This article was originally published on CFO.com.
Continuing pressure on safety, infrastructure capacity, and emissions are going to force carmakers to fully embrace the smart, connected automobile.
The shift to a “digital” economy is fundamentally changing virtually every industry. Over the next decade or so, the accelerating integration of digital technologies will make many things connected and “smarter,” capable of reporting where they are, who’s using them, and how they are used. That flood of data and the embedded analytics that harvest insights from it promise to offer a multitude of new value-creation opportunities to the companies (and their customers) who embrace “digital.”
Getting there won’t be easy. Let’s look at the automobile as an example. Cars are already halfway or more to being the ultimate mobile applications platform, despite the fact that for manufacturers (OEMs) hardware still matters more than software and the idea of “agility,” “updates,” and rapid evolution are embryonic. The update cycle for a vehicle line is still multiple years, and the over-use of “all new” for each model cycle fails to obscure the fact that most changes are minimal and “revolutions” are rare.
Despite the impressive gains in safety and economy, few OEMs (and no mass brands) have fully embraced the smart, connected vehicle paradigm, and few of the lessons learned in building smart connected products in other industries have made their way into auto designers’ thinking. Continuing pressure on safety, infrastructure capacity, and emissions are going to change all this, probably sooner rather than later. As soon as one OEM gets on board the digital platform, competitive pressures will drag everyone else along, or relegate them to niche status.
So the car of the future will be:
- Connected: Not in the relatively trivial way cars already are, but tied closely to the driver, the driver’s other connected devices, to other cars, and to the infrastructure (roads and parking structures at a minimum) that it uses.
- Autonomous: Fully autonomous eventually, because we need to pack more cars into the infrastructure we have available and humans simply aren’t equipped to control vehicles at the speeds and traffic density we’ll need within a decade.
- Rented by the journey: Most vehicles on the road today aren’t actually on the road most of the time; they’re parked somewhere. No other consumer product this expensive gets used so little. Sure there are peak usage issues and moving to “transport on demand” will take a huge shift in attitude and infrastructure – and require more than just cars as a part of the mix– unless you’re wedded to the status quo. Sure there will be excess capacity some of the time, but much less “wasted” capacity than there is today. And smaller capacity, driverless “public transit” vehicles that can be scheduled or hailed with an app on a smartphone will offer a class of transport that does not really exist today.
- Electric: Not just because there’s no alternative if we are to eliminate emissions from hydrocarbon fuels but because hydrocarbons are a finite resource; millions of years of stored sunlight being consumed in mere centuries. With the usage data that a fleet of smart connected cars generates we can optimize vehicle use to such an extent that range and recharge time will not be the challenge it is today.
So CAR will become CARE. Not soon or easily or smoothly or without missteps, but inevitably.
There’s a lesson here, I think, for many, if not all, consumer products that can become smart and connected. Although the initial evolution will likely be adjacent to what we already have — and hence familiar — the end points could be very different.
In a smart connected world, what will your products look like? What new capabilities and services will they need to support them? What are you doing to get ready?