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Beyond Uberization – auto industry turning into services business?

Beyond Uberization – auto industry turning into services business?

carI step out of my house to find my driver-less car from the ride-sharing service waiting for me, with my ride-sharing partners already seated and working. The indicator on my coffee mug tells me I have enough for the drive to the office – I fire up the console in front of me and log into my Office 365 account to finish up a sales proposal during the drive.

On the way back from the office, this cycle is repeated, except now the car has transmitted my arrival information to my home – to have it at the right temperature when I arrive with the lights on – and I have enough time to order groceries and shop for a gift on the car’s “marketplace”.

Too futuristic for you? If you have been following the developments in the auto industry, you would know that almost all of this is available today…

It was only about four months ago that I wrote about Uberization in auto sales – idea being that Tesla is leading the charge into changing the paradigm around auto sales to improve customer loyalty and satisfaction.

A couple of weeks ago at the CES trade show, the auto industry was again at the forefront of change – with announcements ranging from enabling people to access their Microsoft Office suite in the car from Microsoft and Harman, to “mobility services” from Ford.

“Ford’s rollout of mobility services, mostly under the “FordPass” brand name, resulted from 18 months of evaluation into building an end-to-end customer experience around the new offerings. FordPass, which launches in April, will be free, whether or not users own a Ford vehicle. FordHubs, the name for its storefront centers—which bear resemblance to Tesla’s retail locations—will open later this year in New York, San Francisco, London, and Shanghai. In February, Ford plans to launch a shared-lease program in Austin, Texas, that will allow up to six friends or neighbors to share a single vehicle. And soon FordPass members can speak directly to a human being, from a team dubbed FordGuides, to book a space at a local parking garage or receive other services”.

Add to that GM’s recent $500 million investment in ride-sharing company Lyft and purchase of SideCar‘s assets (SideCar was a ride sharing service which shut down last December) – the auto industry is truly thinking ahead, maybe because of necessity.

There are many factors leading to that thinking, but primarily, it is the increasing global realization that owning a car for everyday use may not be the most attractive option (of course, the purchase of a car for ego purposes cannot be discounted just yet). Even in the U.S., the number of households without a car grew from 8.7% in 2007 to 9.2% in 2012.

Consider this prediction from 2014:

The world will reach “Peak Car” — a point at which annual global sales growth will top out — in the next decade, several auto-industry analysts predict.

Researcher IHS Automotive, for one, sees annual sales cresting at 100 million within that time. Peak Car is at odds with the ambitious expansion plans of global automakers, which IHS says are gearing up to produce more than 120 million vehicles by 2016 — almost 50 percent more than last year’s worldwide sales mark of 82 million

So what is a major auto manufacturer (and its ecosystem of parts suppliers) to do?

An interesting article in MIT Technology Review talks about how auto manufacturers are taking tentative steps to become services businesses. In this age of “Everything as a Service”, a new term comes to mind for this – Mobility as a Service”.

Indeed, the article offers a prescient quote: “Uber showed the world that it can help people get where they want to go.”…(On another note, people following this thread maybe interested in a recent article in The New Yorker around how Uber and it’s Dubai-based competitor, Careem, have changed the lives of women in Saudi Arabia – which restricts driving by women)

The tune of the analysts has also changed in less than two years:

In November, Gartner, a technology market research firm, predicted that by 2020, 10 percent of today’s vehicle owners in urban markets will replace vehicle ownership with on-demand vehicle access. Thilo Koslowski, vice president and automotive practice leader at Gartner, believes companies like Uber and Lyft have an early-mover advantage in the short-term—but in the long run car companies could become legitimate players in mobility services made possible through car connectivity. He says their success won’t strictly be a matter of investment, but developing a culture and mind-set that extends beyond products.

So to answer the question above, in the short-term, companies like BMW are hoping to gain competitive advantage by impressing the ride-sharing users with the benefits of owning a BMW, but in the longer run, the Mobility as a Service and related offerings may become the primary way to financial success.

For more thoughts, follow me @RajBhandariDFW

Marx, Monetization and M2M – where do we go from here?

Marx, Monetization and M2M – where do we go from here?

sharingA recent article in The Economist caught my eye – firstly because the tag line referred to digitization being a threat to the industrial leadership of Europe’s largest economy, and secondly because it brought to mind Karl Marx’s words from over 150 years ago.

The article, Does Deutschland do digital?” talks about how German manufacturing companies, long focused on engineering and precision, are now trying to transform themselves (slowly) into data and software companies. The trend is nothing new – here in the States, we have been seeing provocative headlines like “Domino’s Becomes A Tech Company That Happens To Make Pizza” for years. The premise is companies are using the latest advances in mobile, cloud, big data and analytics to improve their business models – and get more revenue from improved services.

marxSo what is so different in the Deutschland? Enter Karl Marx, who in Das Kapital talks about commodities being the fundamental units of capitalism. Commodities, according to Marx have two values – a “use value” – what it does in the way of satisfying needs and wants – and an “exchange value” – the relative value of the commodity in relation to another commodity.

The article talks about a German company founded in 1923 called Trumpf – who is now trying to re-establish itself as a software provider – “Trumpf’s roots in metalworking and other hardware stand in stark contrast to what it is trying to achieve next: building a new business purely based on software and data. Unveiled last month, its online offering, called Axoom, connects machines built by Trumpf and others, and uses the data it collects from them to help customers organise their production—for instance, to warn them when they are running out of material or to order it directly from the supplier. Much like smartphones, Axoom will be able to run “apps” from other providers, such as software to schedule workloads, or to predict when machines will need a spare part”.

