November 1, 2017 | Written by: Wired Brand Lab
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Even the largest and most forward-looking auto manufacturers today were built around the economics of the 20th century, not the 21st. They followed the codes of Detroit and Tokyo more than those of Silicon Valley. But everyone knew disruption was coming—it was just a matter of when. So when companies like Google, Uber and Tesla grew from startups to tech giants—each one tied very much into the future of transportation—the auto-industrial model moved into the crosshairs, targeted for a serious overhaul.
Consumers, not automakers, will design the great cars of tomorrow
That’s not to say it’s a dinosaur. More than 200 new electric or hybrid models will hit the marketplace within the next three years, and just about every car made today comes loaded with tech-enabled features and services. It’s simply that the business model needs a refresh. Just looking at where major trends in IoT and machine learning are headed, for instance, we’re nearing a time when most vehicles on the road will be talking to (and learning from) not just satellites and your phone, but your home and business, traffic hubs, other cars on the road and many points in between.
The autonomous revolution is emerging
The autonomous revolution is starting to emerge. But cars—and buses, trucks, vans, crossovers and their brethren—will soon require a new kind of power plant inside them to augment the physical one, whether it’s gas, electric, hybrid, hydrogen or some other source providing the horsepower. In brief, they’ll need to get outfitted with an intelligent engine that can juggle the dizzying array of data streams to manage everything from autonomous navigation and safety to entertainment, concierge and business services.
Most automakers today, though, aren’t prepared for the challenge. According to a recent study by IBM, less than a fifth of auto executives today report that their companies are prepared for challenges they face over the next decade. While 75 percent say they are “somewhat” prepared, just 60 percent of auto companies say they are only “somewhat” adaptable—and all this at a time when the pace of change in automotive is accelerating like never before.
It isn’t just the pressures of tech disruption bearing down on automakers—it’s consumer preferences and expectations. As IBM’s report argues, consumers “now expect seamless, omni-channel and customized auto-related experiences, and they are increasingly willing to contribute to product and services innovation. Consumers know how to get information online and circumvent the standard processes that used to restrict their involvement with industry participants.”
So what must automakers do to catch up with both forces? Here are a handful of key trends they will need to stay on top of:
Collaborate with consumers to create new features and services at market speed.
First, the bad news. As mobility trends gain more traction, growth in vehicle sales will slow in the coming years, especially as the sharing economy achieves more scale and mass adoption outside major metros. The good news? According to a study by McKinsey, the overall revenue pool for automakers in the coming years is forecast to grow by as much as 30 percent by 2030—meaning there’s a $1.5 trillion prize to be awarded to manufacturers who can best capture their share.
How will they do it? By tapping into the wisdom of the crowd—that is, consumers and customers—and collaborate with them on new ideas and services. As Dirk Wollschlaeger, General Manager, Global Automotive Industry at IBM explains, “it won’t be enough to know what consumers want today; the forward-thinking industry participants will bring consumers permanently into their views to plan for the future. It will become a new core competency.” According to the IBM survey, two thirds of auto executives today expect consumers to influence overall business strategy.
Develop and nurture a tech-partner ecosystem.
For decades, automakers ruled their own kingdoms with their own select suppliers and partners. The model made it difficult for outside companies to break in, and as IBM notes, “even consumers didn’t have much of a voice.” Over the last 15 years, according to McKinsey, just two new companies broke into the ranks of the top 15 suppliers in automotive—whereas in the mobile phone sector, 10 new players joined the club over the same time period.
That’s an unsustainable model against the demands of customers and the trends in IoT. Today, IoT-enabled vehicles demand new partners and competitors to stake their claim to consolidating mobility services and other extensions. “As cars are increasingly integrated into the connected world,” according to McKinsey, “automakers will have no choice but to participate in the new mobility ecosystems that emerge as a result of technological and consumer trends.” IBM’s survey echoes that point, noting that 75 percent of auto executives today view non-traditional partners as having the biggest influence on how the industry will change over the next decade.
Personalization is the path to differentiation.
Cars of the coming years will need to be a lot more like digital chameleons, and less like the fixed objects of desire they seem like in TV commercials. The quaint system of custom ordering a vehicle from a showroom today—and selecting from a menu of pre-set, fixed-price packages—pales in comparison to the scale of customization and personalization that tomorrow’s vehicles will need to deliver.
Personalization, arguably, will be the new differentiator in automotive—same as it is with every leading-edge type of connected service or technology. Cars will need to get to know us much better than they do today. For automakers, that means tapping into software and IoT services to deliver a range of customizable options that every buyer can align to their lifestyle—news, weather, sports, streaming music and video, games, social media, banking, retail and so on.
Cars may soon be able to detect that you’re in a bad mood or upset and adjust its operation to help the driver and guard against unsafe or aggressive driving maneouvers. Consumers will soon expect access to all those services, customized to their liking, before they get into the car. (They also expect it, no matter which car they’re driving: 78 percent of auto executives, according to IBM, expect consumers’ digital personas to be interchangeable between vehicles.)
The technology that can power all that personalization and demand is emerging today in the form of AI-enabled platforms, such as IBM Watson, that bring cognitive learning abilities into every vehicle, allowing the software to tailor the experience to person behind the wheel. But the industry has some cognitive learning of its own to get through before it will happen.
Find out more at Watson IoT for Automotive.