“Dealership customers are doing vehicle-related Internet searches right in front of salespeople during negotiations.” – Darin George in Wardsauto

How will we buy our cars in the future? It is doubtful we will still be standing in the physical locations of dealerships we see today facing a sleazy salesman. Instead, maybe we will experience a virtual test drive before actually ordering the right car via an app or website on our smart devices. Or maybe we will design and build our own cars. Here’s a short clip about the potential future of car manufacturers:

Local Motors (LM) is an Arizona-based car manufacturer running on a business model that stands out within the global car industry. The most unique element of their company must be the inclusion of various stakeholders’ knowledge in designing, conceptualizing, and producing cars. LM allows amateur designers from around the world to send in their ideas for vehicles (the product line also includes a type of bicycle). However, also professionals, customers and partners are allowed to add value to the design and production phase. The crowd of LM is a highly diverse online workforce and together they make one of the most innovative vehicles in the world. Even BMW recognized the hidden talents of LM when they teamed up with the company for an “Urban Driving Experience Challenge”. The crowd of LM was asked to come up with new features and functions to improve the BMW driving experience.

How does LM work exactly?

The business model of LM revolves around the idea of co-creation and open-source. People from all kinds of backgrounds are welcome to join the online car community. They can submit their designs or ideas via the platform and are also empowered to comment or like the works of others. Via a voting system, the most popular design is selected and then the work is opened up for others to start co-creating. It is important to note that all original designs are protected by “Creative Commons”; a non-profit that provides licenses. Once a design is complete, it can be ordered by customers up to 2000 times, meaning the editions are rather limited. The production of a LM car takes place in a local micro factory creating local jobs and sustainability gains. The customer that ordered the vehicle is actually allowed to actively participate in the building process and can get training from the LM community. Lastly, the blue prints become readily available to the LM members who can download them freely and these prints are again protected by “Creative Commons”.

Why would this be the future?

Business models are increasingly evolving around the consumer. In order to remain competitive, it becomes crucial to create an exact fit between a consumer need and a product or service. The consumers of today are much better informed about the alternatives and can set higher demands. LM decided to empower the consumer as much as possible but they also got rid of a tunnel vision on car manufacturing. Part of their success lies within innovation and co-creation, but a major competitive advantage would have to be the fact that they claim to “bring vehicles to the market at 1/100^th of the cost and 5 times faster than the traditional vehicular development and production paradigm” as stated in the 2014 report of the European Union on Design for Innovation. Although it must be noted that LM aims for the niche markets where consumers enjoy being part of the car production process, we can admire them for their innovation and co-creation efforts. How can a traditional car dealership and manufacturer battle this unique way of producing and selling cars? How can competitors match LM’s pool of knowledge?

References:

Dervojeda, K., Verzijl, D., Nagtegaal, F., Lengton, M., Rouwmaat, E., Monfardini, E., et al. (2014). Design for Innovation. European Commission, Business Innovation Observatory. European Union.

George, D. (2015, March 15). Car Dealership Salespeople Should Lose the Bicycle Helmet. Retrieved April 3, 2015, from Wardsauto: http://wardsauto.com/dealers/car-dealership-salespeople-should-lose-bicycle-helmet.

Ramaswamy, V., & Ozcan, K. (2013). Strategy and Co-creation Thinking. Strategy & Leadership , 41 (6), 5-10.