It seems that the very
remit of automotive industry forecasters is two-fold, whether as
consultancy or guru, to both analyse the winds of change in a
seemingly objective manner, yet also subtly promote beliefs about the
speed of structural change and so socio-economic transformation.
In effect the balance
of the strictures and limitations of the present day versus an
apparent emerged tomorrow based upon PESTEL trends. When polished and
presented the expected outcome may seem wholly plausible based upon
the multi-fold strands of intelligence which range across extracts of
scientific journals to the capital markets momentum of new C21
monetising business models.
In short, such forecasting depicts what appears sensibly evolved
idioms, which in turn serve as platforms of belief for self-fulfilling
philosophy.
Given its massive
impact upon the world, the automotive arena has been a – indeed
perhaps even the – prime focus over successive decades and
generations.
Yet because its own evolution was itself so closely tied to that of national economic growth, infrastructure types and development, sociological change etc, the car has, though very much evolved, remained effectively the same for over 100 years, constrained by the innate boundaries it must operate within.
Yet because its own evolution was itself so closely tied to that of national economic growth, infrastructure types and development, sociological change etc, the car has, though very much evolved, remained effectively the same for over 100 years, constrained by the innate boundaries it must operate within.
Those real world
limitations means that the tomorrow's world showcased in national Worlds Fairs and corporate 'Futuramas' remain exactly that: fantasy. And although “on the mid-term horizon” for over thirty years, even with sporadic research projects, no publicly
marketed partially or fully remote controlled or autonomous vehicles existed over the timeframe they were promised. Furthermore, only by the early 1970s did enabling
technical corollaries exist to provide the hyper-efficient
close-coupling of vehicles on manufacturers test circuits; notably GM
and Daimler.
But given that myriad of
real world limitations, little and no self-driving solutions were able
to be offered to external customers. Likewise, the urban low speed
'pod' was effectively little more than either a cinematic
'short-hand' ploy so as to indicate “the future”, or when a
daring entrepreneur would seek to build such a vehicle, his efforts derided given the innate superiority of the conventional city car.
However, general belief only came when GM and
Chrysler (with the then GEM subsidiary), during the early 2000s began to publicise their similar 'pod' inspired take on the created future. These ideas reasoned answers to the growth and required orchestration of emerging mega-cities.
So whilst the base
technologies have been available for decades it was not until the
2000s - with the emergence of digital connectivity, expanded and
aligned input-output feedback systems, the reduced cost of mass-data
streams and so creation of a low level of so called 'AI' (artificial
intelligence) - that a new impetus toward a new automotive future
arrived.
Yet fundamentally
regards function, the external cyber-based control-architecture of
today known as the IoT (internet of things) is little different in
basic principle to that of the radio-wave based command-control
promise of 60 years ago.
Then, instead of
delivering a new mobility future to the American populace, the likes
of GM and Ford instead chose to use such vision as the basis for
marketing exercises in styling and added feature. Technological
revolutions such as the jet-age were instead metaphorically imbued
into cars with tail-fins, wrap-around windscreens and extensive
application of chromium brightware.
Thus the much flaunted
futurism promise was instead delivered within the conventions of
consumerism.
The obvious question is
whether the very same thing is happening today? Or whether 'Big Data'
truly can deliver truly needed, wanted and desired consumer
solutions? This across the lifestyle spectrum, and most specifically
regards mobility.
Most critically, as now
well demonstrated, beyond the personal proximity of the smart-phone
and tablet, the vehicle is by a long way the most effectively
'intelligent' machine within most people's lives. Thus far that
intelligence has been internalised to operate the array of modern
convenience and safety features. Yet that intelligence has over the
last decade or so been showcased as able to operate externally so
connecting to other parts of someone's life; from home to office to
leisure activities. The once introverted, insular box on wheels has
increasingly become the contemporary interpretation of the electronic
facilitator, not so removed from the philosophical ideals of the
1960s sci-fi robot.
