Professional Documents
Culture Documents
AUTOMOTIVE
INDUSTRY
AS A DIGITAL
BUSINESS
NT T INNOVATION INSTITUTE, INC.
DR RAINER MEHL
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This is a time of both great opportunity and great challenge software – have crushed traditional barriers to entry and
for the global auto industry. expansion, and have accelerated the speed of change
within markets.
Historically, few companies can rival this global industry for
the way that it has reflected and been shaped by important In this always-on, always-connected digital world, it is
social, cultural, and economic trends. critical for the industry to reexamine its approach to the
entire value chain using the lens of delivering customer-
Economic recession and recovery. Conflict and peace.
defined value at every touch point. Only with that fresh
Energy crisis and demographic shifts. The space race and
approach can the business be informed and prepared to
startup culture. All have had a role in the way the industry
successfully evolve to face new possibilities, challenges,
thinks about and has approached design, production,
and competitors.
distribution, partnerships, and customer interaction.
Auto companies need to embrace digital technologies
Today, the industry is facing a powerful new shaping force
as part of their core DNA. Only then can they take full
that is moving nearly every aspect of modern business
advantage of the opportunities it gives them to think
from analog to digital. We are experiencing the birth of a
smarter by sensing and predicting opportunities, act
new era of digital business unlike any we have ever seen
faster through true business agility, and create a flexible
before.
approach to business to quickly take advantage of new
As technology drives the transformation to digital business, circumstances. The rise of new competitive threats from
the opportunities for disruption increase, both from within companies born outside the rules of the traditional auto
the industry and from new and often unexpected external industry makes this need for digital change even more
threats. Technology trends such as the rise of mobile and imperative.
pervasive connectivity, data and machine learning, 3D
printing and the Social Network of Things, the cloud and
virtual systems, APIs and open
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TABLE OF CONTENTS CHAPTER 1
The Evolution of the Auto Industry: Past, Present and Future 6
• From Auto 1.0 to Auto 4.0
• Why the Industry Has Struggled to Change
CHAPTER 2
Trends Driving Structural Change in Business 16
• Digitization
• The Rise of Millennials and Digital Natives
• Apple-ization
• The Sharing Economy and “Asset-Light” World
CHAPTER 3
The Drivers of Digital Business Transformation 27
• Technology and Digital Transformation
• The Social Network of Things
• Robotics, Autonomous Control, and 3D Printing
• The Connected Car, Connected Driver, and Mobility Customer
• Data, Machine Learning, and Cyber-Security
• Open Source Patents and APIs
• The Changing Nature and Sources of Competition
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TABLE OF CONTENTS CHAPTER 4
Auto 2.0: The Current State of the Industry 44
• Industry 4.0
• Manufacturing Technology
• Redefining the Supply Chain
• The Connected Car Version 1.0
• The Birth of Mobility Services
CHAPTER 5
Learning from Today’s Cutting-Edge Leaders 56
• Tesla
• Google Self-Driving Car Project
• BMW iSeries and Consumer Mobility Initiatives
CHAPTER 6
Auto 3.0: Building the New Value Chain of Customer-Centered Innovation 69
• Rethink Value
• Re-imagine the Customer Experience
• Reconsider Culture
• Reorient Processes and Operations
• Re-Engineer IT
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TABLE OF CONTENTS APPENDIX 83
• About NTT Innovation Institute Inc.
• About the Authors
• Collaborator and Contributor Bios
• Other Books from NTT Innovation Institute Inc.
• Photo Credits
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CHAPTER 1
The
evolution
of the auto
industry:
past,
present,
and future
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FROM AUTO 1.0 TO 4.0
“I will build a car for
the great multitude…
constructed of the
In the past 130 years, there have aimed at the American consumer.
best materials, by
been very few businesses that can In 1908, Ford created the Model T, the best men to be
rival the automotive industry for the first car aggressively marketed
hired, after the
the unmistakable way that it has to appeal to the experiential
both reflected and been shaped aspirations of the average family. simplest designs that
by significant global social, cultural Ford not only began the articulation modern engineering
and economic changes. And now, of auto marketing, but also
digital technology is becoming addressed the former limitations of
can devise… so low
an important way in which those the business side of the industry. in price that no man
changes are addressed – from He introduced and put into practice
making a good
understanding customer values and mass production efficiencies, early
defining the consumer experience, lean manufacturing techniques, salary will be unable
to re-engineering the systems that and vertical supply chain integration to own one…”
impact design and manufacturing. (coal and iron mines, timberlands,
rubber plantations, a railroad, – Henry Ford, 1913
Auto 1.0 freighters, sawmills, blast furnaces,
Most historians credit the a glassworks).
German inventor Karl Benz with Fast forward to the start of the
creating the first modern Great Depression, car companies
production automobile in 1886. were largely small and specialized.
For two decades, the automobile By the end of the decade, they
was considered to be a novelty had been consolidated into the
item because they were expensive larger corporate brands that would
and time-consuming to produce. dominate the industry for the
Between 1904 and 1908, 241 next half century.
different firms began producing cars
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“We at BMW do not
build cars as consumer
objects, just to drive
Auto 2.0 from A to B. We build
Today, the majority of the practices manifest decades old perspectives mobile works of art.”
of mainstream automobile on the relationship between
companies in Auto 2.0 mirror the distribution efficiencies – Chris Bangle, noted automobile
cultural and economic forces that and consumer experience. designer and former
Chief of Design for BMW
shaped the industry over the past
The integration of technology
half century. The result is that the
into vehicles has been
historic differentiators of quality
largely invisible to the consumer,
and reliability have become
focused more on performance
mere table stakes in the industry.
and dealer diagnostics
The post WWII emotional love systems. The advent of the
affair with the car still drives connected car, with the
much of car design decisions. provision of basic infotainment
Mainstream hybrid explorations systems, is just beginning to
are informed by the echoes of change the role of technology
the 1970s oil crisis that first forced for most manufacturers.
the industry to consider factors
other than design and performance.
The globalization of car production
and focus on lean manufacturing
has its roots in Toyota’s approaches
in the 1980s. Capital-intensive
dealer networks and showrooms
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“Your car should drive itself. It’s
amazing to me that we let humans
drive cars... It’s a bug that cars
were invented before computers.”
– Eric Schmidt, Google Chairman Auto 2.5
Most of the automobile industry via OTA software updates that
examplifies the focus on internal repair problems, bring new levels of
processes with the vehicle design optimization, and even new features
and manufacturing value chain of without ever going to a dealer.
Auto 2.0. There are, however, new
“Connected technology” is having a
intrapreneurial labs from established
significant impact both on customer
major auto OEMs (such as BMW
expectations about experience
iSeries) and new aggressive entrants
and also on how forward-thinking
(such as Tesla) that seek to redefine
auto OEMs are re-prioritizing and re-
the industry by addressing digitally-
engineering their end-to-end value
defined niches that may quickly
chain. For the Auto 2.5 company,
become mass. This is where the
this is about the design of business
cutting edge of cars is to be found
that fully reflects the value of the
today.
customer over the efficiencies
For the digital leaders in the auto and financial ROI of car production.
industry, the Auto 2.0 concept
of “connected car” is evolving into
the Auto 2.5 “connected driver.”
Software functionality is no longer
limited to infotainment delivery,
but can now offer consumers the
ability to transform their vehicles
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Auto 3.0
In this near future, the next phase of
evolution of the auto industry will be
defined by more consumer-centric
approaches to cars and mobility that
are reflected throughout the entire
value chain. Auto OEMs will need
to begin to find ways to derive and
drive value from technology-fueled
social forces such as the Sharing
Economy and Social Network of
Things – or risk rapidly becoming
irrelevant within a decade.
