Autonomous vs. Self-driving — What I’m reading #1

Somewhat belatedly, I read a short article from The Economist — “ Why autonomous and self-driving cars are not the same”

Autonomous cars will look like the vehicles we drive today, according to car makers, with forward facing seats and a steering wheel. These cars will take over from the driver under certain circumstances…. Self-driving cars are a stage further on. The steering wheel will disappear completely and the vehicle will do all the driving using the same system of sensors, radar and GPS mapping that autonomous vehicles employ. While some personal cars will remain, a fleet of shared vehicles will likely fill the streets of towns and cities.

Simply put, Autonomous cars represent Kaizen (continual improvement), whereas Self-driving cars are close to disruptive innovation.

https://hbr.org/2015/12/what-is-disruptive-innovation

Yes, I just said “the D-word”. Just to remind you of how viral this word is, I brought a nice chart from HBR. The reason why this 2 year old article caught my eyes is due to Intel’s $15 billion purchase (or gambling if you wish to call it) of Mobileye a few weeks ago.

Mobileye dominates ADAS (Advanced driver assistance systems) market — “90% of the world’s major automakers rely on Mobileye technology to make their cars safer to drive”. Even if you haven’t heard of the jargon, you might have known or experienced adaptive cruise control, or lane keeping assist.

Lane Change Assist is one of the well known examples of ADAS.

It certainly is impressive, but their revenue was $358 million in 2016, which means Intel paid over 40 times of their revenue. How do you justify the premium? If you contemplate one significant issue that Mobileye inherently entails, the premium might be somewhat difficult to swallow — Mobileye has low bargaining power over the buyers (the carmarkers). In other words, Mobileye won’t be able to create its own ecosystem. Now, it is inevitable to talk about Apple’s success.

Carmakers are in favour of autonomous cars. Autonomy still implies personal ownership but with a raft of extra features that they can charge for.

If we think about it, there are stark similarities as to how iPhone has completely changed the phone market. Right before the rise of iPhone there was PDA.

PDA was meant to be an extended version of PC like autonomous car. Then iPhone came out and revamped the entire industry. The iPhone’s greatest strength is user experience that can pretty much only be achieved by superior ecosystem. It is nice to have beautiful design or smooth scrolling, but iPhone could have been crushed if it did not have iTunes and App stores.

Now back to the topic, can Mobileye create its own ecosystem? The answer is no, and this is why this deal perplexes me. Intel must have been under pressure. Intel is slowly declining even though it is rather early to judge them at this point. Pretty much any big tech companies have jumped in self-driving car project, thus it seems logical to me that they rush to the game as well. However, it also should be pointed out that self-driving car’s future is really hard to tell right now. It might be completely different picture when it truly gets to the market. Hence Intel might not want to gamble too much into the pot yet, so probably they decided to go with rather safer way.

What’s with the hesitation? Just because other companies do this, that doesn’t necessarily mean you should follow the same path. And this is possibly one of the worst things that a company can do. Without a certain goal, you shouldn’t just put yourself into something that you don’t even know what you are doing.