
Digital Businesses are Disrupting Industries
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NavigationMake the mobility revolution work for your organization by understanding and embracing the disruptive trends of the auto industry.
There’s a famous car show in Metro Detroit every year, far from the more familiar—and more grandiose — North American International Auto Show. It’s the Woodward Dream Cruise, a chaotic spectacle of thousands of vehicles stretching for miles along America’s first paved road.
Love it or hate it, every summer the Dream Cruise transforms Woodward Avenue into an artery flowing with nostalgia for a culture the auto industry largely defined and controlled throughout the 20th century with its stand-alone vehicles.
As good as this nostalgia may feel, those at the heart of the auto industry today know we are in the middle of a revolution where there is no time to contemplate the way things were. After decades of relatively little innovation when it came to vehicle production, this revolution is quickly redefining every notion we have of what it means to get from point A to point B.
“After decades of relatively little innovation when it came to vehicle production, this revolution is quickly redefining every notion we have of what it means to get from point A to point B.”
As a result, futuristic concepts of mobility — like autonomous vehicles — are no longer pie-in-the-sky ideas. It could be argued the future of mobility is here now—a future where consumers no longer look at vehicles the same way, no longer buy vehicles the same way, and are no longer satisfied with one-dimensional modes of transportation.
For this reason, it will be crucial for OEM’s and automotive suppliers alike to understand the many disruptive trends shaping the future of mobility and, ultimately, the revolution occurring within their industry. Those who adapt will find success—and those who fall behind will not only struggle, but miss the chance to invent the future. For companies wanting to challenge their thinking and capitalize on what the future holds in our modern world, the following industry shifts are particularly relevant.
Younger drivers are not rushing to get drivers’ licenses anymore, according to an extensive study by the Transportation Research Institute at the University of Michigan. Among its many findings, the study shows that from 1983 to 2014, the number of people ages 20-24 with drivers’ licenses decreased by 16 percent. One of the reasons? According to the same study, 31 percent of respondents said it was simply easier to get a ride from someone else.
It’s not surprising the millennial generation is driving the mobility revolution, though consumer behavior overall is greatly affecting how we view vehicles today. Rather than seeing the act of driving as a rite of passage, or vehicle ownership as a point of pride, younger consumers who are shaping mobility’s future see themselves as “users” of vehicles. These vehicles will become extensions of their lifestyle—pragmatic, flexible tools that allow them to live more efficiently and economically. So vehicles must be connected. They must be “smart.” And they must best serve the purpose at hand, whether someone needs to take a date to dinner or a family on vacation.
“Rather than seeing the act of driving as a rite of passage, or vehicle ownership as a point of pride, younger consumers who are shaping mobility’s future see themselves as “users” of vehicles.”
To that end, many consumers realize spending tens of thousands of dollars on a new vehicle may be unnecessary. In fact, a study conducted by Internet trends firm KCBP on 2016 digital trends shows a vehicle is used on average only 4 percent of its lifetime, contributing to not only financial and economic waste, but environmental waste, too. So it is no surprise that many people, especially in densely populated urban settings, are considering ways to lessen these transportation burdens, which could include consumers over the next several decades embracing a culture of sharing and on-demand vehicle use. As a result — by 2050, one in three new vehicles could potentially be a shared vehicle.
This trend is a good thing, and here’s why: though more people will be sharing vehicles in the future, mobility and data-driven services are expected to add 30 percent to automotive revenue pools, or about $1.5 trillion in potential new revenue opportunities by 2030. Auto organizations embracing a consumer-centered development approach — such as developing mobility products and solutions based on consumers’ new transportation sensibilities — are likely to reap a big part of this potential revenue.