With that understood,
the fact is that that the automotive value-stream is perhaps the most
valuable available to any firm, its very industrial complexity,
social meaning and environmental impact means that technical and
brand leadership in this field can be more easily translated into a
host of other realms. In essence auto is a socio-technical hub, that
can be credibly leveraged: from a far greater public belief in
ecological housing, through to more likely acceptance of domestic
robots.
In short, the central
enabling role of the car over the last century, and the ingrained
'social contract' now associated with car-makers. means that in an
age of public distrust of politicians and government, it is the
revered enabling brands of car-makers that today best espouse the
libertarian freedoms extolled by Jean-Jacques Rousseau et al.
Although unstated, it
is undoubtedly with that very concept in mind that a new crop of
possible auto-sector disruptors have come to the fore, seeking to
themselves inter-link much of the everyday human functionality of an
increasingly cyber-based, 'augmented-reality', new world.
The Threat of the
New...Once Again -
The notion of
auto-sector disruptive all-new entrants has been with us for decades,
most prevalent over the last 20 years or so, the start of this phase
in the mid 1990s. Back then scenario planning exercises created for
board-room contemplation expected the likes of Sony and Virgin –
respectively representing the “hi-tech brand” and “new service”
leadership – to be the avant garde pioneers; which could
potentially disrupt the near strangle-hold of established vehicle
producers.
Though then seen as
potentially powerfully disruptive, Japan's economic stagnation and
Branson's preference for brand collaboration rather than true
innovation, means that Sony and Virgin were relatively quickly
superseded by a far more aggressive crop of global reach Californian
IT companies.
Today these appear, at
least theoretically by way of experimentation and high profile press
publicity, to pose the greatest threat. Google's massively adapted
self-driving cars and its 'POD' demonstrator, Apple Inc's concept of
an all-electric (ZEV) 'iCAR' (still only a story likely aimed at
car-makers for a JV), Tesla's partial “self-drive” feature on its
cars using tailored software , and now the all new start-up named
Faraday promoting its cyber-centricism per business model and
supercar (another story). Whilst perhaps less known is the LUTZ, from
the UK, government funded via the Catapult Scheme its very name –
echoing Bob Lutz of GM – appears to deliberately seek to serve
Detroit's future possible need for 'pod' vehicles, the likes of which
it illustrated in years previous. Elsewhere, unsurprisingly the
Japanese have been conceptualising a myriad of urban 'pod' cars or
decades as the natural determinant to an ageing population and
further miniturisation of the Kei Car.
Whilst a mix of
hyperbole and incremental real technical achievement, the fact is
that rather like a bloc-chain system in Fintech, Californian
entrepreneurs are seeking to create what could be viewed as discrete
corporate components to tomorrow's “automotive-bloc-chain”: ie
'value streams'.
When taken to
speculative ends, brands which are able to encompass a broad range of
lifestyle solutions via the smart-phone, 'wearables' and mobility
devices etc – specifically when 'bundled' together – would
effectively have successfully expanded the realm of socio-commercial
tribalism / loyalty.
Theoretical
Possibilities... -
Prior to this weekend's
dedicated verbatim snapshot of the digital-age now influencing
automotive (after previous 'software', 'electronic' and 'mechanical'
ages, The Financial Times' Lex column provided a short but useful
overview as how such new disruptive ventures might be theoretically
feasible. With expectation that fruition would be brought about in
the following manner; (ranked as most probable):
1. Chinese (or Indian)
auto-player takes on the mantle as contract manufacturer.
2. Western Tier0.5
operator [integrator] (notably Magna Steyr) serves likewise.
3. Western auto-player
allies with IT firm to offer excess capacity / new capacity.
However, whilst
theoretically “a slice of the pie” appears to be on offer, as a
secondary beneficiary to those newly gained tech-brand auto sales,
the reality presently looks rather more stark.
...Seemingly Presently
Unlikely -
It seems unlikely that
either Magna Steyr might be willing to undertake such a prolific
venture given its revenue reliance upon the long established volume
manufacturers; switching allegiance to promote what the old marques
as their own value destruction would not go down well; any attempt
likely to see attempts of hostile takeover of any such new Tier 0.5
provider.