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Auto 4.0
The technological, social, and And “roads” – how might they
economic forces of Auto 3.0 will evolve as well? It’s too soon to
become mainstream in Auto 4.0. know what might happen with
With this may well come the final the Hyperloop project – “a cross
and definitive change in redefining between a Concorde, a railgun,
the industry as one of “mobility” and an air hockey table.” Among “For crowded cities,
as opposed to “automobiles.” others, there is already a team
they (flying cars) are
of engineers working on this
Within 20 years, there will be tens
at Hyperloop Technologies, a godsend. But for
of millions of autonomous vehicles.
The ability to call for a vehicle (with
a company founded by venture places like Africa which
investor Shervin Pishevar and
or without a driver) on demand
former SpaceX Engineer Brogan
has no passable roads
may create a new model of shared
Bambrogan. (especially during rainy
ownership or access to vehicles
and services that take the current What would the world look season), these future
utilization of cars from 5-10% to like if you could take an on- Transporters are the
75% of the hours in a day. demand autonomous vehicle to
a Hyperloop station? equivalent of Africa
We might even see the flying car
long promised in science fiction.
skipping the copper-line
Perhaps it will look more like a phone system and going
grown-up version of the quadcopter straight to wireless.”
drones that we see today.
Developments in battery, navigation – Peter Diamandis, entrepreneur,
and lightweight, high-strength founder of the X Prize Foundation
materials are making this more and Singularity University
possible today than ever before.
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WHY THE INDUSTRY
HAS STRUGGLED TO CHANGE
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Configuration Complexity
Premium OEMs in particular have are largely engineering and
pursued a strategy of allowing for manufacturing-driven decisions that
consumer customization of their do not strongly tie back to economic
products by providing an increasing and consumer considerations.
number of options and variants.
Tesla’s approach to customer
The result has been very complex
choice is built around identifying
product structures, often with
the customization options of
hundreds of thousands of possible
greatest importance and value to
combinations. At those numbers,
their customer - as opposed to
there are real limits to the economic
offering a large volume of options.
sense of this approach in providing
The company offers limited choices
“consumer choice.” Additionally,
relating to issues that impact
too many choices can result in
manufacturing (number of models,
confusion, and effectively no con-
colors, and options packages), and
sumer choice at all.
focuses more on customization
Rather than asking the question of and value driven by software after
what the most important elements purchase.
of choice are to the customer
If the auto industry cannot
and concentrating only on those,
reframe the current approach to
the industry has focused on
configuration complexity – which is
various business and engineering
growing with more options coming
processes to more effectively
from world of software – many
manage the large numbers of
of their key processes of product
possibilities it is creating. Product
development, manufacturing
structure management with Boolean
engineering, production, and
expressions, variant management,
logistics will be negatively impacted.
modularization, and platforms
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Capital Intensive
Manufacturing Legacy
Change is expensive. The New entrants into the market,
auto industry faces the dual such as Tesla, have been able
difficulties of writing off past to start with a relatively clean
manufacturing investment, slate. They have no legacy
while simultaneously incurring systems to evolve or outdated
significant new investment, physical plant investment to
if it is to move toward operations write off. In order to compete,
with more flexible production the major auto OEMs will have
processes. to carefully weigh the economic
risk of when and how to move
Billions of dollars have been
to manufacturing systems that will
invested over decades into the
enable them to evolve production
factories and manufacturing
faster and for far fewer dollars.
processes of established auto
companies. Business practices
require these sizeable costs to
be amortized over long periods
of time, making it very expensive
to quickly write off any of these
in order to move on to other
more flexible processes. Then
building those new manufacturing
capabilities will require their
own significant capital investment.
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Dealer Network Commitments
Today’s dealer networks are the
result of the optimization of an
old value chain. Dealerships are
quickly becoming an inflexible
link in the new customer value
chain – unable to respond to
evolving needs and behaviors.
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CHAPTER 2
Trends
driving
structural
change in
business
DIGITIZATION
MILLENNIALS
APPLE-IZATION
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Moore’s Law Cheap, Fast Storage Millennials
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DIGITIZATION
As nearly every aspect of modern and values around mobility and The reason why it is
business that was once analog transportation. The need to
so difficult for existing
moves to digital, the opportunities respond to the new mobility
for disruption increase. Market customer compels the consideration firms to capitalize on
boundaries become permeable. of changes in internal business disruptive innovations
The technical and talent resources processes, manufacturing,
required to mount a legitimate distribution and supplier partnerships
is that their processes
challenge to an established leader to effectively respond and compete. and their business
become easily accessible.
model that make them
Digitization of the world means that good at the existing
no one approach to a market or
innovation is competitive for long. business actually make
Established and once stable industry them bad at competing
leaders now face challengers from
for the disruption.”
outside the traditional industry
boundaries - companies such as
- Clayton Christensen,
Google, Apple, and an army of Harvard Business School
well-funded and nimble technology professor and author “The
startups. Innovator’s Dilemma”
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MILLENNIALS
Millennial
Generally defined as the generation
born 1981-1996. There are more than
70M in the US, a group that is now The Rise of Millennials
larger than either Gen X or boomers. and Digital Natives
They currently represent more than
Both the sheer size and digital year olds being out of workforce,
$170B in purchasing power in the US,
technology savvy of the Millennial with many “boomeranging”
expected to grow to $1.4T by 2020. and Digital Native make them back into the homes of their
Globally there are 2.5B Millennials or important forces for the automotive “helicopter parents”
1/3 of the world’s entire population. business to understand and engage.
• Significant changes in
Detached from traditional institutions
Digital Native attitudes toward privacy and
while intimately attached to their
A phrase coined in 2001 by author trust in government and
mobile devices, they are creating
Marc Prensky, this term does not business, with Edward Snowden
their own social and economic
and Julian Assange as icons
refer to any specific generation. networks of friends, partners, and
It is a “catch-all” for individuals brand relationships. • Increasing globalization of the
who are indigenous to the use of work force with jobs leaving
Millennials have been shaped from
technology, such as the Internet, traditional powerhouses like
their earliest days by significant
computers, and mobile devices – the US
social and economic factors that
both at home and in school. It is
have had an undeniable impact on While these events would be
assumed that their early and constant
how they see, operate, and engage expected to have decades long
exposure to technology has provided with the world. These include: negative consequences on
them with a personal understanding their views of human nature and
and social relationship with it that is • Fifteen years of conflict in the
economic futures, this group still
unlike any other group.
Middle East and a new age
exhibits a generational personality
of terrorism born out of 9/11
that demonstrates confidence, multi-
• The 2007-2009 Great Recession modal self-expression, flexibility,
and the anemic recovery that and connectedness to technology
followed, resulting in 1/3 of 18-29 and social groups.
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Compared to
previous generations,
Millennials are:
Millennials have a unique Tracking to be Not unexpectedly, the behaviors 35-54? Will their behaviors
relationship with how they the most educated of Millennials are leading changes be the same as they are today,
choose, use, and advocate generation ever in many areas of mobility. In the or will they revert to traditional
brands, products, and services. US, Millennials are driving less than patterns of ownership and use?
More detached from
Products must provide utility major institutions such
previous generations in America
Regardless of which scenario
with quality, and design married as political parties, with a 23% decline in 2009 from
proves to be true, the amount
with function. And they no organized religion, the 2001. Additionally, the percentage
of driving is likely to be lower
longer see ownership of a military, and marriage that hold driver’s licenses is at its
than recent years. This will have
product as required for access lowest level in 50 years (67% in
Linked and defined by significant implications for auto
to the service it provides. 2011). This may be the result of
technology and the kind manufacturers, adjacent industries,
several interrelated trends: growth
of relationships it the demand for different types of
enables with business
in preference for walkable urban
mobility, and even public policy
and social groups neighborhoods, economic recession
and transportation infrastructure.
making car ownership difficult, and
Low on social access to on-demand car sharing
trust, but upbeat services fueled by the pervasiveness
about the future
of smart phones.
