Read part 1 of this post for background.

By the early 1920s General Motors realized that Ford, which was now selling the Model T for $290, had an unbeatable monopoly on low-cost automobile manufacturing. Other manufacturers had experimented with selling cars based on an image and brand. (The most notable was an ad by the Jordan Car company.) But General Motors was about to take consumer marketing of cars to an entirely new level.

Market Segmentation

General Motors had turned the independent car companies acquired by its founder Billy Durant into product divisions. But in a stroke of genius GM transformed these divisions into a weapon that Ford couldn’t match. With the rallying cry “a car for every purse and purpose,” GM positioned its car divisions (Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac) so they would cover five price segments – from low-price to luxury. It targeted each of its brands (and models inside those brands) to a distinct economic segment of the population. Chevy was directly aimed at Ford – the volume car for the working masses. Pontiac came next, then Oldsmobile, then Buick. The top-of- the-line Cadillac offered luxury and prestige announcing you had finally arrived at the top of the conspicuous consumption heap. Consumers could announce their status and lives had improved by upgrading their brands.

GM had one more trick to make this happen. Within each brand, the top of the line was just a bit less expensive than the lowest priced model of the next expensive brand. The goal was to convince the consumer to spend a little more to trade up to a more prestigious brand.

Market segmentation by price was something no other automotive manufacturer had ever done. While other car companies could compete with one of GM’s divisions, few had GM’s capital and resources to compete simultaneously with the onslaught of car models from all five divisions.

Planned Obsolescence

While market segmentation allowed GM to use its divisions to reach a wider market than Ford or Chrysler, this didn’t solve the problem of market saturation. By the late 1920’s, most everyone in the U.S. had a car. And cars lasted 6 to 8 years. Even worse, the market was now filled with used cars that provided even lower cost basic transportation. Sloan, the General Motors CEO, faced two seemingly unsolvable challenges:

• How do you get consumers to abandon their perfectly fine cars and buy a new one?
• How do you turn a product that competed on price and features into a need?

In another stroke of genius, GM invented the annual model change. Sloan borrowed this idea from fashion where styles changed every year and applied it to automobiles starting in the 1920s. General Motors would change the external appearance of cars every year. Sloan preferred to call it “dynamic obsolescence.”

Styling and design became an integral part of GM’s strategy. Sloan hired Harley Earl to set up GM’s in-house styling staff. Earl would run it from 1927 to 1958.

Before Earl, cars were designed by in-house body-engineers who focused on practical issues like function, costs, features, etc. Each exterior component was designed separately to be functional – radiator, bumpers, hood, passenger compartment, etc. Some companies used third-party bodymakers to set the style , but GM was the first to take car design away from the engineers and give it to the stylists.

The concept of yearly “improvements”, whether styling or incremental technology improvements, every model year gave GM an unbeatable edge in the market. (Henry Ford hated the idea. He had built Ford on economies of scale – the Ford Model T lasted for 19 years.) Smaller car makers could not afford the constant engineering and styling changes they had to make to … Next Page »

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A Boston-area security tech company and the University of Michigan are involved in one of the most ambitious—and potentially controversial—transportation projects of our time. It could have major impact on federal legislation, and almost everyone you know.

Picture this: You’re driving in your car, approaching an intersection. Maybe you’re speeding a little, going 40 mph in a 35 zone, say. Unbeknownst to you, another driver is racing down the cross street and is about to run a red light (probably texting or something). This could spell disaster. But instead, your car picks up a wireless signal from the other vehicle. A beeping sound or flashing light on your dashboard alerts you to slow down, so you hit the brakes. Disaster averted.

Now let’s take it a step further. Maybe the alert is hooked into your car’s control system, so if you don’t put on the brakes, your car does it automatically. And maybe that’s fine with you. But you might be a little worried about giving up that kind of control in life-and-death situations. After all, computers get hacked and software crashes. Not to mention, you might not want your car broadcasting its speed and location out there for all to see (especially not the cops, since you were speeding).

This scenario isn’t the future. It’s happening already—at least the driver-alert part. In six cities around the U.S., trials of about 100 drivers each are underway to see how people react to in-car alerts (such as collision warnings, do not pass, and vehicle stopped ahead). But the next step is bigger. In Ann Arbor, MI, some 3,000 cars will be equipped with onboard wireless devices for communicating with each other and signaling to drivers when there’s an imminent hazard. This 12-month pilot study, which was announced recently and starts next August, is being led by the University of Michigan’s Transportation Research Institute (UMTRI) through a $14.9 million contract from the U.S. Department of Transportation. The state of Michigan has been heavily involved as well.

The goal of the federal initiative is, ultimately, to save lives. In the U.S., auto accidents are the leading cause of death for people aged 15 to 34; more than 30,000 people are killed on the nation’s roadways each year. The hope is that with new early-warning systems in place, a sizable fraction of would-be victims could be saved—some say 80 percent of non-alcohol-related cases—especially when high speed is involved.

The idea of wirelessly connected cars isn’t new, of course. The field of vehicle telematics has been around for years, with applications in fleet management, tracking, and safety. But advances in GPS location technologies, wireless communications, sensors, hardware, and algorithms are enabling smarter, better-connected vehicles to be tested on a bigger scale. And recent breakthroughs such as autonomous road-racing vehicles and Google’s self-driving car are starting to propel the technology into the mainstream.

Nevertheless, the Michigan study raises some serious real-world concerns. “This is a massive system with tremendous security and privacy implications,” says Ed Adams, the chief executive of Security Innovation in Wilmington, MA. And that’s exactly where his software security firm comes in.

