I’ve been reading The Ikea Way, and lessons from the book have popped up on an almost daily basis.
The basis of Ikea as a company have always been to design functional and “good” looking furniture for the every day person, at a reasonable cost primarily by removing the middle man. This is obviously the dream for most businesses that produces any type of goods, control the entire flow (Ikea didn’t want to control the availability of wood/manufacturing but had to buy Swedwood in the end to ensure delivery capacity).
One industry that is moving faster than it has since the first mass produced product was released is looking more and more to be the Car industry, you have your giants based out of Detroit and Japan. For Detroit based businesses it seems like it’s all going downhill, and i am not sure how they will turn their faith around. Japanese businesses are steaming ahead, and Toyota is set to take the throne as the biggest producers of cars in the world this year. The innovation in the car industry is happening primarily in two categories.
1. Electric cars - You have small new companies that are focusing on using new battery technology to achieve a extremely “energy” saving way of moving forward.
2. Cheap cars - having spent considerable time in China, and also in India and Asia overall you have a thirst for cars, the number of cars being bought in Asia is on a stunning growth curve, obviously the GDP is growing and purchasing power is getting higher, but still far away from that of a western country.
I was reading this New York Times piece on “taking a whack at making a car” the other day, not that it was one of the top pieces i’ve read this year at Nytimes, but it was still interesting. I thought there was one quote in the article that was a bit amusing:
“David Cole, chairman of the Center for Automotive Research, an industry-financed research group in Ann Arbor, Mich., said there was little chance that a start-up could succeed in creating a car for the mass market. The entrepreneurs’ optimism, he said, reflects ignorance of manufacturing costs, regulatory hurdles and intricate technical challenges involving heating, ventilation and safety.”
David Cole might be completely right what do i know, but Cars are made in a reasonable similar way to how they have been made for a very very long time, which brings me to another nytimes piece discussing innovation - One of the largest problems from my view with large corporations is that it’s hard to get innovation through all the way, which is really why start ups exist in some markets.
Also how well David Cole know the cost of production in countries like China and India i do not know, i remember speaking to a friend who runs a apparel factory a bit outside Hong Kong, he told me they had done research and discovered if they factory in towards the middle of China by 100 miles each 10 years, they could continue to pay the same salaries for the next 100 years (adjusted with inflation).
So that brings me to the enormous human powered capacity that exists to create cheap vehicles in these countries, what’s left at cost would be the cost of material which due to the fast growth is however going up.
Which brings me to the point of the Ikea Way - There is currently cars that are very close to arriving on the public market for a lot less money that what is currently out there, primarily the car Tata is set to launch next month that will cost around 2500$ in the Indian market. Being a big fanatic of cars there is only one question left having seen a lot of the so called “cheap cars” that will revolutionize the market.
Why do they have to be so UGLY?
Every year there is ton’s of car shows where car manufactures and design companies (pininfarina etc) show new concepts, a large part of them don’t look all that good, but every year there is a couple that stand out, just as there is ready made templates out there for most designing, i ask myself, why these start ups and large companies taking a shot at a huge market simply don’t buy an existing design that have received good reviews?
Below is an example of 2 cars, one is a concept that was never made, the other one is in production.
Can you guess which one is designed by a manufacturer trying to create a cheap car?
And obviously people in India will like a different look to the people in Sweden, but overall there is almost always points in a design that can be used for different markets and then have it modified slightly depending on market. But as Ikea to have shown is that Design can be “nationless” - The same sofa/bookcase/coffee table/bed etc that gets sold in US also gets sold in Sweden and China.
So i am very exited to see how 2008 will turn out for the car industry, i am not saying it’s easy to make a car, but i believe we will see it being turned around within the next 2 years, now all that’s left for the chinese/indian manufactures is to fly in someone who used to work at Volvo to get the safety working, and someone from BMW so it feels like a quality machine and they should have a good shoot at grabbing piece by piece of the worldwide market.
If you are interested in some examples of cars that are targeting the lower end of the market you can view a slideshow at businessweek (Accompanying article)
PS. can someone please make a lightweight SUV for US market so soccer mom’s can stop polluting the air, lighter car = less pollution. The average US car lets out 4 times the pollution as the average car, and it’s twice as bad pollution wise as the average Chinese car! According to Nytimes piece americans want BIG and powerful cars… how come BMW can squeeze out more power from a 2 liter engine than GM can from a 6 liter one… must just be lack of innovation on GM’s side.
PS2. Andy Grove, Co-founder at Intel spoke about innovation in this Portfolio piece - Where he suggested “Or as my email to Immelt urged, it could be G.E. building an electric car and taking on the energy industry. These are companies big and powerful enough to solve intractable, industrywide problems and produce lasting change.”
I don’t think that’s a bad idea either.
