In auto retailing, technology innovation often becomes a jagged, uneven thing.
The industry's big retail technology companies tout innovations in their dealership management systems both behind the scenes and facing customers. DMS platforms, however, can require dozens of add-ons and plug-ins and additional software to make their vast processes work the way dealers want them to.
In that scenario, innovation can become stunted and half-baked, because maximum efficiency comes from all the pieces working together seamlessly, and retail technology isn't collectively there yet.
Retail technology company executives say help is on the way, through improvements and investments in new technology to eliminate friction points and provide new services. They assert that their efforts will reduce or even end the need for all the add-ons used by retailers for their digital processes.
That may be true. At the same time, however, some observers believe the larger players are so out of touch with how to organically innovate that the way they can do it best is to acquire startups that have achieved advances they have wanted to make on their own.
This is where venture capitalists can make a real difference as they quietly and steadily invest in startups, explore innovative ways to raise money and spur industry interest in new technologies. Some dealership groups are also acting as de facto venture investors and developing and housing startups themselves.
A startup's potential to truly change things may be enormous, but innovative technology only makes a major impact with a wide user base. Most startups don't achieve that on their own, unless they are able to scale in size and reach the public markets. Another option for those fledgling innovators: Setting themselves up as acquisition targets for the big retail technology competitors.
When big retail tech rivals acquire such startups, the aim is to maximize a technology's potential in a way that benefits retailers in game-changing ways. Delivering on that, however, hinges on integrating any new tool with a dealership's technology systems and programs in a unified and coordinated way.
Innovation in retail technology may be uneven right now. The question moving ahead: Can all the parties involved work collectively to smooth out the rough edges?