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Illustrative Case: BetterPlace 

The electric mobility revolution that never was. Studying the factors which led to the failure of  a promising multimillion dollar partnership initiative.
Aerial Photo of a Road
The BetterPlace story

In 2007, the company BetterPlace, led by the charismatic and experienced Shai Agassi, embarked on a mission to rid personal transportation of oil by 2020.

BetterPlace proposed a revolutionary business model around electric vehicles, in which the company, and not the user, owned the electric batteries and a sophisticated charging infrastructure which could swap an empty EV battery for a full one in just two minutes. With a professional team, a compatible vehicle model provided by Renault-Nissan, unmatched media excitement and analyst backing, strong government support within the two first-launch countries (Denmark and Israel) and 900 Million dollars of venture capital, Betterplace seemed destined to succeed.

Yet after its launch in 2012, demand for their electric cars was only in the hundreds and BetterPlace, burning through all its cash in building underutilized infrastructure by October 2012, had to file for bankruptcy in November 2013. This dramatic failure has not only been costly to those involved in the effort to transform the market, but also delayed a critical transition towards sustainable transportation, with currently electric vehicles comprising less than 1% of the cars in use.

Applying Market Formation Dynamics

Our research program helps understand how other organizations and policy makers may avoid BetterPlace’s fate. An important starting point is the realization that the effective functioning of markets requires many elements to be in place that support ongoing production and sales. In the case of electric vehicles and BetterPlace this is: a large number of consumers recognizing and being willing to consider electric driving; a producer value chain able to scale-up production and introduce a range of models on an ongoing basis; established providers able to install additional charging options using agreed-upon formats; favourable regulation; technology standards in place for swapping the batteries, etc. While developing a new market up to such a point is critical for actors’ success, doing this is often a major challenge. The BetterPlace launch was ambitious. However, the actors involved did not realize the extent to which market formation efforts were needed. Our research explores these challenges across different settings and through development of more general theories, and the actions and coordination needed to overcome them.

Read the full text of the BetterPlace teaching case here 

See also: An article in The Conversation discussing our market formation research with BetterPlace as example

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