Security Innovation developed the mobile software being used in the U-M study to … Next Page »

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It was the most advanced consumer product of the century. The industry started with its innovators located in different cities over a wide region. But within 20 years it would be concentrated in a single entrepreneurial startup cluster. At first it was a craft business, then it was driven by relentless technology innovation and then a price war as economies of scale drove efficiencies in production. When the market was finally saturated the industry reinvented itself again—one company discovered how to turn commodity products into “needs.”

They opened retail outlets across the country and figured out how to convince consumers to flock to buy the newest “gotta have it” version and abandon the perfectly functional last year’s model.

No, it’s not Apple and the iPhone.

It was General Motors and the auto industry.

In the Beginning
At the beginning of the 20th century the auto industry was still a small hand-crafted manufacturing business. Cars were assembled from outsourced components by crews of skilled mechanics and unskilled helpers. They were sold at high prices and profits through nonexclusive distributors for cash on delivery. But by 1901, Ransom Olds invented the basic concept of the assembly line and in the next decade was quickly followed by other innovators who opened large scale manufacturing plants in Detroit – Henry Packard, Henry Leland’s Cadillac, and Henry Ford with the Model A.

The Detroit area quickly became the place to be if you were making cars, parts for cars, or were a skilled machinist. By 1913 Ford’s first conveyor belt-driven moving assembly line and standardized interchangeable parts forever cemented Detroit as the home of 20^th century auto manufacturing.

Feature Wars
The automobile industry was founded and run by technologists: Henry Ford, James Packard, Charles Kettering, Henry Leland, the Dodge Brothers, Ransom Olds. The first twenty-five years of the century were a blur of technology innovation – moving assembly line, steel bodies, quick dry paint, electric starters, etc. These men built a product that solved a problem – private transportation first for the elite, and then (Ford’s inspiration) – transportation for the masses.

Market Saturation
Ford tried to escape the never-ending technology feature wars by becoming the low cost manufacturer. Fords River Rouge manufacturing complex – 93 buildings in a 1 by 1.5 mile manufacturing complex, with 100,000 workers – vertically integrated and optimized mass production.

By 1923, through a series of continuous process improvements, Ford had used the cost advantages of economies of scale to drive down the price of the Model T automobile to $290.

When the 1920’s began there were close to a 100 car manufacturers, but the relentless drive for low cost production forced most of them out of business as they lacked capital to scale. For a brief moment, half the cars in the world were now Fords. To make matters worse, … Next Page »

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I visited GM’s Advanced Technology division in Silicon Valley on August 4, the same day the Detroit giant revealed its second-quarter financial results. The numbers were far better than one might have expected, given the automaker’s troubled recent history. GM said it brought in $2.5 billion in net income in the quarter, which was a bit less than it had earned in the previous quarter but nearly double the figure from a year earlier, back when the company was still mostly owned by Uncle Sam. The same day, GM said that its market share, after six years in free fall, has started to tick back upward.

Now, that’s encouraging data—but your mind is probably stuck a few sentences back, saying, “Wait, what? GM has an office in Silicon Valley?” Innovation, after all, isn’t a big part of the brand image at a company where the most iconic and profitable product is still the massive, gas-guzzling Chevy Suburban SUV.

But indeed, GM (NYSE: GM) does have such an office—inside a converted HP manufacturing facility in Palo Alto, on the same street with more conventional Silicon Valley players like WePay, mSpot, and Fry’s Electronics. GM doesn’t play up the facility’s existence in the press, and it took me more than a year to score an interview with its managing director, Byron Shaw. But once I’d toured the place and had a chance to quiz Shaw on his mission, I realized I’d picked a pretty appropriate time to visit. The situation at the office was—well, far better than one might have expected, given the automaker’s troubled recent history.

The biggest achievement for the 10-person outpost, which Shaw set up in 2006, is that it has managed to stay open for five years, despite the company’s bankruptcy, and broader turmoil in Detroit and the larger economy. “Surviving through the 2008-2009 downturn was key for us,” says Shaw. “We were able to maintain this operation without any cuts or loss of resources during that time. That was a big thing.”

Byron Shaw

But GM has a common-sense reason for keeping the Palo Alto office open, and it’s this: When you’re in your car, you’re not just driving anymore—you’re likely in “infotainment” mode, toggling between satellite radio, the GPS navigation system, cell-phone calls, and the like. Which means the components that make a car stand out in the marketplace are no longer made just from steel, rubber, or glass, but also from electronics and software. “The writing is on the wall,” says Shaw. “Look at what a car is today, and look at what it will be in 20 years. If you want to be competitive you have to have the best software and electronics in the industry, and you won’t get there if you don’t participate in Silicon Valley.”

Shaw’s squad doesn’t actually write software or build electronics. Rather, its job is to build relationships with all the people who do—so that when a new idea comes along that might make a future GM car better, the company knows about it.

Take Terminal Mode as an example. One staffer from Shaw’s office represents GM within an informal group of companies called the Car Connectivity Consortium (Honda, LG, Motorola Mobility, Nokia, Samsung, Sony, Toyota, and VW are also members). The consortium is working on a way to make the infotainment system in your car into an extension of your smartphone. The idea is to let you access the content and apps on your phone via the in-vehicle sound system and LCD displays, with all user-interface elements automatically optimized for use while driving. (Sorry, no Doodle Jump allowed.)

Terminal Mode is both a set of Internet-based standards for moving all this data around, and an emerging system for evaluating and certifying new apps to make sure that they don’t exceed driver-distraction guidelines. Shaw says that Silicon Valley is “pretty much ground zero” for the consortium’s negotiations over Terminal Mode. For GM customers, the benefits of the company’s participation will be … Next Page »

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In February, Munich-based car giant BMW set up a corporate fund, BMW i Ventures, in New York City, with the goal of fostering startups that are developing location-based technologies. The fund’s first investment was MyCityWay, a company founded by three former Wall Street execs who created a series of apps designed to help people find products and services in 50 cities around the world—starting with their hometown of NYC. BMW is currently searching for office space to house the fund and an accompanying technology incubator.

