Lessons from Big Auto's disastrous missteps

Startup AFS Trinity came to the Detroit show with a brilliant system for boosting gas mileage - but couldn't sell the idea. The company built and showed its own prototype.

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DETROIT (FORTUNE Small Business) -- If I had my druthers, I'd rather learn from someone else's screw-ups than face another of my own bone-headed business blunders. So I was all eyes and ears here at the North American International Auto Show, which opened to the public over the weekend after several days of press previews and glitzy industry events. If ever there were a poster child for how a small business should not play the innovation game, it's here at this massive shrine to All Things Automotive.

Traditionally I've been bullish about emerging technology in cars. Automotive audio, video and navigation are not subject to the limits of battery power, infrastructure and consumer indifference that stymie the rollout of new products like digital televisions and video-over-cellular services. In cars, new technology works. Consumers see the value, and they are willing to pay.

But that is the after-market. At the automotive mothership that is the factory production line, the tech news is far grimmer. Carmakers play the role of innovators - there is much talk here about new power plants and improved navigation and multimedia - but from a technological perspective, it's mostly smoke and mirrors. Today's cars sport cool gadgets and spiffy bodies, but inside they have the same old internally combusted engines and roll on the same old rubber tires.

The good news for small business is that the auto industry's sometimes feeble attempts to innovate offer a rare learning opportunity for the rest of us. Here is what I learned at the show:

Don't over-promise.

I have covered, purchased and wrestled with developing technology - much of it vaporware - for decades. And I can say with confidence that the auto industry takes the prize for talking up stuff that's just not there.

Rick Wagoner, chairman and CEO of General Motors (GM, Fortune 500), showed off a slick techno Cadillac at the recent International Consumer Electronics Show in Las Vegas and talked up the cool new technology coming down in cars. I took him at his word - hey, if a car guy can talk tech, then a tech guy can talk cars - and hopped a plane to Detroit.

But the techno-reality here from GM and other manufacturers is less than dazzling: I saw a couple of Ford (F, Fortune 500) models with voice-control using technology developed with Microsoft (MSFT, Fortune 500); some Chryslers with a couple of kids' video channels piped in using the new video service from Sirius Satellite Radio (SIRI), some Cadillacs and Minis with hard drives and Bluetooth connectivity, and "hybrid" drives - basically banks of batteries - that add a few miles per gallon of fuel efficiency.

But those are mere blips of innovation among hundreds of cars that are exactly like millions of cars already on the road. Hardly the American Technological Revolution Wagoner touted in Vegas - and enough to make me feel worse about GM and the auto industry's chances than had I not even come.

To me, this is a stone-cold reminder to not over-promise. Sure, like Rick, I'm tempted to exaggerate my shop's capabilities in order to drive business in tough times. But in the end, it's a mistake. I'll almost always look like a dope.

Partner with innovators

The lack of support for innovative small companies looking to amp up the auto industry is downright shocking to a technologist used to covering companies that must innovate to stay alive.

Even the smartest tech companies - Google (GOOG, Fortune 500), IBM (IBM, Fortune 500), Microsoft, and the rest - have active acquisitions groups that constantly gobble up new companies simply for their ideas. But the auto industry can't seem to get the hang of this basic techno-play.

Take a start-up out of Bellevue, Wash.: AFS Trinity Power Corporation. The company has developed a technology that powers most any car to a 150-mile-per-gallon range, with a 0-to-60 performance that is faster than some Porsches. Better yet, the AFS product is built from off-the-shelf technology, so nothing new need be developed.

How has the auto industry rewarded such innovation? By ignoring it.

AFS Trinity could not sell the idea as an idea. So it built a working prototype on its own dime, tested it and brought it to this show - and it still cannot get a deal done with a standing carmaker.

"We have had some very interesting inquires," says Edward Furia, the company's CEO. "But no deal at this point."

It makes me wonder: Where are the Ed Furias in my new-media business? Am I dealing with the best possible partners? Am I making innovation my friend or shunning the unknown - and possibly revolutionary - as an enemy?

Take the Feds' free lunch

The consumer electronics industry has never been shy about taking what the public sector develops and making a killing off it. Steve Jobs, for example, got the silicon chips for that first Apple (AAPL, Fortune 500) computer from the SoCal defense industry.

But the car industry hasn't mastered the techno-baton handoff. The 2007 Urban Challenge - sponsored by the Defense Advanced Research Projects Agency, GM and Carnegie Mellon - awarded $2 million for making a driverless Chevy Tahoe that navigated a 60-mile course around a mock city. Love it. The winning car was here in its full robotic glory, and GM was proudly placing the technology into a concept car.

But guess how long the floor rep said it would take to get some of this technology - remote sensing, fuel management, inter-vehicle communications - into a real market?

Five years, maybe longer. That's an eternity in tech time.

And there I was again, checking my own list of brainiacs. Do I have the best relationships with my New York schools? Am I using common public resources to boost my bottom line? Yes, sometimes I dream up cool stuff - but so do other people, some of whom are close by and dying to share their ideas. Do I know who they are?

In the end, the take-away for small business is simple: If you play the innovation game they way these car guys do - talk too much, do too little, and be unprepared to incorporate the new developments around you - your prospects will diminish even as the technological capacity around you flourishes.

The good news is that few of us on Planet Small Biz have the auto industry's enormous infrastructure, thorny union relations, and cherished institutional legacies weighing us down.

The better news is that we can watch how a once-great American industry responds to inevitable change. And we can choose to do it better.