{"id":28303,"date":"2018-11-12T10:52:49","date_gmt":"2018-11-12T15:52:49","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/disruption-in-the-automotive-business-how-distributed-innovation-can-change-a-100-year-old-industry\/"},"modified":"2018-11-12T10:52:49","modified_gmt":"2018-11-12T15:52:49","slug":"disruption-in-the-automotive-business-how-distributed-innovation-can-change-a-100-year-old-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/disruption-in-the-automotive-business-how-distributed-innovation-can-change-a-100-year-old-industry\/","title":{"rendered":"Disruption in the automotive business: how distributed innovation can change a 100-year-old industry?"},"content":{"rendered":"

CONFIDENTIAL. I saw that word in every single technical drawing during my 4 years working for Toyota. After co-leading the product development process of Toyota\u2019s worldwide best-selling truck (see Exhibit 1<\/strong>), I wondered if it was possible to develop vehicles without being so \u201cstrictly confidential\u201d. Well… the answer is YES!<\/p>\n

Founded in 2007 by Jay Rogers (HBS 2007) with a belief in open collaboration and co-creation, Local Motors Inc. (LM) began low volume vehicle manufacturing of open-source designs using multiple micro-factories. [1]<\/a> LM stands out for combining new innovative technologies to launch Olli<\/em>, the first co-created, self-driving, electric and 3D printed shuttle (see Exhibit 2<\/strong>).<\/p>\n

Applying crowdsourcing innovation, can dramatically reduce costs and lead time of a vehicle development process, while sourcing the company with creative ideas<\/strong>. The design process of a new vehicle in a typical manufacturing company lasts at least 1 year and costs millions of dollars utilizing valuable resources such as highly skilled designers and engineers At LM things are a little bit different (see Exhibit 3<\/strong>). Olli\u2019s current design was conceived by a 24-year-old Colombian after winning the Urban Mobility Challenge: Berlin 2030<\/em>. He was paid $28,000 (roughly 2 monthly salaries of senior engineers) for winning the challenge and is expected to obtain royalties when LM begins commercializing the shuttle. [2]<\/a><\/p>\n

In addition, it is important to discuss how the company is deploying distributed innovation. LM launches challenges and hosts an open innovation crowd-powered SaaS platform that community members can use to co-create<\/strong> products such as Olli<\/em>. But it is not only about cars, LM developed the Launch Forth<\/em> platform, which works with big-name manufacturers such as GE and the Airbus to help companies innovate and manufacture products faster.[3]<\/a><\/p>\n

In this process, it is critical for the company to get motivated talent. Participation can be due to either extrinsic or intrinsic factors. Extrinsic are related to rewards or just specific individual needs to perform the task. Intrinsic values are more emotional and comes with enjoyment, having fun and the social benefits of being part of a community. [4]<\/a> \u00a0LM is hugely leveraging the external factors through monetary prizes and royalties to further motivate its community<\/strong> (See Exhibit 4<\/strong>). Furthermore, it is relevant to note that LM not only outsource the idea-generation process<\/strong> which ends up in the vehicle design, but also the empowers the participants in the idea-selection process<\/strong> to vote in challenges and design contests (see Exhibit 5<\/strong>).[5]<\/a><\/p>\n

After analyzing the importance of open innovation in LM and how the company is using this megatrend, I think there is still room from improvement. My recommendation for Jay Rogers\u2019 company is that it appeal more to intrinsic values to motivate people and foster knowledge sharing<\/strong>.<\/p>\n

LM seems to be focusing too much on economic rewards. Trying to foment joy and a stronger sense of identity among the community members might trigger intrinsic motivation within participants and thus, less need for economic incentives. Optimizing on only one dimension might have the effect of limiting participation.[6]<\/a><\/p>\n

The second advice relies on that there are two ways to organize external innovation: collaborative community or competitive market (see Exhibit 6<\/strong>). Currently LM is in the competitive market group. Participants have economic incentives to differentiate, to search for novel solutions and to protect rather than share knowledge.[7]<\/a> I believe LM could take more advantage of the crowd-source innovation if it promotes mechanisms to further increase knowledge sharing within participants.<\/p>\n

To sum up, LM is changing the paradigm of the confidentiality in the vehicles development processes. It is leveraging its community-based innovation platform to deliver quickly, cost efficient and creative vehicles.<\/p>\n

However, I find myself struggling with the following questions:<\/p>\n