BMW’s head of Project Mobility Services, Bernhard Blattel, is based in Munich and working with a team of four New York-based colleagues to get i Ventures off the ground. Xconomy spoke with Blattel by phone about why the automaker is fostering the development of technologies that are not necessarily car-based, and why it chose New York as the fund’s home.

Xconomy: What was the genesis of BMW i Ventures?

Bernhard Blattel: We were seeing trends that we thought provided growth opportunities for a company like BMW. One trend is growing urbanization—the tendency for people to move into urban areas. These people will still have the need for mobility, and the desire to be comfortable when they’re being mobile.

One enabler of transportation in urban areas is electric cars, which speaks to new products, like our new i3 and the i8 vehicles. But on the other hand, we think that connectivity, location-based services, and the rising penetration of smartphones will make the future a great enabler for a new set of services that will help customers to be more mobile.

We believed that we could combine our engineering know-how, products, great brand, and marketing with the agility and the drive and innovative ideas within startup companies. That’s why we created i Ventures and decided to invest in these companies.

X: You created the fund and chose its first investment in parallel. Why that strategy?

BB: When we started the plan for BMW i Ventures, we thought it was important to show our board and other people internally what we meant when we said we were going to invest in these new companies. So we had to very quickly focus on making the first investment.

We chose MyCityWay because it is a one-stop city portal. It goes way beyond classical concentric services, and provides a complete menu of city information. We were able to demonstrate immediately what the mission of BMW i Ventures is.

X: But the MyCityWay app was not designed to be used in a car. So why is it of interest to BMW?

BB: It’s an example of the scope we have for Project Mobility Services. Of course, mobility services will sometimes have to do with cars—that’s our home turf. But we’re convinced that the key to success of this new field is to … Next Page »

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Cambridge, MA-based Zipcar, the auto-sharing company, plans its initial public offering of 8.3 million shares to be priced at $14 to $16 per share, according to an amended filing with the SEC. The company expects net proceeds of $89.2 million, which it will use for repaying debt, expanding the business, and other purposes. Goldman Sachs and JPMorgan are the lead underwriters. Zipcar originally filed to go public last June, with an initial target raise of $75 million. The company then closed $21 million in Series G financing from Meritech Capital Partners and Pinnacle Ventures in December, prompting rumors that the IPO was dead.

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Drivers today like to gab and text on their phones while they are on the move. So I guess it makes sense that their cars should also talk to one another.

But unlike distracted drivers, Ford hopes vehicle-to-vehicle communication will prevent accidents, not cause them.

Ford, based in Dearborn, MI, is accelerating research into “intelligent” vehicles, cars and trucks that can wirelessly transmit data between each other, such as location, speed, proximity, and brake status. Guided by a vast array of sensors and cameras, the system can alert drivers to nearby accidents, or signal if they risk colliding with another vehicle at an intersection.

“It’s like having a 360 degree pair of eyes,” says Mike Shulman, technical leader for Ford Research and Advanced Engineering.

What began as an interesting R&D project for Ford has morphed into a company-wide effort to make smart cars a fixture on roads and highways by 2016. (Ford said it doubled its investment on intelligent vehicles but did not disclose specific figures.) The company is contributing two prototypes to government-sponsored driving clinics scheduled for this summer.

“We kind of like to get it out as soon as we can,” Shulman says.

Ford’s work is only one part of an ambitious effort spearheaded by the U.S. Department of Transportation called IntelliDrive.

The goal is to develop a common communications platform for all vehicles, regardless of maker, to talk to each other, using 3G and 4G broadband technologies found in smart phones. IntelliDrive also envisions building infrastructure across the country that allows cars to “communicate” with roads, highways, and bridges, exchanging information on traffic patterns, road conditions, and weather.

“IntelliDrive will help drivers bypass congestion, and it will reduce crashes by providing advanced safety warnings,” according to a report by the Center for Automotive Research (CAR), a non-profit research group based in Ann Arbor, MI. “It will even be able to take over the vehicle when there is not enough time for the driver to react.”

The system “will also help us manage traffic, alerting drivers to upcoming congestion, advising them of alternative routes, and altering the timing of traffic signals to improve traffic flow,” the report said. “It can even help owners with vehicle maintenance by reporting pending problems, keeping small repairs from becoming larger and more expensive.”

In the past, automakers focused on “passive safety,” such as crush zones, anti-lock brakes, and air bags. But technological advances have pushed car manufacturers to explore “active safety” features such as … Next Page »

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Peter Hofbauer spent nearly a decade in advanced propulsion system research and nearly another decade in power train development at Volkswagen. After creating and developing the automaker’s first diesel engine, he was ready to relax.

“In 1997, I moved to Santa Barbara, CA, and my main idea was to retire—and that did not work,” says Hofbauer, founder, chairman, and chief technology officer of EcoMotors International, an Allen Park, MI-based engine developer funded by Bay Area and Seattle investors led by Sun Microsystems-cofounder-turned-venture capitalist Vinod Khosla, and Bill Gates.

Instead, he continued working on engine innovation and started his own company, Advanced Propulsion Technologies, in Santa Barbara in 2003. The company developed what’s called opposing piston, opposing cylinder technology that would eventually form the intellectual property of EcoMotors. (As I wrote last fall, the company sees the engine as a way to make cars cleaner and cheaper, and would involve an easier infrastructure transition than revamping fleets of vehicles with hybrid technology, according to CEO Don Runkle.)

