Automakers are facing four changes that will altogether change the automotive experience in the few years to come. These four innovations, brought from the consumer electronics industry, include Connectivity, Artificial intelligence, Sensors, and Interface. Each of these four disrupting factors, taken independently, is a powerful wave on its own. When combined, they will redefine the industry.
We all get used to technological progress and forget how things were only a few years ago. This is so true that we tend to overlook the huge improvements in the products and services we use every day. To realize the breadth of the changes, just recall what purchasing music was like only a few years ago: it involved going to a store, purchasing a CD, and bringing it back home.
This rule applies to all industries, and the automotive industry is no exception. Since the first mass produced car, the Model T, cars have evolved, one step at a time, generation after generation. This evolution has encompassed a large array of components and sectors, like electronics, mechanics, and new materials. In order to meet the expectations of their customers, automotive companies are used to including new features incrementally in their new models by surfing on new waves of innovation.
In the next few years, the innovation waves will get bigger, which will drive automakers to reinvent themselves in several ways.
There were hundreds of automakers in 1950. Today only a dozen remain; the others have either disappeared or merged together. This is the result of two main drivers of competitive pressure in the automotive industry: quality and quantity—the“Two Qs.”
Automakers, for all their dexterity in launching new innovation-packed vehicles on a yearly basis, focus their efforts mostly on producing reliable cars in large quantity at a reasonable price. As a consequence, scale is the paramount factor of success, which enables consistent increases in quality while maintaining or lowering costs. Overall, the quality of the cars being sold has consistently improved. To be able to offer ever more sophisticated vehicles at a perpetually decreasing price, and to amortize the considerable amounts of industrial investment and R&D costs involved, carmakers have to produce in huge quantities. Quality and quantity complement each other in a virtuous industrial cycle.
To achieve both quality and quantity targets (cars made of high quality components, platforms and engines, at low cost, reused on several models, which enables the increase of the reliability of cars), automakers have to rely on strict development processes. Processes enable both quantity and quality by standardising not only the production process, but also the research, development and purchasing functions. By enabling the reuse of similar modules and components across different models and brands, processes enable the two Qs.
Processes are for the 1990s car what Fordism and production lines were for the 1930s car: the cornerstone of success; the pillar of the whole enterprise. This is what we will call the ‘weightlifter’ model, which we can describe as follows: automakers excel at producing large quantities of quality cars through systematic use of processes.
Automakers are facing four changes that will altogether change the automotive experience in the few years to come. These four innovations, brought from the consumer electronics industry, include Connectivity, Artificial intelligence, Sensors, and Interface (CASI). Each of these four disrupting factors, taken independently, is a powerful wave on its own. When combined, they will redefine the industry.
Cheap, small, light, reliable sensors – Remember when you had to carry a camera on every trip to take pictures and bring a few snapshots of your holidays? These days are gone. Sensors got so small, cheap and light that they now appear in any low-end smartphone.
Unsurprisingly, they have now invaded cars, and next generations of automobiles will include dozens of them to support the Advanced Driving Assistance Systems that will culminate in the emergence of the partially, and ultimately, completely autonomous vehicle. Other sensors will follow in the next few years: sensors to measure vibrations, weather or the pollution, just to name a few. The consumer electronics wave precedes the automotive innovation wave, and it brings along with it the economies of scale that bring costs down and volumes up.
Innovative, user-friendly Human Machine Interface (HMI) – Touch screens have invaded automotive cockpits, but they are not so well adapted for safe use in a driving context. We can expect more from voice and, to a lesser extent, gesture HMI. This should increase the autonomy of the driver and the number of tasks a driver can carry out while driving. While we should not expect to be able to safely watch TV while driving, routine tasks such as making or receiving a phone call, or booking a parking slot, are already widespread or just around the corner.
Artificial Intelligence – Artificial intelligence will become ubiquitous in vehicles. Google-owned Waze already offers its users intelligence by tracking driver history and making suggestions based on their driving habits. It can automatically identify frequent destinations, such as work, home, school, etc. We can expect more in the years to come. Tired after a few hours of driving? There is no need to worry, your car will offer you a coupon at Starbucks!
Connectivity – Connectivity will become mandatory in cars. In Europe, regulation already requires new cars to be embedded with a 2G SIM card. The promises of assisted, and ultimately, autonomous driving will further encourage all automakers to embed connectivity on all vehicles.
The benefits for clients of the CASI revolution rely on interactivity: by relying on sensors (for instance, let’s say, a camera facing the driver), a car can perceive and collect data about the attitude, needs or physical state of the driver. Using artificial intelligence, the car can analyse the data about the driver and the environment. Through advanced HMI, the car can interact with the driver; through connectivity, the car can interact with the outside world. Complete new interactions and user experiences become possible.
As automakers become magicians, their weightlifting skills (producing large amounts of high quality cars) become a necessary, yet insufficient, condition for success. It remains necessary, because the traditional model of manufacturing cars remains the same overall. It becomes insufficient because clients will expect the car to offer new functions: this is the wizard phase.
As automakers transform themselves into wizards, they will need to master new skills, among which the most important is to learn to design cars around user experiences. Where traditional “weightlifter” car designs focused on delivering a good product, the “wizard” automaker must focus on the user routine, and their needs before, during and after the trip they makes with their car, and embed interactive functions that make the journey more simple, less stressful and more entertaining.
At the “wizard phase,” the car design teams still rely on strong established processes, but a broad range of new skills become paramount success factors: interface design, connectivity and IT, user experience, and ergonomics. These disciplines require speed, agility and openness to innovations originating from other industries. They also typically involve test-and-learn and iterative approaches to product design, less centralized management styles than the traditional “top-down” management style, and more flat hierarchies to get the information flowing fast across the organization.
As the external car sensors and algorithms that analyse information become more and more reliable, vehicle automation will become a reality, which in turn will make car ownership an option among others. The automotive industry, which has always been product-centric, will become service-centric. This will have huge implications.Whereas the weightlifter automaker provides a high quality, well designed product, and the wizard automaker provides an enchanting experience on-board, the genius automaker will provide a ubiquitous mobility service, at any time, in any place.
Mobility is not a common service: it is about transporting someone from one place to another in the shortest possible time. Whereas most service providers (let’s say, a movie theatre, or a hairdresser) provide their services in a dedicated location at specific times of a given day, and can therefore afford to focus on the comfort and enjoyment of the overall experience, a mobility supplier must above all take a person from point A to point B in the shortest possible time. This requires being as ubiquitous as possible, which in turns requires scale. For an automaker, being a genius involves being able to give any of its clients a lift, anywhere, anytime.
This phase is clearly the most challenging for automakers, as it requires them to reinvent not only the way they design cars, but also the very position they occupy in the value chain. It will also question their core strategic competitive advantages, as success factors will switch from product design (integration of features in a well packaged, user friendly, nice looking product) to service design (time and location as the two main parameters); from mass production (scale effect) to mass service (network effect); from steel and electronics (what a car is mostly made out of) to IT and maps (what an autonomous car fleet would be mostly about).
This ultimate phase will be the most disruptive, and bring paradoxical requirements for the automakers: how to combine the legacy of an industrial company (size, quality, product) with the new requirements of an internet age and ubiquitous mobility era (creativity, speed, flexibility)?
Without a doubt, for the automotive industry, the coming 10 years will be quite a ride.