Dutch-born designer Adrian van Hooydonk raced up the ranks at BMW from his first job sketching cars at BMW's Munich studio to become BMW brand chief designer in only 12 years, including a three-year stint running BMW's California studio, DesignWorksUSA, from 2001-04. Van Hooydonk, now 42, earned a degree in automotive design at the Art Center Europe in Vevey, Switzerland, in 1992. His fast-paced climb reflects the openness to fresh ideas and talent that makes BMW's innovation engine hum constantly at high revs.


Van Hooydonk's first coup at DesignWorks was an early concept car for the Mini (see BusinessWeek.com, 7/11/06, "Maximum Mini"), followed by the Z9 concept car. But his first production-car win was the 7 Series (followed by the 6 Series). In fact, it was van Hooydonk—and not BMW Design Chief Chris Bangle—who penned the lines of the controversial 2002 7 Series and its provocatively heavy back end, since dubbed, erroneously, the "Bangle Butt."

The year was 1997 and Bangle had given a thrilling brief to BMW's Munich and California studios. The company's goal was to make a "design leap" to give BMW's flagship luxury car a silhouette that would match the huge technological leap the car was making. Van Hooydonk, then 33, was one of 20 designers pitted against each other in a heated internal contest. Bangle backed van Hooydonk's early sketches, ensuring that they survived the cuts. But it was van Hooydonk's full-size model that won the unanimous support of top management.

Van Hooydonk recently spoke with Senior European Correspondent Gail Edmondson about how BMW's bottom-up management culture inspires car designs that buyers crave and rivals rush to imitate. Edited excerpts of their conversation follow.

Is BMW different from other auto makers in the way it manages car design?
We brief the entire design team on every new project. All projects are open to everyone. Some are told to submit sketches. Some have projects going, but they're free to submit too if they have time. We want to keep all design projects open to all designers. We don't want to have a "3 Series studio" like some car companies, where all they do is a certain model, where three junior people sit but only the studio chief designs. You can imagine which setup is more motivating.

Our approach gets people to do their best. They stretch themselves because there's so much more to gain. We ask designers for a complete car—not just a headlamp. The winner takes all.

BMW doesn't use consumer clinics to vet new designs. What's the logic there?
Consumers always will give an opinion based on what they know—they can say what they like or don't like today. What we're really asking ourselves today is what cars should be like in ***0. BMW embraces risk. It knows that risk comes with the territory.

It's too scary for some competitors. Other automobile manufacturers won't take that risk. No one likes making mistakes. But BMW knows that's part of doing business.

What role does BMW's California team at DesignWorks play?
DesignWorks is something very unique. No other company has succeeded in setting up a similar model. They're a design consultancy and a profit center. We pay them like companies would pay any external design consultant. DesignWorks does 50% of its work for companies like Hewlett-Packard and Microsoft. They design cell phones, computers, and airplane interiors—and act as a complete design consultancy.

Because we require DesignWorksUSA to apply itself to as many diverse customer experiences as possible, its approach of using crossover skills to solve its client's problems ensures that everyone benefits from its talents and BMW's own philosophy of design quality.

How does that benefit BMW?
Any company benefits from an outside view. And having to win outside contracts keeps DesignWorks on their toes. It also helps the innovation process. They're market-driven. If there's a faster way to design a model, they will discover it. No other car company has an approach like that. At other auto makers, design houses are cost centers. They get a budget and an assignment. They aren't based on or mixed with any experience outside the car world.

[DesignWorks is] not based on the cost-center approach. Ford (F) tried to set up something similar in London and they recruited from DesignWorks, but it didn't work out. DesignWorks replaces the need for consumer clinics because they work on futuristic products. We set up our design center in Singapore and DesignWorks both to learn by participating in creating the future.

How do you decide which cars should be designed in California and which cars in Munich?
We want DesignWorks to work on every project we have. DesignWorks is managed outside Munich. I am a client of DesignWorks. I say, "Please give me design proposals."

And then?
At BMW, design happens in a competition. Not only is each studio in Munich, Los Angeles, and Singapore in competition, each designer is in competition with the one sitting next to him. It's an open and true competition. Anyone can enter with their sketches—we aren't biased.

To prove that, just ask other car company studios how many sketches of theirs actually go into production. Normally in the car industry, local studios do designs for local markets [only]. We don't do that. We want the look and feel of BMW to be the same around the world.