APT worked on creating the engines for military applications, but needed a different setting, Hofbauer says. “We started to design it, but you cannot develop an engine in Santa Barbara,” he says. So he moved the company to work out of an engineering firm in Detroit.

In 2006 APT firm signed a deal with defense firm L3 Communications (which has a subsidiary in Michigan), creating a joint venture called Combat Advanced Propulsion, to continue working on the technology for military uses. Two years later, EcoMotors kicked off with $10.5 million in funding from Menlo Park, CA-based Khosla Ventures to continue advancing the opoc engine for civilian vehicles.

The opoc is named (as you no doubt guessed) for its opposing pistons and opposing cylinders, which have a single crank in the middle and together work to create a combustion event with every revolution. The design, which allows the units to be stacked to scale up to meet bigger engine needs, involves fewer parts and provides more power per size and weight than existing engine technology, according to Runkle.

EcoMotors’ plan has been to license its technology to automakers or engine suppliers, who would then develop opoc engines for specific vehicles. The company has already gained some traction on this strategy. Last year, it signed a deal with Chinese automotive parts maker Zhongding Holding Group. The firm will build an opoc engine development center in Shanghai, first focusing on truck engines, then on passenger cars. Because China has … Next Page »

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As an entrepreneur, sometimes it doesn’t matter how much money you raised, from whom, or even what your company is building. Sometimes it just matters that you’re alive.

Meet Gina Ashe, the co-founder and CEO of stealthy Internet startup Krush, based in Cambridge, MA. She isn’t talking much about her new business yet, but a report in Mass High Tech said the company recently raised a Series A round from Boston-area angel investors and outside institutions, and it put the firm’s pre-funding valuation at more than $6 million. Previously, Ashe was part of the founding team at Sermo, the online physician community, and she has senior executive experience in marketing and finance at a number of firms.

But the most important thing about Ashe is that she is a survivor. On the afternoon of August 19, 2010, she had just left an investor meeting and was driving home on Route 2 west of Boston, when an oncoming car crossed the median and smashed into her head-on at 85 mph. The driver of that car, Shannon Gwiazda, died in the crash. Four other people including Ashe were injured in the four-car pileup, which closed the highway for several hours.

Ashe survived—in part because she was driving a Cadillac CTS 4, a car that people had teased her about (who drives a Cadillac?); the mid-size luxury sedan had a huge engine up front and extensive airbags. “It truly saved my life,” she says.

But she sustained serious injuries, including a smashed heel and ankle, four broken ribs, and cuts and burns over much of her body. She spent weeks in the hospital and was told she wouldn’t walk again. But with help from Daniel Palestrant, Sermo’s CEO, she found a surgeon at Brigham & Women’s Hospital who performed a new procedure that she says accelerated her recovery by six months. The surgery involved putting a plate and seven screws in her leg.

Ashe was bedridden for weeks, but progressed to using a wheelchair and then crutches—on which she delivered her financing pitch at the Open Angel Forum in Cambridge in October (which won her some Boston-area investors). Meanwhile, her Krush co-founders, Alexis Kopikis and Alan Osman from Propel Consulting, stood by her and kept the project moving. The site was two weeks away from launching beta trials when the accident happened. “There were days I thought I couldn’t go on, but they said, ‘No you have to think about this [or that],’” she says.

The local business community also provided a lot of support. “Women CEOs rallied … Next Page »

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We had such a great time at our “5×5” Xconomy Forum yesterday, I just wanted to share a few thoughts from the talks and discussions. I think it was very useful and entertaining stuff, especially for entrepreneurs and investors.

First, a note of thanks to all our participants, several of whom flew into frigid Boston from warmer climes. And a very special thank you to our host and sponsors, who made this event possible. Our host, the Fidelity Center for Applied Technology, was wonderful in every respect—it was a fantastic event space, and the supportive staff helped us with logistics and a lot more. Our event sponsors—Avaya, Comerica Bank, Duane Morris, and Turnstone—provided much-needed support and some really cool demos that added depth to the program and reception. We also got support from our design sponsor, Upstatement; our event partner, Mass Technology Leadership Council; and our media partner, Greentech Media. Thanks again to all of you.

Now here are my top five takeaways from a rousing set of speakers:

1. Bill Warner turned our thinking around. The entrepreneur evangelist and renowned angel investor spoke from the back of the room and made us all turn our chairs around, to emphasize his unconventional approach to startups. “I intend to help people follow their heart,” he said. “I believe people are pushed to follow their head.” Essentially, a startup’s philosophy boils down to what he calls the “negotiated invention” model—what most entrepreneurs follow by leading with their idea or technology and making compromises based on the market and egos—versus his “from the heart” approach, which involves sticking to your true beliefs and intentions and building a loyal following (and taxing them as little as possible—see Google, Facebook, Twitter).

2. CarWoo gave us tips on how to become the next Groupon. Founder and CEO Tommy McClung, from the Bay Area, talked about targeting established business models in big markets, which are “usually ripe for disruption”; riding the emerging trend of “online to offline” (like Groupon, getting merchants up and running online while also getting customers into physical stores); and balancing incentives for your customers (in CarWoo’s case, letting car dealers in for free while charging consumers a service fee).

3. Kiva Systems is profitable. The Woburn, MA-based robotics, er, warehouse automation startup, is cash-flow positive and now gets business from 10 of the top 100 retailers, including Amazon (Zappos, Diapers.com), Staples, and Gilt Groupe. CEO and founder Mick Mountz showed some nifty action videos and talked about lessons learned from dot-com disaster Webvan, All in all, not bad for a robotics company (sorry Mick, but retailers have to get with the robot revolution) that’s been quietly building its business since 2003.

