Exploring revenue streams in a swiftly changing technological automotive landscape. Ginny Weeks reports.

Changing attitudes and circumstances have led to a lot more collaboration across industries, even among rival companies.

Yet, to enable the creation of a collaborative system within the auto industry, a defined structure that allows for alliances is necessary, says Mahbubul Alam, CTO/CMO with Movimento Group. This alliance will define the area in which the parties will not compete but collaborate with each other. “The collaboration we have seen on developing navigation maps is a good example. Industries need to come together and ask, what are some of the areas that we should not be competing on, that should not be our differentiator? A very good example is cyber security, which should be a collective defense mechanism and not be taken up by just one industry,” he says.

Holger G. Weiss, CEO and founder at German AutoLabs, acknowledges the difficulties in creating an open, collaborative system. “We see a couple of initiatives that are currently pushed. However, for many companies the level of knowledge sharing stops very soon. Daimler and Porsche joined forces to run the Startup Autobahn but they wouldn't share APIs for developers to use them. BMW pushes an open data platform but the data is mainly useless to really build new business cases upon. Open source initiatives like Genivii more or less failed owing to lack of engagement. The way forward could be to create an interesting hub utilising HERE Technologies where carmakers and suppliers could become shareholders to develop common knowledge,” he says. 

A willingness to invest in strategic alliances is key to a collaborative system, particularly cyber security and in-vehicle operating systems. Using the PC world as an example, computer companies built different designs and computers but used the same Windows operating system. The same model should be adopted for the common good of the automotive industry, says Alam. “The same model of distributed innovation on services can be incorporated while agreeing that some areas like firmware, software and OS are non-competitive areas,” he says.

The focus should always be to provide excellent services to the end consumer and to do this the business model has to be innovative, flexible and adaptable.  “We need to drive rapid market adoption and not get stuck in a rut with the business model. If that is laid out as the foundation, we can adjust, modify and create new collaborations, some will work, some will not,” says Alam. “The business model should be flexible enough to adjust according to the need of the situation.”

Identifying key applications for the auto industry

Both experts agree that to make use of the latest developments in AI, VR and more the industry needs to carefully select which areas to build on based on strategic growth. A separation between fashionable and foundational technologies is paramount, says Alam. “For example, AI and VR are foundational technologies but the applications that are created based on those technologies become fashionable technologies. When building R&D efforts, we must look at the investment and figure out if we have the capability to create foundational technologies or fashionable technologies. Fashionable technologies are closer to the end customers and need to be agile in development. Foundational technologies on the other hand require a lot of investment and create a lot of value in terms of intellectual property. There are pros and cons for both, the decision depends on the investment, ROI and the expected timeline. The ability of the leadership to identify and understand the application, without taking it at its face value; understand where in the network it applies, its nature of impact and the capability of driving the business’s talent pool accordingly is important.”

It's all about the use cases and data, says Weiss. “Is a restaurant guide in VR a helpful application? I seriously doubt it and that's the reason why VR in automotive has failed in that respect. Will a pilot like VR dashboard making driving safer? Yes of course. Will a voice assistant like Siri help in the car? No, since it's not made for it. But a co-driver especially developed for the in-car assistant case will be needed because it's specialising just for this respective use case. The same counts for data: those applications that really deliver useful data to the driver and the use case (autonomous) will succeed.” 

Overcoming common challenges

Data privacy and integrity remain two of the biggest challenges to the digital industry. There has also been a steady rise in digital manipulation in regards to data being stolen both inside and outside of the car, so cyber security is extremely important.

In terms of presenting a modern business model to overcome these challenges, this will need to include entitlements, payments and ROI way after the product is sold, says Alam.  “We need to understand which parts of the automotive industry are truly digital, which parts are physical and which parts comprise of an intersection between the two. The business models for each of these parts will be different. For example, if music is being provided in the car, a complete digital business model can be adopted. If physical parts are being sold, then a complete physical business model is required but when there is an intersection between the two, we need to think about how we can continue to generate revenue through apps and services on physical devices. They could be subscription-based model or have an iTunes-like market place where new services can be sold on a one-time basis,” he says.

One answer to this challenge is time, says Weiss. “In a positive sense, industries have to cope with much faster development cycles. They have to be ready for that and getting tech and talent to manage those shorten iteration cycles. In a negative way it will take a long time, especially in automotive, to overcome certain challenges such as seamless connectivity and to replace an installed base of cars.”

The biggest challenge for the automotive industry is creating the right business model for the ‘software defined car’, says Alam. The model would need to generate revenue after the car is sold and throughout its entire lifecycle via services and apps. This in turn will enhance the user experience and drive customers to spend on aftermarket devices, he says. Just look at the smartphone industry who are already operating this business model successfully.

[Tele.Weeks.2017.09.27]

TU-Automotive Detroit 2018

06 Jun 2018 - 07 Jun 2018, Novi, USA

With 150 speakers, a 200,000 sq ft exhibition and 3000 attendees, TU-Automotive Detroit is the world's biggest conference & expo for connected & autonomous cars.