So designers in California have the same chances as designers in Munich to win the competition?
If the best idea for a car comes from DesignWorks, it will be chosen. DesignWorks has a very good track record influencing production products. I'm talking about the early design phase—before the car is in development. If DesignWorks wins the competition, we ask the model designer to come here to Munich and work on the car for a year, so that the net result is that people here in Munich feel as much ownership of the new model as DesignWorks.

Which Bimmers has DesignWorks produced?
The previous 3 Series—until then, no one expected California could really do a core product. They had done the X5, X3, and Z4—so they already had a track record higher than any other California studio I know. (Ask other brands—and you will find a sense of frustration among designers in outpost studios.)

O.K., so a new car is in the pipeline and you've briefed the teams. How do you keep the team spirit that drives BMW's culture when everyone is competing with each other?
The competition is extremely intense. People go the extra mile. That's because people know the competition is extremely fair. They know BMW is looking for the best solution, so if they lose, they can deal with that message, too. It's part of how you keep people motivated and performing at a high level for the next competition.

What was it like when you got the briefing for the new 7 Series?
It was very exciting. It was clear BMW wanted to make a technology leap with the car, which was also to be expressed in a design leap. The assumption was if we offer a car with new technology, we need a breakaway design. It would be weird to package new tech with old design. That would have been a nonstarter.

BMW perceived a growing desire in society for greater individualism. People were beginning to make more individual choices—car buyers were becoming increasingly difficult to pigeonhole. They were making more discerning choices and car choices were no longer homogenous, based on your job and salary. This translated into the need to do more individualistic cars.

It was also a time of a lot of mergers in the auto industry, and BMW wanted to maintain its independence. So it decided it had to grow its product range. The danger was stretching our design language over a greater range of products which all looked the same.

What were the specific instructions for the competition?
Chris Bangle came out to DesignWorks in 1997 to give us the brief for the exterior designers, of which we had 20 to 25. We all heard the words "design leap" and "top-of-the-line product," and you knew it was important. They took 12 sketches of scale models. There were five cuts. Near the end, we still had three full-size clay models in competition. It became scarier and more exciting toward the end, when there were only two exteriors competing.

What's it like leading the design effort now for the BMW brand?
At BMW, you can't do design in a dark corner. There's a team of 80 people behind me developing designs. I'm not a designer anymore. I'm the design director [as Chris Bangle was earlier]. I guide the competition.

Didn't you go back and tone down the controversial lines in the 7 Series when it came time for the facelift?
BMW approaches facelifts as a way to inject models with new impulse and generate interest. We want even the people who bought the car to start thinking about buying the facelifted version. We want them to say, "I like this one—it has more power, better handling, and interesting design."

Four years after the launch of the 7, we coupled the new version with a new look again. Why? To give it a lifecycle impulse. That gives us the opportunity to streamline again. The new 7 had more engine power and was sportier. We changed the look of the front bumper to be sportier and the hood sharper. The rear looks wider and lower. That reflected the car's improved handling with a wider stance. We emphasized the new rear design as lower and wider—that's exactly what we wanted to show the car handled better.

Design should help communicate technology better. People say we pulled back on the design, but that wasn't relevant. Overall, we know the facelift was good for sales. What's impossible to do is to make everyone happy.

You've been at BMW for 14 years. Is it true BMW throws you in the water to sink or swim?
Yes. They delegate responsibility early on—and you deal with it. No matter how young you are, BMW gives you a rough description of the goal—you aren't told how to get there. The manager watches to see if you can do it. If you're able to deal with responsibility independently, your career develops very rapidly. What's important is your ability to be self-critical. Typically, new people want more feedback. They're just told to get on with the task. The first question is, "Is this all I get as a briefing? Isn't there a boot camp?"

BMW prides itself on a management culture where conflict is allowed and even encouraged. How does that actually work? It must produce awkward clashes at times.
There's a heartfelt belief at BMW that people be taught a difference of opinion is O.K. Some conflict is bound to happen. Everyone is working wholeheartedly—and if they're given free rein to individuality, inevitably people will clash. The clash may escalate. If so, you call meetings and make a decision.

What happens is that people aren't punished for disagreeing. They aren't told, "We don't want to see you doing this again." The rule is that you can make mistakes. At BMW, you aren't trained to avoid conflict. If something is brewing, you bring it out in the open, deal with it, and move on.

