Ford and GM Need Business Model Innovation--Look to India's Nano.

Congress just loaned $17.4 billion to Ford, General Motors and Chrysler, but it didn’t do what it should have done—seriously mandate major changes in the distribution system of the US carmakers. Thanks to heavy lobbying, some 40 states have laws prohibiting consumers from buying directly from Ford, GM and all other car-makers. These auto franchise laws force consumers to go through car dealers. This is an unnecessarily expensive way of doing business in an age of web connection. It protects a distribution system that has a great deal of local power, but makes less and less economic sense.

Web 2.0 disintermediates the middle person in most businesses and certainly the car biz. Why can’t we simply go on line, choose our colors and options, order our car and pick it up someplace nearby, or at the factory itself?

The Tata Nano $2,500 has invented a new form of distribution system in India that bypasses most car dealerships. This cuts costs and makes the car more affordable to upwardly mobile Indians.

Thanks to the Information Technology and Innovation Foundation’s Robert D. Atkinson and Mark Cooper for the shout-out on this issue. the ITIF is doing great work in urging innovation in government. The Obama administration needs to get a much better handle on innovation before it pours hundreds of billions into the economy to pump it back to life.

This is a key moment for CHANGING the economy. We need to revive the economy by reforming the economy, using Web 2.0 technology. We need to focus on intangibles—investing in education, R&D health—not just tangible infrastructure projects.

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