[Opinion] The Common Denominator of Automobiles and the Digital Singularity

Kim Kyung-jun, Vice Chairman of Deloitte Consulting

Amid the ongoing digital upheaval, two photographs capturing Easter morning over a century ago on Manhattan's 5th Avenue in New York have gained fame. In 1901, a single automobile runs alone among horse-drawn carriages filling the street. Twelve years later, in 1913, horse-drawn carriages had vanished from the procession of automobiles. The street scene had completely changed by 1913, even before the baby born in 1901 had graduated from elementary school.

Today, we might simply think that automobiles rapidly spread in New York at that time, but those involved in the transportation business experienced a period where success and failure, survival and collapse, were decided in an instant. In fact, carriage manufacturers and coachmen fiercely opposed automobile traffic, citing the 'Red Flag Act' enacted in the UK in 1865 as a precedent. This regulation required automobiles operating in central London to be preceded by a person walking while carrying a red flag 60 yards ahead. Eventually, in 1900, protests arose in New York led by coachmen demanding regulation of 'dangerous automobiles' that interfered with the passage of 'safe carriages.'

While carriage manufacturers actively supported the fierce protests asserting the livelihood rights of coachmen, William Durant (1861?1947) took a different stance. He was an entrepreneur who founded the Flint Road Cart Company at age 25 in 1886 and grew it into the top company in the US. He thought automobiles were noisy, polluting, and dangerous, and did not even put children in cars, remaining skeptical about the industry's prospects. However, after witnessing the protests, Durant sensed the future potential of the automobile industry and took action. He acquired the early automobile company Buick in 1904, managed it to understand the industry, and founded GM (General Motors) in 1908.

Ford Motor Company, which led the 20th-century automobile industry alongside GM, was also established around the same time in 1903. While Henry Ford (1863?1947) challenged the existing order dominated by carriages as a genius engineer, Durant represented the vested interests. Nevertheless, Durant did not get stuck in the carriages running on the streets but expanded his vision to the future automobile.

Over a century ago was a period of upheaval when the mainstay of the transportation industry shifted from carriages to automobiles. Many existing businesses related to carriages experienced sudden death, a sudden catastrophe, while new companies in the automobile field created a new trend. In today's terms, it was an era of singularity where rapid changes occurred in a short time.

Theodore Levitt (1925?2005), who insightfully understood markets and customers, mentioned the upheaval symbolized by carriages and automobiles in his work "Marketing Myopia." "Companies limit their interest to their specific products and fail to see product obsolescence. The whip industry for carriages is a typical example. Despite efforts to improve the product, it becomes a declining industry as automobiles spread. However, if the business had been defined not as whip manufacturing but as transportation-related, survival would have been possible. Change is always necessary. If the business had been defined as an industry providing stimulation or catalysts to mobile energy, it might have transformed into manufacturing automobile fan belts or air filters."

The transformation of the GM founder is a lesson to break away from existing perspectives and redefine the essence of business amid the upheaval when DX (Digital eXchange) is in full swing. He saw carriages not as products but as means of transportation, thus understanding the automobile engine replacing the horse?the power source of the carriage?as part of the same continuum. However, competitors who were fixated on the distinct product concepts of carriages and automobiles failed to keep up with the times. Similarly, many analog businesses in Korea currently seeking digital transformation for future survival and growth must redefine the essence of their business from a new customer perspective beyond narrow existing product concepts to find direction.

Kyungjoon Kim, Vice Chairman, Deloitte Consulting