Imagine – just a decade ago if someone had told you that one day soon all your movements would be recorded by a small device in your pocket with accessible readouts of your whereabouts and other personal data. At the time this possibility surely would’ve seemed more threatening than liberating. But of course we now accept this as a price to pay for having a smartphone as this technology continues to pave new ways for us. Now this same quandary is being applied to arguably what has long been viewed as a modern symbol of personal freedom – the automobile.
Over the last few months alone – all eyes have quickly turned to the brave new world of how we will next interact with our vehicles. We’ve read about and debated questions on – the safety of nascent self-driving technology, Silicon Valley’s entry into driverless technology, Uber trialing autonomous technologies with major automakers, implications for insurance companies and of course, the issue of privacy.
And just this week - US federal automobile safety regulators came out and judged that America's highways will be safer when cars are driven by machines, not by people. President Barack Obama has endorsed this view by rolling out a fifteen point plan that will pave the way for new rules and guidance that automakers should follow when developing self-driving cars to keep passengers safe. While the guidance stops short of being official regulation and policy - the key points of the plan address areas like safety, technology and privacy. All of these events point to how we have rapidly moved the conversation around the automobile from the possibility to the inevitability of driverless cars and automated technologies.
A few weeks ago while I was in Japan – a country already familiar with advanced robotics in everyday areas like restaurants and recreational golf courses – I was reminded of two imminent realities that I will likely face around the world. For one, I might soon be hard-pressed to find a traditional cab when I leave the office. And when I hail a car from a ridesharing app, there is likely to be no driver.
My friends and I will be the only people sitting in the car as it makes its journey to our next destination. Indeed, the sweeping changes unleashed onto traditional taxi businesses have already rocked an entire industry from London to Singapore. Even the innovative business models of ride-sharing apps that now dominate the landscape will soon be disrupted by newer forms of transport. But these two developments are no longer newsworthy. Innovation can happen so quickly that whole industries can be blindsided and redefined without warning. How industries prepare themselves and respond to disruption is the real story here.
Don Butler at The Ford Motor Company recently said that the value in cars today is shifting from being 90% hardware-based to being more than 50% software and experience-based – with that percentage set to keep climbing. Already the cars we drive are becoming a rolling software platform able or soon able to deliver services built on cloud-based data collection, robotics, sensors and artificial intelligence (AI).
This shift in focus is opening the door for technology companies to compete directly with carmakers. Tech companies like Alphabet, are aggressively developing fully self-driving vehicles of their own. This incoming competition is changing the way we imagine the next generation of vehicles and other products we consume. No doubt, some of this new technology will spill over into other industries like the consumer products and media and entertainment sectors that are relying more heavily on personal data collection.
And as more vehicles become self-driving and have the technology to connect with other cars, infrastructure and smartphones – we could very well see the transportation industry converge with the technology, logistics, energy and other industries into a broader mobility industry.
This new sector would likely attract new competitors and success will go to those who offer the best capabilities for the redefined marketplace. This is what EY calls ‘Industry Redefined’ in its latest report: The upside of disruption: Megatrends shaping 2016 and beyond. This future undeniably poses many challenges for traditional automakers – and how they introduce this new technology into their existing business models will have long-lasting effects.We’ve seen many incumbent organizations in other industries lack the digital savvy at the leadership level to react and effectively disrupt their long-held practices when challenged by new technologies and competitors. The news media is a prime example of this and it is seemingly always tackling questions around its longevity.
Arguably, tech companies may hold the initial advantage in this race as the increasing demand for software content in cars attract firms that excel at code, algorithms and AI to enter this new competitive space. Tech companies are also the leaders in connectivity, logistics and other areas critical to autonomous vehicles and connected-driver experiences – like smartphones, interactive maps, cloud-based data and more. While automakers face high hurdles in recruiting and retaining talent in advanced technologies, they’re also saddled with legacy costs in real estate, IT infrastructure, supply chains, and other hard assets. Simply put, they have a lot of catching-up to do.