CASE STUDY Founded in 1976 consortium in 1985 (partners Fiat Group - - PowerPoint PPT Presentation

FIAT: Open Innovation in a

downturn (1993-2003)

Pontedera, January 30, 2015

High-Tech Business Venturing course Workgroup V: Mariangela, Lorenzo, Vito, Emmanuel, Giovanni

Here goes the title of the presentation or the chapter

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

CRF ‘s TRADITIONAL CLOSED INNOVATION MODEL

Technologies transferred

• nly within FIAT

Funding only from corporate level IP management  very defensive No participation in European or other public funded research projects

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.

Technologies transferred only within Fiat Group External investors funding research & development IP management not in the hands

• f CRF

No participation in European or public founded research projects

Opening CRF to the market: Open Innovation External investors funding research & development Overcoming the cuts

Opening CRF to the market: Open Innovation

Technology transfer to external customers External investors funding research & development IP management not in the hands

• f CRF

No participation in European or public founded research projects

Technology is now also transferred to external customers Fast incomes

IP management Leaving IP management to Fiat HQ led to consequences: The common rail technology was sold to Bosch for at least €14.3 millions. Billions in potential revenue were lost.

Technology transfer to external customers External investors funding research & development IP management not in the hands

• f CRF

No participation in European or public founded research projects

IP management To avoid doing such mistakes in the future a taxonomy of technologies was introduced. They were differentiated into:

Technology transfer to external customers External investors funding research & development Partial control of IP management in the hands of CRF No participation in European or public founded research projects

• distinctive: unique value for CRF

and Fiat Group

• standard: easily acquired from
• utside of CRF or Fiat Group
• actual: protecting or improving

competitiveness but not critical The classification of each technology was decided by CRF, not Fiat HQ!

From ‘shopping list’ to ‘full dinner menu’

(closed innovation) (open innovation) 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:

• 1. Transferring competitivness

Open Innovation Risk of losing focus of core expertise Search for RIGHT CUSTOMERS

• could benefit today from CRF’s future technologies.
• High mutual co-dependence with CRF

CASE: Partnership with BEGHELLI.

• 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.

The new challenges of Open Innovation:

• 2. Stay focused or Turning Customers into Partners

European Carmaker’s Participation in the EU EUCAR V Framework Programme

• High Benefit/Cost Ratio
• Benchmarking
• Relationships Establishment
• Training of Junior Researchers

Participation in EU Projects

Technology transfer to external customers External investors funding research & development Partial control

• f IP

management in the hands of CRF Participation in European or public founded research projects

CRF Organizational Structure Matrix

Implication in Organizational Structure

Selling competitiveness Micro-Clients Overcoming Inertia Not Invented-Here Syndrome

Researcher with a Briefcase

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 subsidiares. Outsourcing technologies to external customers. 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
• pportunities, 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

Conclusions

THE END

Thank you!