[PhotonHunter]

It's an interesting question for sure!

Yes, I'd argue it is incompatible, at least for companies dealing with atoms. At some point, the technology lead erodes, "not bad" becomes good enough, and mature businesses are unable to adapt while maintaining engineering at the center. Technology development at the frontier is too irregular to rely on for the long-term.

[margalabargala]

Okay, granted, but is that applicable on the timescales here?

There has been a very steady march of progress in cars, in safety, efficiency, and comfort since that ad came out. They did lose their tech lead, but I'm not sure it was inevitable in that time frame.

Volvo made a name for itself with safety. Mercedes could have done that. Toyota made a name for itself with hybrid drivetrains. Mercedes could have done that.

They didn't, sure, but your argument seems to hinge on low hanging fruit going away and others catching up. This seems like Mercedes simply opted not to reach for the next piece of fruit.

[PhotonHunter]

I would argue that primacy in safety was insufficient: Volvo's consumer division was offloaded to Ford, and then Geely. Saab was even more obsessive about safety to the point of being pathologic, to their downfall, looted by GM for their knowledge of 4-cylinder turbos and engine management (truly ahead of their time) and left to wither on the vine. And it isn't like Mercedes was a laggard with safety, they had a number of firsts to their name and in the US did have a reputation as a safe car, just not an affordable one; safety was a part of the constellation of "the best or nothing", just not the whole thing. What true differences in safety exists between marques now?

I would also argue that efficiency is insufficient, at least in the US. For Toyota, while their hybrid tech is an incredible engineering accomplishment and certainly put them on the radar for many consumers, I don't know that it's the crown jewel; to wit, they started offering their hybrid tech royalty free a few years ago. If you want an efficient car, you can get one from a number of marques, but is there real demand for that?

You're right I think to call out Toyota as a counterexample, but I think it's the Toyota Way that truly distinguished Toyota and continues to do so. That seems to be the only hedge against decay, to bake a lasting, long-termism culture into the organization in day one and ruthlessly enforce it. There's a few other Japanese companies that come to mind that have similar storylines. It needs to be there in the beginning too, TPS isn't a secret, and JV attempts to share the knowledge (NUMMI) didn't seem to make a lasting impact without the culture to enforce it long-term.