Master’s Thesis Research Project – Sustainable Business and Innovation Dealing with an identity threat: Porsche and the transition to electric mobility Student: Marcelo Brull Student Number: 6557996 Email: [email protected] Supervisor: Dr. Christina Bidmon Course: GEO4-2606 Program: Sustainable Business & Innovation Word count: 17,646 Abstract Due to sustainable transitions, industries and organizations across the globe need to transform and align their product offerings and business practices with more environmentally friendly and socially accepted ways of operating. The movement towards this reality may come to confront organizations and industries’ business as usual, creating an identity threat. This is especially the case for incumbent organizations, who have reached their current market positions based on legacy business practices and products. Understanding how incumbent organizations deal with the identity threat within their external communication becomes important as theory acknowledges that an organization’s ability to communicate the process of change to its stakeholders and manage the expectations of these stakeholders as the organization transforms is as important as the act of changing processes, structures, and products. This longitudinal study explains how an incumbent organization deals with an identity threat caused by a sustainable transition in its external communication, and identified which corporate identity elements does it alter, maintain, and disrupt. As empirical context, the study analyzed Porsche and the transition to electric mobility. The study used Porsche’s external communication (annual/sustainability reports and website for press-related matters) and interviews with Porsche’s senior executives, searched on Nexis Uni research database, during the period of 2005 and 2020. The data was first analyzed to reconstruct the case chronology and then analyzed for the identification of maintenance or change of corporate identity elements. This led to the identification of specific themes related to maintenance and change, which were then used to construct a process model that depicted how Porsche communicated about corporate identity change during this timeframe. The findings demonstrate that Porsche does not disrupt any corporate identity elements within its communication but maintains three corporate identity sub-elements and changes five. Porsche’s communication about maintenance and change of specific corporate identity sub- elements interplay, creating, at times, an ambiguous message which creates an impression that Porsche is changing while remaining the same to possibly balance different stakeholder interests. Such dynamic sheds light on Porsche’s struggle to align itself to the sustainable transition and demonstrates that such transformational process is a slow and gradual one. The results can bring improved understanding of the transformational journey and deeper knowledge of what challenges and barriers incumbent organizations meet within the context of sustainable transitions. List of Abbreviations ...................................................................................................................... 4 1. Introduction ............................................................................................................................. 5 2. Theory ..................................................................................................................................... 6 2.1 Corporate identity ........................................................................................................... 7 2.2 Sustainability transitions as identity threats .................................................................... 9 2.3 Dealing with identity threats ......................................................................................... 10 3. Methodology ......................................................................................................................... 11 3.1 Research design ............................................................................................................ 11 3.2 Case selection................................................................................................................ 11 3.3 Data collection .............................................................................................................. 12 3.4 Data analysis ................................................................................................................. 15 4. Analysis................................................................................................................................. 18 4.1 First-order analysis: Case chronology and temporal bracketing................................... 18 4.2 Second-order analysis: Identity change over time ........................................................ 31 4.2.1 Corporate identity sub-elements that were maintained ............................................. 35 4.2.1.1 Continuous focus on emotional sportiness ........................................................... 35 4.2.1.2 Continuous and intensified cooperation with Volkswagen .................................. 36 4.2.1.3 Preserving the production location ....................................................................... 38 4.2.2 Corporate identity sub-elements that changed .......................................................... 39 4.2.2.1 From results-oriented to product development-oriented strategy ......................... 39 4.2.2.2 Aligning motorsport strategy for product development ........................................ 40 4.2.2.3 Stronger emphasis on sustainability...................................................................... 42 4.2.2.4 Re-training of the workforce and hiring specialized employees .......................... 44 4.2.2.5 Addition of novel production processes ............................................................... 46 4.3 Model of the overall process of change .............................................................................. 47 5. Discussion ............................................................................................................................. 50 6. Conclusion ............................................................................................................................ 54 References ..................................................................................................................................... 56 Appendix A ................................................................................................................................... 67 Appendix B ................................................................................................................................... 68 List of Abbreviations The following table describes the meaning of various abbreviations and acronyms used within the study. Abbreviation Meaning AR Annual Report CI Corporate identity CO2 Carbon dioxide DFI Direct fuel injection ECJ European Court of Justice EU European Union EV Electric vehicle FIA Fédération Internationale de l’Automobile ICE Internal combustion engine LEV Low-emission vehicle LMP1 Le Mans Prototype 1 PHEV Plug-in hybrid electric vehicle R&D Research & Development SUV Sports utility vehicle VW Volkswagen 4 1. Introduction The current state of our planet calls for more environmentally and socially responsible business practices. The way societies function needs to be rethought and current business practices need to be challenged in order for humanity to be able to operate within the planet’s regenerative capacity (Rockström et al., 2009). Making this a reality requires a large-scale socio-economic change and system actors need to transform accordingly. Innovation academics refer to such transformation processes as ‘sustainability transitions’. Sustainability transitions are formally defined as “long-term, multi-dimensional, and fundamental transformation processes through which established socio-technical systems shift to more sustainable modes of production and consumption” (Markard et al., 2012, p. 956). Individual organizations experience sustainability transitions in distinct ways, due to variables such as the industry setting, their internal capabilities, maturity level and market position (Turnheim & Sovacool, 2020). Unlike sustainable startups, which have sustainability as an integral part of their strategy, incumbent organizations often find themselves challenged by sustainability transitions (van Mossel et al., 2018). The shift to more sustainable operations can require incumbents to abandon their legacy business model and become ‘a different type of organization’ (Augenstein & Palzkill, 2015). Sustainability transitions can thus threaten the corporate identity (CI) of incumbents, which is defined as a set of attributes or features that are perceived to be central, enduring, and distinctive to an organization (Albert & Whetten, 1985). To date, transition research has been dominated by “perspectives portraying incumbents as ‘villains’ who irremediably resist, slow down, prevent transition efforts (Byrne and Rich, 1983; Geels, 2014; Penna and Geels, 2015; Sovacool et al., 2017; Stirling, 2014, 2011) due to their shared and deep attachment to ‘dominant regimes’” (Turnheim & Sovacool, 2020, p. 181). This study takes a different perspective and tries to understand how incumbents communicate about changes to their CI in response to an identity threat caused by a sustainability