Traditionally, OEM’s earn revenue in three ways: the sale of a vehicle, aftermarket sales (parts, accessories, and maintenance) and financial services. But a new form of revenue—connected services—is just now hitting its stride. It started with services like OnStar and Sirius XM Radio, and has transformed into 4G Wi-Fi and connected vehicles with features like remote start, vehicle diagnostics and, on the extreme end, Smart Summon (Tesla’s James Bond-like vehicle summoning technology). As these connected services continue to develop, it’s become apparent that users expect these services free of charge for the duration of ownership. Therefore, manufacturers must evolve the in-vehicle experience to create more revenue outlets.
Connectivity will continue to play a critical role in user satisfaction, and the OEM’s and suppliers ability to create new revenue streams. As hours are reclaimed from long, strenuous commutes, users will look to increase productivity on the road and stay connected with their families. Media companies will have an expanded opportunity to market and advertise their content. Restaurants and retailers can actively promote their products and services in real time. Content providers like Amazon and Netflix can tailor content to passenger profiles, trip length and mood. The in-vehicle experience opportunities are truly endless.
Further down the road—as trust and security reach a nexus, and users fully adopt mobility technology—the vehicle also has the potential to handle micro-transactions, capturing a small percentage of sales for facilitation of the transaction. Multiply this by thousands (and potentially millions) of transactions per day, and we are able to better understand exactly how and why thinking of vehicles in more innovative ways could have a major impact on an OEM’s ability to develop new revenue streams.
“Further down the road—as trust and security reach a nexus, and users fully adopt mobility technology—the vehicle also has the potential to handle micro-transactions, capturing a small percentage of sales for facilitation of the transaction.”
Samsung’s recent $8 billion acquisition of Harman, a global leader in connected vehicle technology, is a stark example of a shift in the mobility revolution. Samsung is not in the business of making vehicles, nor does it want to be anytime soon. Nevertheless, the company “sees automotive technology, and the broader shift toward connected, driverless vehicles, as a promising growth area,” according to an article on the deal in The Wall Street Journal.
Automotive organizations would be wise to see the potential going the other way. Fiat Chrysler Automobiles (FCA) for example, will — for the first time — NOT be revealing a new vehicle at the North American International Auto Show (NAIAS), one of the premier auto shows in the world. Instead, they introduced a new concept vehicle at the Consumer Electronics Show (CES) in Las Vegas on January 3, a subtle nod to the role technology plays with consumers and investors alike.
Similarly, General Motor’s investment in Lyft proves that building vehicles can no longer be the only mission of a traditional auto manufacturer. They must be willing to get out of their comfort zone, and the Lyft deal sends the clear message that GM is committed to being at the forefront of the new ride-sharing technologies. GM is certainly not alone. Daimler has developed car2go, which allows consumers to book a vehicle via mobile app and pay only for the time rented in one-minute increments. BMW is emulating car2go with its higher-end vehicle-sharing service, Reach Now. Download the app, and they say you’ll “be driving a BMW or MINI in minutes.”
Even automotive suppliers are starting to step out of their comfort zone when it comes to innovation and technology development. Chinese company Ileja Tech, for example, wants to conquer the heads-up display (HUD) race in the U.S. with its development of the Carrobot C2 — following the trend for aftermarket HUD devices providing navigation and infotainment without taking a user’s eyes off the road. In this respect, suppliers have just as much potential as automakers for getting ahead of the competition by figuring out creative, high-tech ways to take advantage of the mobility revolution.
“…suppliers have just as much potential as automakers for getting ahead of the competition by figuring out creative, high-tech ways to take advantage of the mobility revolution.”
Will we ever become a world that’s “over the whole car thing?” as one recent New York Times headline provocatively asked its readers? Perhaps this is an extreme view—after all, we know vehicles are still an important part of everyday life across much of the globe. Still, mobility companies must be prepared for the “extreme” shifts in their businesses representing this revolution, no matter how uncomfortable that may feel right now. It is a complex revolution, to be sure, but also an exciting one. By challenging the traditional line of thinking and embracing these trends, organizations new and old will become relevant change agents for the future of mobility.
Who wouldn’t want to be a part of that?
Scott welcomes you to connect with him via LinkedIn or direct through email to continue the conversation.
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