Dealing with economic What will happen in the decade
hardships of student loan
starting in 2030 when this group
debt and unemployment
reaches what has historically been
More racially diverse considered the peak driving ages of
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APPLE-IZATION
Apple has been at the forefront There are several key lessons
of the companies that have about both consumer value and
consistently and inventively enterprise operations (and their
launched products and services relationship to each other) that
that are deeply personal, can be taken from Apple’s success
meaningful, and intuitive. They and applied to the auto industry:
have conditioned their customers
• Balance of Design
to expect useful and powerful
and Utility
The Apple iPhone is a study in a company truly understanding technology delivered with a deep
what is core to the user experience of a product, where to understanding of the desired • Rise of Mass Customization
provide customization, when to remove complexity from user experience and a distinctive
• Importance of the
minimalist design. The company
distribution, and how to deliver value at every step of the game. Supporting Ecosystem
has designed its value chain to
The iPhone is available in four models. For all models except reflect those philosophies - from • Abundance of
the choice of materials to the in- Consumer Choice
the iPhone 5c, only three metallic finishes are available. These
store and online “fan” experiences.
limited choices define the majority of the manufacturing process. • Consumer Expectation
Everything else is essentially an accessory from Apple or a third Other companies inside and far of Product Obsolescence
party in a well-orchestrated partner ecosystem. outside the world of consumer
technology are studying the • Product and Business
Customization and personalization are delivered largely though Apple phenomena, what we call Amortization Cycles
apps. This approach provides needed variety “Apple-ization,” as one of the
without injecting undue complexity that leads to roadblocks ultimate learning opportunities for
within distribution and even consumer choice. the digitally-driven business.
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Balance of Design and Utility Rise of Mass Customization Importance of the Ecosystem
With an Apple product, form and Apple limits the configuration choices Dating back to the days of the Apple
function naturally go hand-in- available to consumers to reflect II, the company has excelled at
hand. There is a well-established those aspects of the experience that building and supporting a robust
customer expectation that the benefit the most from personal choice.
ecosystem of third party developers.
brand delivers human-centered Strategic limitations on configurations
This success results from the
design with elegance and value. also lead to manufacturing and supply
chain efficiencies. Within the world of company’s emphasis on delivering a
hardware, Apple is clearly on the side reliable, well-designed foundation on
that more choice is not always best, top of which others can create value.
and may actually lead to inaction from Apple’s customers benefit from
an overwhelmed customer. greater personalization of products
without Apple having to shoulder the
business burden.
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Abundant Consumer Choice Consumer Expectation of Amortization Cycles
Product Obsolescence
The world of the iTunes and Even with the ability to upgrade
Apps Stores has given the Apple The rhythm of new hardware and change functionality through
customer a nearly endless world announcements and software software, product and business
of choice to add functionality to upgrades has accustomed amortization cycles have changed
their product. Barriers to switching customers to expect various levels in response to the speed of
to a different app and vendor in of obsolescence in products. technology change. Different levels
those environments are virtually Some of the “Apple fans” must have of performance and function are
non-existent. every new product at the moment now expected every 18 months as
of launch, and end up replacing opposed to 3-5 years.
products every 18 months or less.
Others wait for a new product to
become more established and to
prove its value.
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Apple has demonstrated that the elements
of choice, flexibility, transparency and
consumer-defined experience are now critical
dimensions that businesses cannot ignore.
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THE SHARING ECONOMY
AND “ASSET-LIGHT” WORLD
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What do the behaviors and rules of
the Sharing Economy mean for the
auto industry and related markets?
The drivers
of digital
business
transformation
TECHNOLOGY AND DIGITAL
TRANSFORMATION
Digital Business:
• Provides customer-centric,
seamless, and context- Key Attributes of
a Digital
aware experiences that result
Business Technology
in a sustainable competitive
advantage. Flexibility
Scalability
• Requires technology, but Interoperability
demands a vision and plan
beyond the latest technology
in order to deliver on a Human Relationships
new value proposition. Empathy and Relevance
Respect
• Moves beyond the “value
extraction” model of a “consumer”
to an approach built around
“reciprocal exchange” of value
with customers.
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TECHNOLOGY AND DIGITAL
TRANSFORMATION
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THE SOCIAL NETWORK
OF THINGS
Evolving from the Internet of Things Phase 2: The Transition to Greater “In the twentieth century, computers
to the Social Network of Things Integration and Intelligence
were brains without senses—they only
Since the phrase was first coined Today, industry evolution has
in 1999 by the British entrepreneur taken us to somewhere between knew what we told them. That was a
Kevin Ashton, much has been the Internet of Things and the huge limitation… In the twenty-first
written and debated about the near future possibilities of the
potentially game-changing impact Social Network of Things. Last
century, because of the Internet of
of the Internet of Things as it year’s isolated products with Things, computers can sense things for
relates to the evolution of consumer attached sensors are being
themselves… In the imminent future, it
experiences and enterprise replaced with greater levels of
processes. network power, social connectivity, will enable things like self-driving cars,
systems interoperability, and which will give us back the 20 days a year
Phase 1: Internet of Things robotic hardware. In the car, this
The first phase of IoT largely is experienced in the evolution of
we spend doing nothing but driving, will
focused on adding sensors to navigation from old GPS systems save 40,000 lives a year in the U.S. alone,
devices designed for relatively to the socially-driven Waze app
will reduce traffic and pollution, and will
isolated purposes, with the and community. In the smart factory,
data generated primarily used this is about machines that can allow cities to grow without devoting as
for reporting purposes. This is predict maintenance needs and much land to roads.”
still the case for the majority order their own replacement parts.
of companies and applications. – Kevin Ashton in The Smithsonian, January 2015
Look at Fitbit in the consumer
space, most smart meters
in the utility industry, and
on-board data recording or
navigation systems in cars.
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Imagine a driving environment in which there are
three kinds of “cars.” Some will be fully automated,
others will have simple systems for accident
avoidance and traffic routing, and still others will Phase 3:
be little different than today’s average cars. In such The Social Network of Things
a complex landscape of old and new, cars and The Social Network of Things How will we look at a world in
networks will need to be built to be adaptable, is predicted to mark a time when which it is becoming less possible
self-aware, and able to communicate in real-time devices, machines, and people to decouple human from machine
between each other and with humans. are deeply connected through social networks?
pervasive computing, rich networks
How will we build interfaces and
with highly integrated sensing
networks that enable us to interact
capabilities, advances in machine
with machines that make key
learning and cognitive computing,
decisions for and about other human
robust APIs and equally important
beings—such as two driverless
– significant cultural changes.
cars coordinating with each other to
This evolution of connectivity,
avoid an accident?
integrated standards, and
intelligence will enable most of our How will we need to evolve IT
personal devices and industrial platforms and systems to be able
machines to increasingly interact, to respond to the needs and
collaborate and coordinate with demands of billions of connected
each other – if that is the human devices that can easily impact the
design choice. This is what safety and health of humanity?
distinguishes the Social Network
How will we define and ensure the
of Things and its evolution from
level of cyber-security needed to
today’s Internet of Things.
protect someone’s life in a vehicle,
An auto industry that is integrating which far exceeds that needed
the Social Network of Things will for today’s e-commerce and mobile
be faced with some fascinating and wallet transactions?
fundamental questions.