4. Whether it’s the energy grid or the Web, we need situational awareness. That was the message from two of our out-of-town speakers, Joaquin Silva of On-Ramp Wireless (San Diego) and Craig Labovitz from Arbor Networks (Detroit). Silva discussed new ways to harness super-sensitive wireless sensor networks to monitor global electricity and water systems for safety and efficiency. Labovitz talked about the vulnerabilities in today’s Web and mobile systems (hint: firewalls are not secure), and how to fight back in the escalating battle between hackers and security experts. (He also stuck up for Ann Arbor as a key contributor to the modern Internet.)

5. TerraPower will change the world—if it works. Technology advisor Roger Reynolds talked about Bill Gates and Nathan Myhrvold’s nuclear reactor design and its many challenges. The 20-year goal: cheap, safe, and plentiful energy for everyone, and the eradication of poverty. Reynolds’s deadpan style worked well—with an idea this big, you don’t need bluster, you need expertise to make it work. (Or as Bob Metcalfe put it, “Why is this taking so long? It was very clearly explained. Just build it and ship it.”)

Speaking of whom, here’s a bonus takeaway:

Bob Metcalfe isn’t leaving, he’s expanding. The Internet tycoon’s move to Austin, TX, is part change of scenery (and weather), part new career (Professor of Innovation at UT), and part “strolling into Whole Foods and buying everything in there.” But there’s something more profound in this, too, and it’s really about the spread of ideas and influential technologists and business leaders to new clusters. “Is innovation a zero-sum game?” Metcalfe said. “I don’t think so. We want innovation to be everywhere.” To that end, Metcalfe proposed the idea of an Xconomy “6×6” conference next year—adding Austin (or perhaps another city) to our network. We shall see, Professor. We shall see.

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OK, a flying Humvee doesn’t sound like a very green vehicle—but the U.S. Defense Advanced Research Projects Agency isn’t interested in green.

DARPA is interested in improving the safety and lethality of U.S. troops in dangerous environments. And it is willing to pay handsomely for it—to the tune of a five-year, $65 million research program to develop what it calls a “Transformer” vehicle that works like a Humvee on land, but can also fly.

No, this isn’t an Onion article. The goal is to be able to carry four troops and their gear (1,000 pounds) over a distance of 280 miles on one tank of fuel, by any combination of air and land, the agency says. The vehicle must be able to take off and land vertically—meaning it will fly like a cross between a helicopter and a plane (see drawing above). And, oh yeah, it has to be piloted by an average Marine Corps soldier without any flight experience. In other words, it needs to fly mostly by itself.

If it works—a big if, indeed—such a vehicle could swoop over obstacles or tough terrain, and potentially could help troops avoid ambushes and improvised explosive devices in roads. It could also be used for evacuation or rescue missions where it would be very useful to scan the situation from the air and then drop in at the right spot—in urban combat operations, say—while maintaining some mobility on the ground after landing. (You can read more details and speculation in this Popular Mechanics article.)

A key participant in the DARPA program is Woburn, MA-based Terrafugia. You might know it as the “flying car” company, though the firm much prefers the drier term “roadable aircraft.” Terrafugia was founded in 2006 by five MIT-educated pilots, and has been developing a light sport plane, called the Transition, that can be driven on roads and is slated for testing and production next year. The company declined to comment on its involvement in the DARPA program beyond the information in its press release this week. But it’s clear that Terrafugia’s expertise in combining flying and driving vehicles is valuable here.

Indeed, Terrafugia is “one of the few companies that has experience blending the disparate ground vehicle and aircraft requirements into a single functional concept,” says Stephen Waller, the program manager for the DARPA project, in an e-mail. “This is the primary challenge to successfully develop the Transformer vehicle.”

Terrafugia is one of several companies participating in the program—and a few have connections to the Boston area. Virginia-based aerospace firm Aurora Flight Sciences, which has a research and development office in Cambridge, MA, and technical consulting firm Metis Design, based in Cambridge, both have received small-business research grants to work on the project. For its part, Terrafugia is the largest subcontractor to AAI, a Maryland-based aerospace and defense company owned by Textron, a multi-industry conglomerate headquartered in Rhode Island. AAI is one of the two main contractors on the DARPA project; defense tech giant Lockheed Martin is the other (see drawing on left for Lockheed’s competing design concept).

Meanwhile, Carnegie Mellon University in Pittsburgh has been awarded $988,000 to develop an autonomous control system for the vehicle. Sanjiv Singh, a professor in CMU’s Robotics Institute, is leading that effort. And rocket engine company Pratt & Whitney Rocketdyne is working on the engine and propulsion technology for the … Next Page »

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If some is good, more is better. That’s certainly the case for “5×5: Five Cities, Five Big Tech Ideas,” the next Xconomy Forum taking place in Boston. It’s all happening on the afternoon of Dec. 8 at the Fidelity Center for Applied Technology, near South Station.

We’ve got some big additions to the lineup. Bill Warner, the Boston-area startup evangelist and angel investor, has signed on to give a keynote. We’re hoping he’ll share some of his perspective on how to think about big ideas in technology—and how to build viable businesses around them. Warner knows a little something about that, having founded Avid Technology (NASDAQ: AVID), Wildfire Communications, Warner Research, and a number of other companies over the past 35 years.

Warner joins Bill Taylor, the co-founder of Fast Company and the author of Mavericks at Work and the forthcoming Practically Radical, as a keynote speaker. Together, the two Bills will help frame the day’s discussions about what it takes to turn a big idea into a promising company—and help inspire all of us to change the world.

