What will it take for major world powers to move toward environmentally friendly technology such as electric cars and clean coal?
Professor Robert A. Burgelman and Andrew S. Grove, a lecturer in management and former chairman of Intel, have been researching — and helping students research — energy independence for several years. Their fall 2009 Bass Seminar at Stanford GSB, "Strategic Thinking in Action — in Business and Beyond," examined how the United States and China make strategic decisions about adopting electric vehicle and clean coal technologies.
Among their conclusions:
- The United States will move toward electric car adoption in the next 5-to-10 years, but progress will be slow unless oil prices rise rapidly and stay high.
- The Chinese electric car market will remain small during this time, but the country will have big opportunities in battery manufacturing and exports.
- Similarly, it appears unlikely that either country will quickly adopt clean coal technology.
Hoping their work will influence policy makers, Grove sent a letter outlining the findings to U.S. Energy Secretary Steven Chu. In their fall 2007 seminar research, Burgelman, the Edmund W. Littlefield Professor of Management, and Grove had concluded that introducing electric cars from China would be unlikely to disrupt the U.S. auto industry.
They next challenged students to investigate how the United States could retrofit enough low fuel efficiency vehicles (mostly SUV, pickups and vans) to give electric vehicles a foothold and addressed the issue of how to generate the needed power. Electric cars need electricity, Burgelman and Grove reasoned, and coal generation is a major source.
"Coal creates enormous pollution," Burgelman said, "so you must think about going to electric cars simultaneously with going to clean coal."
The students in the second-year MBA seminar broke into teams to study four topics: electric cars in the United States, electric cars in China, U.S. clean coal, and clean coal in China. Students studied how organization-level frameworks can be applied to national and transnational strategy making. For instance they considered whether the governments would simply promote bottom-up strategic initiatives undertaken by various interested groups or impose top-down policies.
For students, the seminar provided in-depth knowledge of a critical topic as well as an understanding of how to approach complex strategic issues. Jamie Perencevich, MBA '10, said the seminar gave him "the capacity to understand what's in the mind of strategic decision-makers," knowledge he hopes will serve him well when he goes to work for General Electric's Energy Financial Services group after graduation.
Burgelman and Grove "did a great job of mixing what was happening in the real world with frameworks that helped us structure and understand what's going on," said Michael Ovadia, class of 2010, who spent last summer as an intern at the U.S. Department of Energy and is working on an interdisciplinary PhD in environment and resources along with his MBA. In the future he plans to do advisory work in sustainable development. "The seminar gave me tools and frameworks and ways of thinking that I could apply to any complex issue."
When looking at American and Chinese strategy, students were asked to pay close attention to what the countries actually did rather than what they said. Key findings included in the paper:
- The United States needs to adopt electric cars to reduce its dependence on foreign oil and reduce carbon emissions. However, consumer demand needs to be stimulated. The government should increase demand for electric cars through tax credits, more stringent CAFÉ standards (Corporate Average Fuel Economy — the government standard for a manufacturer's fleet of cars) and continuing consumer incentives such as access to high-occupancy vehicle lanes.
- China is the leading manufacturer of Li-ion batteries and has an advantage as a low-cost manufacturing location. And its government is focused on boosting the competitiveness of its automotive industry. However, for widespread adoption of electric vehicles to occur in China, much infrastructure needs to be put in place.
- Strongly pursuing carbon capture and storage, to reduce the carbon dioxide emissions from coal, could demonstrate the U.S.' commitment to acting on climate change. But the technology needs to be proven with full-scale demonstration projects.
- China has focused on energy initiatives that provide immediate economic benefits and maintain social stability, making it unlikely that the country will pursue carbon capture and storage technologies unless Western countries fund the project.
The researchers predicted that the United States will focus on adopting electric cars in the next decade, while China's biggest opportunity will be in battery manufacture and exports. Neither country is expected to quickly adopt clean coal technology. The slow pace of large-scale global change, the researchers said, is not surprising.
Organizational-level conceptual frameworks tend to break down at the transnational level because no one nation is in control. For next year, Burgelman and Grove plan a different seminar, on the future of Silicon Valley. But there will be a connection to this year's work: One of the industries that students will examine will be the automotive industry.