The Ultimate Innovation Machine

CASE STUDIES
Innovations do not come about by chance, but result from the right combination of creativity and courage as well as systematic innovation management.
-Dr. Burkhard Gschel, BMW Group Board of Management
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The Ultimate Innovation Machine

Imagine a car is cruising at 80 mph in the fast lane on the highway, when suddenly the driver suffers a heart attack. But instead of causing a terrible accident, the vehicle takes over. It slows down, assesses the traffic around it, and pulls into the slower lane. It continues to decelerate, using the turn signal again as it safely pulls to a stop on the shoulder of the road. The hazard lights come on. The car calls an ambulance. It sounds like something out of a science-fiction novel, but its much closer to reality than that. Its a concept that BMW is refining, called Emergency Stop Assistant, which will be available in vehicles just a few years from now. BMW is practically synonymous with premium luxury, and has long been a leader in technological innovation in the auto industry. Customers worldwide expect not only style, but substance and performance from BMW. The company delivers on these promises by continually exceeding expectations and producing vehicles that are beautiful, technologically advanced, and thrilling to drive. But innovation at BMW isnt simply a new gadget on a dashboardits a long-term, carefully managed strategy for success. In an industry with long lead times, high developments costs, and considerable regulation (safety standards, environmental concerns, etc.), how does BMW balance principles of discipline and structure with those of creativity and imagination? How does the company ensure a constant flow of ideas without letting everything spin out of control? Like other top innovators, BMW focuses on a few simple but critical elements to generate significant results from innovation. Read on to learn how you can apply parts of the companys winning innovation strategy in your own organization.
Activate Innovation: P 646-257-5737 | F 866-447-8134 | innovate@futurethink.com | www.futurethink.com 2005-11, Future Think LLC. All rights reserved.
CASE STUDIES
The Four Innovation Capabilities

futurethink's Innovation Case Studies are designed to provide insights on todays leading innovators. Information about each of the companies we feature covers the four key innovation capabilities: Strategy, Ideas, Process, and Climate. Set a foundation that defines innovation objectives and mobilizes your efforts. The notion of serendipitous innovation is dangerously outdated. The secret to success lies in crafting an action-oriented strategy. It means setting a vision for your company to follow, and viewing innovation as an expected result, not a lucky one. Innovation should be handled like any business initiativewith an eye on growth, results, and profit. Think differently to develop original ideas that drive business value. In todays economy, the ability to continually fuel innovation is what separates winning organizations from the rest. Idea generation should be managed, purposeful, and clearly linked to business objectives. Leading innovators succeed by balancing out-of-the-box thinking with sound management principles. Create a streamlined and flexible approach to shepherd innovative ideas to market. The reality in every organization is that money is limited. To make sure youre spending effectively, you must have a streamlined process for innovation. A good process will help to consistently identify your best projects and enable you to move them forward more effectively. Build a thriving work environment that drives innovation across your organization. We live in a world where the new replaces the old very quickly. Only organizations that keep pace with the shifting marketplace will be able to stay ahead. So how do the best companies adapt? They cultivate a climate in which employees are encouraged to innovate in a continuous and consistent manner. The companies that stay ahead have made innovation part of their DNA.
futurethink analysts develop case studies by drawing from a mix of extensive research, organizational and customer interviews (where possible), and by experiencing first-hand interactions with the organization. We want to thank those individuals who contributed to this case study and provided the information found here which made the BMW story so fascinating. We hope the information contained on the pages that follow offer insights and inspiration for innovation in your organization.
CASE STUDIES The Center of Innovation At BMW, innovation efforts for the entire company are driven primarily by the Munich Research and Innovation Center, where over 7,000 employees toil away on products and ideas intended to propel BMWs future growth. BMW Group specialists are motivated by innate curiosity and the ultimate goal of creating the perfect automobile. This curiosity and desire for perfection leads engineers to find increasingly creative solutions to complex problems. BMW Groups Innovation Network is an integrated system that enables direct and open communication between engineers around the world. Worldwide teamwork is the underlying principle in daily work at BMW. The BMW Groups agile network, which includes its innovation and production networks, is distinguished by unconventional, flexible thought and action.
A Clear Imperative for Innovation

