THE CHANGING DYNAMICS OF INNOVATION IN THE AUTO INDUSTRY

This is a book about the changing dynamics of innovation in the auto industry. Innovation in the auto industry has traditionally been associated with great, pioneering personalities such as Henry Ford, E.J. Budd, the Fisher Brothers, Alfred Sloan and Eiji Toyoda. Its business history is that of an invention within one company that has become a ‘best practice’ and subsequently adopted by the industry. However, within specific industries, the general processes of invention and innovation have been guided by characteristic architectures. An outstanding example to be referenced in the book is the difference between the industry architectures of the auto industry versus that of the personal computing industry. The pace of innovation in personal computing, both at the software and hardware sides, has been almost unprecedented in economic history. The anchor point for this success was the industry standard architecture of Wintel, though this itself was assisted by public policy. This was the reference point and enabler of the astounding diversity and pace of advances in computing. In terms of industrial organization strategy, the key strategy was modularization, embodied in the success of Dell. Auto companies in the last 15 years have sought to replicate the modularization strategy in the auto supply chain, in the attempt to replicate Dell’s commercial success. This has dramatically changed business relationships, R&D and the economic geography of the auto supply chain. However, it has not brought the same level of technical or business gains as Dell did in computing. Why not? A major reason is the difference in automotive architecture of innovation. Proprietary company product architectures still predominate. Innovation in automotive has been inherently self-limiting from its basic tenets. However the new and aggressive impacts of public policy, environmental and safety regulations are now producing industry convergence. Finally, the incredible mechanical engineering complexity of modern automobiles, along with emerging electronic and software engineering complexity of the new vehicles, means that automotive technology is emerging as a complex adaptive technological system that provides an additional new internal dynamic for auto innovation. The auto industry is by far the largest manufacturing industry in the world. What is good for General Motors may or may not be good for the world. However, better understanding the changing dynamics of auto innovation may help us better understand the theory and best practices of the Innovative Firm.