By Niranjan Manohar, Program Manager in Frost & Sullivan’s Automotive and Transportation
As the year opened up to CES and the Detroit Auto Show it is clear that automakers have a clear roadmap with set themes focusing on connected mobility. As electric vehicles made a comeback, near term focus of automakers and Tier 1’s suppliers was towards creating contextually aware services (e.g. door to door mobility ) offering more personalization. Trends such as automated driving, shared mobility and connected living are set to become real, drawing support from enablers such as artificial intelligence, localized maps and others.
These trends are transitioning the component driven automotive industry to a software and solutions-focused industry, coupled with the growing digital consumer lifestyle; automakers need to evolve to the next generation. IT is not about getting the auto industry to pump in more dollars into a vehicle rather using it as tool to achieve business objectives that will yield more value from each user. Working towards this goal, Automotive CIO’s are focusing on areas such as
- Pushing Car Retailing into the Next Generation
- Future Proofing the Software Heavy Car
- Building data driven Monetizable business models
- Best in Class Customer Experience and Service
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- Digitizing the retail experience incorporates the latest in human-interaction technologies for customers, connected to business processes for automakers. This is where several automakers like Audi, BMW, Volvo (Microsoft HoloLens) and Mercedes are working bringing in developments to car configurators models. Audi after its success with Audi city demonstrated virtual showroom at CES 2016 (partnering with Nvidia Quadro GPUs, Oculus and HTC) where users can configure and build of every Audi model. It is not only about digitizing the buying experience but efforts are being pursued to do away with the owner manuals as well. Hyundai’s augmented reality app is an example where the camera recognizes the different component in the vehicle with labels and tutorials for the same. In addition to selling an experience, digital retail has made buying vehicles and selling used cars online a breeze. As customers are used to online shopping, given an option customers will look at doing an entire deal on-line, for example startups like Roadster and Beepi are bringing in the e-commerce angle and re-inventing the car buying process by completely avoiding dealerships. The end game is that automakers would need to assimilate customer requirements and feedback for new product development and also use this as strategy where the brand can have an emotional connect with the customer, failing to do so might greatly increase the risk of obsolescence. Digitization in retailing is expected to have a significant impact on diverse channel activities and can enable lead conversion ratio improvements of more than 80% beyond 2020
- Another big area of concern and focus for CIO’s is cybersecurity where automakers expenditure could increase to about ~5% based on their game plan. Though hack mitigation might be the first step, security training and transparency within supply chain regarding cybersecurity policies and methods will be critical to contain future vulnerabilities and attack vectors. In the year 2015 and early developments in 2016 clearly indicated key activities/focus of automotive participants towards industry consolidation (review boards, alliances, and acquisition). Security giants like Symantec and Fire eye who are entering the automotive cybersecurity face stiff competition from security specialists’ start-up companies (Argus, Arilou, TowerSec (now acquired by Harman) and Security Innovation from US (specializing in V2X security and security training). In the near future car shoppers will not only see the crash-test rating of vehicles, but they will see a security rating focusing on how equipped a vehicle is to protect against hacking and data theft. Net effect is that by 2025 solution maturity will help automakers bring down their cybersecurity costs by 18%, as tier 1’s will acquire software capabilities which will create a cost sensitive competition among extended ecosystems
- Data is receiving commercial value in the automotive world because of multiple revenue stream opportunities and using the cloud and related big data technologies, the need is to focus on gathering specific, actionable insights. A typical example here would be Ford’s Smart Mobility subsidiary with its HQ in Michigan will be focusing on smart mobility experiments. The first of the rollout plans from this subsidiary is to build a point to point multi-person ridesharing model using e-hailing technology using their own Transit Vans. The idea of using their own vehicles will aid Ford in understanding how their vehicle designs can support shared mobility services and not only appeal to regular car buyers. Another example here would be GM’s prognostics entry with the Driver Assurance program is set up to understand component durability using their OnStar’s embedded connectivity and cloud based servers. Basically this means that GM is not only minimizing their cost due to their in-house embedded expertise and cloud processing but supporting customers with proactive monitoring of vehicle which is currently not happening. Doing this if automakers are able to achieve reduction in warranty and recall related expenses by ~ $90-100/vehicle, this would have significant impact to their bottom line.
- Engaging the customer is like providing “Product as a Service (PaaS)” model that will help automakers form a collated effort using ecosystem partners to deliver content and other features allowing additional revenue opportunity. Ford Pass is an ideal example, where the automaker has partnered with Parkopedia, 7-Eleven, Flightcar and others. Though Ford is not the only automaker trying to engage customers, Mercedes-Benz had rolled out Mercedes Me (a unified digital platform) allowing its users to access various services aimed at convenience couple of years ago. The real difference being that Ford is enabling these solutions for non-Ford users as well; this level of relationship with non-ford owners will help them understand the experience of having to buy/rent/share a Ford vehicle. A distinct highlight here is that Ford Pass solution has immense scope for future expansion with several flavors that can support electrification and new experimental mobility efforts. The customer experience is what sells. Services such as these will help evaluate new business models with connected services such as merchant services, financial processing etc. for customers. This process will be controlled by the automaker and ultimately each and every service bucket goes back as a revenue opportunity to the automaker, where PaaS could be billion dollar market. The consumer piece of the pie is like an apple store model where every transaction can be monetized by the automaker. It is important for automakers to adopt these strategies over the vehicle lifecycle, allowing a longer period of customer engagement and associated opportunities.
The success for future development of IT and its effect on the auto industry will require synergetic efforts from all ecosystem partners .Going forward these synergetic efforts will need to address key pain points of CIO’s to boost reliability and deliver benefits –
- Distinct business and operational advantages that can be achieved as a result of aligning IT strategies with the next generation growth opportunities? and
- The next wave of IT revolution that the digital team within the organization needs to be prepared for?
About the Author: Niranjan manages the automotive IT team and regularly interacts with CIO’s of automotive companies helping them create future proof business models and revenue streams.