Self Driving Cars…Short-list of Potential Winners: Waymo
It’s hard to pick up any popular media today and not read about developments to make self-driving cars a reality. From customer standpoint, there are two key aspects: (i) technology, and (ii) customer experience. Though today the discussion is primarily focused on technology, I think, its just table stakes — long-term differentiator will be customer experience.
There is immense amount of innovation happening on the technology front for perception and automation to enhance safety, improve compute, and lower cost. And technology advancement is happening at a rapid clip. California DMV recently published disengagement report for 11 companies that had the permit for testing autonomous vehicles in 2015. There has been progress made across the board, but Waymo, with~635k miles driven (97% of the total reported miles), reported 4x drop in rate of disengagements compared to prior year. Just in past couple of months, from start-ups like drive.ai to large OEMs like GM / Cruise, there has been demonstration of technology across various road conditions. There also have been approaches to tap into the community for technology development and testing, as evidenced by comma.ai open-sourcing it’s technology to Udacity’s open-sourcing the development.
Bottom-line: self-driving car technology is here, and will only get better over time. It will become table stakes for any company that want have an active role in the sector.
The technology thus over time get will get commoditized. I’ve witnessed this in a different sector, solar. As the hardware costs plummeted and all the manufacturers had ‘similar’ products, the key to differentiate and grow, came down to customer experience. This included from the first contact to the customer, during the buying journey, and then post-sales by pivoting to managing energy services for the customers (vs. one-time hardware sale). This end-to-end customer experience will critical for business growth.
It’s this second prong of end-to-end customer experience that’s isn’t discussed much in the context of self-driving car, yet.
Waymo is one of the few companies that has key building blocks (in the parent Alphabet portfolio) and is in a position to capitalize on this.
- Software + Hardware focus: In addition to software development, the company has announced it’s focus on hardware, particular key sensors like LiDAR. It’s an integrated software and hardware play, and they expect to achieve 90% cost reduction in sensors — a huge step to make technology economically viable. Recent launches of Google Home and Google Pixel have demonstrated the unique customer appeal associated with integrated products.
- Maps: Google Maps is the most popular smartphone app, used by 54% of the smartphone users worldwide. Mapping is key for self-driving cars for contextual awareness of the surroundings. While others are trying to catch-up, e.g. Uber reportedly investing $500 million to develop in-house capability, Google Maps are getting better. There are becoming more integrated where Uber service can be requested from Google Maps directly (ride-hailing service aggregator, anyone?) to easing the pain-points with parking by incorporating estimated free parking information. It’s not unrealistic to expect that Google Maps will become the platform for end-to-end transit needs, and further driving stickiness with the users.
- Waze: Google launched Waze Carpooling service last year, and announced further expansion last month. Unlike Uber or Lyft, Waze Carpool is paired driver and rider with identical commutes, with a maximum charge of 54 cents / mile. Though still relatively small, this pilot will give value data on consumers (e.g. commute patterns, willingness to pay, ride experience). This could further serve as a platform to launch the pilot of 100 specially equipped Pacifica minivans to test and refine ride-sharing in autonomous vehicles.
- Sidewalk Labs: Sidewalk Labs, a Alphabet company, in on the mission to improve urban life by leveraging ubiquitous connectivity. This includes sensing what’s happening in cities (with cameras, sensors), leveraging information from social networks, faster compute times, and embrace of technologies like 3D printing & robotics, to rethink urban design. Though currently in pilot in NYC, the potential intersections with self-driving cars are hard to miss. One of the initiatives, Flow, is focused on providing real-time traffic conditions on streets by leveraging data from Google Maps, cameras, sensors, and city data. Another avenue to drive customer stickiness from the time they start planning their commute.
- Android: Android Auto leverages mobile device capabilities in a car, with all the Google apps we’ve come to love. Essentially, a gateway to carry user’s persona seamlessly from home to the vehicle. With 88% of the smartphone marketshare, Android provides a massive user base to Waymo.
Waymo (Waymo Team) / Alphabet is in a unique position by not just having leading technology, but also unique building blocks to provide seamless and superior customer experience. This will be critical for the fledgling self-driving car industry. And also to Alphabet by having access to users practically all the time — after all, it’s a media company that controls 12% (or $60 billion) of the global media spend.
I think it will be interesting how Waymo will decide to bring these assets to the market at scale and how will they be monetized. Which is why the partnerships like with FCA or Honda; and the ones after these will be important to assess these dynamics further.