This could indeed be
done in a syndicated manner in which a number of producers to create
a shell company / investment vehicle with the implicit intention of
extinguishing the threat, and likely use the assets gained for their
own traditional purposes.
Similarly, so as to
retain brand standing and so 'share of mind' (vs a powerful new
entrant easily able to 'brand extend' ) an incumbent western
auto-player would likely shy away from such a deal – unless itself
in dire straits – so as to not eventually have its own market share
markedly diminished.
It is well recognised
that whilst GM went through its massive Chapter 11 re-shaping
exercise to off-load excess capacity and degraded marques, others –
typically European – sought to protect their own excess capacity as
much as possible, 'mid-term moth-balling' awaiting return of the
economic upswing, and so gain from the in-situ plants and machinery.
They did this for their own future gain, not for that of another
entity.
Exploiting the
Commercial Halo of 'Tech' -
No doubt such
entrenched players would like to fully exploit the business
relationships already formed with the likes of Microsoft, Apple and
Google regards in-cabin info-tech systems. Today these integrated
hardware and software 'solutions' are marketed to potential buyers to
market and promote the profile of model or brand, such as Apple's
'iPLAY, but this is done essentially 'invisibly', so as to convey
this virtue upon the model and car brand.
The next step would be
a 'visible' JV, but to retain power in the brand-buying equation, the
traditional auto-producer likely to use a short-term co-branding
exercise, itself related to a specific USP of the car's feature-set;
this specifically evolved as client-supplier contract.
Thus, although (to
re-quote the FT) theoretically “a slice of the (commercial) pie”
created by the generation of an iCAR or similar would indeed be had
by the VM – acting as vehicle supplier itself - it would most
likely come with a gradually debilitating cost to itself over the
long term.
As is also understood,
Apple products are effectively a branding exercise in fashionably
packaged first release systems and software; Jonathan Ive's
retro-modernist physical product design allied with intuitive
interface and solutions; ostensibly contract manufactured in China
and SE Asia. Given its own integrated connectivity with the human
mind and customer, an iPhone, iPad etc then is far more than the sum
of its parts to the user; hence brand appeal.
This is wholly
understood by automakers, who themselves would ideally like to
replicate that brand-consumer relationship for themselves, and regard
the very complexity of their vehicles – physical and metaphysical –
as the probable route to do so; whether through conventional cash
sale, high margin earnings credit provision for lease and loan or
through possibilities for traditional car rental schemes of newer
owner-car share templates that align the to much heralded C21st
sharing-economy.
“Vigilance” +
“Value Stream Exploitation” -
Stories of disruptive
future-tech, such as autonomous cars etc, whilst avidly digested by
the public must be seen for true impact such stories actually convey
in reality. Apple's and Google's publicised ambitions have indeed
becoming incrementally crystallised as the delivery mechanisms for
such radical vehicles have been matured via research and development
efforts, Google's planetary digital mapping core to its hopes.
But whilst gaining
traction in 'laboratory' conditions and low-complexity 'in the field'
environments, it would be very wrong to view Google or Apple as an
immediate threat to conventional auto-players and their business
models. A myriad of issues exist: from e-infrastructure re-fuelling
to state by state and nation by nation legality to design and build
routes are still challenging; even if the California tech firms
recognise the need to create an incremental PESTEL road map which
allows them to reach their goal step by step. Thus 'the future' is
far from immediate; even if streamed depictions of that tomorrow is
seen upon a smart-phone itself driving a commercially based augmented
reality.
Yet equally, it would
be foolhardy to disparage these efforts given the enormity of the
task ahead. A poor analogy is that of the “self-parking” family
hatchback recognised on an evolutionary path as the simple 'amoeba'
over generations evolving into the intelligent 'mammal'. Thus whilst
the autonomous vehicles of Google's test fleet look ungainly -
presently encumbered with somewhat cumbersome 'bolt-on' technologies
– some of the autonomous driving solutions therein have, in simpler
form and driving solution, been retro-fitted to various conventional
cars and are being publicised by early-adopter users to expand
demand.
Given that pace of
advancement it would be wholly dangerous if an auto-maker simply
disregarded with off-hand disbelief – and thus ineffective
monitoring - of the potential threat.