BMW states that innovation is one of its key success factors, and it is clear that theyve directed considerable resources toward it. A gleaming research and innovation center, satellite innovation hubs around the globe, specialized teams, and a clearly defined process come together to create repeatable, value-driven results from innovation.
BMW Research & Innovation Center; Munich, Germany
BMW Research and Innovation facilities around the world
CASE STUDIES
A Systematic Approach to Innovation

BMW uses a phased idea-management process that works like a funnelstarting with many ideas at one end and gradually narrowing down the list of active projects as ideas get closer to launch. The objective of the funnel approach is to better qualify projects and commit more resources to them as the likelihood of market launch increases. At any point in BMWs robust innovation process, an idea may be filtered out of the funnel if research and evidence indicates that it wouldnt survive as a business proposal. This process considers the ideas value and risk, determining whether it can ultimately be brought to fruition. Such evaluation guarantees that resources are dedicated to ideas most likely to succeed, thus optimizing the returns on new ideas. Although thousands of ideas enter the review process each year, only four or five end up making it all the way to implementation. BMW doesnt just kill ideas outright, however: any idea that doesnt pass the review process is tabled for later exploration or development. BMWs three-phase innovation process breaks down as follows: Innovation Research involves collecting ideas from a variety of external sources; researching new trends and market forces; and generating ideas internally to address known white spaces or neglected opportunities. Innovation Management involves the thorough filtering of ideas by multiple parties. Ideas are funneled through different groupsstarting with a centralized Innovation Strategy Board and ending with Innovation Field Councilsto ensure that any idea reaching implementation is truly viable and worthy of investment. Innovation Transfer involves the full development of an idea so that it becomes a working prototype or concept that can be launched in the marketplace.
CASE STUDIES Scouting for Ideas. Internally, BMW employs technology scouts from around the world to research and report on interesting, relevant industry and technological developments. Based in some of the most vibrant global technology hotspotsTokyo, Japan and Palo Alto, California for examplescouts are charged with staying ahead of cutting-edge developments that may enhance the BMW driving experience. A Portal for a Distributed Organization. Scouts submit interesting ideas and developments to Technis, BMWs intranet idea-management database. Every BMW employee can read about the scouts submissions and search through this database, offering further ideas for exploration. The Virtual Innovation Agency. The VIA (www.bmwgroup.com/via) is an online ideasubmission box accessible to the general public. The goal of the initiative is to encourage outsiders to participate in shaping the future of BMW. The site acts as an open invitation for outside parties to submit unusual innovations on the subject mobile future. In its first year and a half of existence, more than 1,000 suggestions came through the VIA portal, two or three of which ultimately made it to market maturity.
Innovation Research: Clear Guidelines and Casting a Wide Net

