Digitization opens the Garage Factory model for car manufacturers

Combining startup innovation with the scalability of the traditional auto industry

Digital technologies have upended the automotive industry

Formerly based solely on a business model of car ownership, the auto industry is fundamentally redefining itself into a multifaceted digital ecosystem. In fact, in a recent study from the IBM Institute for Business Value, 80 percent of executives said “comprehensive connected vehicle services” will be a key differentiator for consumers. Today’s car manufacturers and suppliers face intense competition from startups and internet companies with new business models, agile processes, and rapid releases. To innovate and scale, industry leaders will need to combine the creative skills of a startup with the traditional strengths of an industrial enterprise.

Developing digital products using the Garage Factory model

Today’s automotive consumers expect seamless, customized auto experiences. As their personal mobility expectations grow, Original equipment manufacturers (OEMs) are turning to companies that offer digital mobility services to help them with tasks such as dealing with traffic, parking, or simply getting from place to place. Having direct access to customers through a digital platform with a diverse product and service ecosystem creates opportunities for new revenue streams. Ride sharing, e-hailing, subscription pricing, and platform marketplaces are a few examples of monetization opportunities that have emerged through digital technologies.

OEMs are aggressively implementing digital services in and around their vehicles to meet consumer demands. Direct access to customers and usage data is critical for creating a personalized in-vehicle experience and long-term customer loyalty. Companies that occupy this central position of customer interaction have the potential to capitalize on both customer and mobility market opportunities.

Large automotive companies have already tried to imitate the digital industry’s approach but often failed because of internal processes or lack of scalability. Leading car manufacturers need a way to combine startup innovation with the scalability of the traditional automotive industry.

Marrying agile methods and the capacity of enterprise approaches

The Garage Factory model provides a frame-work for the development and operations of digital products all the way from idea to finished product. The term “garage” communicates the innovation of the first product development phases, which include ideation and minimum viable product (MVP) development after extensive business modeling.

In the garage phase, customer benefits and business potential are extensively explored, and the fundamental product viability is validated with prototypes.

The close cooperation between both partners including co-creation and colocation sets the garage apart from traditional OEM-supplier relationships. The “factory” side of the frame-work involves scaling the product in two phases after the first market launch. The production phase involves iterating the product based on market feedback. It also prepares the product for a large market launch including local adaptations and product hardening. The rollout phase scales the product development capacity by identifying the best possible use of marketing channels to achieve scale and relevance. This factory phase involves continuous development throughout the product life cycle.

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Meet the authors

Ilker Uzkan

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, Senior Business Designer, Aperto (An IBM Company)

Stefan Schumacher

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, Head of Automotive Strategy & Solutions, IBM Deutschland GmbH

Philipp Beckmannshagen

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, Business Development Executive and Solution Leader, Transform Customer Experience, IBM

Alexander Ruhland

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, Business Development Executive, Digital Products and Services

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Originally published 01 June 2018