In the previous parts of this series, we focused on the lessons learned, reasons for industry struggle and the two main domains in the automotive. In this part, we'll finally get into the possible solutions to how classic European automotive manufacturers can survive.
Part 4: A possible way-out:
How small & medium companies can help large OEMs from troubles?
Let's not concentrate on strong claims such as "EVs will save the world" "let's get back to fossil fuels" or "let's make it all hybrid". No, the way the vehicle is moving is beyond this discussion. The efficiency and impact of CO2 emission can be easily researched through the whole logistic chain for every vehicle type.
Above, I attempted to define the main reasons for the current state and problems:
- Short-term thinking (internal, management)
- Quarterly/yearly financial numbers as main performance indicators
- Poor quality of the vehicles
- Cost/efficiency ratio
- Absence of purposefulness (adaptation to a purpose: as, the purposefulness of an architectural design)
Now think about how small and medium companies can help out automotive brands:
- Customer/user centricity
- Long-term thinking
- Common/unified goals
- Continuous education and skill improvement
A storm is coming, and many companies in the industry will collapse or seriously restructure. Those stormy times will generate real leaders who will get a chance to truly disrupt a half/dead market ruled by gerontocracy and bureaucracy.
While analyzing the automotive area, we always need to keep in mind a variety of choices - consumers can be split into 6 groups based on their will to consume new digital services (plus their emotional connection to a brand), their location - city, suburb, rural. Financial income in the context of the changing economic situation due to multiple crises will shift more towards a simple A to B movement.
The creation of new products must follow the design thinking approach. The user must be in the middle and all features, and functionalities must be derived from the client's needs and wishes.
Plans and strategies should be long-term; common goals should be defined across various companies, preferably for the whole market. Not to misunderstand, this should be a cooperation out of a free will, not another poorly defined and legally mandatory activity.
If we agree with the statement that the major reason for global warming is excessive CO2 emissions (which leads different governmental bodies to insanely raise limits on vehicle CO2 emissions) then car-sharing and ride-sharing would be an amazing opportunity to drastically reduce the number of cars on the road in addition to freeing up parking space.
Another topic to think about is the number of produced cars in time. Statistically, cars are driven only 4% of the time. 96% of the time they are parked/stationary. If the goal is to make a significant part of commuting and transportation by shared and autonomous cars, then automotive companies would have to satisfy just a fraction of the current market demand. That means that those companies could shrink, lay off a major part of their workforce and give up on their influence. But will they?
It would be very naive to think that governmental bodies would legally force car manufacturers to open their systems and unify (and if so, it will not happen naturally, thus the output will most probably not bring the needed results). Automakers should then come up with win-win solutions, like offering a kick-back model for every open/close activity on a certain branded vehicle.
Common (or unified) goals should consider other parameters like sustainability, quality, service availability, and immediate and short-term profitability should not be in priority.
Now think about how many car manufacturers do invest in similar solutions like car-sharing. So many man-days are being burned and wasted to create exactly the same solution (from the customer's point of view) which was developed already a number of times over.
Can this be solved with unified platforms? Probably.
To fulfill innovation via purposeful collaboration, various car manufacturers can build (digital) platforms to:
- Define, iterate and improve common goals, to have a platform for the creation and discussion
- Create an easily accessible ecosystem with available and potentially universal solutions
- Efficiently use competent and valuable human resources, data, and know-how to bring improvements at a fraction of the cost
- Reduce costs, improve quality and speed
In any case, efficiency and cooperation must succeed and fulfill goals defined by the main stakeholder and by the customer in the first place. Let's stop reinventing the wheel over and over and over… you get my point.
We need to have purposefulness as a basis for every previous point. For all stages of vehicle lifecycle - R&D, logistics, production, sales, and aftersales.
The main purpose of the vehicle is to transport goods and people from A to B. With safety and a bit of comfort. The majority of mobility and commute demand can be covered with shared economy services - mainly carsharing and ridesharing.
But what about dealerships? Nowadays they have really high operating costs, which are projected to be the total cost of owning a vehicle. Some automakers already started online car sales and in some cases also implemented virtual headsets to show what a new client's car can look like. So costs can go down. Great initiative, but can we push it even further?
Adoption of fully online sales was performed by carvago.com (where we participated in the development), which is offering a very convenient service which is not only bringing a fully online buying or selling experience of a new or used car but also brings trust and on top, it brings together the offer and demand to one platform. Basically, it is flattening the price peaks for the final customer, which is a very important added value.
In my humble opinion, hardware and vehicle electronics should be separated from entertainment and around-car services. The separation level should be at the connected car functionality (to make it simple, let's call it the Car API.), which is an enabler of all digital services around the vehicle. Currently, this layer is proprietary and in most cases very carefully guarded by automakers not to endanger their plans to run e.g. shared economy services.