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Evolving from the Internet of Things to the Social Network of Things
THE SEARCH
Efficiency Efficiency Transformative experiences
FOR
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COGNITIVE ROBOTIC SYSTEMS,
AUTONOMOUS CONTROL,
AND 3D PRINTING
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The coming evolution of the
auto factory will be defined
by “advanced cyber-physical
systems” that include:
Cultural Changes Required for
Next Generation Manufacturing • Human-machine interfaces
and “collaborative robotics”
Cultural change will be required
for the next evolution of auto • Self-aware machines with
manufacturing. This will be autonomous control
especially true in relationship to the
need for increasing acceptance • Networked systems that
of information technology and can directly influence their
collaborative systems outside the environment
company’s own controlled factory • Flexible and small batch
environments. manufacturing systems
In an industry where there is • Condition monitoring and
increasing dependence on suppliers predictive maintenance
to provide just in time delivery,
wouldn’t it help the production line • Intelligent self-organizing
to know exactly where the truck logistics
is with those materials, or if it is in
a traffic jam? That kind of timely
information would enable the
production line to be automatically
and autonomously adjusted for any
schedule change.
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Traditional car manufacturers spend
about $3B to bring a new car model
to market. Startup manufacturer Local
Motors now claims to be able to bring
a model to market for $3M, albeit not
at the same production scale. That’s
a 1,000X improvement. Open-source 3D Printing Goes Mainstream
motor vehicle designs, design co- 3D printing technology can have one easily accessible. Using locally
creation, the use of micro-factories, significant impact on several deployed 3D printers and creating
and 3D printing are among the key touch points in the auto value a “print parts on demand” service
technology and process drivers for chain including the design cycle, business could change not only
this company. replacement parts for customer the customer experience, but
service, and even customer co- also the whole supply chain and
design of their vehicles. warehousing infrastructure.
As cars and processes have For the car enthusiast, what might
become increasingly digital in the be more intriguing than being able
auto industry, one of the challenges to be the co-designer of part of their
has been in the misalignment of own vehicle? There are companies
hardware-software design and today that can print the outside of
development cycles. What if the a car. That creates a new kind of
cycle for hardware could look more mass customization for the industry.
like its accompanying software,
and be compressed to under
a year? This could be possible
with the use of 3D printers to create
prototypes in the design cycle.
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THE CONNECTED CAR,
CONNECTED DRIVER
AND MOBILITY CUSTOMER
The evolution of the connected car Connected Car Connected Driver Mobility Customer
presents new requirements and The connected car has largely With the connected driver, there Mobility customers look across a
challenges for the auto industry. been focused on delivering content is a deeper integration of the variety of platforms and options for
While the connected car has been a from infotainment networks and customer-car-service relationship. their transportation needs, which
part of the language of the industry enabling dealers to access black The “car functions as an app” are often on-demand. Their choices
for over a decade, the rise of the boxes for diagnostics. enabling the vehicle to obtain new may be the result of a practical and
connected driver and the mobility functionality and service repairs emotional rethinking of how they
customer is relatively new – and will via OTA software uploads. The relate to their once beloved cars.
be game-changing for those who driver experience discussion They may see all options as equally
are prepared. evolves beyond the tradeoffs of likely: car ownership, two-way car
the distracted driver and their sharing, one-way ride sharing, app-
infotainment systems. New facilitated car pools, long distance
business models around “renting” buses, and even bike sharing.
downloadable capabilities in the
car versus permanently purchasing
them become possibilities.
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What will facilitate the ability
to address the evolving
needs of the connected driver
and mobility customer?
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BIG AND LITTLE DATA,
MACHINE LEARNING,
AND CYBER-SECURITY
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Machine Learning and Cognitive
Computing
Machine learning based on data
inputs and outputs within specific
contexts is a key force in the
evolution of both autonomous
robotic manufacturing and self-
driving vehicles.
In the factory, robots can have the “I like the word ‘autopilot’ more
capability for both autonomous and
human-collaborative modes as a
than I like the word ‘self-driving.’
result of the intelligence imparted ‘Self-driving’ sounds like it’s
by machine learning that evolves going to do something you don’t
them into “cognitive computers.”
In time, cognitive computing may want it to do. ‘Autopilot’ is a
expand from individual robots and good thing to have in planes,
processes to entire factories or
factory networks.
and we should have it in cars.”
- Elon Musk, CEO Tesla
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“We intend to protect our
customers against the abuse
of their data. I clearly say yes to
Big Data, yes to greater security
Cyber-Security
and convenience, but no to
As the volume of computers, networks and code grow both
paternalism and Big Brother.”
in the connected car and in “smart factories” there is a
– Martin Winterkorn,
growing need to understand and address the technology and Chairman of the
policy issues around cyber-security. Board of Directors of
Volkswagen AG
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Open Source Patents and APIs
The ability to create ecosystems
of complimentary products and
services built upon the IP and APIs
of others has been a key driver
in the exponential growth of the
technology industry over the past 5
years. The auto industry has been
one that has closely guarded its
secrets in the past, so this kind of
“free market” experimental product
system has never existed. As cars
and the auto industry become
more technology-driven, might this “Tesla Motors was created to
change in the not too distant future?
accelerate the advent of sustainable
transport. If we clear a path to the
creation of compelling electric
vehicles, but then lay intellectual
property landmines behind us to
inhibit others, we are acting in
a manner contrary to that goal.”
– Elon Musk
from 6/12/2014 blog post
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Access to capital from the venture Customer advocacy and behavior The tenure for leading companies “Innovation
community, angels and the crowd will be an even bigger factor in a becomes shorter and is no longer
inspires “little bets” business’ competitive success guaranteed distinguishes
If the barrier of access to needed Customers are increasingly in Looking at the changes in the between
levels of capital can be lowered or the driver seat as a result of their composition of the S&P 500 over
provided through non-traditional nearly unlimited access and choice the past 60 years shows this to
a leader and
sources, challenger strategies for about information, products, and already be true. In 1958, the average a follower.”
targeting initially niche markets within services. Millennials in particular tenure of a company in this index
an industry may scale quickly to a have an innate understanding was 61 years. By 1980 this had - Steve Jobs
mass-market opportunity. Companies of marketing and of their value as dropped to 25 years, and in 2011
that pursue markets where they no consumers. They’re significantly it was but 18. At the current churn
longer need to own all of the assets more likely than older generations rate, 75% of the current firms
of “production” naturally have to believe they have the capacity to will be replaced by companies first
lower fixed financial requirements. help a brand succeed or fail. entering the index in 2027.
Challengers can also target markets Technology is accelerating this fact of
that incumbents do not see as digital future: the impermanence of business life.
returning the financial ROI required to Will customers be making decisions
support their massive infrastructure. that boards and executives are making
today? digital future:
digital future: Will size matter in the future or will
Will Tesla evolve from its initial status agility determine the leaders to follow
of “fan boy toy” to “mainstream and their tenure at the top of a new
darling” in 2017 with a $30k kind of index?
electric vehicle tied into a network of
Supercharger stations?
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CHAPTER 4
Auto 2.0 :
the current
state of the
industry
INDUSTRY 4.0
MANUFACTURING
TECHNOLOGY
REDEFINING THE
SUPPLY CHAIN
THE BIRTH OF
MOBILITY SERVICES
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INDUSTRY 4.0
Service Orientation
Software enables post purchase
services to deliver additional
customization, capabilities, and
extension of the product lifecycle.
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By using deeply integrated With Industry 4.0 we have the The Challenges of Standards
hardware and software to birth of smart factories, products, and Security
connect machines, processes, services, and businesses. Technology always brings with it hijacks a factory, or even one
systems, and humans – both big promises and potential element of a highly integrated
Smart Factory dangers. This is no exception production line? What kind of
Intelligent networks can be
for Industry 4.0 in which both the significant business damage -
created along the entire product Data-driven networked
lack of IoT standards and cyber- both in terms of economics and
design and manufacturing value manufacturing systems with
security impact the extent to brand reputation - could that
chain - both autonomous control
and human-machine interaction. which the manufacturing elements do to a company if undetected?
