The Big Three's Big Chance
Previously published on Oct 14, 2010
For American car companies, restructuring their business models and building better cars has given this old industry a new lease on life. Of course, Ford, GM, and Chrysler must realize this is only the beginning of their resurgence as they may still fall. With waves of startups and small, nimble corporations leading the charge for innovation in an era defined by technologies that allow people to develop and market novel concepts with little if any infrastructure, many economists are predicting the downfall of large firms. As Detroit has often shown a reluctance to accept, let alone encourage, new ideas, integrate new technological advancements, and let go of a corporate structure incapable of addressing changes in consumer habits, i.e. marketers drove their business model versus consumer demands, it would seem the overweight infrastructures of these businesses have no hope of surviving in the long-term. On the other hand, many large, wealthy corporations are emerging throughout all industries as dominant players.
Granted, individuals can develop and market their products from home as a legal corporation, but any physical components must be manufactured and assembled by someone. Large scale operations backed by vast infrastructure allow goods and services to be manufactured, improved upon, and distributed more efficiently. (Yes, China can offer cheap products, but not always at the best quality or under acceptable conditions.) Of course, setting standards is also a plus that only large corporations have been able to deliver while BP's Gulf of Mexico Spill shows us that the liabilities associated with undertaking industry require the wealth of large, well-established companies.
What the Big Three must do is recognize their old standing in the auto market as the sole link in the car making chain is disappearing. As GM realized almost too late, trying to focus on too broad of a product line undermines quality and viability; similarly, all three auto companies need to understand controlling too much of the design process continues to shut out radical innovation. Yes, the Big Three are finally making quality cars, and profits, but they are not pushing the envelope and they cannot do it by themselves. As such, they need to learn from innovative firms like Google and Apple. Apple in particular is a good model, because it was able to take the best ideas from various other companies and build one of the greatest products in history: the ipod then the iphone. It then focused on marketing through functionality and the human desire to see something familiar, yet different.
What the Big Three need to do is either contract to buy novel products or buyout smaller startups and innovative firms then assemble those innovative products into superior, next generation cars. At the same time, they need to reinvigorate and reinvest in their vast chain of submanufacturers, so ideas can flow amongst those in the Ford network, the GM network, and the Chrysler network. The Big Three have so many resources available too them through their various tiers of subcontractors, dealership mechanics, and other associations that they probably have a gut of good ideas that could drive their industry for at least another century. The problem is that they aren't listening nor are they working to bring those ideas to life.
As the Big Three saga further unfolds, I am hopeful they will eventually see what treasures they have at their finger tips and learn to follow the example of assemblers/marketers like Apple that work as channels for innovation while they too offer their own innovations. If they can be successful in their new role, they both help America maintain its industrial base and provide much needed jobs for Middle Class Americans; otherwise, its foreign competitors will dissect the Big Three by forcing innovation in the auto industry.