The rise of the Chinese EV manufacturers has been astounding, with Chinese EV manufacturers responsible for 70% of global EV production in 2024. Many of the companies leading this charge did not start as car manufacturers, including the largest producer of EVs in the world today, BYD, established in 1995 as a battery manufacturing company, and Geely Auto, founded as a refrigerator parts company in 1986.
In 2024, Xiaomi, one of the biggest smartphone companies in the world, also entered the market, launching its first EV, the SU7. Ford CEO Jim Farley even admitted to driving one, saying that he has been completely humbled by China’s EV progress during his many visits to the country over the last couple of years.
Traditional automakers like Ford and Mercedes-Benz, which have been in the industry for more than a century, have been challenged by these much less established businesses, not because they overlooked the EV opportunity but because they didn’t act quickly enough and didn’t realize that success in traditional automobiles didn’t guarantee success in EVs. Automakers’ historic capabilities (gearboxes, engines, mechanical systems) don’t transfer easily to the EV future, whereas a company like Xiaomi, which had never made combustion engine cars, already had expertise in batteries, software development, and consumer electronics. It only had to build a few more capabilities to enter the EV market.
The challenge is knowing when and how to pivot successfully towards future capabilities without killing the core business. Success in the EV market for a company like Xiaomi, which took just seven months to deliver 100,000 units of its SU7 electric sedan, has come not from any legacy automotive expertise but from strong adjacent capabilities and a fresh go-to-market approach, which sees it market its vehicles in a similar way to the way it markets its smartphones to its loyal customer base.
You cannot predict the future, but you can prepare for it.Howard Yu - IMD Future Readiness Center
As my colleague, Howard Yu, who leads the IMD Future Readiness Center, which produces the Future Readiness Indicator, often says, “you cannot predict the future, but you can prepare for it”. While many CEOs are adept at focusing on their core business, transforming the business for future growth usually proves to be more of a challenge. Our research finds that only 12 to 15% of executives are effective at managing both simultaneously. There are many reasons for this. Many leaders take comfort in legacy success; it is hard to disrupt what is still profitable. It also comes down to the uncertainty around the return on investment: while core investments have clear payoffs, future investments don’t. Many leaders also face cultural resistance, an attitude of, “We’ve always done it this way.” This is compounded by the tendency to underestimate the pace at which innovative technologies will disrupt existing business models, as was the case with electric vehicles, and to underestimate the potential of competitors emerging from other industries, as traditional automakers have experienced with the rise of BYD, Geely Auto and Xiaomi.
“You need to find the strongest competitive advantage your current model can sustain in a changing market.”
Being future-ready isn’t about building the perfect strategy; it is about embracing options, preparing for multiple scenarios, and making intentional choices amid uncertainty. Every organization must build future capabilities before they are urgently needed.
You need to find the strongest competitive advantage your current model can sustain in a changing market. To do this, look beyond cost-cutting and decide what you can still do better than your rivals, what you should give up, and ask why your customers come to you in the first place.
Embrace the possibilities of a new market to conceive new competitive advantages. This is not about exploiting current advantages but about asking what unmet needs customers have in today’s environment and then investing in a few future capabilities to meet these needs. To establish what these are, learn from industries and companies that are not yours. If you are a bank, don’t look at other banks because while it may help you bring some efficiencies to your core business, it will not help you transform.
As the Chinese EV manufacturers have taught us, disruption doesn’t always come from within your industry; monitor adjacent sectors and remain flexible. Expose your leadership team to global innovations by looking at companies across geographies and sectors. Keep an eye on startups, not necessarily as acquisition targets, but as a radar for emerging technologies and models.
Whether you are Ford, BMW, Tesla, or even BYD, the need to balance core performance and future growth never ends.
Whether you are Ford, BMW, Tesla, or even BYD, the need to balance core performance and future growth never ends. Tesla was the disruptor – now it must defend itself from faster and possibly more agile challengers like BYD. It is important to set a long-term direction (North Star), but it is equally important to remain flexible in terms of how you get there.
Our ongoing research on what it takes to be future-ready shows that increased unpredictability and rapidly changing conditions demand that executives break through the tyranny of daily trade-offs and build deeper capabilities that address a range of scenarios. Rather than focus solely on products and markets, leaders must deliberately create multiple viable paths forward – what is known as strategic optionality. This will position their company to rapidly adjust to unforeseen market shifts and scale new initiatives quickly, enabling them to thrive in the future.
Preparing for the future takes a leader who is prepared to shift their thinking from optimizing for today to building for tomorrow; from focusing on efficiency and predictability to focusing on optionality and adaptability; from relying purely on legacy strengths to developing new capabilities; from planning around certainty to planning for multiple scenarios. It is this kind of leadership that will ensure that an organization does not just win over one or two quarters but thrives over decades.
Ester Baiget, CEO of Novonesis, discusses how the Danish biosolutions powerhouse leverages modern technology and its 'library of strengths' to transform food production and washing operations....
Our world needs more scientific innovation, but founding new ventures can be challenging for deep tech scientists. Insights shared by those who have made this transition reveal the key lessons for aspiring...
The Swiss-based energy group is plotting a course toward a renewables-focused future, without abandoning its traditional customer base. Here we explore five key principles that have underpinned the company’s success....
Audio available
Despite making the world’s finest pianos, Steinway & Sons has struggled financially. Howard Yu explains what they got wrong and what others like Yamaha, BYD, and Nvidia are getting right. ...
Explore first person business intelligence from top minds curated for a global executive audience