Now here come the big ideas. In addition to the five featured presenters, who each represent one city in Xconomy’s network (see below), we will also hear shorter talks from five promising startups, each with a big idea of its own: FashionPlaytes (online customized clothing), peerTransfer (global financial transactions), Pixability (online videos for businesses), Prysm (next-generation laser-based displays), and Scio Security (mobile and Internet security). It’s an interesting mix of technologies, markets, and business strategies—and it’ll be really instructive to hear about the genesis and execution of each company’s plan.

The program is anchored by a select group of five other companies, who will each do a deeper dive into their technology and business strategy—and make their case for why their idea is transformative. The presenters will be Mick Mountz, CEO of Kiva Systems, a warehouse robotics firm that could reshape retail, distribution, and manufacturing (Boston); Joaquin Silva, CEO of On-Ramp Wireless, a data tracking and wireless monitoring startup named a technology pioneer by the World Economic Forum (San Diego); John Gilleland, CEO of TerraPower, a nuclear power startup that could fundamentally change the energy landscape (Seattle); Craig Labovitz, chief scientist of Arbor Networks, an Internet security firm that is unifying Web and mobile (Detroit); and Tommy McClung, CEO of CarWoo, an online car-buying startup out of the Y Combinator incubator (San Francisco).

We will keep the sessions informal and interactive; we want to encourage audience participation, and lessons to be shared back and forth on things like honing company ideas, formulating market strategies, and building businesses. We are also planning a demo area, a first for Xconomy.

Last but not least, we are convening a top-notch audience as well as speakers, and we hope you’ll be part of this special event (early bird registration and details here, including special rates for students and employees of startups). Looking forward to seeing you on Dec. 8.

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Don Runkle has a bit of news for everyone. It’s engines, not batteries, that will make automobiles cleaner and more efficient. “We unabashedly say that we have the best solution,” says Runkle, the CEO of Allen Park, MI-based engine developer EcoMotors International.

The startup, which brought in $23 million in Series B financing this summer from Menlo Park, CA-based Khosla Ventures and Seattle billionaire Bill Gates, has designed an opposing piston, opposing cylinder engine that users fewer parts than traditional motors do and generates more power from each stroke of the engine, CEO Runkle says. He says the “opoc” engine is smaller, lighter, and less expensive than the motors already out there, and a more viable option than switching automobile fleets over to electrical power.

“You’re hearing lots of stuff on cleantech right now that is more efficient, but they miss the other three,” Runkle says, noting the size, weight, and expense of hybrid and plug-in electric vehicles has slowed the widespread adoption of the technology.

The EcoMotors technology comes from Peter Hofbauer, who helped develop and commercialize Volkswagen’s first diesel engine. He started working on the opoc engine in 2003, first for military applications, and the startup was officially launched in 2008 with $10.5 million in funding from Khosla Ventures. EcoMotors’ other two top executives, Runkle and president and COO John Coletti, also have experience developing engines at big automakers. Most of the firm’s development work is done at a facility in Livonia, MI.

EcoMotors’ opoc engine is built with opposing pistons, opposing cylinders, and a single crank in the middle. Together, the components work to create a combustion power event with every revolution, unlike existing 4-stroke engines that combust every other turn, Runkle says. (Check out this video from founder Hofbauer for a more in-depth explanation of the technology.) The arrangement results in lower friction and heat rejection, and the the engine has a higher power density—meaning power per size and weight—than anything else out there. “The holy grail of engines is power density,” says Runkle, who joined the company last year.

The company is developing a the sixth generation of the opoc engine module, which is long and narrow, and perfectly balanced on both sides, enabling multiple modules to be stacked for a most sophisticated engine. An automobile with two of the opoc units stacked could better adjust to fluctuating power needs in traffic, Runkle says. For example, a dual-opoc engine could shut off the power of one of the units while the car is moving at a lower speed, and fire up the second one as the car speeds up. This could be even further extended when paired with an electric motor—what Runkle calls a “tribrid system”—which could be the only part of the engine system running as … Next Page »

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The Internet was supposed to make car shopping easier, Tommy McClung is explaining. Back in the 1990s, sites like Vehix.com, Cars.com, and Autotrader.com promised a future where you wouldn’t have to haggle with a salesman, and where you didn’t have to drive from dealer to dealer just to see who could offer the best price or who had the model and color you wanted in stock.

Well, it didn’t quite work out that way. The major car shopping sites, McClung argued to me yesterday, have turned into little more than lead-generation engines for car dealers, where shoppers are enticed into handing over their personal information and are promptly buried in spam and phone calls from pushy salespeople. “The industry has started to realize that they have created a disservice to customers,” McClung says. And it’s not like dealers are profiting either: McClung says they’re lucky if five out of 100 leads results in sale. At $20 to $40 per lead, that’s an expensive form of marketing.

Naturally, McClung has a solution. It’s called CarWoo, and it goes national today after no-publicity launches earlier this year in California and Florida. It’s a website where you can go online, select the make, model, year, and color of the car you’re looking for, and, for $19, get two to three price quotes from local dealers vetted by CarWoo. For slightly more money, $49, you can get three to five quotes. You stay anonymous throughout the process, and the dealers can see each others’ bids, so they’re incentivized to lower their asking price. The quotes come along with all the information you need to make a decision, and once you accept an offer, the price is final.

McClung says CarWoo is great for consumers because it finally makes buying a car online faster, easier, and cheaper than doing it in person (the average CarWoo user ends up paying $3,000 below the sticker price, the company claims). And he says dealers like it because they don’t have to pay for the leads—CarWoo makes all its money on the up-front fees from car shoppers.

“What the $19 plan and the $49 plan do for the dealer is eliminate the tire-kickers, the people who aren’t ready to buy yet,” says McClung, who’s CEO of CarWoo. “As soon as the consumer pays the $49, they’ve got some skin in the game, and 85 percent of our customers buy a car within two weeks.”