Leading innovators understand that innovation doesnt happen consistently unless its clearly defined and understood at all levels of the organization. While its true that, on occasion, innovation is the result of happenstance or luck, long-term growth is rarely sustained by random flashes of brilliance. Innovation, as seen by the BMW Group, does not mean developing new concepts and technologies simply because they happen to be new. Instead, new technologies must fulfill specific requirements in order to be acknowledged as genuine innovations.ii At BMW, a new idea is only classified as an innovation if:
It presents a clearly recognizable benefit to the customer It strengthens the character of the BMW Groups cars and brands Actual implementation of the idea would meet the greatest demands in terms of quality and reliability A sensible business case is attached to the idea
By setting a clear definition of what innovation means, BMW empowers all employees to be part of the process. Though these guidelines are stringent, BMW receives thousands of ideas from its team of more than 96,000 employees in more 100 different countries. Many come from the numerous BMW research centers around the globe (mentioned above). These centers act as satellite innovation labs that feed a constant stream of new ideas and insights back to company headquarters.
The Co-Creation Lab. This online community is a virtual meeting place for individuals interested in car-related topics, eager to share their ideas and opinions on tomorrows automotive world with one of the leading car manufacturers. The Lab was launched as a central platform through which BMW could organize ongoing co-creation projects and idea contests.
CASE STUDIES As members share their ideas, theyre able to collaborate with other users and the team of the BMW Group to turn those ideas into marketable realities. Launched in 2010, the first Idea Contest organized in the Lab, Tomorrows Urban Mobility Services, sought new ideas for mobility services in tomorrows urban areas. In total, nearly 500 users published approximately 300 ideas, which garnered over 8,000 evaluations and over 2,100 comments. Learn more at https://www.bmwgroupcocreationlab.com/ resources on core competencies without having to expend valuable time, energy, and money building internal capabilities from scratch. For the past decade, as technological innovations have become increasingly important in automotive innovation, BMW has fostered deep relationships with external firms to ensure it has access to the latest innovations that may one day become integrated into the world of automotive manufacturing. In a 2005 speech, Dr. Burkhard Geschel, a member of BMWs board of management, outlined the importance of partnerships and external collaborations to BMWs innovation program. For functionalities that are not considered to be BMW Group core activities, we use the competencies of our development and production partners. Through intelligent outsourcing and cooperation, we free up for ourselves the necessary personnel capacity and financial resources to be able to set benchmarks in the decisive brand-influencing fields of innovation. Benchmarks that our customers rightly expect from our products. Partnerships provide us with access to the virtually limitless innovation reservoir of the supplier market. iii
Lateral Thinking: Getting Ideas from Unexpected Places. New solutions are often sparked by seeking inspiration from the wildest imaginable fields, including architecture, art, and nature. Studying nature, for example, provides BMW designers and engineers with valuable insight for efficient technical solutions because the evolutionary process has constantly optimized natural functions. Following this line of thinking, aerodynamics scientists at the BMW Group have studied the streamlined bodies of dolphins to obtain new knowledge for designing automobiles. Championing and Partnering with Science. The BMW Group promotes constant dialog with scientists outside the organization. In addition to numerous joint projects with research institutes and universities, the BMW Group grants the internationally recognized and highly endowed prize for university students, the Scientific Award, every two years. With the motto Passion for Innovation, this prize promotes and honors the passion of young researchers and scientists taking an interdisciplinary approach to their work. Reaching Outside to Better Focus Inside. The BMW Group embraces external partnerships and collaborations with other leading businesses. Why? Because smart partnerships allow BMW to focus its
A key area of focus in BMWs partnership activities is in the area of in-vehicle electronics and operating systems. In partnership with companies like Google, Daimler AG, and Bosch, BMW has been working on AUTOSARthe Automotive Open System Architecture.
CASE STUDIES AUTOSAR is essentially a vehicle operating system that would be compatible with many of the consumer technologies on the market today (mobile phones, MP3 players, navigation systems, etc.). The system would leverage internet capabilities to feed information and entertainment into a vehicles main interface. BMWs ultimate vision is to create an open-source system that many auto manufacturers could customize and leverage. Imagine a future where your mobile smartphone is the brain of your vehicle. The signal your phone emits unlocks your vehicle when you approach, and allows you to start your car at the push of a button. Your seats and mirrors adjust to your specific settings, and your contacts, music, and favorite destinations are all synced up with your vehicles info-tainment interface. Best of all, your settings and information travel with you. When you rent a car for business travel or borrow your spouses vehicle, all your media, information, and preferences sync up with whichever vehicle youre using.
Innovation Management: Evaluating Ideas and Assigning Responsibility

