It’s no secret that innovation is what keeps any industry healthy and capable of adapting to future changes – even if there’s no inkling that radical change may be on the horizon.
Yet a new report issued by The Boston Consulting Group (BCG) claims that the global automobile industry is entering what the firm describes as a “new golden era” of innovation and advancement, with the ability to innovate in four key areas – powertrain, lightweight materials, connectivity, plus active safety and assisted driving – touted as major factors in either the success of failure of vehicle OEMs in the years ahead.
[For fun, check out the short video below showing how an “ordinary” Ford Fusion sedan looks when converted into “stock car” mode.]
What gives BGS such confidence the required level of “innovation” is occurring? Well for starters patent applications within those four areas of vehicle development cited above surged at 6% to 15% growth from 1995 through 2011, compared with an average growth rate for all patent filings by OEMs and tier-one suppliers of only 4% over the same period.
On top of that, patent filings in all four areas showed only an 8% decline from 2008 through 2009 – the deepest “trough” during the Great Recession – compared with an average drop in the number of patent applications of 25%.
Finally, patent filings increased 10% faster than the average growth rate in the bounce-back years from 2010 through 2011, noted Xavier Mosquet, a BCG senior partner and co-author of this “innovation” study, largely driven by consumer demands.
"Innovation in the automotive industry is retaking center stage," he added. "Consumers want to buy cars from companies that bring new technologies to market, and connectivity, safety, and fuel efficiency are three of their top priorities. The ability to innovate in these areas will be a major factor in individual automakers' success in the coming years."
[To see how such “innovation” becomes reality, click here check out some of the Ford Motor Co. vehicles put on display outside the Homestead, Florida, race track where the NASCAR racing season wrapped up in 2013.]
Regulatory and marketplace demands with respect to fuel efficiency, connectivity, and safety, as well as technological advances are making new advances in all four areas possible as well as reducing their cost, too, Mosquet noted.
Yet he also stressed that OEMs and tier-one suppliers need to address three “innovation” areas with a sense of urgency in the coming years; areas truck makers will also more than likely be keeping a harp watch upon as well:
- The continuing shift from mechanical to software-driven vehicles: Cars are no longer primarily mechanical devices. Rather, automobiles are increasingly becoming software driven (literally, as well as in other ways). Given the rise of electronics and the fact that software features reduce tooling cost, as well as allow for configuration later in the product development cycle, the shift to more software in cars will continue. This shift requires auto executives to think about product life cycles—and the involvement of their companies with them—in new terms.
- The quickening pace of product development: Consumer electronics and technology companies have taught consumers to expect a rapid pace of innovation. This expectation will make it more and more difficult for automakers and their suppliers to adhere to the current three- to five-year product design and development process. Car manufacturers will need to experiment with alternative design processes, new development models, and in the longer term, advanced manufacturing techniques. The ability to discern early what consumers see as the most valuable innovations will also create an advantage.
- The more prominent role of tier-one suppliers in innovation and technological development: The importance of tier-one suppliers in innovation and product development will escalate. These companies are already playing a bigger role in innovation in the areas of power train, interior design, and chassis components—historically the research and development (R&D) domain of automakers. In addition, the determinants for differentiation are shifting toward connectivity and active-safety features, in which tier-one suppliers have substantial expertise. Those manufacturers that construct the most effective collaboration models, encouraging and rewarding supplier R&D investment, will build a long-term advantage.
"Other areas of innovation loom large as well, such as alternative fuels and assisted driving," said Massimo Russo, a fellow BCG senior partner and another co-author of the firm’s study. "Those automakers that determine how to organize themselves to harness and direct fast-moving developments in power train, lightweight materials, and, most critically, software, electronic components, and connectivity will establish a decided advantage over competitors in the near and longer term."
Something to contemplate as the pressure to craft every lighter and more fuel efficient vehicles – even for the heavy-duty commercial market – will only keep increasing.
