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Detroit: Learn from the Apples, Amazons of the world

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Right now it’s a little embarrassing to be an American car manufacturer. You find yourself asking for billions in handouts so you can continue building cars that the market doesn’t want. If that weren’t bad enough, it appears that the energy-efficient models, like the Volt, that had been bragged about, won’t see the road till 2011. There are many Monday morning quarterbacks on this subject, but I can’t help jumping in and adding my suggestions for how these dinosaurs might turn things around. U.S. carmakers can learn from guys like Apple and Amazon to create a game-changing business where customers are begging for products.

Let’s start with inventory. On my drives to and from work, I pass several auto dealers. There are hundreds upon hundreds of cars sitting in the lots. This capital-intensive tradition is stupid. Nobody needs to have that many cars in the lots. The web model to learn from is Amazon, and the idea is to carry as little inventory as possible. Amazon has essentially become a supply-chain company. The products that pass through its massive infrastructure are less important than the speed at which they get to the customer. It has moved its warehouses closer to the consumer, and it monitors inventory so closely that it can tell exactly when to restock a local warehouse or when to discontinue an item. Better yet, have an on-demand system in which buyers purchase their custom-designed cars and factories build only those cars that are ordered. Why is it possible for me to customize and build my car online but not order it? Why must I be referred to a dealer? That’s a legacy idea that must go away.

Let customers order their cars online, and let them pick up their cars from the dealers. No more pressure sales in an overcrowded, rundown dealership. You could even provide an option for the car to be delivered to a customer’s home for a small fee. Now that would be service. Apparently, Toyota has started providing online ordering options with dealer pickups. I can order a 50-inch HDTV from Best Buy’s site and have it installed without speaking to a salesperson.

Solving the problem of the test drive is easy too. A customer goes to the website and picks the car they want to test drive. Either a local dealer provides them with a car to rent for a few days or manufacturers link them to a local car rental company.

My favorite tech-company analog for automakers would be Apple. Its focus on design, providing fewer products, making an amazing in-store experience and groundbreaking advertising offers so many lessons for automakers it’s impossible to list them all here. The easiest lesson to learn from Steve Jobs would be to cut product models to just a handful of beautifully designed market leaders. Anything that even smells like a second- or third-place product gets cut. The models that stay have more marketing power behind them. Too many brands mean the auto companies are competing against themselves. There are simply too many models chasing too few buyers.

The final idea that’s really going to stir things up is the suggestion that U.S. automakers stop building their own cars. Most car components are already outsourced anyway. Most companies don’t make their own brakes, interiors or external parts such as bumpers. Yamaha makes whole engines for Ford. Why not make the whole car? The only losers would be the people who are costing taxpayers anyway.

These ideas are not going to get rid of the biggest problem: lack of demand. Jobs are only created by product demand. My suggestions are not going to directly change demand for American cars. The most likely scenario is that demand for competitive brands would increase, and that the Big Three would become the Tragically Small Three leading to consolidation. Of course, some jobs and brands will be lost forever, but that sounds like a free market to me.

Author Richard Banfield

As CEO, Richard leads Fresh Tilled Soil’s strategic vision. He’s a mentor at TechStars and BluePrintHealth, an advisor and lecturer at the Boston Startup School, and serves on the executive committees of TEDxBoston, the AdClub’s Edge Conference, and Boston Regional Entrepreneurship Week.

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