I attended the Financial Times ‘Future of the Car’ summit last week, an event primarily concerned with changes to the car from electrification and digitisation.
Three main themes emerged over two days of talks:
Autos are late to digitisation
The audience was OEMs, tier 1 suppliers and automotive industry leaders. There was no one there from major mobility disruptors such as Uber, Lyft, Google or Waymo. It was a pre-digital event, so despite the presence of startups, the gravity was legacy. The debate was similar to that in finance or media 20 years ago. There were pre-digital-era signals of embattled CEOs talking up tangible qualities of analogue products and unhelpful questions like “will your fridge talk to your car?”, which belies a lack of awareness and confidence, to say the least.
Digitisation in the automotive industry lags the leading industrial sectors of media, financial services and technology. A dozen years ago, Rupert Murdoch‘s Sky owned hardware (satellites and set-top boxes) access (channels and EPGs) and content (TV content, sports rights).
Automotives are not just a stubborn legacy industry struggling with digitisation. It genuinely has pressing crises such as the strategic investment required to focus on redesigning cars, factories and whole supply chains to serve electrification. This doesn’t leave much executive bandwidth for engaging in a digitisation strategy with its new words and ideas.
Ecosystem Approach – AKA avoiding being truly digital
Rather than trying to approach digitisation themselves, the car industry is looking to leverage partnerships with tech companies that do what they cannot. A McKinsey report suggested these partnership ecosystems emerging:
- China-specific
- Dominated by Value-OEM
- Dominated by Premium OEM
- Dominated by Technology partner
Arm’s length collaboration allows OEMs to learn about working with tech but hedges any investment in new technologies. It means they will not truly understand the development, ownership and staffing of a technology business and the longer this goes on the further they will be from being a properly digitised business. I think these companies need to build digital teams as soon as they can. There is absolutely a place for external teams to enable and kickstart this, but at some point, these projects need to be owned and iterated by their internal teams.
Opportunities in data
Silicon Valley companies like Waymo have an early advantage in data ownership, gathered from drivers’ smartphones. You need a large amount of data for reliable predictions and analysis. Car companies will soon be releasing cars that produce as much if not more data on location and performance. These connected cars will create a lot of data but it’s fair to say that compelling customer propositions are still light on the ground.
Across the auto industry, there have been ‘connected fridge’ type propositions such as coffee shops spamming drivers with an offer when they are nearby or insurance companies monitoring braking styles to change premiums. As highlighted by the Director of Innovation at TFL, Michael Hurwitz, the bigger opportunities will come from sharing data outside the traditional car-customer loop. Other than Ford (Disclaimer – We have worked with Ford Smart Mobility on related projects), he was unimpressed with the current state of data sharing between automotive companies and cities. To realise the full potential of their mobility future, automotives need to partner with cities during the development of mobility platforms. This will allow cities to be proactive rather than reactive in the services and value they create.
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Author: Max Gadney