Volvo Car Group, \u201cDrive-E,\u201d <\/em>http:\/\/www.volvocars.com\/us\/about\/our-innovations\/drive-e, accessed November 2016.<\/em><\/p>\n

With sights finally set on its new direction, and with money to spend, Volvo engineers designed and built a 2.0-liter four-cylinder engine with a turbocharger and supercharger called the T6 Drive-E.\u00a0 The engine delivered more power at lower revolutions, without the downside of turbo lag, producing 320 horsepower.\u00a0 The company also designed a hybrid model of the engine, which included an electric motor component that supplemented the gasoline engine, producing a combined 400 horsepower [8].<\/p>\n

In 2016, Volvo\u2019s T6 engine was named one of Wards Auto\u2019s 10 best engines. \u201cVolvo has created an engine that can match big naturally aspirated V6s in power and torque and also cream them in real-world fuel efficiency when powering big vehicles. The T6 promises to be a perfect fit for a lot of Volvos coming down the road and is proving out a new strategy for squeezing more performance and efficiency from smaller and smaller engines\u201d [9].<\/p>\n

The Future Path Towards Sustainability<\/strong><\/p>\n

Despite the resounding success of its new engines to date, Volvo is not resting on its laurels \u2013 it has set lofty sustainability goals for 2025.\u00a0 As Volvo works towards its ambitious goals, though, it needs to ensure that its sustainability initiative is introduced into its supply chain, as well.\u00a0 Can Volvo achieve its goals?\u00a0 It\u2019ll take some real innovation.\u00a0 Fortunately, Volvo has some experience in that.<\/p>\n

Word Count: 767 words<\/p>\n

 <\/p>\n

[1] Volvo Car Group, 2015 Sustainability Report, p. 5, http:\/\/www.volvocars.com\/intl\/about\/our-company\/sustainability, accessed November 2016.<\/p>\n

[2] Volvo Car Group, \u201cInnovations,\u201d http:\/\/www.volvocars.com\/us\/about\/our-company\/heritage\/innovations, access November 2016.<\/p>\n

[3] Ibid.<\/p>\n

[4] Vikas Bajaj, \u201cTata Motors Finds Success in Jaguar Land Rover,\u201d New York Times, August 30, 2012, http:\/\/www.nytimes.com\/2012\/08\/31\/business\/global\/tata-motors-finds-success-in-jaguar-land-rover.html, accessed November 2016.<\/p>\n

[5] U.S. Environmental Protection Agency, \u201cRegulations for Greenhouse Gas Emissions from Passenger Cars and Trucks,\u201d https:\/\/www.epa.gov\/regulations-emissions-vehicles-and-engines\/regulations-greenhouse-gas-emissions-passenger-cars-and, accessed November 2016.<\/p>\n

[6] Ibid.<\/p>\n

[7] Jordon Golson, \u201cVolvo Bets its Future on Small, Turbocharged Engines,\u201d Wired, October 20, 2014, https:\/\/www.wired.com\/2014\/10\/volvo-turbo-engine-concept\/, accessed November 2016.<\/p>\n

[8] Ibid.<\/p>\n

[9] Drew Winter, \u201c2016 Winner: Volvo XC90 T6 2.0L Turbo\/Super-4,\u201d WardsAuto, January 8, 2016, http:\/\/wardsauto.com\/10-best-engines\/2016-winner-volvo-xc90-t6-20l-turbosuper-4, accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

With a clean sheet and $11 billion, can Volvo innovate again?<\/p>\n","protected":false},"author":2433,"featured_media":10776,"comment_status":"open","ping_status":"closed","template":"","categories":[217,1093,1218,1626,1627,1226,14,1625],"class_list":["post-10691","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-auto","category-cars","category-climate-change","category-drive-e","category-electric","category-global-warming","category-sustainability","category-volvo"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nCan Volvo Out-Innovate the Competition Again? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/can-volvo-out-innovate-the-competition-again\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Can Volvo Out-Innovate the Competition Again? 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