These networks can constantly of the auto industry value chain If security is not effectively
inform and control each other Smart Product can evolve digitally. Without addressed, there may well be
autonomously - Customizable, technologically standards, communication between the potential for the creation
advanced, and intelligent products software solutions, machines, of “digital product tampering.”
Via real-time decision-making enabled by sensors, networks, and IT systems are difficult.
systems informed by data, communications interfaces,
analytics and machine learning. embedded software, and apps. If and when standards enable the
meaningful connection of machines,
Smart Service processes and humans - security
Physical products linked with and the potential for sabotage
software-delivered services to will need to be addressed. In the
provide customers with evolving near future auto industry, security
added value versus obsolescence.
concerns are not limited to the idea
Smart Business of hackers hijacking a connected
car. What happens when someone
New models for collaboration,
partnership and measuring
success across the value chain
of manufacturing.
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Industry 4.0:
Elements, Technology, and Participants
SMART FACTORY DATA & ANALYTICS COMPANY BIG & LITTLE DATA 11
SMART PRODUCTS CLOUD SERVICES CUSTOMERS ANALYTICS
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MANUFACTURING
TECHNOLOGY
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The Data Chain -
Where the auto industry excels
in manufacturing today
As an industry, today’s auto the assembly line means that the with both autonomous control and
manufacturers excel in three right information gets to the human-machine interaction will
main areas: right machine, down to the level be the standard, not the exception.
of calling out which screwdriver
• Vertical systems integration This will be the new production
and what level of torque needs
baseline in order to create the
• Automation of machines and to be applied against a particular
highly flexible factory ecosystems
production component and step. More
needed for both mass production
recently, with some machines
• Delivery of individual and mass customization.
having the ability to both send
production information from
and receive data, this new stream
orders to the assembly line
is being integrated into the
In the area of vertical systems manufacturing process, assisting
integration, the auto industry in areas such as predictive
has been a role model for other maintenance.
manufacturers. Integrating data
The most cutting edge factories of
from ERP to planning optimization
today are beginning to be positioned
to shop floor scheduling and
for the world of Auto 3.0 where
execution has been an area of
they will need to be able to respond
technical and business process
more effectively to consumer
focus. The ability to digitally
demands. Data-driven and highly
have configuration information
networked manufacturing systems
travel with every vehicle down
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Only a few years ago, when there
was a problem with a machine, an
engineer would be dispatched to
see what was wrong. Upon diagnosis,
they may not have the right tools
or parts and would then have to go
back to the central office to acquire
them. In a worse case scenario,
the needed parts would not even
be in stock.
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REDEFINING THE
SUPPLY CHAIN
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THE CONNECTED CAR
VERSION 1.0
Connected cars are not anything Now connected cars are: Many of today’s “connected cars” have more
new. They have been around for
over a decade.
• Becoming a mobile node in lines of code than a Boeing 787. The Tesla S
a huge computer-controlled
is thought to have more than 30 million lines of
It’s what they can now do and in transport network.
the near future that is truly code, with the Chevy Volt having 10 million.
• Morphing into mobile
revolutionary. They are dramatically
data centers
changing consumer expectations
and behaviors, as well as the Connected cars are no longer a
need for IT reinvention in the premium car offering limited to
enterprise. The connected car Tesla, Mercedes Benz, BMW,
may be the exception today. By the and Audi. They are now a part
end of the decade it will be the rule. of mainstream brands such as
Ford, VW, Toyota, and Nissan.
Connected cars started out
to provide auto-generated Connected cars can deliver
emergency roadside calls for highly desired consumer benefits
help. (Remember OnStar?) of convenience, safety, energy
efficiency, entertainment, and
Then came Internet radio and
information.
streaming music via connected
smart phones and connectivity For the auto OEM, they are
adaptor kits. driving the exploration of new
services and revenue models, the
formation of innovation units and
strategic partnerships, and greater
technology complexity needing to
be addressed by the IT practice.
Currently (2015) connected cars are 10% of new cars,
rising to 90% by the end of the decade (2020).
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It’s All About the Data
(and Networks)
Data is the basis for all connected This kind of built-in and networked
car services, whether it is broadcast data power is beginning to drive not
to the vehicle or collected from the only truly revolutionary consumer
various built-in sensors or devices services, but also the need for
in the car and even its surrounding the enterprise to re-engineer its IT
environment. systems, teams, and partnerships
around responsiveness.
With the connected car, data
is both received and transmitted, Concerns about data use and
as well as collected and stored privacy are also beginning to be
locally. raised and will be a critical part
of the evolution of the connected
• Receive information:
car. Manufacturers will be under
Streaming media services,
increasing pressure to make
directions and road conditions,
money from data and will hence
remote service, predictive
be motivated to own it. Consumers
diagnostics, and software
will be rightly concerned about
updates.
what auto companies are learning
• Transmit information: and sharing about them as they
Location based information, drive, whether it is with insurance
requests via the Internet, and companies or government agencies.
booking appointments.
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The Strategic Importance of the
Connected Car
The evolution of the connected
car from its current base state
is strategically important for
established auto OEMs. Already
several brands are working to
evolve their century old brands
from “car manufacturer” to “mobility
provider.” No one wants to loose
access to an important part of
the customer value chain, and be
relegated to the role of a commodity
“data pipeline” with Apple and
Google moving in as expert service
and user experience providers.
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THE BIRTH OF MOBILITY
SERVICES
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CHAPTER 5
Learning
from
today’s
cutting-
edge
leaders
TESLA
GOOGLE SELF-DRIVING
CAR PROJECT
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TESLA
Tesla Teaches Us That
• There is power in
niche vs. mass
• The connected
This Is Not Your Father’s The Challenger Brand Finds That car evolves to an
Automobile Company Niche versus Mass is an Advantage “app on wheels”
Tesla has challenged the market Tesla has found that niche can • Customers should be
dynamics and practices of the trump mass when moving into part of movements,
established auto industry, leading an established product category not transactions
the shift from analog to digital by with large dominant players. By
• Bespoke products
creating a car defined by software focusing on a digitally-savvy
can be created by
and the user-experience. Starting customer set with desires for a
mass manufacturing
with the goal of developing a great high design, high tech, all electric
product—a sexy high-performance vehicle, the company crafted a • Open IP platforms
electric car—the company has product offering and end-to-end can stir innovation
relentlessly focused on reinventing value chain unencumbered by past
• The network
every aspect of the value chain practices. Larger players were not
effect can meet a
(sales, manufacturing, mechanics, immediately incentivized to move
commitment
service, and business model) with into the space of this challenger
to social good
the customer always in mind. This brand as it represented such a small
is a company that does not see any percentage of their current sales,
element of the industry as sacred; and appeared to many almost as
all are subject to harnessing the a Silicon Valley novelty. The billions
disruptive forces of digital business of dollars of assets in infrastructure,
to its advantage. Tesla has also manufacturing and supply chain
been successful not only in relying that historically make the leaders
on its own intellect and creativity, successful now function as an
but has successfully engaged both anchor to the past, while serving
generous government incentives as an advantage to the new entrant
and the exceptional enthusiasm of who is building from a clean slate.
its customers.
