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What GM, Ford and Chrysler Learned From Google

July 13, 2011
By embracing open innovation, the Detroit Three automakers are tapping into a global network of ideas and technologies.

Just three years ago, it looked like the U.S. auto industry might be finished.

The fact that U.S. automakers survived at all and are now on the verge of what could be a resurgence has less to do with the temporary injection of government funds than with the radical transformation of the corporate culture in Detroit.

After decades of centralizing all their activities in the Detroit area, American carmakers had to learn to go global.

Stark: The recession spurred the U.S. automakers to break down walls in their organizations and embrace open innovation.
And globalization is not just about manufacturing in the right countries -- such as China and India -- to meet the explosive demand from a rapidly growing middle class. It also means being open to ideas and technology from a global research and development network. What is giving the U.S. auto industry a new lease on life is its openness to solutions from wherever and whoever can offer them -- a strategy known as open innovation.

Milking the Dairy Industry for Ideas

For decades, GM considered its massive tech center in a Detroit suburb -- with 25 buildings spread over 330 acres and hosting thousands of researchers -- to be the hallmark of its commitment to R&D.

Now, GM, like other carmakers, has built up a network among literally hundreds of universities and other research facilities around the world.

With open innovation, a carmaker can engineer improvements in the drivetrain by borrowing technology from manufacturers that use drivetrains in a stationary environment.

A U.S. automaker will learn techniques for minimizing heat buildup in the car cabin from researchers in India, where extremely hot weather makes such innovation imperative. One manufacturer of automotive sensors found oil-level sensor technology in the dairy industry.

None of these individual innovations marks a radical departure, but the constant incremental improvement enables the finished product to remain competitive or ahead of the pack, both in the U.S. and in global markets.

Something as specific as finding new conductive thermoplastic materials -- helping reduce weight in structural body panels and enable mixing of different polymers -- can improve manufacturing efficiency, reduce costs and improve fuel economy.

And designing cars not just in Detroit, but also in design centers around the world, can allow automakers to increase sales in other regions by adapting their models to local tastes.

Technology Scouting

Open innovation works when a manufacturer maintains an active program of technology scouting, concluding agreements on intellectual property rights with research networks ahead of any actual innovation.

This streamlines the adoption of a new technology when the manufacturer's needs match research available in any one of these networks.

For instance, a number of research laboratories in Russia that previously were devoted to military technology have shifted to industrial applications. Having agreements in place with them makes it easy to incorporate their innovations when the right lead emerges.

Just the act of creating the networks becomes a valuable asset because it keeps the company abreast of the types of innovation that are available.

There may be a technology out there somewhere that solves a problem automakers don't even realize they have, and the process of actively scouting new research makes them aware of it.

So, for instance, the big carmakers now have offices in Silicon Valley that resemble venture-capital firms.

They are not set up to fund new ventures, but like classic VC firms, are scouting new technologies for possible use in auto manufacturing. These offices enable them to stay connected to what is still the main U.S. community for technological innovation.

Ecosystems of Ideas

The automakers have, in a sense, adopted the strategy employed by Google and other high-tech firms of spreading out from their base and scouring the globe for promising innovations to maintain their growth and competitiveness.

They are building ecosystems of ideas that circulate through the network, and likewise needs that get pushed out into the system in search of solutions.

In a way, the financial crisis and ensuing recession helped accelerate the breaking down of walls that confined U.S. automakers within their headquarters in Detroit.

They could no longer afford the luxury of layers of management and research within their own locations -- that all had to go. Instead, they reached out and tapped into existing research networks, effectively increasing the resources available to them even while downsizing.

"Innovate or die" could well be the watchword for the automotive manufacturing industry in today's global economy.

Open innovation is a way to facilitate that process and leverage the global reach that today's big companies must have.

Each of these companies assembles a global brain trust, and the very existence of that network fosters an innovation culture throughout the organization, creating a positive feedback loop.

The U.S. auto industry, which faced an uncertain future in the wake of the financial crisis, has turned itself around and opened itself up to a world of new ideas and technologies. It may well become a poster child for the open innovation that increasingly will characterize the successful industries of the future.

Kevin C. Stark, Ph.D. is director, technology solutions, at NineSigma, a Cleveland-based provider of open-innovation services. Contact him at [email protected].

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