But here, we are talking about information as a commodity which has an “exchange value”. When would sharing information between apps become a “loss of sovereignty”?

“Apple and Google are pressing carmakers to install the operating systems they have designed for cars’ entertainment systems, which in practice will suck up all sorts of other data about the car and its occupants. Carmakers are realising that to give up this territory would risk their “sovereignty over the data” generated by their vehicles, in the words of Wilko Stark, Daimler’s strategy chief. They could end up like Samsung, whose profits from smartphones are limited by the fact that it depends on Android, Google’s mobile operating system”.

So how do we get past the fear of sharing?

One way is by looking to bureaucracy – the “Open Data Initiative” of several governments has put a lot of data (albeit mostly mundane) in public domain – which can then be used by startups like Zillow to create apps which can monetize the inferences from this data. Other good examples cited in another article in the same issue of The Economist are around corruption – “Making data public can also fight corruption. Last year IMCO, a Mexican think-tank, found over 1,400 teachers apparently born on the same day in 1912, prompting a purge of the “ghosts” from payrolls. British and Nigerian officials have used property and company registers published by several governments to investigate money-laundering…”

The other way could be revenue sharing – where the platform company acts as a trusted broker for the monetized data – providing various participants their proportionate share of the revenue stream or utility. The first step, a la Google or Apple, would be to build the right platform for that industry sub-vertical, where companies would want to share data and use shared data (remember Marx’s “exchange value“?)

Take an example of Navistar – a manufacturer of commercial and defense vehicles, which has not been profitable since 2011, in addition to being sued for violation of the Clean Air act.

They use sensors, big data and analytics today to offer efficiency solutions to their customers: Navistar is analyzing data pulled from OnCommand Connection, a remote diagnostics system the company launched in 2013 to monitor performance of more than 150,000 trucks in Navistar’s fleet, including its own international brand, as well as Freightliner, Kenworth, Peterbilt and Volvo makes. The software builds 20 million records a day, measuring fuel economy, geolocations, idle times and potential failures, and recommends corrective measures. Such visibility enables fleet customers, who can monitor the metrics from smartphones or tablets, to schedule maintenance, reducing unplanned repairs and downtime by as much as 30 percent. For example, rather than changing oil based on time or miles logged, the diagnostics software will alert customers when new oil is required.”

This is exciting – but more exciting is the vision around “platform” of their CIO – “ Navistar will eventually build an online portal that integrates telematics data with additional GPS data and parts inventory information, allowing fleet owners to locate the nearest dealer service location where the necessary part is in stock, as well as service locations that have available technicians and bays. The company is also considering offering an analytics service that would enable smaller fleets to acquire operational data about their without ponying up the cash to build their own systems”.

This is where Navistar could be the trusted partner for partners like parts manufacturers or service locations – sharing revenues from the monetized data for the greater good of all the partners subscribed to the platform, while adding more data from partners to extend the exchange value.

I believe we just scratching the surface of new business models to come. As the Economist article states, “It is impossible to predict where the open-data revolution will lead. In 1983 Ronald Reagan made America’s GPS data open to the world after a Soviet missile brought down a South Korean airliner that had strayed into Soviet airspace. Back then, no one could have guessed that this would, one day, help drivers find their way, singles find love and distraught pet-owners find their runaway companions…”

For more of my musings, please visit RajBhandari.info

 

Marty McFly was right – Flying Cars are here…

Marty McFly was right – Flying Cars are here…

back-future-part-ii_3Well, sort of…

Thirty years after “Back to the Future Part II”, it is amazing to see that some of the predictions the movie made in the 80s are real today – including 3D, abundance of flat screen TVs and drones…but no flying cars yet…

However, the transportation industry is undergoing paradigm shifts in every facet – from supply chain to marketing to to sales to predicting driver behavior and using technology to improve it.

Much has been written about using IoT, big data and analytics throughout the supply chain to improve the productivity, logistics, forecasting and predict machine failure. Not surprisingly, it is the emerging area of Connected Vehicles – from Connected Cars to Connected Trucks to Connected Rail – which is igniting possibilities from an end-user, commerce and fleet management viewpoints.

Think about what GPS data, real-time road conditions, weather data, driver behavior history, combined with data from the sensors in the vehicle can do…plus newer technologies like vehicle connected infotainment and dynamic route mapping… Add to that the projection that half the new vehicles shipping by 2032will have robotic autonomous (driver less) capabilities – we are painting a future which obsoletes all the current norms around transportation and commerce.

connected carA lot of this technology is available today – and some of it is under testing. An interesting report talks about “multi-modal mobility” as the future – “With mounting traffic congestion increasingly resulting in lost time and economic value as well as environmental issues, especially in mega cities in developing regions, the focus of both public and private companies in the automotive and transportation industries is shifting to multimodal / intermodal transportation solutions. Traveler information systems providing real-time public transport timetable information, multimodal journey planners, and smartphone-based pedestrian guidance applications are geared at facilitating knowledge of and seamless access to a wide range of mobility solutions. This is prompting even car OEMs such as BMW and Ford to offer solutions beyond the narrow context of the vehicle itself, realizing their products will become part of an integrated intermodal system, offering a balanced range of mobility modes…”

The basic technologies remain the same, but are being continuously improved – automated data collection (via IoT or other data streams), storing the immense volume and variety of data in efficient stores (big data), advanced predictive modeling on this data, and presenting it in the right context and format back to the user.

And just in time for the October 21, 2015 date famously referenced in the movie, learn how a couple of companies – HortonwWorks and Harman (disclosure: I work for Harman) are taking connected cars to the next level at this webinar on Oct 22nd.