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The Next Evolution of the Connected
Car Is Really an “App on Wheels”
For Tesla, the “connected car” entertainment, driving directions, to predict issues and software
and how it relates to their customer and calls for emergency services. downloads to address problems
has been at the center of their Because the company owns the or even provide new features –
design, business, and manufacturing car operating system and driver has provided unprecedented
“If something is
decisions. Consumer-focused interface, and sees the car as a consumer convenience while important enough,
(versus dealer-focused) software generator and receiver of data, minimizing vehicle obsolescence. even if the odds
is at the core of the “car as app there are real-time insights into both This kind of remote software
model.” Long-established OEMs car functionality and the customers’ download capability might be are against you,
will have the challenges of driving experience. Services the way that an autonomous- you should still do it.”
addressing the issues of “software have been crafted to address both driving feature is eventually
as add-on” to vehicles evolving of these. provided for purchase, as well – Elon Musk,
from a mechanical past. as opportunities for drivers to CEO of Tesla
While the competition might have
“rent or test drive” new high
Data connectivity and software over the air map upgrades, there
performing driving modes for
architecture are as central to Tesla is still the need to go to the dealer
special trips.
as is the physical design of their to plug-in onboard computers
vehicles. Its concept of connectivity to access diagnostic data. With
services was never limited to Tesla, the use of the network
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Make the Customer Part of a Bespoke Product Can Be Created
Movement, Not a Transaction By Automated Mass Manufacturing
Tesla understands that its core Tesla vehicles are built-to-order
customers are hungry for more bespoke products, and yet
than a unique driving experience. they are produced in a highly
Tesla drivers want to be co-creators automated robotic manufacturing
of their vehicle, and have purchase environment. The company has
and service experiences that built its own IT solutions to drive
eliminate complexity. The company’s both automated production volumes
direct to consumer model means and close linkages with its ERP
that “dealerships” are actually and e-commerce platforms, both
playful and informative showrooms of which its IT team built within 4
where the focus is on engagement months.
and learning rather than backroom
With more limited production
sales negotiation. Touch screens
runs than what established car
and kiosks in the physical world
manufacturers would need to reach
serve as compliments to online
to meet their ROIs, Tesla focuses on
user forums and community groups
optimizing each stage of its vertically
that make the customer part of a
integrated value chain as opposed
movement, not part of a transaction.
to optimizing production volume.
Co-creation of a Tesla car extends
Currently, the most important
beyond selecting the model and
elements in the value chain relate to
color to the owner being able to
consumer confidence about “driving
customize their dashboard interface
distance,” so battery production and
after purchase.
accessible charging networks are
a priority over production volume.
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Markets that initially looked
separate, can after some time,
appear as a coherent business
Open IP Platforms Can Stir opportunity. At one time MP3
New Innovation players and mobile phones
Partnerships play a key role in homeowners, businesses, and utility were seen as separate market
Tesla’s game plan, and initially companies. Its existing position of opportunities. That is no longer
focused on serving the needs of the excellent in batteries, and its sister the case.
connected car with telco operators company Solar City’s focus on home
and content providers. With the solar energy, may provide a jump-
company’s announcement to open start to success in new spaces with
up its patents, the opportunity to new revenue sources.
create an even more robust set
of business partnerships, markets, The Network Effect Meets a
and co-created products is Commitment to Social Good
now on the table. While this may In the electric vehicle market,
be new in the auto industry, this whoever creates the best charging
kind of co-innovation model network experience married with the
already exists in other industries. right car and business model, will
GE and its relationship with startup shape the future of mobility. Tesla’s
Quirky in the connected product Supercharger network may well
space is an important example of be its version of iTunes or Google
co-creation from non-traditional Play, serving as the ecosystem that
sources with the involvement of a extends the use and value of the
Fortune 500 company. product for the consumer. And it
is not a bad thing either that the
By securing the opportunity to have
network serves as a flagship symbol
others in the industry building off its
for the company’s commitment to
specs, Tesla gains a new revenue
social good, which has become an
source to sell batteries, super
important buying criteria not only
charging stations, and other services
for Millennials, but for boomers and
not only in the auto industry but to
Gen X alike.
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GOOGLE SELF-DRIVING Google’s vehicles have driven
CAR PROJECT over a million autonomous
miles to date. That’s equal
to 75 years of driving for the
typical American adult.
Exploring What It Means to Have
an Autonomous Vehicle
Google’s self-driving vehicles have
been on the road for years, starting
with modified Lexus and Prius cars.
Now the technology that powered
those models is in Google’s first
purpose-built custom cars that hit
the road in July 2015.
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What would be possible These are very different questions Google’s Self-Driving Car
than those about sexier design, Teaches Us That
if a vehicle could be built better mileage, or more premium
• The ability to capture and
that could shoulder the options. And with different
translate data may be the
questions, will come different
entire burden of driving? most important driver of
results.
mobility in the future
Could a vehicle that
There are some important premises
takes anyone from point about mobility (as opposed to
• For an important group of
customers, mobility is about
A to point B at the push just cars) that are the foundation for
utility over design
Google’s exploration.
of a button, transform
• Car ownership may no
• S
afety:
mobility for everyone? longer be required to get on-
What if you could reduce the
demand mobility for anyone
94 percent of accidents that are
caused by human error? • Rapid experimentation and
prototyping within a niche of
• Human productivity and creativity:
unaddressed customer need
What if you could reclaim the
may change the trajectory of
billions of hours of human
an industry more quickly than
potential wasted in traffic?
ever before
• Accessibility:
What if everyone could be
mobile, with everyday destinations
and new opportunities within
reach of those who might
otherwise be excluded by
economics or disabilities?
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In the World of Technology,
Form Follows Function
Why design a self-driving vehicle the creature comforts and luxury “We’ve been bolting
from the ground up? If the concept finishes are absent, the functional
things onto cars for a
of safety is the starting point of needs of passengers (two seats),
the investigation, then re-imaging safety (seatbelts), urban cargo long time and started
what a vehicle should look like (space for passengers’ belongings), to realize that that’s
in relationship to how it needs to and user interface (start-stop
perform when it’s built for self- button and a screen that shows
very limiting when you
driving – is essential. The result is the route)—are what’s included are working within the
a rounded-shape prototype vehicle beyond the extensive built-in
constraint of an existing
with an unobstructed 360 field of network of technology.
view for sensors that can capture vehicle. We wanted to
While this is a very Google
visual data from two football fields
approach to consumer-product rethink a vehicle from
away. That’s essentially the distance
required to safely stop an average
experimentation, it may not be a fresh sheet of paper,
that far off from what the new
car going 60 mph.
mobility customers, particularly
and what that vehicle
When Experimenting, Learning is those in urban environments, are needs to look like
More Important than Luxury demanding. Basic utility is gaining when it is custom built
priority over the value of envy-
Google’s design aesthetic has
inducing design. Given that trend, for self driving.”
always been on the side of
Google may know more about
minimalism. So it is not unexpected – Jaime Waydo,
the new mobility customer than
that its approach to prototyping Systems Engineer,
the auto industry may have given Google Self-Driving Cars
and experimenting with autonomous
them credit.
mobility is about designing for
learning and not luxury. While
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“The opportunity for
people to move around
and not worry about it.
It’s going to be incredibly
empowering and
Technology Must be Married
powerful to people.” with Purpose
– Chris Urmson, Director, Like Tesla with its software for non-owners, or even insurance
Google Self-Driving Cars approach to the car, everything in premiums paid by car manufacturers
the Google project is custom- and not riders.
made. Nothing is borrowed from
other uses or purposes, which Security and Privacy -
can result in limitations. Since it’s the Two-Headed Monster
the software that makes the car With data and safety at the core
self-driving, and it must therefore of the functionality of Google’s self-
function flawlessly with handshakes driving car project, cyber-security
between sensor and software, is a more critical issue than in
Google created their own computer. your “normal” connected car with
Designed to withstand the specific functionality focused on navigation
vibrations and temperatures and entertainment. Having your
of the driving environment, it’s streaming media interrupted is a
fundamentally very different very different concern than hackers
from someone’s office desktop. taking control of your vehicle.