This separation should be done also from the organizational, process, and “everything else” perspective. While having a strictly defined communication protocol, those two worlds can be easily separated, communicating and mainly cooperating to mutually improve each other at the same time.
How easy and seamless it would be to have a high-quality vehicle (produced by a generic car brand that no one cares about) where the driver connects his phone to identify themself and to access and use the infotainment. By the way, this would also solve huge data privacy issues. Personally, I do honestly think that my data should belong to me. And I can move from one service provider to another with my data.
Approach to software development (and more)
A clear separation of the hardware and software worlds, and of course the Car API, can and will drastically change the organizational structure, mindset, design thinking, and development methodologies.
To define some clear preconditions, software engineering must be user-centric, the user should be in the middle and features must be tailored to the needs - especially of different users and use-cases, e.g. long/short distance drivers, city / suburban drivers, digital early adopters and conservatives, and for privately owned/shared vehicles. The development approach comes around that.
There are diverse demands from different groups of users and different use cases. With lightweight solutions, one can fulfill demand and further improve services in continuous iterations while gathering feedback, anonymous usage data, logs analysis, etc. The continuous deployment will make shipping fast.
Imagine that one morning your vehicle tells you that from now on you can plug it into a peer-to-peer car-sharing platform and while being on vacation, your car will earn money for you. With this money made, you could use the same platform to rent a vehicle at your vacation destination. Your car would effectively become decentralized, there would be no need for long travels, where you get tired and emit unnecessary CO2. So simple.
Now back to reality and the organizational structure.
To reach the desired speed and efficiency, teams must be split according to the services and must have full responsibility for them. With responsibilities, there has to be the right to make decisions. One without the other will simply not work. Organizational units shall be driven by an OKR-like approach (in Jimmy Technologies we practice this organizational approach since the beginning). Objectives are not defined top-down or opposite. They have discussed both ways across units and defined according to the objectives of the whole company that are clearly communicated.
This approach eliminates unnecessary activities, duplicated projects, and unnecessary competitiveness and it will drastically reduce overall costs - thus, the final price for the customer can be lower, and thus the competitive advantage is bigger!
New revenue streams
As was mentioned above, the main motivator while making decisions is a (short-term) profit. Simplification, agility, user-centricity, and acceleration will bring various new revenue streams. Let's analyze some examples.
With the Car API present, automakers can simply charge for the usage.
- Connected car services are very popular
- There are huge amounts of data that can be used e.g. for insurance companies, city municipalities, road maintenance, autonomous driving companies, etc.
- On the other hand, a car owner can purchase a "camera vision extension package" (aftersales), plug it in and generate data while driving and make it available for the listed recipients in the previous point
- A car-sharing provider can be charged for every vehicle closed/open or/and engine launch operation
- Digital key
- Additional service providers like a carwash, mobile fuelling/charging stations, and dry cleaning will surely be happy to pay again to open a trunk or fuelling/charging cap
- Electrification will bring a whole new world of services - charging, storing energy, and discharging back to the grid (V2G load balancing). Each use case brings the potential for revenue and by far not only for the car manufacturer
The automotive industry is going through some exciting times. In the current macroeconomic landscape, where customers will likely very soon concentrate on cost cuts and direct their spending to basic needs due to inflation and rising energy prices, very few will care about the level of autonomous driving or the number of apps in their infotainment system. While living our own version of "Amusing Ourselves to Death" (by Neil Postman), we forget that the main purpose of a vehicle is to transport goods and people from point A to point B. The pressure comes from other angles - IT companies and other car manufacturers. This creates a new need for automotive businesses to partner and collaborates with technology solution providers.
The saddest part is that there is no major observable drive of automotive giants to transform themselves and adopt the necessary change; the direction remains the same, and people in the top management remain the same as well.
It would be naive to think that companies, which after 3 years of hard work of thousands of smart engineers, can't even roll out the ever more important OTA update feature that would enable the start of a car software “revolution”, would all of a sudden change and transform.
Separation should be done also on a company basis. Hardware development has completely different processes and value and priority lists than software development.
Companies having decades of experience in producing hardware should continue doing and improving what they do best - simple, perfectly engineered and almost flawless hardware parts. And leave the digital area to others.
Being humble is the way to change things. It is insanely hard to innovate and bring a change while having an "I know everything in the world" attitude.
As this struggle continues, and the “big guys” deal with their platforms, spend billions of euros and pay for teams without significant output, small and versatile teams have the time to prepare services around the car. When the time (and conditions) are right, those services will just be integrated into any “thing on wheels” to fill the last piece of the puzzle.
One day, we will achieve true COOPERATION. I truly believe that.
I would like to therefore empower and motivate all small companies to push further into innovations and R&D. To be better, faster & stronger than large and heavy OEMs. Time for the true cooperation is getting closer.
Just do it!