In other organizations, the conflicts have such a negative impact. We believe rather than talking in the kitchen behind people's backs about your frustrations, which is what happens in most big companies, you get everything out in the open.

So how are decisions actually taken in this free-flowing, unhierarchical world of opinion?
I'm the design director. I manage a competition. I don't say, "The design should be like this." He who interprets the idea of the new product best, wins. We state a very open goal with a rough target. You fill it in to the best of your capability. It's an open discussion. I get 20 different opinions back. That diversity helps me form my opinion about what's best.

Twenty team opinions from designers are better than a consumer consensus about what's best. Then I voice the opinion [to the board] of the entire design team. If, by contrast, I give my opinion about the design of the car at the beginning of the competition, I train my people to have my opinion. They would then try to please me. They should focus on the BMW brand and the future, not me.

BMW encourages individuals to build personal networks across the company and to use them informally to solve problems and innovate. Do you have a "network" and do you use it?
At BMW, you experience the network every day. People are always talking—always "on." Every lunch, people are meeting and talking about their project or about one that they want to make happen. It's somewhat manic. But you can't help it. It makes things move very quickly.

The first thing you do when you have an idea is pick up the phone and call someone or discuss it over lunch—rather than get your calendars to match for a formal meeting. BMW's history says good ideas can come from anywhere. That's accepted. Everyone knows if you have a good idea and a good network, you can get things moving.

Does BMW really break down the barriers, say, between designers and engineers?
What I tell designers is that their task isn't just to do cool sketches that impress me. If they're attractive and filled with emotion, I will be drawn to them. But another task is to get other people excited. They could say, "That's not my job." One could be very hierarchical. But I have to take the sketch and go to the engineering chief and make it happen. The task for us is to help create excitement around ideas, so every engineer that walks by the model has to be pulled in. The designer at BMW who says, "Here's a sketch, build it," won't get very far.

BMW designed the Project House where models are actually developed to force a lot of togetherness—of engineers, designers, marketing managers, accountants, and production people. How does that "closeness" help you work better and faster?
The success of the whole [development] story depends on chemistry. The team of 300 people working on a new model is based in the Project House. The clay model, the virtual model, the computer data is all close at hand. We have a power wall 20 meters wide to display the car virtually, near the clay models. We can work quickly and you have to—suppliers, tooling, everything has to come together.

Having everything so closely linked speeds the process. The project leader has everyone [involved in the car] just a few steps outside his office—it's "product central." At that point, there is no possibility for [divisional] kingdoms to exist anymore. There are no turfs—each specialty has sent people to the team. At most companies, engineers sit in one place and the clay studio is elsewhere.

Toyota's Lexus also has BMW in its sights as it makes a move to gain in Europe with sportier, better-handling cars. "We will be challenged -- no question," says Reithofer. "We have to take Lexus seriously."

OCTOBER 16, 2006
By Gail Edmondson


BMW's reputation for innovation can be traced to its equally innovative lateral management techniques

At 4:00 p.m. on a Friday afternoon, when most German workers have long departed for the weekend, the mini-cafés sprinkled throughout BMW's sprawling R&D center in Munich are jammed with engineers, designers, and marketing managers deliberating so intently it's hard to hear above the din. Even the cappuccino machine is running on empty. It's an atmosphere far more Silicon Valley than Detroit.

"At lunch and breaks everyone is discussing ideas and projects all the time. It's somewhat manic. But it makes things move faster," says BMW chief designer Adrian van Hooydonk.

The intense employee buzz at BMW is hot management theory in action. Top consultants and academics say the kind of informal networks that flourish at BMW and the noise and borderline chaos they engender in big organizations are vital for innovation—especially in companies where knowledge sits in the brains of tens of thousands of workers and not in a computer server. Melding that brain power, they say, is essential to unleashing the best ideas.

HANDS ACROSS DIVISIONS. "Cross-functional teams look messy and inefficient, but they are more effective at problem solving," says James M. Manyika, a partner at McKinsey & Co. in San Francisco who has studied the effectiveness of such networks. Companies such as BMW that leverage workers' tacit knowledge through such networks "are widely ahead of their competitors," Manyika adds.

BMW is one of a handful of global companies including Nokia (NOK ) and Raytheon (RTN ) that have turned to networks to manage day-to-day operations, superseding classic hierarchies. Those pioneering companies still turn to management hierarchies to set strategic goals, but workers have the freedom to forge teams across divisions and achieve targets in the best way possible—even if that way is unconventional.

