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Who Wins, Who Loses as Detroit Embraces Silicon Valley

See the light and open innovate!
Silicon Valley-style innovation! Sounds fantastic, right? Even more so when it's transferred from the tech sector to the the old-school realms of manufacturing. However, what happens in the Valley is a hallmark of the new, hyperactive economy. And not everyone in the car business is going to be happy about the disruptions that it brings.
That said, there's an argument building in management circles that so-called "open innovation" is the best thing to happen to Detroit since the internal combustion engine. This is from Industry Week, a trade publication:

[G]lobalization 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.

So Detroit survives -- but not in its 20th century form. And that means winners and loser, as Motown learns to let go of the old ways and grapple with the challenges of managing far-flung networks where intellectual capital is key.


  • Silicon Valley. The tech world has thrived on open innovation, making it something of an article of faith. As this model migrates to older industries and reforms them, it will mean that no matter what happens in the Valley, business-wise, its mojo will be ritually praised. There's already a belief that Silicon Valley can fix Detroit, a view that's been advanced by startups like Tesla Motors (TSLA), bolstered by Motown's need to hire software engineers to bring entertainment and communications technology into vehicles.
  • GM Ventures. The most advanced thing happening at General Motors (GM) is its venture capital arm, which is strategically funding various advanced technologies that GM thinks will make it more competitive in a future with transportation options far beyond the good-old, four-wheeled, gas-powered car. Of course, the more GM Ventures succeeds, the more it will be able to invest outside the conventional boundaries of the auto industry, making it a reactor for open innovation at the world's biggest car company. Remember, it all starts with the money!
  • Car dealers. The sale of autos is a complex system from an earlier time. Essentially, the financing and products come from the mothership, while the dealers leverage their understanding of local markets to make sales. Of course, if Zappos and Amazon (AMZN) can put local shoe stores and book shops out of business (And then merge!), how long will your friendly neighborhood car dealer stay in business? A while, it seems, as people still like to meet their new wheels in person. But dealers still tremble when they think about how the Internet has transformed the consumer experience. Buy a car entirely online? That day could be coming, sooner than dealers want it to.
  • The UAW. The autoworkers union has done nothing but lose members for the past few decades, a trend that has forced its leadership to get more aggressive about unionizing non-union plants in the U.S. South. However, all these efforts will be for not if the auto industry copies most other domestic companies in outsourcing manufacturing to places with much cheaper labor. Computers, consumer electronics, clothing -- it's all made in China. And by the way, the Chinese are rapidly getting pretty good at making cars.
Related: Photo: Wikimedia Commons
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