My father was “old school. ” He grew up in the Bronx, NY, joined the Navy at the age of 17 to serve in WWII and became a NYPD police officer when he returned from service. He proceeded to walk a “street beat” in the toughest neighborhoods of NY back when cops walked patrol by themselves. He eventually worked his way to be a motorcycle cop chasing speeders in the Bronx.
He was also an interesting character (to say the least) complete with handlebar mustache and New York attitude. He often spoke fondly of his old Indian, the brand of motorcycle he rode on the streets of NY, and while escorting such dignitaries at President Kennedy, President Truman, Fidel Castro and the Queen of England.
Stories. He never lacked for stories. My Dad had “escorted” (the police term for the motorcycle riders (“escorts”) in a motorcade) President Truman, for example, on multiple occasions. On one occasion, he stood at President Truman’s side after the President had left office and asked him, “Mr. President, now that you are out of office, how should I address you?” President Truman characteristically responded, “Just call me Harry.” He had also “escorted” the Queen of England when she was in NY and, while visiting Buckingham Palace many years later, he struck up a conversation with one on the palace guards, mentioning to him that he had “once escorted the queen.” He didn’t realize that the comment probably was ill advised until later when he saw two guards pointing at him, snickering. It turns out that “escorting” the Queen means something very different in England – they thought he was claiming to have escorted her to a ball or palace event! Of course, they didn’t know that snickering at a rough-and-tumble ex-NY cop might also have been ill advised!
One day, while chasing a speeder at over 90 miles per hour on his beloved Indian, his bike went one way and he the other. Not a good thing to do while traveling at 90+ miles an hour on a motorcycle. I am telling this story in good humor since not only did he live to tell about it, surviving a broken neck, he lived a mostly healthful life until he passed away, still ornery, at the age of 80.
Jay Rogers is also an interesting guy. His grandfather OWNED the Indian Motorcycle Company. He went from Princeton University to a startup in China and then to the US Marine Corps, where he served for 9 years. In the middle of these 9 years, he did something very few do – applied to Stanford, got accepted at Stanford and then proceeded to turn them down. He turned them down since he felt he had more service to give to his country, a duty that he felt was more important than his business degree, a decision I greatly admire. He eventually finished his tour and “settled” on that “other” business school, the Harvard Business School (as Yale faculty, Harvard will always be the “other school”) where he earned his MBA. His time at Harvard was often spent working on his dream, a dream to not just start his own automobile company, but to revolutionize the entire automobile industry, a lofty goal to be sure.
Turns out that this goal was even loftier than you might think – he has done something else that no one else has done before – his company, Local Motors, has “3D printed” a car. Yes, you read that right. The key to this story, however, rests not with the impact of “additive manufacturing” (“3D printing”) on automobile manufacturers, but rather with reverberations throughout every aspect of manufacturing:
“Think of walking into a store, the likes of which you have never seen before, order a car of which there are 5 new models every month, and you can order it and take delivery that afternoon … Then, if you get into a crash and the materials for that car only costs $2,000, so you take the components that work off it – there are, after all only 50 parts – and print a new car. You had 4 seats to begin with, what about 5 seats this time?”
Local Motors was founded in 2007 with the vision of designing, building and delivering vehicles differently. The concept is relatively simple: uses the collective brainpower of the crowd by having innovative people from all over the world design the car. Then, use this design – which can easily be modified by any buyer for uniqueness – to produce it in local “micro factories” that produce vehicles locally faster with far fewer parts (50 versus a traditional 25,000+ utilizing between 500 and 1,500 suppliers). For example, they brought their Strati vehicle to production in ¼ of the time it took Tesla to bring its first model to production and used 1/100th of the capital that Chevrolet used to develop its Volt electric vehicle. They can do this in part because they “crowd source” both interior and exterior design from community users. For the Strati, the global crowd source contest winner was an Italian, Michele Anoe, who came to the US from Italy with tears in his eyes saying “This is a country that put a man on the moon and now I’m helping in this country 3D print a car.” He didn’t even have a passport and Local Motors had to move mountains to get him over to the U.S quickly. It truly is a different world in which we live today.
Perhaps most importantly, under traditional automobile manufacturing, with its 25,000 parts and 500 to 1,500 suppliers delivering parts, you can’t change quickly. In just 4 weeks, Local Motors used crowdsourcing and designed a car, the Strati, designed by someone in Italy, with just 50 parts. Because of this, they are able to control all aspects of the production, back to front in the value chain. Much like Amazon, they can control – and earn margin on – every step. Much like Tesla, they have learned that owning the chain right down to the retail level enables them to leverage their platform and community of engineers and designers in ways that few others can imitate. It’s something Amazon learned a long time ago. According to Jay Rogers:
“Car companies have killed each other on the retail end because they sell the same product to a ton of different retailers – dealers – and then they all compete for the razor thin margin of price. We won’t do that in our business because we control the chain. And you’ve heard of Tesla fighting to distribute products differently to the world and they are being fought tooth and nail by the dealers of the world and we have to stop that because it’s stifling innovation.”
Illustrating one of the key principles of Strategic Control, the ability to leverage strength in one market space and from one value chain to another, Local Motors has taken its ability to design, build and deliver vehicles and expanded to work with GE on microwave ovens and rapid design testing, with Dominos Pizza and BMW on parts, and with Airbus in 2016 on drones. Own the value chain back to front in one industry and then leverage this to other industries and value chains, much as Amazon has done.