And they are encouraged to build ties across divisions to speed change. "Good companies have this lateral ability to communicate across divisions and silos, not just up and down the hierarchy. That's what makes BMW tick," says chief financial officer Stefan Krause.

LIGHTNING-FAST CHANGES. Speed and organizational agility is increasingly vital to the auto industry, since electronics now make up some 20% of a car's value—and that level is rising. BMW figures some 90% of the innovations in its new models are electronics-driven. That requires once-slow-moving automakers to adapt to the lightning pace of innovation and change driving the semiconductor and software industries. Gone is the era of the 10-year model cycle.

Now automakers must ram innovation into high gear to avoid being overtaken by the competition. That's especially true in the luxury-auto leagues, where market leaders must pulse new innovations constantly onto the market, from podcasting for cars to infrared night vision systems.

By shifting effective management of day-to-day operations to such human networks, which speed knowledge laterally through companies faster and better than old hierarchies can, BMW has become as entrepreneurial as a tech startup, consultants say. "Not many large companies take on lateral communications the way BMW does. It's a knocking down of barriers, like Jack Welch did at General Electric (GE ) to make a boundaryless corporation," says Jay Galbraith, a Breckenridge (Colo.)-based management consultant.

MOBILE-PHONE MESSAGES. BMW's ability to drive innovation even pervades its marketing division. "People talk about innovation in products, but what's underestimated is innovation in processes and organization," says Ernst Baumann, head of personnel at BMW, which has its share of radical new ideas.

To reach a younger crowd of potential buyers for its new 1 Series launch in 2004, BMW used mobile-phone messages as the main source of buzz, directing interested people to signups on BMW's Web site for pre-launch test drives in August that year—something unheard of in the industry at the time. The experimental tactic worked: BMW sparked responses from 150,000 potential customers—and sales of the 1 Series took off when it was launched in September, 2004.

In 2001, BMW stunned the advertising world by investing ad spending normally set aside for Super Bowl spots in short films that had nothing to do with telling consumers about its cars. The slick, professionally made films were pure entertainment, like its series of short films, The Hire, starring Clive Owens, and they cost a bundle: $25 million.

BALANCING ACT. The risky bet triggered serious consternation at BMW's Munich headquarters. "You have to worry when your marketing team goes into the business of making films," says Krause, who noted that Internet-driven businesses were imploding left and right in 2001. Given those conditions, "Who cares how many clicks you get."

Few large companies are willing to embrace the lack of organizational clarity and nebulous structures that drive innovative ideas. At most companies, headquarters would have put the kibosh on the short-film idea, which has since been widely imitated. Researchers say most experiment with networks on a small scale and very few use the practice to full effect since doing so means an uncomfortable balancing act between hierarchy and discipline on one hand, and free-wheeling networks that can veer toward near-chaos.

But for innovation-driven companies, networks that enable entrepreneurial risk-taking are a silver bullet. "The ideas are richer, they implement more effectively, and there is less resistance to change," says Rob Cross, assistant professor of management at the University of Virginia.

IDEAS FIRST. How does BMW manage discipline with creativity and keep the anarchy of networks from careening out of control? Workers at the Bavarian automaker are encouraged from their first day on the job to build a network or web of personal ties to speed problem-solving and innovation, be it in R&D, design, production, or marketing. Those ties run across divisions and up and down the chain of command.

When it comes to driving innovation, forget formal meetings, hierarchy, and stamps of approval. Each worker learns quickly that pushing fresh ideas is paramount. "It's easier to ask forgiveness for breaking the rules than to seek permission," says Richard Gaul, a 33-year veteran at BMW and former head of communications at the $60 billion automaker.

BMW's complex customized production system, the polar opposite of Toyota's (TM ) standardized lines, is easier to manage if workers feel empowered to drive change. Like Dell Computer (DELL ), BMW configures its cars to customers' orders, so each auto moving down the production line is different.

FORGET OLD-SCHOOL RIGIDITY. Making sure the system works without a hitch requires savvy workers who continually suggest how to optimize processes. "Networks can do things that hierarchies cannot, because hierarchies lack the freedom. With a network you get the powerful ability to leverage knowledge quickly to bear on solving problems," says Karen Stephenson, management consultant and Harvard professor. "A network is the only way to effectively manage BMW's kind of complexity."

