Gaining a foothold in the automotive supply chain has never been easy. For the first one hundred years, however, most of the players were companies that operated exclusively (or at least primarily) in the automotive markets and, therefore, intimately understood its complexities. Those that did not at least came from manufacturing pedigrees, with the same level of obsession with quality and process that is encoded into the automotive DNA. But as we have seen for the past decade or so, the times they are a-changin’.
As cars have come more and more to resemble computers on wheels, and as the industry continues to transition to connected and automated vehicles, the ecosystem becomes increasingly ripe for disruption from a different breed of company with speed and agility at its core, but not necessarily process-oriented manufacturing excellence. Tech companies, after all, are not accustomed to making products that are directly involved, as automobiles are, in over one million fatalities globally each year. While cries in the media of a “clash of cultures” between Detroit and Silicon Valley are certainly overblown, there has formed a certain sort of “cultural exchange program” that is here to stay.
So, how does a tech company that comes from the “move fast and break things” school of thought successfully navigate an industry that painstakingly manufactures a product that quite literally moves fast and—even with an intense focus on safety, when something goes wrong—breaks things?
First, get involved and stay engaged in this new mobility ecosystem. There is no shortage of opportunities to do so with organizations, if you know where to look. The Original Equipment Suppliers Association (OESA) recently held its quarterly Mobility Supplier Form in Silicon Valley, where I had an opportunity to speak to a mixed audience of established Tier 1 auto suppliers and mobility startups on this subject of automotive and tech collaboration. That event also featured an excellent AutoTech Connect Matchmaker program—OESA’s first of many—where dozens of potentially fruitful introductions were made between entrepreneurs with promising tech and the very companies responsible for most of the technology in cars on the road today.
OESA is just one example; there are numerous other associations including MICHauto and the PlanetM Landing Zone, which put on similar events involving their own membership bases and other industry stakeholders. These groups help set the auto industry agenda, provide educational seminars and bring together top talent and decision-makers. For both automotive and tech, talent drives innovation, making industry events important venues to better assess opportunities and meet potential partners. Incredibly brilliant, passionate people working in both the auto and tech industries have a genuine desire to meet other people and discuss mutually beneficial projects.
Once the door opens and potentially productive conversations begin, it is important to spend time with key management, to understand their perspective, bench strength, future plans and the overall health of their companies. In a cyclical industry that can be so impacted by both internal and external factors, it’s equally important to understand the relevant supply chain by reviewing product portfolios, assessing their market position and, if possible, by speaking with suppliers and customers up and down the chain.
There is no substitute for doing the proper homework. So, after appropriate NDAs and confidentiality agreements are in place, begin to share preliminary product information. Remember: even though your company might provide only part of a system, it is mission-critical to understand as much as possible about the entire integrated solution while safeguarding information that the other party might take advantage of were it to turn from customer to competitor.
Throughout this courtship process, a technology provider must never lose sight of its long-term market strategy and intellectual property portfolio. Is this a single or multipurpose relationship? What are the competitive advantages of the combined product? Will further engineering, design and development be needed to implement this specific solution? Even if the customer isn’t paying separately for those additional services, will the technology provider retain the ability to take advantage of the resulting intellectual property to the extent that it can be used for other customers?
Only after conducting the appropriate due diligence should your company consider entering into an agreement, which is when the fun really begins. Depending on the stage in the product life cycle, the relative strengths and weaknesses of the parties, and their respective goals, the relationship might take one or more of several different forms. Stay tuned for my next blog focusing on best practices in structuring these collaborative relationships.
In the meantime, the attorneys in Warner’s Automotive Industry Group do more than just provide superior legal counsel. We know the people and the players, and are always willing to help make introductions when our connections can bring value. Give us a call and put us to work for you.