Navigant Research Blog

‘Not Invented Here’ is Good for Automakers

— February 1, 2015

Not so many years ago, the auto industry was afflicted by a phenomenon known as “Not Invented Here,” or NIH.  As one of the less desirable relics of the massive vertical integration that provided tremendous economies of scale and profits, NIH also led to technological stagnation.  Fortunately, the drive to reduce fatalities, fuel consumption, and emissions has helped push automakers to look beyond their proprietary engineering labs to adopt and fund innovations from both established suppliers and more recently tiny startups.

“Four decades ago, 90% of the intellectual property [IP] in the auto industry originated from inside the OEMs,” said Dr. David Cole, chairman and co-founder of the AutoHarvest Foundation and an engineering professor at the University of Michigan.  “In those days, suppliers would basically build to print, but today they generate more than half of the IP that goes into new vehicles.”

OK to Fail

As Cole observes, as manufacturers have grappled with integrating state-of-the-art electronics, automated driving systems, and electrified powertrains, they have expanded the scope of their collaboration beyond traditional suppliers that are equally inexperienced in these areas.  In 2005, Ford began a development partnership with Microsoft that led to the SYNC in-vehicle connectivity system.

In 2011, General Motors (GM) and BMW took inspiration from Silicon Valley and established GM Ventures and i Ventures.  Both of these venture capital (VC) funds make relatively modest investments in startup companies that have promising ideas that could enhance future mobility.

For example, GM Ventures put $5 million each into Powermat and Bright Automotive and $4.2 million into Sakti3.  Like all VC investments, a certain percentage are expected to fail, while others will catch on.  Electric van builder Bright went bankrupt in 2012, while GM introduced wireless phone charging mats based on Powermat technology into several vehicle lines in 2014.  Sakti3 is still developing a new type of solid-state battery that shows tremendous promise for reducing the cost and improving the range of future electric vehicles (EVs).  Companies that have received funding from BMW i Ventures include JustPark.com and Coulomb Technologies, the company behind the ChargePoint EV charging network.

Opening Up

Ford doesn’t have a separate venture funding arm, but has made strategic investments in companies like Michigan-based software firm Livio.  Ford bought the startup in 2013 and has incorporated its technology for connecting smartphone apps to the vehicle into its new third-generation SYNC system, scheduled to debut later this year.  In 2013, Ford also contributed the code for its SYNC AppLink system to the open-source GENIVI project, so that any automaker can use the system in its vehicles.  In December 2014, Ford announced a partnership with Techstars to launch a mobility startup incubator in Detroit that will also get funding from Verizon Telematics and Magna International.

From newcomers like Tesla Motors to century-old companies like GM and Ford, everyone has recognized that NIH inhibits innovation, and that no one knows where the next great idea that revolutionizes mobility will come from.

 

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