As these ideas stream in from internal and external sources, how does BMW decide upon which ideas to focus? Its here where BMWs phased process moves from Innovation Research into Innovation Management. Like many top performers, BMW knows that to successfully execute innovation projects, you need a dedicated, committed group of people. Smart companies assign a team (either centralized or distributed) to oversee innovation projects. This group ensures that projects are guided by common standards and processes, and they also act as a go-to resource for teams to help shepherd ideas to launch. Innovation Strategy Board. BMWs larger Innovation Strategy Board (ISB) is in charge of managing and tracking the groups overall portfolio of ideas. This centralized team, located at the Research and Innovation Center, ensures that BMW stays focused on only the most promising
Innovation Management: BMWs Idea Funnel. Source: Business Innovation Council
CASE STUDIES opportunities. How does it accomplish this? The ISB tracks ideas from the point of initial generation all the way through project completion. The group then monitors project results once they have been completed and launched, and lessons learned can be used to inform decisions about new ideas in the process. The ISB, with a big-picture view of BMW Groups entire portfolio of past, present, and future ideas, uses its portfolio as a kind of opportunity dashboard. The group is easily able to see what has worked, what has not, whats coming down the pike, and what white spaces or opportunities need to be explored. The ISB is the first gate through which a new idea must pass. If an idea is truly new (it hasnt already been explored or isnt already in progress), the ISB passes it on to an appropriate Center of Competence.
Innovation Field Managers (IFMs). These specialists are tasked with making the final call on whether an idea should be implemented or not. Each IFM is in charge of a specific customeroriented Innovation Field. The current six Innovation Fields are:
1. Experience dynamics 2. Convenience and service 3. Safety and security 4. Concept cars and experimental vehicles 5. Aesthetics and value 6. Environmental acceptability
Centers of Competence (CoC). These groups represent various business units across BMW from engineering to marketing, the CoCs have deep expertise in the day-to-day operations of the company. Ideas that pass the CoCs evaluation are then categorized and passed to one of six Innovation Field Managers.
These broad categories are the basis for defining new market opportunities.iv Innovation Fields are not designed to be mutually exclusivenew ideas certainly overlap from time to timebut having core areas of focus allows BMW to speed idea exploration and development, while allowing employees to gain expertise and leadership in different areas. Ultimately, the Innovation Fields provide focus and lend traction to prioritized ideas and opportunity areas. Innovation Fields are also flexible. BMW adds and removes categories based on the state of the market and emerging trends. If an Innovation Field Manager marks an opportunity for further development, then the idea moves from the Innovation Management Phase to the Innovation Transfer phaseanother step closer to becoming a reality.
CASE STUDIES
Innovation Transfer: Field Councils and Implementation

The last stage in BMWs phased approach is Innovation Transfer, which covers everything from development through launch. Innovation Field Councils. These groups are tasked with developing an idea and guiding it toward final implementation and launch. Organized as crossfunctional teams, the Councils are made up of researchers, operations specialists, engineers, designers, and other employees from various levels in the organization. Innovation Field Councils hold Steering Committee Meetings in which they discuss recent efforts, evaluate breakthrough innovations and new ideas, and exchange information that might be relevant to different groups. In this way, the company prevents the formation of silosenabling knowledge, information, and expertise to be dispersed and utilized throughout the organization. At this point in the process, BMW may also assign specific activities to specialist divisions. For example:
Implementing Ideas. After an idea is developed by the Innovation Field Council and relevant groups, its ready to be released to market. Finally, all of the brainstorming, evaluation, experimentation, and fine-tuning is shared with the outside world. As a result of BMWs organized and systematic approach to innovation, many brilliant ideas have been brought to life. Here are a few examples: The Megacity Vehicle (currently in beta). As part of BMWs commitment to sustainability, it is working on a new car with the working title Megacity Vehicle. Set to launch in 2013, it will be part of a new series of BMW vehicles, called BMW i, which will embody highly efficient and sustainable mobility. In 2010, BMW invited 450 customers to field-test the MINI E, the companys first all-electric vehicle (and a pioneer in the industry, as most alternative-fuel vehicles are currently hybridelectrics), and starting in July 2011, customers can test the BMW ActiveE, which uses all-electric technology on the BMW 1 Series (small family cars, but larger than the MINI). Insights from these field tests will ultimately inform the final development of the Megacity Vehicle.v The challenge for BMW is to convince drivers and skeptics worldwide that the Megacity Vehicle can achieve incredible driving performance via electricity, while not sacrificing any of the premium comfort or style that BMW customers demand. Carbon-Fiber Reinforced Plastic. In order to make new vehicles light enough to be fully electricpowered, BMW has taken a revolutionary new approach to building components from carbonfiber reinforced plastic (CFRP). Its much lighter than a traditional aluminum or steel auto body, without sacrificing safety. The Megacity Vehicle will be the first volume-production vehicle with a passenger compartment made of CFRP. BMW sees this as the first step in opening a whole new chapter in sustainable vehicle development for the entire industry.vi
The BMW Technology Office conducts technology research in Silicon Valley. The Oxnard Testing Facility tests new products and refines working prototypes. DesignWorks USA, a subsidiary company, focuses on innovative product design both within and outside the automotive industry. Clients include Hewlett-Packard and Starbucks. Fast Company Magazine ranked DesignWorks USA as the #1 most innovative company in design in 2010.
CASE STUDIES Emergency Stop Assistant. BMW has long been a leader in the automotive industry when it comes to integrating computer technology systems, from the first in-car navigation system to the first full integration of the iPod into the stereo system. Now as part of Connected Drive (a package of technologies that connect car, driver, and the world around them), the company is refining a new concept called Emergency Stop Assistant. As mentioned earlier, it automatically detects that the driver is no longer manipulating the controls. It then utilizes a complex system of sensors, satellite guidance, and algorithms to determine the best course of action for taking the vehicle safely to the side of the road. After coming to a stop, it turns on the hazard lights and makes an emergency call. Rollout of this feature is still a few years down the road, but its an amazing look into the seemingly boundless possibilities for new vehicle features.vii
Stepping Outside of Core Competencies

