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The Innovation Imperative

The importance of innovation to vehicle manufacturers is vital.While some people might consider that to be a blinding case of the obvious, according to a research study conducted by A.T.

The importance of innovation to vehicle manufacturers is vital.

While some people might consider that to be a blinding case of the obvious, according to a research study conducted by A.T. Kearney (www.atkearney.com), North American manufacturers don’t seem to be getting that message, of if they are, they are generally doing a pretty good job of ignoring it. As Joachim Ebert, vice president and North American Innovation and Complexity Management Practice Leader, at A.T. Kearney explains, they’ve determined that the company that does the best at leveraging supplier innovation—and let’s face it, suppliers are generally the source of developments—is BMW, followed by Toyota. Those two are what are referred to in the study “global innovation leaders”; of the 11 companies ranked, Chrysler comes in at 8, GM at 9, and Ford at 11.

Ebert highlights a couple aspects of the study that he finds interesting. One is that while some people might imagine that being innovative might result in a fall-off in quality, that’s not the case: “There is a good correlation between innovation and quality,” he observes, and not only is the correlation a good one, but the companies deploying innovative products in their vehicles tend to have higher quality than those that don’t. Another thing is that he finds interesting is how highly Toyota is scored when it comes to innovation. Not only does this put paid to the concept of Toyota being a follower, but Ebert points out that while the company has long been known as a quality leader, if it becomes acknowledged in the market as an innovation leader, as well, then unless the Big Three do something post-haste with regard to their innovation performance, they’ll find themselves playing catch-up—again.

One of the factors that Ebert says dampens the deployment of innovation at some companies is financial. “Investment in innovation can take time to provide significant returns,” he says. And given the climate, primarily in and around Detroit, there is a reticence to think long-term. A related problem is that the Detroit based builders—GM and Ford in particular, as Ebert credits Chrysler’s COO Eric Ridenour as someone who has taken a personal interest in innovation—tend to be dealing with their suppliers purely from the point of view of lowering costs, which has a consequence of the suppliers taking their true innovations elsewhere. . . presumably to places like Germany and Japan.—GSV