Developing New Networks of Talent and Resource Should Be Driving Force for Ailing Auto Industry

Posted by Chris Flanagan on November 19, 2008

Great op-ed piece in the New York Times yesterday called "Have You Driven a Bus or a Train Lately?" by guest contributor Robert Goodman.

In the midst of the current debate around bailing out the auto industry, Goodman argues that as a condition of financial assistance, Congress should insist that automakers shift from manufacturing just cars to becoming innovative "transportmakers."

"As transportmakers, the companies could produce vehicles for high-speed train and bus systems that would improve our travel options, reduce global warming, conserve energy, minimize accidents and generally improve the way we live."

Goodman’s article reminded me of a design workshop I attended a while back led by BIF Research Advisor Andrew Hargadon. Hargadon, an Associate Professor and Director of Technology Management Programs at the Graduate School of Management at University of California, Davis and author of How Breakthroughs Happen, believes that organizations today are too fixated on invention. Successful innovators, he says, do not invent, they recombine.

Which brings me back to Goodman’s piece - because there's precedent for his argument which doesn't reside with federal government mandates.

If we go back in time, to the turn of the century, the automobile industry was just emerging. There were 57 firms focused on building cars in the United States. In 1907, Henry Ford had 1,599 Model T’s on the road. By 1914, his number rose to 264,972. (Source: Andrew Hargadon, How Breakthroughs Happen) This astounding penetration can be attributed, in part, to the marketing and distribution networks Ford designed around his automobile. And one component of this new network was the bicycle industry.

For everyone in the biking supply chain - from manufacturers to distributors to retailers - the car represented a huge disruptive threat to their livelihood. Ford knew it and capitalized on it. When he founded his company, he began building a new network based on what was already out in the marketplace; combining proven systems from disparate industries for immediate gains. By 1907, he had signed up 15,000 people from bicycle retail shops to sell his car which greatly contributed the growth of the industry.

Henry Ford’s explanation for his success: “I invented nothing new. I simply assembled into a car the discoveries of other men behind whom were centuries of work…Had I worked fifty or ten or even five years before, I would have failed. So it is with every new thing. Progress happens when all the factors that make for it are ready, and then it is inevitable.” (As recorded in John Steele Gordon’s The Business of America.)

Another industry severely impacted by the rise of the automotive was the carriage business. Yet a number of prescient companies developed strategies to take advantage of the disruption:

Studebaker, founded in 1852, was the world's largest producer of horse-drawn vehicles. During the company's first 58 years it shipped over one million horse-drawn vehicles of all types and large quantities of harness. Studebaker began experimenting with a "horseless vehicle" in 1897. The company's first automotive product was offered two years later when Studebaker produced bodies for electric runabouts made by another firm. Then Studebaker sold its own line of electric runabouts from 1902 through 1912 before finally offering a family of gasoline vehicles from 1904 to 1966. By 1918 the annual capacity of Studebaker automobile plants was 100,000 units. This surpassed the capacity of its horse-drawn vehicle plants by one third.

Two other examples involve divisions of General Motors. The Fisher brothers originally built carriages with their father in Norwalk, Ohio. They founded Fisher Body in 1908 to supply the auto industry and were acquired by General Motors in 1919. Edward M. Murphy, the owner of the Pontiac Buggy Company, organized the Oakland Motor Car Company in 1907. This later became the Pontiac Division of General Motors.

Taken from The Growth of Automotive Transportation by Kenneth L. Hess, September 23, 1984

Economic growth through innovation can be found when you carefully and creatively ferret out current capabilities within disparate systems and then bring them together to form new networks of innovation. Both the carriage and bicycle industry contributed people, components, capital, and ideas to automotive transportation. In fact, according to one automotive pioneer - Hiram Percy Maxim - the bicycle actually helped to create demand for the automobile:

“It has been the habit to give the gasoline engine all the credit for bringing the automobile--in my opinion this is the wrong explanation....We could have built steam vehicles in 1880, or indeed in 1870. But we did not. We waited until 1895.

The reason why we did not build road vehicles before this, in my opinion, was because the bicycle had not yet come in numbers and had not directed men's minds to the possibilities of independent long-distance travel over the ordinary highway. We thought the railroad was good enough. The bicycle created a new demand which it was beyond the ability of the railroad to supply. Then it came about that the bicycle could not satisfy the demand which it had created. A mechanically propelled vehicle was wanted instead of a foot-propelled one, and we know now that the automobile was the answer. “

Taken from The Growth of Automotive Transportation by Kenneth L. Hess, September 23, 1984

The Ford Motor Company did not come from revolutionary origins but rather from the recombinant nature of revolutionary innovations. Studebaker chose to follow a disruptive strategy that embraced fear, risk and cannibalization.

The auto industry should take a queue from these legendary innovators and begin recombining old ideas in new ways. They have diverse network connections across a wide range of customers, suppliers and competitors. And most important, there’s a talent base out there just waiting for direction.

Related

• Download the article Retooling R&D: Technology Brokering and the Pursuit of Innovation by Andrew Hargadon (PDF file)
• Learn more about Andrew Hargadon at his blog Hargablog
• Read the article The Growth of Automotive Transportation by Kenneth L. Hess

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