Using mobile phones simply for phone conversations is such an old-fashioned idea, right? These devices have evolved into smartphones that are now mobile information hubs for our needs on the go. Interestingly, many of us think of cars primarily as transportation to get us from point A to B. Similar to the evolution of mobile phones, we won't be thinking of our cars as so for long!
Why? Because the software-driven, Internet of Things (IoT)-connected paradigm that transformed the telephone, computer and other industries is now ushering in the next generation of transportation 'devices'. Motor City, Stuttgart and Tokyo have yet to be disrupted by this tidal wave of technology change that will remake the auto industry. But the transformation has begun and in a few years, the idea that a car's sole purpose is transportation - will truly seem quaint.
Car-as-a-Service
Consider the following: The kids are off on a week-long school trip, so you and the spouse decide to reignite your youthful spontaneity by taking a road trip to Scotland or Wales or anywhere else you fancy. To liven up the ride, you sign onto your car's portal, and upgrade the 190 horsepower engine of your family Volkswagen, a workhorse used primarily to get the kids to and from school, transforming it into a 350 stallion joyride for the weekend. You upgrade your Bose speakers to "earbleed" mode, and send your Pandora Springsteen playlist to your iCar to stream while you drive.
Your connected navigation system maneuvers you out of town avoiding the traffic and road crews. Enroute, you remember reading about a great new country pub that recently opened and was getting rave reviews. With a voice command your iCar estimates your time of arrival, and makes an online reservation for you. As you make your way to the pub, your car navigates you through narrow country roads with timely warnings of the numerous speed limit zones, and it finds you an available parking spot right by the restaurant.
This account illustrates how your car didn't just get you from point A to B - it performed myriad services aligned to your weekend getaway needs. It let you muscle up the engine, enjoy your playlist, maneuver to your destination using the most efficient route, and it facilitated your pub lunch plans along the way.
Under the old 19th century paradigm, a car was defined by the physical object you purchased on the showroom floor. And its functions were unalterable -- fulfilling the same purposes until you bought your next car. Under the 21st century paradigm - your car will constantly be redefined, providing you countless services based on your needs and wants of the moment.
Car-as-a-Service = Platform + Apps + Service
A connected auto industry will soon be able to create an on-going relationship with consumers, and reap the reward of recurring revenues from sales of hardware, upgrades, apps and services. The recipe driving this transformation consists of the following essential formula: Platform + Apps + Service. This is delivered through a combination of:
- Hardware platform (the actual vehicle and its component parts);
- Software applications that control features and functionality of the vehicle hardware, software and services delivery; and
- Software licensing and entitlement management, which sorts out which car features, functions and services a customer has paid for and can access.
This model creates tremendous opportunities for innovation - turning the car into a transportation services platform; and allowing manufacturers to garner new revenue streams, cost and efficiency advantages.
So how can car manufacturers make the transition? A software-driven business transformation that will require them to:
- Re-think product packaging and business models based on how consumers want to use cars and related apps and services. Auto makers will need to segment their customers more and create tailored "platform + apps + services" offerings at different price points for different types of needs.
- Track and manage which services have been purchased. Every car can be configured differently based on the needs of individual drivers. This is possible if manufacturers licence specific features, functionality and services, and track which customers are entitled to them based on what was purchased - say via an owner portal. This makes it easy to modify the car to evolving needs, and get paid for doing so.
- Automate the entire app, device platform and entitlement lifecycles. These lifecycle processes include: app installation and activation; subscription management; firmware and app updates; device platform provisioning, configuration management, device monitoring and remote management; app upgrades and other changes to entitlements.
You might think all this seems like science fiction, but the technology already exists and is being used today in many types of intelligent devices across industry sectors. For instance, buildings have been made intelligent using licensing and entitlement management provisioning and controlling systems such as heating, ventilation, air conditioning, security and fire protection. In healthcare, wearables and home health monitoring devices are already widely in circulation. In the oil and gas sector, where equipment is extremely expensive, licensing and entitlement management technology is used to add and remove features to meet diverse requirements through the same installed infrastructure. And in the mainstream consumer space, there are already smart refrigerators offering added functionality like suggesting a meal recipe from the ingredients available in the fridge or creating a shopping list of items that are running low.
Similar to other goods manufacturers, auto manufacturers too have a great opportunity to transform their vehicles into platforms, greatly expanding their marketplace and increasing profitability.