Case Study $02$: Technology Acquisition Decision

Objective

To evaluate and select the optimal technology acquisition strategy that aligns with AutoInnovate Inc.$\text{'}$s goal, ensuring the chosen path maximizes benefits, minimizes risks, and aligns with corporate and technology strategies.

Case Study

The automotive industry is undergoing tremendous disruption driven by technological advances in electrification and autonomous driving. Fueled by concerns over environmental sustainability and consumer demand for new mobility experiences, electric vehicles $($EVs$)$ are rapidly gaining adoption worldwide. Recent data shows global EV sales increased $40\%$ in $2021$ alone, with major automakers committing billions to transition their lineups electric in the coming decade.

Alongside EVs, autonomous vehicle $($AV$)$ technology is developing at an exponential pace. Pioneered by companies like Tesla, Waymo and Cruise, AVs can drive themselves without human input through onboard computing power and sensor arrays. While full self$-$driving remains a long$-$term goal, many new vehicles now boast advanced driver assistance systems $($ADAS$)$ like adaptive cruise control and lane centering. Industry analysts forecast AVs will become mainstream by $2030,$ presenting a $$2$ trillion market opportunity.

Established in $2010,$ AutoInnovate is an early innovator in EVs, gaining prominence for capable, affordable electric sedans and SUVs. It has since expanded globally, currently operating factories in North America, Europe and Asia with annual sales of $150,000$ vehicles.However, competition in EVs is intensifying as technology and battery costs decline. New entrants from technology giants threaten incumbents, while startups rapidly disrupt the status quo. Recognizing a need for strategic reinvention, AutoInnovate's board adopted a ambitious vision $-$ to become the leading provider of autonomous electric vehicles by $2025.$

To realize this vision, AutoInnovate will pursue a dual strategy of electrifying its lineup while concurrently developing advanced autonomy capabilities. On the product front, $10$ new BEV models will launch by $2024$ across various segments from compacts to trucks. Simultaneously, R&D will focus on integrating sophisticated AI$,$ sensors and computing to enable higher levels of self$-$driving in future vehicles. While AutoInnovate excels at engineering high$-$quality EVs, autonomy remains a nascent field requiring specialized expertise. Acquiring complementary technology through merger or partnership is seen as the surest path to close this capability gap and expedite commercialization of AVs. ENGM $413$: Technology Management Case Study $02$

At the heart of AutoInnovate's strengths lies its robust R&D department, a testament to its commitment to innovation and a solid foundation for pioneering advancements in autonomous driving technology. Coupled with its established market presence, AutoInnovate is well$-$positioned to leverage these internal assets to navigate the competitive landscape of the electric vehicle market.

However, the company's trajectory is not without its challenges. A notable issue is its limited experience in AI technology, crucial for advancing autonomous driving capabilities. This gap underscores the need for strategic acquisitions to bolster AutoInnovate's technological prowess. The external environment, meanwhile, offers a fertile ground for growth, highlighted by the rising demand for autonomous vehicles and potential government subsidies for innovative transportation solutions. These opportunities present a strategic avenue for AutoInnovate to capitalize on$,$ aligning with its vision to lead the market in autonomous electric vehicles. Yet, the path forward is fraught with risks, including intensifying competition in the EV market and regulatory challenges surrounding autonomous vehicle technology. These factors necessitate a vigilant and adaptive approach, ensuring AutoInnovate not only remains competitive but also compliant with evolving regulatory standards.

In alignment with its ambitious corporate strategy to emerge as a market leader in autonomous EVs by $2025,$ AutoInnovate is deliberating over three distinct technology acquisition pathways: internal development, external acquisition, and a collaborative venture. Each pathway is meticulously analyzed for its financial implications and strategic congruence with AutoInnovate's vision.

Technology manager John Smith at AutoInnovate conducted extensive research to explore the best option for acquiring new vehicle autonomy technology. He interviewed executives from leading tech companies, met with startup founders, and performed in$-$depth financial analyses. The first option considered was internal development. Smith estimated this would require an upfront investment of $$10$ million to build the capabilities in$-$house. Ongoing annual costs included $$2$ million for maintenance of the technology, $$250,000$ for training employees, $$200,000$ for change management to integ