Embed Size (px)
Citation preview
Capturing the $47 Billion Connected Car Opportunity
Compelling driver experiences and services are the future of the connected car, but automakers and suppliers are struggling to meet expanding driver needs while also aligning their business models to capture new value. Harbor Research and Pillar Technology discuss how companies can succeed in extending the driver experience while positioning themselves to profit from data-driven services and software.
Harbor ResearchFounded in 1984, Harbor Research Inc. has more than thirty years of experience in providing strategic consulting and research services that enable our cli-ents to understand and capitalize on emergent and disruptive opportunities driven by information and communications technology. The firm has estab-lished a unique competence in developing business models and strategy for the convergence of perva-sive computing, global networking and smart sys-tems. Harbor Research is headquartered in Boulder, Colorado.
Pillar TechnologyFounded in 1996, Pillar Technology is a technology con-sulting firm that offers its clients the opportunity to solve business problems in a no-constraints, creative, collab-orative environment. With expertise in design thinking, embedded solutions, and highly-complex software development, Pillar continues to drive efficiency and innovation for next-generation digital interfaces, auton-omous vehicles, smart cities, and other leading-edge fields. Pillar Technology is headquartered in Columbus, Ohio, with additional locations in Des Moines, Iowa; Ann Arbor, Michigan; and Palo Alto, California.
1How do I leverage car data to drive more visceral relationships and experiences between drivers and their cars?
2How do I monetize these experiences?
The ‘connected car’ has been an industry buzz-word for years, but few companies have had success translating the buzz into real dollars. The core value of the ‘connected car’ is its ability to radically extend the driver experience beyond traditional features. To succeed, automakers and suppliers must ask:
33
capturing the $47 billion connected car opportunity
3
Capturing The Connected Car
Opportunity
At a company event in late 2017, Toyota President Akio Toyoda expressed his concern that technology-driven shifts in the market were nothing short of existential threats to traditional automotive manufacturers.
As automobiles become exponentially more connected and intuitive, automakers must make long-term strategic shifts in their business models. In the near term, there is significant value to be realized around the connected vehicle.
Connected car data is expected to eclipse $47 billion by 2023, but at the moment automakers don’t have a realistic road map for capturing it.
Automakers love to flash high-budget sci-fi films with inspiring music while a visually-arresting concept car glides onto a stage at the latest industry conference. But beneath the marketing glitz, these companies have yet to answer two fundamental questions related to the “connected car” opportunity:
1. How do I leverage the data to drive more visceral relationships and experiences between drivers and their cars?
2. How do I make money from this data?
Without a clear plan to connect car data, driver experience, and profitability, these marketing stunts will remain hollow visions devoid of reality or any kind of tangible revenue impact.
Finally, automakers not only run the risk of missing out on a huge revenue windfall, but also put themselves in peril of becoming simple, low-margin hardware suppliers to the data-focused tech companies, thereby relinquishing control over the entire customer experience.
Data is Key to Improving Driver Experiences
New vehicles generate exponentially more data about the passengers and their surroundings than they did 10, 5, or even two years ago.
Think of the personal data that your car currently uses. What comes to mind? Perhaps it automatically pairs to your smartphone, allowing you to make hands-free calls and
Car Data Drives New Visceral
Driver Experiences
“Over the next 100 years, there is no guarantee that automobile manufacturers will continue to play leading roles in mobility. A crucial battle has begun - not one about winning or losing, but one about surviving or dying.” - Akio Toyoda
4
capturing the $47 billionconnected car opportunity
4
Connectivity can sculpt deeper personalized relationships between drivers and cars
texts. Perhaps it’s learned your music preferences and is able to make recommendations. These technologies leverage the smartphone to give consumers a customized, personal experience.
Additionally, cars extract data from their surroundings that tangentially improve the driver experience by acting as a real-world sensor that surrounding vehicles can leverage to determine real-time traffic and weather conditions. In some instances, cars communicating with each other can reduce potential crashes and improve traffic flows, all of which contribute to enhancing the driver experience.
Simply put: we know the data is valuable in elevating the driver experience. But how can we create a truly personalized experience? And how can we realize that value? By embracing the smartphone as a microcosm of the individual, and by embracing vehicle data as a microcosm of the driver (or rider), your vehicle could infer the moments you’re experiencing, recall your past preferences in those moments, and satisfy them instantaneously.
Imagine you’re cruising down the highway on Saturday, listening to your favorite 90s rock playlist on Spotify. Your car is able to discern your favorite music from your playlists, and with access to your personal calendar, it’s able to discern your open agenda. Connected and intuitive, it also recognizes that there’s a music festival just down the street—and some of your favorite rock bands will be there. The vehicle then allows you to find tickets and pay remotely before guiding you to the best available parking space.
At the intersection of personal data and vehicle data, we have the ability to produce brand-new experiences that are unique, relevant, and personalized. In this case, your vehicle is able to leverage personal insights to produce personal, actionable recommendations.Elevating the driver experience beyond simply the in-car amenities requires a good deal
Contextualized Driver Experience Considerations
55
capturing the $47 billion connected car opportunity
5
of external coordination and collaboration amongst companies to bring new and valuable driver services to market.
