Auto Industry Innovation Spreads Out

North American carmakers drove product innovation in the past, but now the focus has shifted to suppliers including newcomers from outside the auto industry, says a new study by Booz & Co.

The consulting firm's 2010 Automotive Industry Perspective notes that tougher emission and fuel economy standards are pushing vehicle manufacturers in the U.S. into an unusual combination of fast-moving and broad-based technology expansion.

The demand on resources to meet the growth is too great for carmakers to go it alone, the report says. It points out that nonautomotive niche players developers of in-car electronics, for example are increasingly important. Increasingly, the role of carmakers will be system integrators, Booz says.

Vehicle producers and major suppliers must focus their R&D priorities, specializing in a manageable array of technologies and relying on alliances to fill in the gaps, Booz says. It cautions that managing these innovation partnerships will become a key to long-term success.

The Booz report also asserts that carmakers must improve their ability to manage uncertainty. Doing so, it says, will mean developing stronger market-sensing abilities and further refining the ability to integrate product development and production on a global scale.