Today, however, car companies look less like pyramids and more like hubs and spokes connecting product teams: teams networked across the globe to one another and to myriad suppliers, a little like open-source software designers. By 2000, the most advanced car companies -- Volkswagen Group, for example -- migrated to "modular" design strategies, mandating a sharing of underlying components. Imagine cars built up from so many Lego pieces, which could be shared across the group and much more spontaneously than platforms were. Imagine not having to settle for the prix fixe; rather, order à la carte yet pay the same price for the meal.
What Volkswagen Group put in place, in other words, was an organizational architecture that positioned designers across its brands to network freely with component suppliers working to group standards. It is at this level of the ecosystem -- that of first-tier suppliers and their suppliers -- where economies of scale make sense. The keys to making so much freedom work are brand focus and clarity. GM, alas, did not learn that lesson quickly enough to avoid bankruptcy. Forget health care costs and SUVs. GM simply stuck with too many platforms -- 15 by one count -- and distributed these over a dozen brands. Inevitably, most of its cars became undistinguished while the costs of complexity grew. The Volt portends a new approach. Virtually every component in the Volt not specifically reinvented for an electric powertrain was snatched from existing GM product programs.
GM will probably produce about 30,000 Volts in the first two years after launch. Nevertheless, the car is clearly energizing suppliers -- again, from battery makers to the managers of charging data. And given how many innovations boil down to code, the Volt is reviving opportunities, particularly for American suppliers.
A ROLE FOR GOVERNMENT
This focus on suppliers, where the focus belongs, frames the role of government. Yes, the Obama administration has engineered a rise in CAFE standards -- targets for vehicle miles per gallon -- and the House has passed a cap-and-trade energy bill that, if passed by the Senate, will almost certainly pressure energy companies to increase renewable sources of energy. But I got the sense from talking to Posawatz that improving the mileage of internal combustion engines is like improving the storage capacity of tape cassettes. It is much more important, he thinks, that governments at all levels help the base technologies of batteries, components, and the smart grid get off the ground, and also help enforce technical standards, like SAE J1772, to engender a settled environment in which an array of supplier start-ups can compete.
The Obama administration would seem to agree. The stimulus package has made critical investments in all pieces of the ecosystem. This includes $500 million for producers of electric drive components, including electric motors, power electronics, and other drivetrain components; and also $400 million in grants for the purchase of thousands of plug-in hybrid and all-electric vehicles for test demonstrations in several dozen locations. The stimulus package also allocated more than $4 billion to the development of smart grid technology. In August, Duke Energy applied for $200 million in federal infrastructure funds to accelerate its $1 billion electric grid modernization project in Ohio, Indiana, and Kentucky. Note, however, that when Obama signed the stimulus package, he was introduced by Blake Jones, the CEO of Namasté Solar, a company of 60 employees. Obama appeared eager to stress that the energy sector will be driven by thousands of fast, smart start-ups growing bigger, not by a few established engineering giants getting a makeover.
The point is, there are far too many living things in the emerging ecosystem to be anticipated by any government or major OEM. It will take an implicit partnership of hundreds, perhaps thousands, of suppliers to fill out the technology. The key is to bring them into alignment. "If governments act to consolidate standards," Posawatz says, "they can really make a difference in catalyzing competition among suppliers." He would not want to impose standards prematurely and cut off promising avenues for innovation. (Presumably, OnStar's ambitions are also on his mind.) But when the catalyzers of the new auto industry are so entrepreneurial and distributed, technical standards hardened by government become virtual roads and bridges. They are more vital to electric cars than actual ones. The faster we get to standards, the better.
This principle, of catalyzing competition, is an endless subject I cannot do justice to here. To build out the grid Posawatz envisions, the government must help reduce other obvious barriers to entrepreneurial teams converging on a problem. The administration might look at an outdated patent office, which has been swamped by software developers in recent years -- filings mainly from big companies, whose fat patent portfolios needlessly block or intimidate entrepreneurs. It might look at facilitating the exchange, categorization, and monetizing of intellectual property, which cannot flow unless governments engender mutual trust.
Some will persist in calling such government socialist. But you listen to Posawatz and you know that there is no contradiction between a catalytic commonwealth and an ownership society. You also know that the old socialism is finished, not because of natural greed or the invisible hand or even because it required, as Oscar Wilde said, "too many evenings." Socialism is finished because the old machine-industrial capitalism against which it arose is finished, superseded by technologies so transformative that it seems a privilege to be alive just to witness their diffusion.
Bernard Avishai teaches business at the Hebrew University of Jerusalem and writes about business and politics.
