How Management Can Thrive When Oil Disappears

Tesla Motors has made great strides since going into business about a decade ago. The company finally posted a profit and repaid a federal loan 9 years early, sending its stock surging ahead. Consumer Reports called the Model S the best car the publication ever tested. Oh, and as many as 1,228 cars will be recalled for a problematic rear seat latch.

You can’t win them all. But Tesla has won many, and some other cars, like the Nissan Leaf and Chevy Volt are showing some movement. Electric cars are still only a tiny portion of all automobile sales, but inevitability is on their side, as the world has only so much oil. And that is why people with a business degree should pay attention to the electric sub-sector of the auto industry, because eventually their problems may be your problems.

All business runs on energy, whether physical, mental, financial, or chemical. Without energy, lights don’t turn on, computers don’t automate operations, orders don’t come in. There are all different ways of generating the energy that companies need, just as moving a car doesn’t have to mean pumping gasoline into a tank.

But switching types of energy doesn’t mean pulling out one plug and putting in another. There are benefits and costs. Making the change, which is ultimately inevitable for everyone, requires understanding the issues.

  • Alternative energy means many things — There are different ways of generating power without the use of fossil fuels: active solar with photovoltaic cells, passive solar, hydrogen fuel cells, wind, geothermal, biomass, and artificial fuels. Part of the problems for the electric car industry has been identifying the forms of alternative power that lend themselves best to mobile machines. Wal-Mart has become one of the biggest adopters of solar panels, putting them on the roofs of their large stores to offset power expenses. Any company, and its management, will have to first identify the types of power that will work for them.
  • What is the cost of switching?— It’s not enough for an alternative generation technology to be available. It must be inexpensive enough to adopt. Car companies have faced a major hurdle in acceptance because the vehicles had generally been more expensive than traditional cars, particularly given the battery costs. But wait too long to make the change and the sudden cost could be brutal. Companies adopting new energy technology can’t wait until someone turns off the petroleum pump.
  • Storage — The major advantage that fossil fuels have enjoyed is stable energy density. The energy they can release — a lot — remains locked in until burned. Many of the alternative energy forms don’t intrinsically store energy. So any solution must include a storage strategy, whether traditional batteries, energy cells, or even new types of capacitors in development. Can enough energy be stored locally, or will there need to be frequent fill-ups?

There are no ready answers, but managers who want to stay at the top of their career in the long-run need to start looking now.

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