IMVP's fourth phase, Navigating Auto's Next Economy (NavAuto), launched in 2001. This new phase, which will guide research through 2004, responds to sponsor interest in capitalizing on IMVP's historic strengths while examining critical industry challenges. Through NavAuto, we integrate IMVP's strong research capabilities on the extended enterprise with the new opportunities afforded by e-business and with issues of environmental management and sustainability.
Key Research Thrusts for FY01-04
Managing the Extended Enterprise
- Benchmarking the Value Chain
- Modularity and Outsourcing
- R&D -- Product Development Strategies
- Building Skills and Capabilities Across Boundaries
E-Automotive
- e-Supply Chains and Hubs
- e-Powered Consumers/Build-to-Order
- e-Enhanced Product Development
- Telematics: Vehicle as IT/Telecom Platform
Visions for a Sustainable Future
- Green Drive Trains
- New Materials, Recycling & Environmental Management
- Mobility Solutions
NavAuto initiatives are already at work in our Research Portfolio projects.
Navigating Auto's Next Economy
The global auto industry has moved with surprising speed to engage the challenges and opportunities of its own New Economy. IMVP will organize Phase Four research under the three main topics below.
Managing the Extended Enterprise
Once the prime example of Old Economy vertical integration, the auto industry now faces the same pressures to reconfigure the value chain that have transformed the faster-clockspeed high technology industries. Automakers are increasingly reliant upon large and sophisticated Tier One suppliers that take on design and logistics responsibilities and make investments in capital equipment and advanced technology development. Alliances among automakers and with firms outside the industry are increasingly common too as the costs of developing new technologies and of serving global markets strain the resources of even the largest firms.
Collaboration is the key to survival in the next economy. Automakers must be prepared to leverage relationships with suppliers, distributors, technology alliance partners, and customers more intensively. Only those firms that skillfully develop and manage the capabilities of this extended enterprise will thrive.
Faced with the overwhelming complexity of this task, automakers and their partners are investigating models drawn from other industries (IT and consumer electronics) to test their applicability and value. Furthermore, global realignment of the industry proceeds at a startling speed, leaving only ten automotive groups worldwide, each searching for advantage in the industry's new economic geography. Increasingly, firms launch product and process experiments in developing countries and only later transfer the innovations back home.
These developments are stretching the management capabilities of even the largest automakers and requiring new skills from employees at all levels. More and more, individuals must work together across company and country boundaries. The industry's approach to building skills and capabilities will be closely watched, given its continued importance as a path to economic development and jobs.
How can the extended enterprise best be managed to coordinate the activities of so many interdependent firms? What holds the extended enterprise together at a time when long-term relationships are threatened by pressures for speed, technological innovation, and constant cost reduction? What is the relevance of models drawn from other industries? What can be learned from the early experiments with these models? What collaborative or pre-competitive activities at the industry level can help automakers confront the daunting complexity they face? The largest portion of IMVP's research investment will be directed towards answering these and related questions.
As we enter the auto industry's second century, we see powerful signs of change that could foretell the next dominant production paradigm. Central to all these changes is the Internet, which is already transforming how information is used and how coordination is managed in this most complex of industries
E-business offers tremendous potential for reducing waste and inefficiency, redistributing activities along the value chain, and providing new means for collaboration. These e-effects will be evident in product development, procurement, manufacturing, and distribution separately, but the greatest impact will result from end-to-end integration of the value chain, from the final customer back to initial product planning.
While consolidation in the industry and plans for an industry-wide Internet exchange suggest a continuation of strong and centralized control by the dominant automakers, we believe that e-automotive developments will ultimately speed the move away from the old vertical model. As key vehicle functions move from mechanical to electronic controls, and as the vehicle becomes a platform for computing and telecom applications (telematics), the IT and electronic sectors will affect (and infect) auto's competitive dynamics.
Consumer desires for customization will challenge the industry's long-established push approach to distribution and sales. As expectations are raised by New Economy experiences in other parts of their lives, e-powered consumers will be drawn towards build-to-order models where they play a co-design role and production is pulled by real-time information about their preferences.
Ultimately we predict that this will be a transitional stage -- what we now identify as e-business initiatives will someday be the norm for how business is done in this industry. By focusing on e-business now, we hope to catch the inflection point in the trajectory of change -- the point where the continued evolution of mass and lean production gives way to a new emergent logic, a new way of thinking about making things.