The prospect of free bidding opportunities has attracted 3,200 dealers nationwide to the Burlingame, CA-based startup’s network. And the idea of a system that would leave no room for dealers’ occasionally sleazy antics has attracted thousands of beta users, as well as a stellar list of Silicon Valley investors.

CarWoo got its first seed funding from Y Combinator, the Mountain View, CA-based startup incubator where McClung and his co-founder Erik Landerholm, the company’s chief technology officer, were part of the Summer 2009 class. This January, they pulled in $1.8 million in seed funding from Comcast Interactive Capital, Blumberg Capital, Accelerator Ventures, angels Paul Buchheit and Joshua Schachter, and super angels Aydin Senkut and Dave McClure. And the 10-employee startup announced today that it has closed a Series A funding round amounting to $4.2 million. Interwest Partners took the lead, with … Next Page »

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Ten years ago the electric car seemed to be the wave of the future. But in those days of peace and cheap gas, consumers weren’t really demanding the technology. Today that problem has been turned on its ear, as clean energy vehicles are popping up on the factory floor of most major car companies, each vying to tap into an emerging wave of demand for clean, green automobiles.

With the resurgence of the electric car, many are wondering, could it save our floundering American car companies? The industry has gone through a wrenching transformation in this economic downturn, seeing a free fall in demand from the traditional U.S. consumer. Automakers sold about 17 million cars a year in the U.S. during the peak years of 1999 to 2007, but now demand for new cars shrank to just 10 million in 2009.

Many people consider the 2011 Chevy Volt, an electric vehicle, to be the next great hope for the future of Detroit-based General Motors. On Saturday, I was one of the lucky few to get a chance to actually drive one, I hopped behind the wheel at Griot’s Garage in Tacoma. Griot’s was the first stop on the Volt’s “Volt Unplugged” tour, a 3,400-mile, 12-city cross-country caravan orchestrated by GM to showcase the electric car’s extended range capabilities.

When I got to the auto shop’s garage, there were two Volts—one painted in steel grey, the other in black—waiting to be driven out on the road. Four others were already out, being taken for a spin by other members of the local media.

What makes the Volt unique, is that at first glance—with both an electric engine and gas-powered generator—it sounds like a hybrid. But it’s not. The Volt is in fact equipped with both electric and gas power sources, but does not run the same way that a hybrid might. The car’s 16kWh battery powers the vehicle for 25 to 50 miles, after which the “extended range” capabilities take over, and the gas-powered generator is used to recharge the electric battery. The more efficiently you drive, the more energy is recycled back into powering the car.

“It’s more like an electric locomotive,” says General Motors communications representative Alan Alder. “Even the brake harnesses the kinetic energy of braking to regenerate the battery.”

The first 25 to 50 miles (a variable that depends on terrain, temperature, battery age, and driving technique) are powered without using any gas, and has no emissions. Consumers who use the Volt to drive 50 miles a day or less, according to Chevy, would save approximately 500 gallons of gas a year.

“For the average commuter that drives 40 miles a day,” says Alder. “They will never use a drop of gas.”

It takes between eight and 10 hours to fully charge a depleted battery using a basic 120-volt outlet, and around between three and five hours on a 240-volt charger. (If you live in Washington state and your electricity is run by hydropower, even charging up the car is emission-free). With a full charge and a full tank of gas the Volt can run for approximately 350 miles straight, and has a maximum speed of 100 miles per hour.

When I got behind the wheel of the black Volt with Alder and my “photographer” for the day, Sam Speer, my boyfriend (credit Sam for the pictures) to take it for a spin, the first thing I noticed was the noise—or lack of it. The silence was so unnerving, I checked to make sure the Volt was in fact turned on several times before easing out of the garage (there were cameras filming after all, and I’d vowed to myself when I agreed to the test-drive that I would not make the blooper roll). I immediately pressed … Next Page »

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When it comes to the incentive deals offered by auto companies to potential car buyers, little has changed, despite advances in technology. Customers may be starting their auto purchases online, but automakers are still trying to reel them in with deals that are marketed more like the coupons found in a newspaper or Sunday flyer, says entrepreneur Sean Murphy.

The incentives, say $1,000 off the purchase of a certain car type in the next month, go out en masse to consumers, and car makers have no way of determining whether a slightly larger incentive or a different deal entirely would have more power in attracting a certain customer, says Murphy. It’s a problem his Ann Arbor-based startup, Buycentives, is trying to fix with its software.

“We’ll be able to take that consumer information, using software we developed, and we’ll be able to determine what the appropriate incentive is for the consumer to generate a sale or buy a car,” says co-founder Murphy, a veteran of the product strategy and marketing side of the auto industry.

Many automobile makers generate sales leads when interested shoppers start their car search online, through sites like Kelley Blue Book, Edmonds.com, and Yahoo! Autos. And rather than putting out the same offer to all consumers, Buycentives’ software would enable companies to automate incentive offers to these shoppers, tailoring the deals based on things like the person’s budget, past vehicle ownership, geographic location, and so forth. Buycentives would offer this tailored discount from the automaker right at the site of purchase, if customers are buying online, or would immediately e-mail the customer a certificate to bring into a dealership.

“We’re developing a probability model that allows us to segment customers based on information we know, and go into developing a very specific incentive,” he says.