While BMW has a history of partnering with established leaders in areas outside of its expertise (electronics, for example), recent developments have shown that its beginning to explore uncharted territory with a novel approach. Like many successful innovators, BMW tracks trends and uses them to evaluate and guide its innovation process. A few years ago, BMW became concerned about the growing global trend of urbanization. As more people move into cities, and city governments impose fees that discourage driving or parking in congested areas, the appeal of owning any car declines (regardless of whether its a BMW).ix To address this trend, BMW launched a $100 million venture fund in New York City in February 2011, called BMW i Ventures. The purpose of the fund is to invest in mobile services that improve personal mobility in urban areas and deliver extra comfort or smart advantages (intermodal travel, smart parking, recommendations, communication, etc).x In essence, these location-based services may have nothing to do with cars at all, but theyll be BMW-funded and BWM-branded.
Concept BMW App Store. In addition to the opensource vehicle operating system mentioned earlier in this case study, BMW also supports existing technologies with custom apps. For example, a customers iPhone can already be used to unlock the car doors, sound the horn, turn on the heat, and a host of other simple tasks. Another app for the MINI, called MINI Connected, transforms any MINI into a social network on wheels with Internet access and Web radio.viii As mobile apps continue to gain widespread use, along with consumers increased demands for seamless integration, BMW is sure to find more ways to expand the capabilities of its Connected Drive technologies.
It may sound strange, but it is part of a bigger plan to prepare BMW for a future in which urbanization strongly affects consumers feelings and decisions about cars. The BMW i series (mentioned above) is also part of this initiative. These bold developments signal smart thinking from BMW, along with its ability to see the larger picture and reposition itself as a company concerned with mobilitynot just with cars.
We want to become future-proof.

-Joerg Reimann, BMW Strategist
xi
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CASE STUDIES
Whats Next for BMW?

Innovative design, engineering, and technology are at the very core of what makes a BMW the ultimate driving machine. Every detail of a BMW is evaluated with a single goal in mind: to enhance the joy of driving. By integrating new, useful, and valuable developments into their vehicles time and again, BMW has retained its position as the worlds best-selling premium carmaker in a very competitive market. Looking ahead, the development engineers of BMW Group continue their work on a new generation of exhilarating vehicles that reduce fuel consumption and emissions. The very same ingenuity that goes into building consumer-facing products also goes into the structured, yet creative process that drives the innovation behind those products. As the company forges ahead with bold ideas and a long-term strategy for executing them at the highest level, were sure to see more gamechanging developments roll off its production lines in the years to come.
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CASE STUDIES
What Can You Learn from BMW?

