AutomotiveAcomprehensivestudyoninnovationintheautomotiveindustryContentsExecutiveSummary4OliverWyman’s“CarInnovation2015”studyMegatrends:InnovationFocus6Envisionthelong-termchancesofinnovationsCarsforanagingpopulationNewcarsformegacitiesDetermineyourindividualinnovationfocusTechnology:InnovationPotentials 10 Recognizetechnologychancesandmanagetherisks“CarInnovation2015”technologyroadmapChancesofandthreatstohybridpowertrainsChooseandmanagetherightinnovationprojectsCustomer:InnovationAcceptance 14Includethecustomer’sperspectiveWhyinnovationsfailintheeyeofcustomersAssessingthetakerateofoptionalequipmentBuildcustomerunderstandingBusiness:InnovationEconomics18KeepthesystemfromcollapsingBasicfiguresonR&DThechancesoflow-costdesignsInnovateyourassemblyconceptDeviseR&DactivitiestomeetthecostagendaStrategyandOrganization:InnovationManagement22 Createan“InnovationStrategyFramework”thatsuitsyourneedsOEMexample:“Architecturalrevolutionizer”Supplierexample:“Systemconnector”Checkyour“InnovationStrategyFramework”TensuccessfactorsAreasofactionforinnovationmanagersInnovationConsulting30Fiveconsultingservicesininnovationmanagement3IntroductionThechangingroleofinnovationsintheautomotiveindustryDearReader,In2001,MercerManagementConsulting(nowOliverWyman)publishedacomprehensivestudytitled“AutomotiveTechnology2010.”Sincethen,thisstudyhasbecomethebasisformanystrategydiscussionsintheindustryandinspiredmanyofourautomotiveconsultingprojects.Sixyearslater,thenewstudy,“CarInnovation2015,”continuesthistrend-settingworkandexpandsthetechnologicalperspectivetoallaspectsofinnovations,notjustthetechnologicalones.“CarInnovation2015”analyzesthecompleteframeworkofautomotiveinnovations:societalandgovernmentalinfluences,technologytrends,thevoiceofthecustomer,innovationeconomics,andinnovationmanagementandstrategies.Formorethanninemonths,over30expertsatOliverWymanhavecontributedto“CarInnovation2015.”Thestudycomprisesanin-depthexpertpoll,aconsumerpanel,astrategicchoiceanalysis,athoroughanalysisofmorethan300innovations,acardealerfieldstudyandintensivedatabaseresearch.Thisbrochureintroducesthefivetopicsthat“CarInnovation2015”addresses:megatrends,technology,customer,business,strategyandorganization.Italsocontainsrecommendationsandareasofactioninvolvinginnovationmanagementatautomotivesuppliersandcarmanufacturers.During2007,wewillpublishspecialbrochurescoveringeachchapter–and,ofcourse,therewillbein-depthcompanypresentationsbyOliverWymanexpertstothoseinterestedinrealizingsomeoftheideaspresentedinthestudy.Yourstruly,JanDannenbergandJanBurgardOliverWymanAutomotivejan.dannenberg@oliverwyman.com+498993949473jan.burgard@oliverwyman.com+4989939497454“Stagnationmeansregression”toinnovationmanagementintheautomotiveindustry.AlloftheautoexecutiveswhomOliverWymaninterviewedinthecourseofthestudywereconvincedthatinnovationwasoneofthemostimportantsuccessfactorstomaintainingastrongcompetitivepositionintheautomarket.Innovationisalsoakeytoresolvingmostoftheglobalchallengesthattheindustryfaces.Withoutinnovationsbytheautoindustry,theentireconceptofindividualmobilityisputatrisk.Initsanalysisofmorethan300innovations,OliverWymanhasidentifiedthepotentialforcommercialblockbusters,suchashybrids,sequentialmultistageturbochargers,light-emittingdiodes,intelligentdriver-machineinterfacesorelectro-mechanicbrakingtechnologies.Electronicsremainsthebiggestenablerofanddriverbehind60percentofallinnovations.Butthefocusisshiftingfromsingletosysteminnovations,i.e.newfunctionsinacarthroughthenetworkingofexistingcomponentsandmodules.Almostallareasofacarwillimprove:fuelefficiency(upto30percent),emissions,safetyandsecurity,seamlessconnectivityandinfotainment,drivingdynamicsandperformance,comfort,flexibilityandroom–andwithmorevalueforthemoney.However,bothOEMsandcarsuppliersdonotalwaysmeettheneedsoftheendcustomer.Mostcardriverswantsound,reliableproductsataffordableprices.Thetotalcostofownershipwillremainthemostimportantbuyingfactor–afactthatlimitsthenumberofsuccessfulinnovationsintheautoindustry.Today,theentireinnovationprocess,fromthecustomer,thecardealerandtheOEMmarketingdepartmenttoR&DatbothOEMsandsuppliers,ishighlyinefficientandineffective.Withinthenexttenyears,approximatelyEUR800billionwillbespentonR&D–roughly40percentofthatmoneywillbeinvestedincorrectly.Forthisreason,everyOEMandsuppliermustscreenitsinnovationportfoliotoidentifytheinnovationsthatreallypromisetomeetthedriver’sneeds.Anintegratedandfocusedmarketingplanwillhelppositiontheconceptofinnovationinthedriver’smind.In2005,theindustryinvestedEUR68billioninR&D–thatis4.2percentofsales,orEUR783pervehicle.Thecontinuouscostpressureintheautomotiveindustrycreatedbylegislation,competition,increasingriskandstagnatingcustomerdemandshasastrongimpactoninnovationmanagement.Traditionalcost-cuttingprogramsarenotenough–ourforecastshowsanadditionalEUR1,500ofcostreduction(or11percentofcosts)mustbeimplementedtomakecarproductionaprofitablebusinessinthefuture.OEMsandsupplierswillhavetosignificantlyimproveefficiencyinallR&Dprocessestokeepcostsundercontrol.Furth