Who Said Innovating Was Easy?
A BMW outpost deep in Silicon Valley is hunting for the car industry's next big thing. The results so far? Don't ask.
By Jesse Freund

(Business 2.0) – It's not too hard to think up the ideal car. Take, for instance, the one that Joachim Stilla, the engineer in charge of BMW's Technology Office, fantasizes about. It has a spray-on skin that resists scratches and a translucent firewall that lets passengers see the engine. The interior lights glow a cool blue to match the driver's serene mood and can be dimmed so that the kids can watch movies downloaded right to their seats. Should the driver get distracted, a voice warns him that there's a fire engine on his tail. Sounds cool, huh?

Unlike the rest of us, who can only dream about such a future, Stilla's job is to actually build it. The 40-year-old aeronautics engineer holds perhaps the most creative—and frustrating—job in the car business: He heads a staff of 20 engineers who are charged with finding the next mind-blowing innovation, the unexpected technological twist that will give BMW its zing. That's why his base of operations is in Palo Alto, in the middle of the most inventive place on earth, where outlandish ideas are the stuff of everyday conversations. Equally important, it's 6,000 miles away from BMW's bean counters in Munich. Stilla's bosses encourage him to try just about anything, and give him plenty of freedom.

Yet innovation isn't as easy as you might think. Even with a huge car company behind him, and Silicon Valley around him, Stilla's record is testimony to the fact that truly inspired breakthroughs happen about as often as lightning strikes in frozen hell: In its six years of existence, his Technology Office has put its stamp on only two ideas that actually reached production. And neither of them is exactly earthshaking. One is an adapter that rigs the iPod to play through the car stereo; it got mixed reviews. The other is a real barking dog: a central knob called the iDrive that controls an array of car functions. One critic, who struggled just to find a radio station with the iDrive, deemed it "a catalyst for manic depression."

You'd think Stilla would be nervous with that kind of a batting average. After all, BMW has set the bar high with such advances as seven-speed transmissions and rain-sensing, automatic windshield wipers. But Stilla's bosses say the Palo Alto office's modest record is simply a cost of doing business in a company that plows a bigger percentage of its revenue into R&D than just about anyone else in the auto industry. "We're very satisfied with the work of our colleagues in Palo Alto," says Jochen Mueller, a manager at BMW's Munich-based technology group. "We don't measure the Technology Office's success by saying they have to come up with five products every year. Investment in R&D is our life insurance."

Stilla's engineers drill just about every corner of the tech landscape for ideas, and most of the time they come up dry. Not too long ago, Stilla thought he'd hit a gusher when his crew found Aerogel, a nearly weightless silicon material used by NASA in Mars exploration. His team envisioned it as an insulator to seal off engine heat from the passenger compartment. But the price, nearly as much as gold, could prove prohibitive. His hopes were similarly dashed with Liquidmetal, a weird substance from a company by the same name in Lake Forest, Calif. The spray-on alloy had shown promise as a super-resilient exterior coating, but the idea lost appeal when Stilla's team discovered that Liquidmetal is also as brittle as glass. "We can't change a car every month, the way technology changes around here every month," Stilla says. "But we need to try."

He's had somewhat better luck tapping the local student population. BMW sponsors contests at Stanford that have led to a side-view mirror containing an infrared sensor and processor that calculates a person's height and could someday automatically adjust a car's seat, mirrors, and steering wheel. Stilla thinks the device is a winner. His next step is to take it to Munich for approval. Another student brainstorm, interior lighting that changes color and pattern to suit the driver's mood, has already gotten the coveted thumbs-up from Stilla's Deutschland peers. Whether either of them will ever see the light of day, though, is anyone's guess. "To produce usable innovations, auto engineers will go down more blind alleys than you've had hot dinners," says Jim Hossack, vice president at AutoPacific, a market research firm in Tustin, Calif.

But even ideas that do get Munich's blessing aren't guaranteed winners. The iPod adapter, hatched by one of Stilla's staffers and his buddy at Apple, has been the office's biggest success. In June, BMW began offering the $149 part, which connects an iPod placed in the glove compartment to the car's audio buttons. While the system is far from perfect—for one thing, the radio doesn't display the name of the artist or song—BMW has sold thousands of units. The sales may be modest, but the idea was certainly well ahead of the pack.

Equally cutting-edge was the iDrive, the über-controller to which the Technology Office contributed haptic technology, or touch-sensitive feedback. The console knob, introduced in 2001, was supposed to serve as a central command for functions ranging from air-conditioning to the radio. But drivers derided it as overly complex, and it has contributed to the disappointing sales of BMW's flagship 745i sedan. Protests Stilla, "Bring something new to market and you're taking a risk."

So it goes in the fast lane of invention. For every idea that gets past the drawing board, scores are rejected out of hand, and dozens more never get past the let's-take-a-look stage. Even those that are green-lighted in Munich don't necessarily make it in the marketplace. Yet Stilla soldiers on, undeterred. Ask him what's coming down the pipeline and he waxes enthusiastic over in-car Wi-Fi capabilities that pick up emergency-vehicle warnings and can download movies. If all goes well, that innovation could appear in a BMW by 2007. By then, Stilla hopes, there will be a million more where that came from.