Set a foundation that defines innovation objectives and mobilizes your efforts. The BMW Group has clearly defined what innovation means for its business, and has given innovation a home to ensure that it is well supported. What types of ideas are you specifically looking for to drive your organizations success? What is the definition of innovation in your organization? If there isnt one, what should it be?
Think differently to develop original ideas that drive business value. BMW leaves no stone unturned when it comes to seeking out new ideas. From online submission channels for the general public to technology scouts located in various innovation hotspots, BMW does everything it can to fuel its pipeline of ideas. How are you creating opportunities for your customers and fans to contribute their ideas and insights? How can you better leverage their enthusiasm? How can you do more to stay ahead of rapidly-changing sectors that are adjacent to your own business?
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CASE STUDIES
Create a streamlined and flexible approach to shepherd innovative ideas to market. BMW has built a robust, reliable process to ensure that every idea is considered, filtered, and pushed to the appropriate business unit. What workflows do you have in place to move ideas forward? What can you do to better streamline processes and get to market faster?
Build a thriving work environment that drives innovation across your organization. At BMW, employees rely on informal networks and a flat structure to move ideas forward quickly. Everyone in the company is encouraged to take risks in the name of progress and innovation. How can you break down some of the hierarchy that so often hinders innovation from being effective and taking off? How will you create a climate of innovation that embraces change and welcomes a bit of rebellion to drive success?
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CASE STUDIES
Additional Reading
2010 World's Most Admired Companies. Fortune. 4 March 2010. 2010 World's Most Innovative Companies. Fast Company Magazine. March 2010. Borroz, Tony. BMW Chooses Schlock for Its Next Art Car. Wired Autopia. 3 February 2010. Breen, Bill. Driven by Design. Fast Company. August, 2002. Edmondson, Gail. The Secret of BMWs Success. BusinessWeek. 16 October, 2006. Edmondson, Gail. BMWs Dream Factory. BusinessWeek. 16 October, 2006. Kiley, David. Driven: Inside BMW, the Most Admired Car Company in the World. San Francisco: Wiley, 2004. Sutherland, David. From Roadmap to Roadway: Managing Innovation at BMW. The Launch Institute. Goeschel, Brukhard. Research Success Through Collaboration. Speech: SAE World Congress 2005. 13 April 2005. Murphy, Cait. 10 Most Admired for Managing Talent. Fortune. 04 March, 2008. Levinson, Eugenia. The Worlds Most Admired Companies. Fortune. 02 March, 2007. Schultz, Jonathan. BMW Officially Announces BMW i Brand. The New York Times. 21 February 2011.
Online References
Autosar: <www.autosar.org> log: <www.bmwblog.com> BMW Co-Creation Lab <www.bmwgroup-cocreationlab.com> BMW Education: <www.bmweducation.co.uk> BMW Facebook Fan Page: <www.facebook.com/BMW> BMW Group: <www.bmwgroup.com> BMW Innovation Lounge: <www.bmw.com/com/en/insights/technology/innovation_lounge/overview.html> BMW on YouTube: <www.youtube.com/bmw> BMW USA: <www.bmw.usa.com>
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ENDNOTES
i ii iii iv v
Gschel, Burkhard. Innovations The fuel for the future of the automobile. Mchner Kolloquium 2006. 03 October, 2006. BMW Group. The BMW Groups focus on innovation. www.bmwgroup.com. Goeschel, Brukhard. Research Success Through Collaboration. Speech: SAE World Congress 2005. 13 April 2005. Sutherland, David. From Roadmap to Roadway: Managing Innovation at BMW. The Launch Institute. BMW Group 2010 Annual Report.
vi vii
BMW Group 2010 Annual Report. BMW Group 2010 Annual Report. BMW Group 2010 Annual Report.
viii ix
Muller, Joann. The Ultimate Driverless Machine. Forbes. 20 April 2011. www.forbes.com/forbes/2011/0509/global-2000-11-europe-bmw-autos-drivenow-driverless-machine.html
x xi
www.bmw-i-usa.com/en_us/i-ventures/
Muller, Joann. The Ultimate Driverless Machine. Forbes. 20 April 2011. www.forbes.com/forbes/2011/0509/global-2000-11-europe-bmw-autos-drivenow-driverless-machine.html
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CASE STUDIES

The Ultimate Innovation Machine

The Four Innovation Capabilities

A Clear Imperative for Innovation

BMW Research & Innovation Center; Munich, Germany

BMW Research and Innovation facilities around the world

A Systematic Approach to Innovation

Innovation Research: Clear Guidelines and Casting a Wide Net

Innovation Management: Evaluating Ideas and Assigning Responsibility

Innovation Management: BMWs Idea Funnel. Source: Business Innovation Council

Innovation Transfer: Field Councils and Implementation

Stepping Outside of Core Competencies

We want to become future-proof.

Whats Next for BMW?

What Can You Learn from BMW?

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