Fiat: Open Innovation in a Downturn (1993-2003)

In the midst of a worse than expected economic downturn, Italy suddenly discovered that one of its companies had reached a status of worldwide excellence. This is Fiat Group Automobiles Spa (Fiat), the well-known Italian carmaker, which was claimed by President Obama and his auto industry task force on March, 30th to be “the only route to survival for Chrysler”. Today’s Fiat is the result of an “extreme makeover”, engineered and steered by Sergio Marchionne since its appointment as CEO of the Fiat Group in 2004. However, this article will show that Marchionne’s makeover was preceded – and possibly favored – by another revolution, occurred in the early 1990s, which radically turned around Fiat’s R&D center organization and strategy. As the Italian carmaker, like many other players in the automotive industry, was going through troubling times in the early 1990s, fundamental changes in the approach to R&D and technological innovation allowed the Fiat Group to: (a) maintain and reinforce its in-house R&D activities (b) build and enlarge its networking capabilities within the automotive sector and across different industries (c) end up and advance the development of a family of innovative fuel-efficient engine technologies, which have been one of the essential ingredients for the success of the new car models lunched in the Marchionne’s era and have had such an important role in the Fiat-Chrysler deal. The protagonist of the makeover in the R&D and innovation strategy of the Fiat Group during the 1990s is Centro Ricerche Fiat (CRF), the company of the Group deputed to R&D and technology development. This article will show how CRF managed to keep the company’s “innovation engine” running despite a heavy downturn of the industry, adopting and mastering a strategic approach to innovation that resembles and anticipates most of the underpinnings of what would be known as the Open Innovation paradigm. The CRF case is interesting because it shows how Open Innovation can represent a strategic approach able to protect the firm’s innovation capability from the risk of severe resource rationalizations during periods of crisis, and to confer a starting point to replicate innovation capability once the downturn is over. This is an aspect that the growing literature on Open Innovation has not looked into thoroughly yet. The history of CRF further allows to discuss a number of organizational solutions a firm might be required to adopt in order to enable an Open approach to innovation. In particular, it indicates that the efforts to streamline the adoption of Open Innovation need to be very pervasive and should be targeted to several dimensions of a firm’s organization, i.e. structures, organizational roles, planning and control and performance management systems, corporate values and individual competencies and attitudes.