What Automotive Industry can learn from the Cloud business?
(Learning — Increasing the product utilization frontier)
The automotive industry should invest heavily in improving the product utilization frontier. Just like the Cloud, the change is noticeable for automotive industry (Uber, Lyft, Zipcar, Ola, Grabtaxi etc etc). The trends point very different business model.
The automotive industry has gone through multiple rounds of transformation since 1900’s. The mass production in 1910’s, consolidation in 1930’s, power vehicle in 1960’s, design focus in 1980’s, lean manufacturing in 1990’s, the hybrid vehicles in 2000’s and now the connected vehicles. In 2018, the five largest automotive companies in the world generated a little more than $1T in revenues — Volkswagen ($278B), Toyota ($253B), Daimler ($191B), Ford ($160B) and GM ($147B).
All this time the focus has been on bringing newer design or product features of vehicle (customer needs) or improving the production efficiency (lower cost or faster time to market) or building the massive distribution capabilities (to service customers). All of them was to ensure that the vehicles move out of the manufacturer’s premises efficiently. Now the time has come for the automotive industry to extend this efficiency frontier to the vehicle utilization improvement in the hands of customers. This is where the Cloud business comes as a learning model !!!! Something that took 15 years to mature.
The roots of Cloud go back to the 2000 time frame when Amazon was simply an e-commerce company struggling with scale problems. This issue forced the company to build some solid internal systems to deal with the hyper growth and laid the foundation for Amazon Web Services (AWS). The main idea of this business was to improve the utilization of servers. The same servers when bought & managed by individual customers had very low utilization.
AWS was first to market with a modern cloud infrastructure service when it launched Amazon Elastic Compute Cloud in August, 2006. Today, it’s a growing $40B annual business for Amazon. Along with it the competition (Microsoft, Google) is also flourishing.

Source — Company presentations and analyst calls
Today’s cloud service providers have both the buying power and the operational discipline to minimize the cost and bring in more features to the customer. Some of these are

And what’s happening to server manufacturers, who have been thriving for years by selling their product by improving efficiencies on their side.

So the automotive industry should invest heavily in improving the product utilization frontier. Just like the Cloud, the change is noticeable for automotive industry (Uber, Lyft, Zipcar, Ola, Grabtaxi etc etc). Within years, we’ll have trends that point the way toward a very different future. They still have the time….