More customized sales incentives could enable automakers to get the most out of their incentive budgets, Murphy says. For example, certain customers might not be inclined to buy a car with a $1,000-off incentive, but a slightly larger $1,500 discount could sway them. A company might break its budget offering that big of a discount to everyone—wasting the extra money on those who are already willing to buy for $1,000 off—so traditionally companies err on the side of keeping offers lower and in doing so lose some customers, he says. But the Buycentives tool could identify which customers would likely be convinced by the slightly bigger incentive, and offer … Next Page »

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In 2007 Shelby Clark’s car died just as he crossed into San Francisco, ready to start work with micro-lending nonprofit Kiva.org. He discovered ZipCar once he got to the Bay Area and a year later still hadn’t bought a car of his own.

Fast-forward to November 2008. Clark had moved to Boston to attend Harvard Business School, with the goal of getting into social entrepreneurship. He was biking through sleet and snow to his Zipcar rental, two-and-a-half miles away, while passing dozens of unused cars on the street. And there you have the inspiration behind his Cambridge, MA-based startup RelayRides.

“We already have this massive resource in our communities,” he says. “Zipcar works, but I thought it would be better if we could just use people’s cars.”

RelayRides builds on the car-sharing idea that Zipcar took the masses, but expands on its powerful themes of creating community and a more sustainable alternative to traditional car ownership. Clark thought the car-sharing model could better serve the customers if more vehicles were closer to where customers actually lived. And he thought the way to get them there is by using vehicles that are already owned by consumers and parked in residential areas.

RelayRides, which began its pilot phase with the first car rental last Wednesday, enables users to rent cars by the hour much like Zipcar. But instead of a commercial fleet, the RelayRides inventory consists of entirely of cars owned by everyday people. It strikes me as a more structured system of borrowing your best friend’s or roommate’s car (which I frequently do).

The company bought off-the-shelf technology to transform RelayRides vehicles for renting. It equips the customers with membership cards, and places card-readers in the cars, much like Zipcar. RelayRides also offers in-vehicle consoles that immediately gather user feedback on the condition of the vehicles, and allows users to extend their hourly reservations. Customers can … Next Page »

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Zipcar has set its sights on a new funding vehicle: An initial public offering. The Cambridge, MA-based car sharing service says it wants to raise $75 million in an IPO, according to an SEC filing.

The company, founded in 2000, has changed the way many people think about renting cars. Its members can reserve cars on the firm’s website, use key cards to wirelessly unlock their reserved vehicles, and drive away without ever having to physically check in with the company, as people must do with traditional car rental outfits. The firm’s membership has grown to more than 400,000 people, and its fleet of “Zipcars” covers 13 cities and more than 150 college campuses, according to the SEC filing. (Its areas of operation include Boston, Seattle, San Diego, and Ann Arbor, MI—all of which are covered by Xconomy).

Zipcar, the world’s largest car sharing network, has increased its size through both internal growth and acquisitions. In April, the firm bought the car sharing firm Streetcar in London. Last month, the company borrowed $70 million through a one-year credit facility to buy new cars for its U.S. fleet.

The company’s growth hasn’t been cheap. Zipcar took in $131.2 million in total revenue in 2009, but ended the year with a net loss of $4.7 million, according to regulatory documents. The firm owes most of its 2009 losses to its $137.1 million in total operating expenses last year.

Zipcar’s top institutional shareholders, according to the SEC filing, are Revolution Living of Washington, DC (22.98 percent), Benchmark Capital Partners in Menlo Park, CA (12.64 percent), San Mateo, CA-based Greylock Partners, which has an office in Cambridge, MA (7.12 percent), and Smedvig Capital in Norway (5.57 percent). Scott Griffith, Zipcar’s chairman and CEO, controls 3.92 percent of the company’s stock.

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I believe there is a strong tie between sharing and the ability to innovate. This post will walk you through the logic.

Innovation is built on these things:

1. The existence of problems and the desire to solve them

2. The ability to apply new ways of thinking to these problems

3. The cost of the inputs needed to solve the problem (skills, data, resources, devices, networks)

4. The ability to iterate, adapt, evolve and scale.

1. PROBLEMS: Frankly, there is no dearth of problems and some kinds of people really like to think about how to solve them if they have the time. So problem-solving people who have at least some time on their hands try to problem-solve and people who don’t have time, can’t. (Why are there so many fewer historical examples of women doing remarkable innovative things? Well, duh…)

2. NEW THINKING: The ability to apply NEW ways of thinking, with an emphasis on the word “new.” Problems that are kept hidden in discipline silos don’t get any new thinking applied to them. See all the great work done by Innocentive, that gets problems out of silos and opens them up to a diverse group of solvers.

3. THE COST OF INPUTS. Here is where I want to linger for a bit. There is a whole world of inputs that could come at much lower cost—wherever there is excess capacity, an underused resource that has already been paid for and which therefore has lots more value locked up in it! If only we could get people, companies, governments to “share” more—to make sure that their unused unneeded excess capacity was made available to others to make use of.

Exactly when are we NOT willing to share?

• When we believe that abundance only comes from hoarding and we perceive that everything is rivalrous (see this earlier post).

• When we have just witnessed a communal sharing debacle (Chinese cultural revolution) or when goods really are rivalrous.

• When things really are scarce, there is just simply not enough to go around and so we hoard to protect our closest family.

• When things are abundant, why bother?

If we look at these reasons for not sharing excess capacity (and thus facilitating a whole lot more innovation), I see lots of room for improvement. We have to stop our … Next Page »

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Seattle-based Airbiquity announced today it has formed a partnership with Tokyo-based Hitachi Automotive Systems to develop telecommunications systems for electric vehicles. Financial terms of the deal weren’t given. The technology could allow drivers to do things like check their battery using their mobile phone, locate nearby charging stations, and get directions. The move is part of a broader effort to establish a global infrastructure for networked vehicles. Founded in 1997, Airbiquity is focused on wireless technologies for connected vehicles and smart transportation services.

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