Visions of a Sustainable Future
The conflicting demands being placed upon the automobile today are unprecedented in their scope and number. Individuals as citizens may call upon governments to pursue the control of automotive emissions and fuel economy and to alleviate problems of traffic congestion. Yet as consumers, they may purchase large SUVs with poor gas mileage and oppose fuel taxes that would lessen automotive use.
Automakers are trying to address both sets of customer requirements, typically through green initiatives that are independent of their ongoing product and operational activities. Yet the automaker who can persuasively link their current green strategies to a future vision of sustainability, from a competitive, environmental, and economic development perspective, may enjoy a strong advantage in both corporate reputation and consumer attractiveness.
Opportunities certainly exist. New drive train technology, by disrupting the dominant vehicle design, may spur product innovation and create openings for new entrants. New lightweight materials can lessen the tradeoffs associated with green vehicles. The green goals of recycling vehicle content and minimizing the environmental impact of manufacturing are beginning to affect automaker decisions. Consumers seeking to simplify their lives may rush to support a mobility solution, provided by firms that use information technology and access to a broad inventory of vehicles to offer a bundle of products and services that meet their overall mobility needs.
While opportunities abound, the costs of moving beyond current industry product architecture and infrastructure are huge and the technological uncertainties are high. If hybrid drive trains win widespread acceptance, the commercial prospects for more radical technologies like fuel cells may be impaired. New materials pose their own dilemmas with respect to cost and product performance. Planning for end-of-life recycling of vehicles often conflicts with other trends in vehicle design and technological innovation. Finally, the outlines of a mobility business model are still unclear. Figuring out how best to go green will be the major strategic battleground in auto's New Economy.
The three cross-cutting themes link across the main research topics, but also identify important elements of IMVP's research perspective and strategy.
IMVP already maintains ties to researchers and research groups that it does not directly fund, and we seek to expand our network in the future. We will plan to bring the best work of our research partners to the attention of IMVP sponsors, either through our working paper series or through presentations at sponsor conferences.
Current alliance partners include: the Three-Day Car Project of the International Car Distribution Programme at Cardiff University (Prof. Daniel Jones); the Globalization Project at the Industry Performance Center (Dr. Timothy Sturgeon); the Material Systems Laboratory at MIT (Prof. Joel Clark); and the Cooperative Mobility Program at MIT (Prof. Daniel Roos).
We are currently exploring research relationships with the following entities: the Wharton e-Business Initiative (WeBI, co-directed by Profs. Raffi Amit and Thomas Garrity); the MIT Center for e-Business (CO-directed by Profs. Erik Brynjolfsson and Glenn Urban); GERPISA (the European-based research network on the auto industry); and with the Sloan Foundation-funded industry centers that have close ties to autos.
To navigate a clear course during this time of tumult, industry leaders need a deep understanding of the dynamics of change that will shape the next economy. IMVP has a long history of helping the auto industry find its way during periods of transition -- most notably during the emergence and diffusion of lean production as a alternative production paradigm to mass production. In its role of honest broker, IMVP works to create a neutral space in which confidential data gathered from the industry is securely analyzed and reformulated to provide new frameworks, perspectives, and tools.
IMVP offers its sponsors three primary navigational guides:
1) insights from its global research, including the opportunity to participate directly as a research site, and early access to working papers from its international network of researchers;2) regular sponsor meetings, both regional and international, where the implications of that research can be discussed in an open and candid environment;
3) special events focused on developing future visions for the industry, through scenario-building, use of simulations, and encounters with provocative ideas and thinkers from other domains.
While the next economy can potentially rejuvenate the auto industry, it's tough to feel much excitement at a time when the decade-long struggle to become lean and the fierce battle for global market share has left many companies -- large and small -- feeling worn out, stretched too thin, and discouraged by low margins and weak support from the financial markets. In IMVP's new phase, we hope to deepen your insights into the industry's present-day situation, as well as to stimulate your enthusiasm, optimism, and ideas for the industry's future.
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Email
for program updates:
IMVPmail@mit.edu
Program Leadership
John Paul MacDuffie
Co-Director
Associate Professor in Management,
the Wharton School, University of Pennsylvania
Michael
Cusumano
Co-Director
Sloan Management Review Distinguished Professor of Management
John
B. Moavenzadeh
Executive
Director
Donna
Carty
Program
Manager
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