Breakthrough Innovations in Internal Combustion Engines

Introduced for the 2018 model year, Nissan/Infiniti has introduced a revolutionary new engine innovation that, for the first time, allows an engine to vary its compression ratio. For background, engines traditionally have either a high compression ratio, for efficiency, or a low compression ratio, tuned for power. However, Nissan has been working for more than 20 years on an engine that can do both- the efficiency of a high compression ratio with the performance of a low compression ratio. They have accomplished an astonishing 10% gain in efficiency compared to similar engines with the same performance, with half the cost of a hybrid system that would give similar gains in efficiency.

The question remains, though, was this a smart innovation to pursue? Companies are aggressively pursuing electrification, Nissan included. This would have been a breakthrough if it were introduced 10 or 15 years ago, but currently the breakthroughs in efficiency come from hybridization and electrification, from all segments of cars, from supercars, to minivans, to hatchbacks. While this could prolong the inevitable disappearance of the internal combustion engine, will it contribute enough to make up for its enormous R&D costs? At over 20 years and over 100 prototypes, Nissan made a long and expensive commitment to this technology. Does it even have 20 years of use in it? Furthermore, could they utilize this technology in new applications, such as truck engines, generators, etc.? Licensing could be a lucrative task if they could make large improvements in industrial engines that have traditional had poor efficiencies. Only time will tell, but this is definitely an innovation to follow closely.

–Ryan Gavin

Another Corporate Restructure or a “Cool, not Cold” Business Model?

The Chinese collective Haier, a multinational consumer electronics and home appliances headquartered in Qingdao Shandong Province, had been led by CEO Zhang Ruimin over its turnaround since the 1980’s. Its first wave of expansion was in Southeast Asia with countries like Indonesia, Philippines, Malaysia, etc. in the late 1990’s. The collective, a state-owned enterprise that resembles a consumer conglomerate, bought off GE Appliance in early 2016. With a foothold in the US, it seeks to inject innovation to spur growth in the company. It has also expanded and operates in the Middle East with countries like Pakistan, Jordan, etc., making Haier an international player. Ruimin’s next strategy is breaking up Haier to spur stagnating growth in the company.

Two factors play into this- Bill Fischer and Denis Simon of HBR state that although China is the second largest investor in R&D, their companies are not pushing out innovative technologies, so they usually doesn’t introduce disruptive business models. This comes from state policy of appropriating foreign IP coupled with lax IP enforcement. Second, Dominic Barton of Mckinsey has finally shown proof that meeting short-term expectations at the expense of neglecting long term investments in breakthroughs is like shooting yourself in the foot. He’s shown that, in a state of normalization (i.e. not an economic recession), corporations who follow a long-term strategy perform better against their short-term strategy counterparts. Many CEOs and business leaders (e.g. BlackRock CEO Larry Fink) have been rallying against short-termism for good reason; Gary Hamel and Michele Zanini show that the start-up culture hasn’t been giving America high economic growth like it used to as more wealth and power is appropriated to larger corporations. These CEOs have been sending out calls to action to these large corporations to embrace long-termism, and maybe Ruimin’s ambitious experiments will give a sustainable model to support innovation to inject a new growth mentality in Haier.

Haier has entered a new phase of its strategy, Networking Strategy. Essentially the strategy states that Haier will be producing products that meets the personalized demands of the consumers. They employ tactics such gauging customer feedback in social media forums. Ruimin moves further by adopting Open Innovation that has these tenants; user personalization, product innovation acceleration, and industry disruption. Its emphasis is “The world is our R&D center” through a focus on the customer.  Only time will tell whether he’s successful, but Ruimin’s entrepreneurial vigor has already produced a success, the Tianzun or Heaven in Mandarin which reflects this approach and its core principle of “customer service leadership.” Even the slogan comes from its customers that want to feel “Cool, not Cold.”

The major component of the restructure is splitting off existing units into smaller ZZJYT (zi zhu jing ying ti; Independent operating unit) which act has independent start-ups that compete for resources from corporate.  Haier maintains the corporate function in accounting, finance, and human-resource support. This is akin to a network of micro-enterprises with corporate acting like a venture-capital incubator. Ruimin has also taken a tactic from Zappos playbook by adopting Holacracy, a flat management system. The outcome is a customer focus embedded into these ZZJYT’s. With autonomy and control over various functions (i.e. R&D, marketing, sales and finance) to properly leverage the internet to connect with customers and each other. Most certainly, their short-term bottom line will have critics worried, but the new Haier might pan out and give critics those double-digit growth numbers they’ve been craving. Since this a long-term strategy, increase in profits and revenues maybe compromised as they invest in new ventures from the ZZJYT’s.

-Eric Dominguez