Reflecting on Disruptive Forces: Lessons from Mobile Handsets to Automotive Innovation
October 2016
Today's automotive industry stands at the edge of a profound transformation, much like the mobile handset industry in 2007. The advancements by Google, Uber, and Tesla in autonomous vehicles echo the disruptive forces that reshaped mobile technology and dethroned giants like Nokia and BlackBerry. Their meteoric rise and subsequent decline serve as cautionary tales for industries facing rapid innovation.
In 2007, Nokia commanded nearly half the global mobile phone market, shipping 80 million devices, while BlackBerry dominated the niche corporate smartphone segment with its QWERTY keyboard and secure communication systems. Both companies, however, faltered as new challengers emerged. Apple’s iPhone and Google’s Android ushered in a new paradigm—not just in devices but in ecosystems. Nokia and BlackBerry, focused on incremental product improvements and proprietary systems, failed to anticipate this shift. This inability to adapt sealed their fate.
As we examine these changes, the parallels between the disruptions in the mobile industry and the current upheavals in the automotive sector become increasingly clear.
What Went Wrong in Mobile?
The Shift to Contract Manufacturing
The mobile industry’s shift from in-house to contract manufacturing was a game-changer. Before the iPhone, manufacturers competed on hardware design and production capabilities. Apple flipped the script, adopting a modular approach that relied on contract manufacturers like Foxconn. This freed Apple to focus on optimizing design, software integration, and marketing. The result? A dramatic lowering of entry barriers enabled new players like Xiaomi and Micromax to scale operations quickly.
The Rise of Platforms
Apple and Google didn’t just create devices—they built ecosystems. Apple’s App Store incentivized developers with favourable revenue splits, while Google’s Android platform, with its open-source philosophy, fostered rapid adoption through partnerships with manufacturers. By contrast, incumbents like Nokia and BlackBerry remained focused on hardware and isolated systems. As Nokia’s then-CEO Stephen Elop poignantly observed in his infamous Burning Platform memo: “Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem.”
This fundamental shift—from competing on devices to competing on platforms—was the death knell for companies that could not adapt.
What Does This Mean for Automotive?
The automotive industry today faces a similar crossroads. How has Tesla challenged legacy giants like Ford, BMW, and GM in such a short time? The answer lies in understanding the parallels to the mobile handset industry.
The Electric Drive Train Revolution
Just as the iPhone standardized manufacturing processes and components, Tesla disrupted the automotive sector by bypassing the internal combustion engine (ICE). Legacy automakers spent decades perfecting ICE technology, building complex supply chains and expertise that once served as formidable barriers to entry. Tesla’s electric drivetrain, however, reduced mechanical complexity and component count, rendering much of that expertise obsolete.
In the future, the design and production of batteries and electric drivetrains could follow the mobile industry’s trajectory—standardized and outsourced to contract manufacturers. Automakers, like phone makers before them, may shift their focus to software optimization and platform innovation.
Software Takes Center Stage
Historically, players like Microsoft and QNX supplied embedded software in cars. Tesla upended this model by developing its own firmware, abstracting hardware functions such as gearboxes and integrating advanced capabilities like autonomous driving. The trend mirrors how mobile platforms evolved, with Apple and Google transforming hardware-centric phones into software-driven ecosystems.
Within 5–7 years, we may see the emergence of automotive equivalents to iOS and Android. These platforms will control core vehicle functions and enable connected services, autonomous features, and app-based customizations. Like the smartphone, the car could become a vessel for a larger ecosystem.
The Platform Challenge
Automotive OEMs have traditionally operated within linear value chains, optimizing internal processes to deliver value downstream. This model worked well in a hardware-dominated era but struggles in a platform-driven world where value is aggregated from networks. Companies like Google, Amazon, and Apple—armed with expertise in platforms, software, and data—are poised to challenge automakers by redefining value creation.
While legacy automakers focus on refining manufacturing efficiencies, the tech giants are building ecosystems that could fundamentally reshape customer expectations and industry dynamics. The automotive giants now face the same existential challenge that once loomed over Nokia and BlackBerry.
Learning from the Past: Reflections for Automotive Leaders
The fate of Nokia and BlackBerry offers sobering lessons for automotive executives today:
Adapt or Perish: Just as incumbents in mobile failed to foresee the shift from hardware to platforms, automotive leaders must recognize the growing importance of software and ecosystems. Investing in in-house platforms and forming strategic partnerships will be crucial to survival.
Break Down Silos: The automotive sector has long relied on tightly controlled supply chains and proprietary systems. However, competing with tech giants requires a more open, collaborative approach. Aligning with external developers, suppliers, and partners can unlock innovation and scalability.
Embrace Disruption Early: Legacy companies often resist transformative changes, prioritizing short-term gains over long-term adaptation. Yet, as Nokia and BlackBerry discovered, delaying change can be catastrophic. This means accelerating investment in electric, autonomous, and connected vehicle technologies for automakers.
Redefine Competitive Advantage: The automaker of tomorrow may look less like Ford and more like Tesla—or even Apple. Success will hinge not on manufacturing prowess but on the ability to create seamless, integrated experiences powered by software and platforms.
A New Chapter in Automotive Innovation
The automotive industry is entering uncharted territory, where the lessons of the mobile handset revolution resonate with striking clarity. The transformation is no longer speculative; it is unfolding before our eyes. Tesla, Google, and Apple are not merely competitors—they represent a new paradigm.
As the prologue ends and the story unfolds, the challenge for traditional automakers is clear: adapt to a platform-driven future or risk becoming a footnote in the history of another disrupted industry. The clock is ticking, and the lessons from 2007 are more relevant than ever.