And with greater concerns around
With this kind of technology in
data and security often comes
place – other form-function issues
increased discussion around
are resolved such as no need
privacy. If you don’t own the car
for a steering wheel or the kind of
you are driving in, who has access
brake pads that a conventional
to the information about your various
vehicle requires. And then extend
destinations? Who will own the
that to what kind of insurance
data from the many thousands of
models this needs – such as lower
riders associated with a single
rates and pay as you go insurance
on-demand autonomous vehicle?
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What if the Future is Only 3-5
Years Away?
If self-driving cars quickly become
mainstream, what might this mean
not only for auto manufacturers,
but also supply chain partners and
service providers?
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BMW iSERIES AND
CONSUMER MOBILITY
INITIATIVES BMW’s Initiatives Are Exploring Questions:
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Project i: BMWi8 and BMWi3
In 2011, BMW unveiled the first
concept cars from its BMWi BMW i8 –
sub-brand - the small i3 urban Materials and Vertical Integration
electric car and the i8, a high- In order to meet its goal of fuel
performance plug-in hybrid luxury efficiency without giving up
sports vehicle. With both models, horsepower, the BMWi8 uses a
the company chose a business carbon fiber composite. This
strategy to build around the choice has led to other changes
traditional BMW values of “sheer in the value chain including vertical
driving pleasure” matched with integration via an investment in
its new agenda of “efficient batteries and in FGL Carbon (for
dynamics” focused on fuel-engine carbon fiber pre-press to create
efficiency. These two strategies parts that can be taken directly
have driven the company’s decisions to the factory for assembly).
around traditional factors of Manufacturing techniques have
design and performance, materials also been modified as a result
and supply chain, the extent of the new material. The production
and functionality of software, and site for the i8 in Leipzig Germany
pre/post customer experience. is part test laboratory, part robotic
assembly. The challenge and
learning is around the difficulty in
integrating carbon fiber into the
production process at speed and
volume, since it must be baked
or glued versus bolted or welded.
This requires human labor.
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BMW’s View of the Connected Car
Both the i3 and i8 reflect the cycle and a more integrated
company’s current viewpoint on digital mobility experience into
the role of software, driver and the company – be it experiences
the connected car. Consumer in the car, on the Web, or with
accessible services focus on mobile apps.
infotainment and simple functions
BMW mobility experiences range
such as remote unlocking or
from the owned car and beyond
controlling the climate of the car.
to ride sharing, parking services,
Software that accesses vehicle
bikes, and buses. Car specific
diagnostics is dealer-focused. There
services include:
are no remote software or feature
updates as in the case of Tesla. • DriveNow – locate, reserve and
access a vehicle.
BMW Mobility
• ParkNow – locate and paying for
Separate from vehicle projects,
parking spaces
BMW digital services group has
been experimenting with alternative • ChargeNow – locate and using
mobility service offerings for several public charging stations in cities
years. This has been with a still for the i3.
historic brand-aligned approach
of “premium car sharing.” With
a team from industries outside the
world of autos – Internet, mobile,
communication and IT - they are
looking to inject a shorter innovation
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CHAPTER 6
Auto 3.0 :
building the
new value
chain of
customer-
centered
innovation
RETHINK VALUE
REIMAGINE THE
CUSTOMER EXPERIENCE
RECONSIDER CULTURE
REORIENT PROCESSES
AND OPERATIONS
RE-ENGINEER IT
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As we move into the next stage • How do we build a more
of evolution of the auto industry – customer-centric approach
a time that is expected to be to cars and mobility that
unlike any that has preceded it – is reflected throughout the
there are important questions entire value chain?
that the established industry
• H
ow do we begin to derive
leaders need to be considering.
value from the growing
For individuals and companies Sharing Economy, rather
to begin to explore their own than be disrupted and
strategies and answers to these made irrelevant by it within
questions, we suggest a model the next decade?
for looking at the digitally driven
• H
ow do we look ahead
forces reshaping the auto industry.
and see what non-traditional
companies may become
disrupters in the world
of autos, as well as how we
might be disrupters in
other adjacent industries?
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The Innovation Spectrum
- Framing new value propositions and digital experiences
BUSINESS
GOVERNMENT MODELS, DISTRIBUTION PRODUCTS RELATIONSHIPS BRAND &
CULTURE MARKETS
& LEGAL PLATFORMS & & PROCESSES & OFFERINGS & COMMUNITY EXPERIENCE
LEADERSHIP
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The Innovation Spectrum in the Auto Industry
Dealerships redefined
or obsoleted
BUSINESS
GOVERNMENT MODELS, DISTRIBUTION PRODUCTS RELATIONSHIPS BRAND &
CULTURE MARKETS
& LEGAL PLATFORMS & & PROCESSES & OFFERINGS & COMMUNITY EXPERIENCE
LEADERSHIP
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REIMAGINE THE
CUSTOMER EXPERIENCE
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Moving from Questions
About the Function of a Car to
What Mobility Enables
Leaders in design thinking are as that from Google) may create
reframing questions and discarding a world in which at least some
the current architecture, structure vehicles no longer require
and design of cars. They are taking a steering wheel and the various
a more systems-wide view to dials and controls of today’s
how mobility might fit into human cars. The question about driver
lives in the future. Questions ergonomics might then be reframed
are then naturally reframed from: into one around the values of
multi-functional personal space in
“What can the car do?”
a mobile environment. Discussion
- to –
about streaming media services
“What does the car enable
may no longer be about a balance
me to do?”
of media access with driver
- to –
distraction, but be reframed into
“What does mobility enable
one about making the mobile
people to do?”
experience more like the in-home
New technology investigations experience.
can also drive new ways of framing
explorations about the nature of
the customer-driver experience and
cars. What if you believe that new
autonomous car technology (such
“The beauty of design is
being able to look at the
bigger picture.”
– Geoff Wardle,
director of advanced mobility
research at Art Center College
of Design in Los Angeles CA
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Human Relationships and Digital
Transformation
Digital business requires a and by whom—in order to create “Empathy is the mental habit
fundamentally different and a design that meets the demands
transparent relationship with of today’s customer.
that moves us beyond thinking
customers and partners. Old of people as laboratory rats or
At the core of understanding
ways of defining relationships as
the human-centric user experience standard deviations. If we are
“360 degree views” or “share of
is the concept of design to “borrow” the lives of other
wallet” need to be replaced with
thinking. Design thinking focuses
an emphasis on a model that helps
on concepts of empathy and people to inspire new ideas, we
customers get the value they desire
from their relationship with the
relevance—asking questions to need to begin by recognizing
reveal how the product or service
company. This relationship needs that their seemingly inexplicable
provides value to the customer.
to be built upon characteristics of
behaviors represent different
empathy, relevance, and respect. Respect for the Customer
strategies for coping with
Empathy and Relevance Digital businesses must know
their customers, understand their
the confusing, complex, and
Digital business’ relationship to the
customer experience represents a
preferences, and act on their contradictory world in which
behalf. The digital-savvy individual
shift from focusing on what’s best they live.
has very little time or patience
from an enterprise’s viewpoint to
for the exploitative tendencies – Tim Brown, CEO of IDEO
the end user’s perspective. Today’s
of traditional companies – intent in “Change By Design”
customers value personalization,
on extracting value from them.
customization, and even co-creation
Digital companies need to
of their experiences. Companies
acknowledge the importance
must start by deeply understanding
of earning customers’ trust
the context in which their product or
and the difficulty of regaining it.
