FIAT : Open Innovation in a downturn (1993-2003) High-Tech Business Venturing course Workgroup V: Mariangela, Lorenzo, Vito, Emmanuel, Giovanni Pontedera, January 30, 2015
CASE STUDY • Founded in 1976 consortium in 1985 (partners Fiat Group subsidiaries) • 1980 CRF founded largest part of its R&D activities • 1990 CRF total workforce of ≈ 700 employees and revenues of € 32.5 million Innovative technologies Here goes the title of the presentation or the chapter
CRF ‘s TRADITIONAL CLOSED INNOVATION MODEL No participation Technologies in European or other transferred public funded only within FIAT research projects Funding only IP management from corporate very defensive level
90s carmakers downturn: CRISIS OF THE OLD MODEL The health of the global auto industry significantly worsened, with all major carmakers enduring terrible results sales of new vehicles sharply decreased negative results in the first half of 1993 The Fiat Group prepared itself to lay off around 12,000 employees in Italy and to significantly restructure worldwide.
The crisis hits CRF In 1994 Fiat Group’s subsidiaries cut their expensed in CRF by around 30% and corporate R&D was sliced by 70% . But CRF was prepared thanks to the work of Ing. G. Michellone , CEO of CRF since 1989.
Opening CRF to the market: Open Innovation External investors funding Overcoming the cuts research & development No participation Technologies in European or transferred only public founded within Fiat research Group projects External IP management investors not in the hands funding research & of CRF development
Opening CRF to the market: Open Innovation Technology is now also transferred to external Fast incomes customers No participation Technology in European or transfer to public founded external research customers projects External IP management investors not in the hands funding research & of CRF development
IP management Leaving IP management to Fiat HQ led to consequences: No participation Technology in European or transfer to public founded external research customers projects The common rail technology was sold External IP management investors not in the hands funding to Bosch for at least € 14.3 millions. research & of CRF development Billions in potential revenue were lost.
IP management To avoid doing such mistakes in the future a taxonomy of technologies was introduced. They were differentiated into: • distinctive : unique value for CRF and Fiat Group • standard : easily acquired from No participation outside of CRF or Fiat Group Technology in European or transfer to public founded external research • actual : protecting or improving customers projects competitiveness but not critical External Partial control of investors IP management funding in the hands of research & CRF development The classification of each technology was decided by CRF, not Fiat HQ!
The new challenges of Open Innovation: 1. Transferring competitivness (closed innovation) (open innovation) From ‘ shopping list ’ to ‘ full dinner menu ’ Transferring competitiveness required negotiating with clients showing the direct impact of the CRF technology on their competitive advantage. OUTPUT SHEET Tool introduced in CRF to produce this collaborative- interactive development with customers.
The new challenges of Open Innovation: 2. Stay focused or Turning Customers into Partners Risk of losing Search for Open focus of core RIGHT Innovation expertise CUSTOMERS CASE: Partnership with • could benefit today from CRF’s future technologies. BEGHELLI. • High mutual co-dependence with CRF • Advanced optical technologies in the mid 1990 ’s were not relevant for automotive industry but CRF did not want to abandon them. • BEGHELLI had immediate application for this technology (potential Right Customer). • Today this technology is essential for integrated automotive systems.
Participation in EU Projects European Carmaker’s Participation in the EU EUCAR V • High Benefit/Cost Ratio Framework Programme • Benchmarking • Relationships Establishment • Training of Junior Researchers Participation in Technology European or transfer to public founded external research customers projects Partial control External of IP investors management funding in the hands of research & CRF development
Implication in Organizational Structure CRF Organizational Structure Matrix
Researcher with a Briefcase Selling competitiveness Micro-Clients Overcoming Inertia Not Invented-Here Syndrome
Conclusions Change of the CRF ‘s business strategy under the leadership of Mr. Michellone Closed Innovation Open Innovation R&D of technologies exclusively transferred to FIAT group Outsourcing technologies to external customers. subsidiares. Funding for research from the corporate level. Funding of research from external and internal sources. No participation in EU projects. Growing involvement in in EU research projects (from € 2 million in 1992 to € 20 million in 2000). Sporadic relationship with external partners. Network of relationship with leading firms, universities and research centers. Defensive approach to IP. Trading approach and out-licensing of IP.
Conclusions Open Innovation as an emerging strategic approach to innovation management • It allows a firm to explore new markets and exploit opportunities, improving the return on investment in R&D. • It protects a firm’s technology base from the risk of severe resource rationalization during periods of crisis, • It confers technological and networking capabilities, key determinants of competitive advantage once the downturn is over. BUT IT IS NOT A FIREFIGHTING STRATEGY!!!!!!!
Conclusions After his appointment to CEO in 2004, Sergio Marchionne was able to capitalize on Mr. Michellone’s work during 90s
THE END Thank you!
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