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| MOUNTAIN VIEW, CALIF. – Google Chairman Eric Schmidt sits in a Google self-driving car at Google headquarters on February 2, 2015. |
This is also the case in the automobile industry, one of the largest in the world. “Not since the first automotive revolution has there been such stunning innovation in the industry,” notes an excellent recent KPMG report, – Me, my car, my life… in the ultraconnected age. “Autonomous vehicles are only part of the story. The convergence of consumer and automotive technologies and the rise of mobility services are transforming the automotive industry and the way we live our lives.”
Self-driving cars have commanded our attention in the last few years. The advent of self-driving vehicles like the Google car is not only a truly dramatic milestone in AI, but concrete evidence that digital technologies are having a huge impact on the future of the automobile. Opinions vary as to the commercial prospects for such trulyautonomous vehicles. Some feel that they will be all around us within a decade, navigating our present roads right along human-driven cars. Others are not quite so sure due to the highly complex technical and societal issues that remain to be worked out. Time will tell.
In any event, car companies are working hard to try to keep pace with the speed of innovation in consumer technologies, a huge challenge to the auto industry, notes the KPMG report: “Melding the two worlds — consumer electronics, with its rapid new product launch cadences and willingness to accept iterative software releases, and automotive engineering, with its mass customization, millions of product configurations, and critical safety, durability, and reliability requirements — is not an easy prospect.”
As is the case in other industries, the core competencies that once made a car company successful, — making great engines, designing appealing auto bodies and interiors, marketing the freedom and romance of the open road, — are no longer enough. New software skills, representing a whole new culture are now needed. “Today an average midsize vehicle has approximately 40 to 50 individual microprocessor-driven systems, which require approximately 20+ million lines of code; a larger, high-end luxury vehicle might have as many as 100 million lines of code. A Boeing 787, on the other hand, has less than 15 million lines of code.”
As products become software-intensive and connected, complexity follows. So is the case with cars. Managing this growing complexity has become the greatest challenge in the industry, especially for companies in the early stages of the transition. “[C]omplexity is wreaking havoc with production costs and new product launches,” notes KPMG. “Vehicle recalls are at a record high, and customers are complaining vociferously about the design and usability of in-vehicle infotainment. The value of a car increasingly resides in software and electronics — and how well they work together. Get it right or lose your customers.”
It’s no longer enough for cars to smoothly get drivers where they want to go. People are now bringing their everyday digital experiences into their cars. In response, the report offers succinct advice to automakers:
- “Customers will expect ubiquitous connectivity and seamless integration with their nomadic devices.”
- “Make the HMI [Human Machine Interface] elegant and easy to use.”
- “Use data and predictive analytics to manage the customer relationship throughout the life cycle, from awareness to purchase to vehicle maintenance and upgrade.”
Easier said than done, and little different from the advice one might offer to a smartphone designer. Cars are essentially becoming Smartphones on wheels, the title of a recent Economist article on the rise of the connected car. “This is the coming together of communications technologies, information systems and safety devices to provide vehicles with an increasing level of sophistication and automation. It is a process that will change not just how cars are used but also the relationship between a car and its driver. This, in turn, will affect the way vehicles are made and sold. Eventually, it is the connected car that may deliver a driverless future.”
Three main kinds of services have already been emerging from the marriage of advanced mechanical and digital technologies:
- Applications such as music, navigation and traffic information delivered wirelessly to users’ mobile devices, — e.g., smartphones, tablets, — or to devices built into the car.
- Maintenance services such as advanced warnings that parts must be replaced or explanations of why the check-engine-light is on, based on data transmitted by the car to a support center.
- Services based on communications with other vehicles and/or with a smart infrastructure designed to reduce accidents and make traffic flow more smoothly.
Who will deliver these different kinds of services? Traditional carmakers and their existing suppliers, or a whole new set of digital-savvy companies? “Cars will become bundles of different technologies, not only of devices but also of consumer brands, all vying for the driver’s attention in a sometimes uneasy alliance with carmakers.”
A more recent Economist article, Upsetting the Apple car, probes deeper into these questions, as it wonders if technology companies like Google and Apple, or new startups like Tesla may one day dethrone the existing car companies. This is an issue in many other industries. Will the legacy industry leaders be able to embrace the new digital technologies, processes and culture, or will they inevitably fall behind their faster moving, more culturally adept digital-native competitors?
“[W]hatever the future of the car looks like, it will be tough to overturn the incumbents in a business where clever technology is only part of the equation,” writes theEconomist. “Despite a reputation, once richly deserved, for sloth in adopting new technologies, most big carmakers are pouring resources both into battery power and other alternative forms of propulsion, and into automated driving … [Moreover,] carmakers have had to become adept at handling mountains of regulations and fending off liability lawsuits. These will be huge issues when any self-driving car is involved in an accident — which they will be, even if less frequently than ones driven by humans…”
“In all, the tech firms may be better off working with carmakers, to develop the software that will provide the brains of the self-driving car, and to improve the range and battery costs of the electric car. In the motor industry, supplying the key parts is generally more profitable than putting the cars together, even if you do not get your company’s badge on the bonnet. In the future cars will be different but the brands will probably be much the same.”
How can today’s auto companies stay relevant and capitalize on these many digital innovations? The KPMG report offers with 5 key recommendations, which while aimed at the automobile industry, apply equally well to any company in any industry facing similar digital challenges.
Find new partners and dance: “The structure of the automotive industry will likely change rapidly. Designing and producing new vehicles have become far too complex and expensive for any likely one company to manage all on its own. The companies that thrive in the future will likely be those that are nimble, future oriented — and prepared to invest in new technologies, new talent, and new strategic alliances.”
Become data masters: “Know your customers better than they know themselves. Use that data to curate every aspect of the customer experience from when they first learn about the car to the dealership experience and throughout the customer life cycle. Having data scientists on staff will likely be the rule, not the exception. Ultimately, you will need to use that data to create mobility solutions that capture consumers’ attention, address their personal mobility needs, and make their lives better, more fun, and more productive.”
Update your economic models: “Predicting demand was hard enough in the old days, when you did a major new product launch approximately every five years. Now, with the intensity of competition, the rapid cadence of new launches, and the mashup of consumer and automotive technology, you may need new economic models for predicting demand, capital expenditures, and vehicle profitability.”
Tame complexity: “It’s all about the center stack, the seamless connectivity with nomadic devices, the elegance of the Human Machine Interface. The companies that create the best, most easily customized user experiences will likely be victors in the age of personalized mobility.”
Create adaptable organizations: “It will take a combination of new hard and soft skills to build the cars and the companies of the future. For many older, established companies, that means culture change, bringing in new talent, and rethinking every aspect of process and people management. Melding the rigor and discipline it takes to build zero-defect automotive grade machines in factories throughout the world with the free-wheeling culture of the most innovative high tech companies will be a challenge. But the winning companies will make it happen.”
Irving Wladawsky-Berger worked at IBM for 37 years and was then strategic advisor to Citigroup for 6 years. He is affiliated with MIT, NYU and Imperial College, and is a regular contributor to CIO Journal.
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