Automakers Can Monetize Data Streams For Connected Services
Carmakers are uniquely positioned to derive value from car data because the car is the source generating the data that other companies and third-party developers need to build new applications that ultimately impact the driver experience.
In this way, carmakers can monetize both the data stream (allowing access to specific streams of anonymized real-time data to third-party developers) as well as the actual application (like real-time traffic route guidance) through royalties charged to the third parties.
According to Harbor Research, revenue associated with car data-based applications will grow from $7 billion in 2017 to around $47 billion by 2023. This opportunity can then be split into two narrower categories:
• Basic systems software and services – applications that include location and routing, diagnostics and monitoring, and other standard capabilities account for $8.2 billion of the $47 billion car data opportunity by 2023
• Advanced value-added software and services – applications that include car
performance, contextualized in-car experiences, and V2X (vehicle-to-infrastructure, vehicle-to-vehicle, etc.) makes up a bulk of the car data opportunity, ballooning to $39 billion by 2023
Revenues associated with car data applications will grow from $7 billion in 2017 to $47 billion by 2023
Worldwide Connected Vehicle Revenue Forecast, 2017 - 2023
Monetizing Car Data Creates New Services
and Enhanced Experiences
6
capturing the $47 billionconnected car opportunity
6
While carmakers appear to be positioning themselves to participate within this new market, their pace of innovation does not provide a clear path to tangible revenue and next-generation driver experiences.
The modern automobile is a complex ecosystem of software and hardware made more complex by the combined sources of this ecosystem, a melting pot of internal groups and external third parties. The traditional development approach has the automotive brand both building and integrating these components into new vehicles.
But elevating the digital driver experience beyond simply in-car amenities requires coordination and collaboration among parties at a level not common in the automotive space. For inspiration, carmakers should look to innovative firms with a Silicon Valley mindset. These firms place value on the creation of product-focused platforms whose development leverages both internal and external sources to create value for the end customer. These next generation platforms are built using modern development practices which reduce delivery risk in highly complex environments.
A scalable platform would position carmakers to create value within their mobility products. Built by internal and third parties, these new applications will leverage product-centric insights with proprietary vehicle data, ultimately impacting the driver experience in a very positive way.
Connected cars can create visceral driver experienc-es and drive tangible revenue for OEMs and suppliers
Visceral Connected
Experience Is Key To Future
Business Models
Mobility Experience Platform Components
In this way, carmakers can monetize both the data stream (access to anonymized real-time data for third-party developers) as well as the actual application (like real-time traffic route guidance) through royalties charged to the third parties.
77
capturing the $47 billion connected car opportunity
7
failure to act will result in not only lost potential revenue and inferior driver experiences, but also an increasing erosion of margins and ownership of the customer experience
While the race to capturing the connected car opportunity is well underway, carmakers still have time to cement their position as a pivotal piece of the value chain as the harbinger of the data that external companies rely on for developing value-rich software and services.
However, failure to act will result in not only in lost potential revenue and inferior driver experiences, but also an increasing erosion of margins and ownership of the customer experience as tech companies play an increasingly-influential role in customer buying decisions and behaviors.
In this last year, a number of startups are creating both challenges and new opportunities for OEMs to capture a piece of the connected car opportunity. Data exchange platforms like otonomo, for example, are enabling OEMs to derive revenue from selling car data to third-party application developers, while companies like Automatic (acquired by SiriusXM for
$100 million in 2017) are going around OEMs completely to obtain car data by installing plug-ins that extracts data from the car’s OBD-II port.
As the industry nears ever-closer to autonomy, ridesharing, and next-generation mobility, the physical vehicle is no longer the focal point of the automotive business model. While selling more cars will always remain a goal, automakers must now shift their focus to design - to the individual. How can we maximize the number of people who prefer our experience? How can we design experiences that speak to the individual?
With personal context at the forefront, the driver and rider experience is becoming the true market differentiator. The automaker that’s able to provide a seamless, personal, relevant experience will rise as the leader in the industry climate of tomorrow. The others will simply become low-margin hardware suppliers to organizations that can provide this experience.
The data to create this experience exists in abundance, and it’s only growing more plentiful. Who will grasp this data, leverage it to infer context, and create bold, revolutionary solutions? Inherently, hardware acts as a commodity, largely static and lacking dynamism. Automobiles, powered historically by feats of engineering and industrial might, have long fallen into this category.
But using data to create a highly-contextual, adaptable experience introduces a new paradigm: one where automobiles are no longer commodities but intimate, personal platforms.
Philosopher Herbert Marcuse noted that people find their soul in these commodities, especially in automobiles. The next generation of automobiles, empowered by data and applied in a highly-personal context, will bring the soul of the individual to the forefront of a brand-new automotive experience.
The Road Ahead
Data fuels a more intimate, personal relationship be-tween the automaker, the car, and the driver
Eric FlecherExecutive [email protected]
Colton BloecherResearch Analyst
Derrick BurnettSenior Associate
CONTACT THE AUTHORS