Understandably, many
will view the firms that proffer partial and full autonomous driving
solutions as little more than apparent full-scale sector disruptors,
who in actuality are simply seeking a high priced exit strategy, able
to sell such technologies and sub-brands to a traditional vehicle
producer, so as to absorb the threat.
In reaction,
auto-producers have grown their own research and development
capabilities, with the German's specifically recognising the need to
not only boost internal efforts, but also acquire the specialist
knowledge necessary so as not to be inadvertently reliant upon
Californian technologies: whether at vehicle level, or indeed at the
intelligent terrain mapping level.
Hence, a
BMW-Mercedes-Audi syndicate named “HERE” purchased the mapping
and location services business of Nokia in August 2015, thus
partaking a direct interest in forming the roll-out of 'intelligent
mobility' far beyond conventional SatNav over the years to come. The
phrase 'digital eyes' used by Audi for a vehicle's ability to deploy
on-board sensors - evolved from the likes of self parking, lane
recognition, speed limit recognition and anti-collision automatic
braking - to continually 'read' the world around.
Given its promised
contribution, from today's passive safety solutions to the
energy-cost efficiencies upon tomorrow's 24-7 tolled-road systems,
this perhaps the most important future-forward investment ever seen
within the auto-sector.
Examples such as this
prompt and highlight the need for auto-makers to look beyond
'business as usual'. Not just in reaction to obvious external threats
from possible new entrants, and so creating parallel operations,but
to critically maximise the potential of internally generated
opportunities aswell. Those opportunities more immediately at hand,
made available from their own 'hard' and 'soft' assets, and could in
turn be used as additional long-term revenue provision by which to
effectively support the barricades against the threat of the new.
Though typical as a
dual aspect strategic consideration of corporate 'defence and
attack', the necessary daring of the HERE syndicate illustrates that
such thinking and execution must undertaken in a more expansive,
inquisitive and intelligent manner than has been the sector's norm.
Most pertinent, a
deeper recognition of how a firm's own internal resources may be
alternatively commercialised and inter-played, and additionally, how
external relationships with goods and service providers could be
expanded into new areas. This in parallel to the all too usually
prescribed panacea of 'complementary' trade acquisitions.
Thus an expansive
review of the full “internal value stream”, ranging from balance
sheet structure, cash and credit resources, real-estate, plant and
machinery, personnel (at functional management and functional staff
levels). Additionally, as a secondary route of enquiry, how other
alternative potential gains may be achieved from better integrating
and expanding in situ commercial inter-relationships; whether they be
within a diversified conglomerate, or relative to independent
external suppliers, across the spectrum of goods and services.
In effect a 360 degree
're-commercialisation' review: to both maximise effective gains from
in-house core competences, and those strategic and income advantages
to be had by broadening toward better managed secondary and tertiary
competencies.
Part 2 of this web-log
illustrates how auto-makers should 'de-construct' to 're-construct'
themselves philosophically, so that if deemed appropriate they might
lay 'revenue-roads' in strategic new direction. Some B2C, seeking to
re-establish through re-invention the once very broad consumer
solutions and so social impact experienced in the distant past.
Others B2B whereby auto-players recognise how their own internal
competencies and capabilities may be externalised.
The Las Vegas located
CES 2016 has just finished, and ironically it seems that many of the
established electronics companies are rehashing old technical answers
or simply added low-value feature so as to be seen to be new and
improved; much of the young CES crowd applauding and cheering what is
effectively 'the emperor’s new clothes'.
Meanwhile it is the
auto-makers who are seen to truly add-value to the consumer. BMW's
re-appropriation of 'google glass' technology in its own motorcycle
helmet giving a rider what could be life-critical HED (head-up
display) information within milliseconds and seemingly so much more
for the individual or group.
Whilst as yet
unavailable, the fact that BMW looks to deploy the helmet within its
BMW Motorrad business model eco-system highlights just how well
auto-companies could create their own similar plug-and-play
branded-centric consumer eco-systems.
This a prime example of
the very definition for “new value stream exploitation”.