service is used— why, where, how,
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RECONSIDER CULTURE
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REORIENT PROCESSES
“Learning to see waste
AND OPERATIONS
and systematically
eliminate it has allowed
lean companies such
Creating Organizations that Facilitate as Toyota to dominate
Customer Value and Engagement
entire industries. Lean
The need to reorient processes and In the digitally-driven company,
operations is a natural outcome of where that which adds value to
thinking defines value as
the exercise of rethinking value to the customer experience reigns ‘providing benefit to the
map to customers’ needs, and then supreme, it would seem that auto
customer’; anything else
building an appropriate culture of companies need to begin to rethink
innovation around that. Historically, they way that they are organized, is waste.”
the organizational structure of the at least to the level that they
auto industry has been driven by present themselves to customers. - Eric Ries, author of “The Lean Startup”
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RE-ENGINEER IT
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Historic Barriers to IT
Evolution in the Auto Industry
Some of their most innovative As established auto companies IT environment where Agile IT • Perceived requirement
and formidable future competitors begin to evolve into the successful coexists with the well-established that all information
of the leading auto OEMs “were digital organizations of the information systems of record. services be on premise
born digital” – Tesla and Google future, they need to begin with IT can no longer be limited to a
• Lack of acceptance
for example. Unsaddled by legacy the realization that the road to ‘come and fix it’ utility within a
and trust in
systems and practices, they have becoming a digital business goes business. Auto companies must
cloud environments
a significant structural advantage through their IT functions. The shift their focus from IT as an
that allows them to rapidly enter challenge that many of them face isolated department-centric utility • Focus on technology
markets and scale by leveraging is that they are saddled with IT to IT as a strategic capability for internal purposes
new information technology infra- that has organizational structures, deployed across the company. and not in collaboration
structure and processes. These management models, operational Creating this kind of environment with suppliers, strategic
structural advantages give them processes, workforces, and systems will, by definition, require a partners, and customers
incredible business agility that that were built to solve the “turn of flexible, extensible and reliable
they can effectively use to out- the century” problems of the past. bridge between systems of Agile
maneuver significantly larger and and traditional IT.
The new auto company IT
more established competitors.
environment must be a hybrid
The new equation for IT success in the evolving digital auto company:
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The old industrial IT model focused Agile IT focuses on how to
ruthlessly on standardization, implement new technology and
implementing command and control processes in a faster and less
based management structures, and capital-intensive manner. It
centralized teams designed to drive provides the ability to achieve The digital auto company that demands business
economies of scale and optimize minimum efficient scale in any agility requires an approach to IT that fosters
unit costs. While providing success process without requiring the experimentation and innovation at a rapid pace.
in addressing long-term projects volume, size, and scale that used Today’s IT organizations can adopt the new Agile IT
or repeatable, recurring problems, to be required to drive efficiency model in an incremental and iterative way.
this approach to IT has been in the old industrialized IT model.
accompanied by increased time to
market, reduced flexibility and stifled
innovation.
5 1. Adaptive enterprise
architecture
2. Digital portfolio
management
2
Agile IT is about building a new 1. Innovative 3. Innovation and
sustainable model for managing business customer centricity
system
the “Business of IT.” It is purpose- 4. Platform thinking
2. Sustainable
built to be adaptive and extensible workforce 5. Horizontal IT teams
to meet the evolving IT needs of
digital businesses. Using systems
Components Capabilities
1 3 8
1. Agile IT 1. Understand the
thinking, it addresses the skills, business 1. Real lean
process, technology, systems, and 2. Manage IT as
2. Design thinking
a business
organizational dynamics that are Goal 3. Be the change agent 3. Discovery-driven planning
the underpinning of today’s digital
businesses. Leadership 4. Visual management
5. Servant leadership
Behaviors 6. 10-20-70 Learning model
7. Component design and APIs
8. Crowdsourcing
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Plays
Platform Thinking
• Consume IT as a service
ENTERPRISE
CUSTOMERS
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APPENDIX
ABOUT NTT INNOVATION
INSTITUTE, INC.
COLLABORATOR AND
CONTRIBUTOR BIOS
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ABOUT NTT INNOVATION
INSTITUTE, INC.
NTT Innovation Institute, Inc. is NTT i3’s Core Platforms NTT i3 offers three platforms to
the Silicon Valley-based, open for Agile IT help IT departments tackle these
innovation/applied research and In order to build the agile and challenges:
development center of NTT Group. hybrid IT systems required by
Cloud Services Orchestration
NTT i3 builds platforms that are the emerging digital generation
Platform
transforming today’s enterprises of automobile companies, robust
that allows IT departments to
into the digital businesses of the and well-designed technological
understand their application
future. Our platforms help clients and strategic platforms must
portfolios, migrate the most suited
engage with customers and markets be put into place, often inareas
applications to the cloud and
in exciting new ways by pushing outside of the traditional IT domain.
provide a seamless way to manage
the boundaries of cloud computing, Legacy systems must be modified
this new hybrid environment.
information security, machine and integrated in a way that
learning, and the Social Network acknowledges complex privacy, Global Threat Intelligence Platform
of Things. NTT i3 builds on the vast speed, and reliability needs that that brings real-time data-driven
intellectual capital base of NTT were inconceivable at the time insights into the identification and
Group, which invests more than of their original design. And all understanding of cyber-security
$2.2 billion a year in R&D, with an of these IT systems need to be threats and needs.
extensive network of technology integrated and orchestrated in a
An Elastic Services Edge Platform
partners, engineers, and scientists. way that makes the management
that leverages network function
of a dynamic hybrid information
virtualization (NFV) to push virtual
environment possible.
network functions (VNF) to the edge
of the enterprise’s network, bringing
agility, security, and flexibility into
the infrastructure.
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About the Authors
Srini Koushik
Srini Koushik served as the President and CEO of
NTT Innovation Institute Inc., the Silicon Valley-based Srini has a passion for lifelong learning and holds a bachelor’s
degree in physics from the University of Madras, a master’s degree
R&D arm of the NTT Group, a global leader in computer science from the University of Bombay, a master’s
in information and communications technology. degree in business administration from Ohio State University,
and executive education on Systems Thinking, Design Thinking,
With thirty years of experience as a programmer, architect, CTO, Clean Energy and Innovation from the MIT Sloan School of
CDO, and CIO for Fortune 100 Companies including IBM, HP, and Management and Duke University.
Nationwide, Srini has a track record of unpacking complex problems,
and hacking the technology and culture of global enterprises to
deliver extraordinary results.
Srini was elected to the IBM Academy of Technology, and was named
an IBM Distinguished Engineer in 1996. He was named an Elite8 CIO
by Insurance and Technology, a Top 25 CTO by Infoworld, a Top 10
All-Star in the financial services industry by TechDecisions, and a 2014
Computerworld Premier 100 Technology Leader.
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About the Authors
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COLLABORATOR AND
CONTRIBUTOR BIOS
Jens Krueger
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Monika Sadowska
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Adam Stephenson
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ADDITIONAL CONTRIBUTORS - NTT DATA GERMANY
Siegfried Adam
Senior Managing Consultant Connected Business Solutions
Christoph Aretz
Senior Managing Consultant Marketing and Sales
Lutz Kauertz
Vice President Discrete Manufacturing, Head of Metals, Mining and Engineering
Markus Klamet
Senior Managing Consultant, After Sales Services
Christof Kleinhenz
Managing Consultant Connected Car
Sebastian Tschödrich
Managing Consultant Digitization
Claudia Wegerer
Managing Consultant After Sales Services
Michael Wegenaer-Schuchardt
Managing Consultant Analytics and Big Data
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OTHER BOOKS FROM
NTT INNOVATION
INSTITUTE INC.
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PHOTO CREDITS
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