By contrast, companies that don't have lateral nimbleness are crippled in fast-moving technology-driven industries. Rigid hierarchies that stifle fresh ideas and slow reaction times are one problem facing General Motors (GM ) and Ford Motor (F ).

Once giants like GM were king, dominating the market with their huge volume and purchasing muscle. Big is no longer the ticket to success, and the slow-moving bureaucracies that big companies are saddled with are now a major handicap. "Lean is passé. What is in is lean and agile: the ability to shift and adjust as circumstances in the market change," says David Cole, partner at the Center for Automotive Research in Ann Arbor, Mich.

KNOW THY CONSUMER. BMW managers, by contrast, even talk about the "physics of chaos" and how to constantly nurture innovation and creativity by operating on the very edge of chaos without getting out of control. "Discipline and creativity are not a paradox, there is a borderline case of self-controlling systems," says Gaul. "Where you break rules you have to be very disciplined." That's the industry's next kaizen—the art automakers will be forced to master in the 21st century.

The novel advertising scheme developed back in 2001 is a good example. Jim McDowell, then U.S. vice-president of marketing, was confident the project, dubbed "Big Idea," and kept under tight security in "War Room" No. 6 at BMW USA's Woodlake (N.J.) headquarters, would create just the kind of consumer buzz that BMW wanted—and would ultimately be more cost-effective for BMW than Super Bowl advertising. The idea was to give film directors a BMW car around which a compelling short film was to be made. Many of the tales centered on life-and-death chase scenes, but several were humorous or even melancholy.

McDowell figured if The Hire, took off and the films were downloaded from BMW's Web site by 1 million to 2 million viewers, BMW would chalk up the same number of eyeballs as a snappy advertising campaign aired during the Super Bowl, but would reach a higher percentage of BMW-type customers, progressives with a nose for cinema, technology, and high bandwidth. "If you really understand your consumer, you can be very clever about how to communicate. You can change the whole paradigm," says McDowell, who is now executive vice-president at Mini.

SNOWBALL EFFECT. McDowell didn't take any half-measures. He went after talented directors such as John Frankenheimer (The French Connection) and Ang Lee (Crouching Tiger, Hidden Dragon), and signed up stars such as Madonna, Clive Owens, and Gary Oldman—giving them complete artistic freedom, aside from the BMW model that starred in each film. No advance advertising heralded the Internet launch of the films.

The buzz started slowly with the first film but grew to avalanche proportions by the time Madonna's short comedy film about a cranky diva was released, overwhelming BMW's expectations and forcing the automaker to add servers as fast as it could.

But it didn't stop there. As the short-film gambit rocketed around the blogosphere, national TV broadcasters flooded McDowell's office with requests for interviews on CBS, Entertainment Tonight, and Fox News. The novelty of an automaker producing films fanned public interest and stoked downloads.

"EXPERIMENTAL ENVIRONMENT". After one year, the number of viewers who had visited BMW's Web site to download The Hire shot to over 21 million, and with three more films added in 2002, it rocketed to 100 million, sparking a Harvard Business School case study. One million enthusiasts ordered a DVD with all eight films.

McKinsey's Manyika, who has studied networks extensively, says knowledge forced through a company top-down drives "conformity, consistency, and efficiency." That's better suited to companies that make a standardized widget than a complex, electronics-driven product that requires constant innovation.

Companies such as BMW have to tap into tacit knowledge to spark fresh ideas. "It's more of a learning and experimental environment. It's building on what people know. It's learning instead of instruction," says Manyike.

HOW IDEAS TRAVEL. For academics and consultants studying the phenomenon of corporate networks, the most fascinating element is the "node" or the broker individual who can join two separate clusters with different pools of knowledge. Such a broker may have once worked in purchasing but now sits in R&D. As such, he or she can bridge the two worlds by "reaching across the white space of disconnected people," says Ronald S. Burt, a sociologist at the University of Chicago, who is studying the impact corporate networks have on performance.

That linkage speeds learning throughout companies—a vital tool to industries that should continually innovate. "People exposed to a diversity of information are at higher risk of seeing a new angle, a better way to frame ideas," says Burt. And companies that recognize and tap such social capital "have better growth rates and better patent rates. Formal structures decide who to blame. Informal structures decide how to get things done," he says.