The Case against CASE
In mobility, platforms are not enough
In our previous articles, we argued for a new paradigm in mobility: Mobility 4.0. Current transport systems are reaching their limitations and to keep the world moving, we will have to reassess the way the world moves. To do so, we must broaden our understanding of mobility, and consider new players, technologies, and business models.
CASE is not the framework for Mobility 4.0
When automotive companies (and their consultants) proposed a new vision for the future of mobility, they coined the concept of CASE — a future of Connected, Autonomous, Shared, and Electric mobility. Their principal concern was the automotive sector, but since CASE’s debut, it has been applied broadly. While the framework has been used to explain trends in mobility, little time has been spent debating its ability to accurately depict the evolution of mobility innovation. By focusing on the trends in this way — each with equal weight — we dilute the fact that the evolution of mobility is taking place in a series of technology sprints. More importantly, the focus on this analogy (e.g. the four pillars of mobility) is suboptimal at best.
The CASE framework, in itself, is an example of the inherent dangers of hastily combining disparate elements. Three CASE elements, Connected, Autonomous, and Electric, refer to technical components — including hardware and software — that provide the infrastructure and critical systems needed for business models to exist. The shared element, on the other hand, represents social and business model innovation which leverages advances in technology. Consequently, the relationship between these concepts is vertical, not horizontal. This would have to be reflected in a suitable framework.
As such, the shared business models we’ve become familiar with over the last decade — the likes of which include Lyft, Zipcar, Didi, Mobike, Lime, and WeShare — are innovative platform business models enabled by technological advancements in ACE. It follows that shared business models reach their zenith when the underlying technological innovations are optimized and widespread. There is inherent interdependence between these concepts. Yet we must take care to treat them as separate entities with complex interactions.
In mobility, platforms are not enough
A platform business model is not enough to make it in mobility. Make no mistake, a well-executed digital platform is a solid value proposition, especially when it satisfies the needs of consumers and businesses. In the future, we expect to witness the birth of many platform businesses across industries, mobility included. The problem with a pure mobility platform play is that it ignores the real, physical aspects of transportation and logistics. While we ourselves argued that digital movement is inextricably linked to Mobility 4.0, underlying much of this is the physical movement of people, goods, data, and energy. The implications are vast. In the digital world, owning the customer interface is sufficient for securing long-lasting competitive advantages. In the physical world, it is not.
“If rapid growth could not drive major margin improvements between 2012 and 2016, there is no reason to believe that Uber will suddenly find billions in scale economies going forward. Fundamentally digital companies like Amazon, EBay, Google and Facebook had massive operating scale economies because the marginal cost of expanded operations was close to zero. Aggressive pricing fueled the growth that drove major margin improvements and also created major consumer welfare benefits.”
— Hubert Horan
Take Uber. They started out as the world’s largest taxi company that owns no cars. As a pure market maker, they connected passengers with drivers through their app — the platform. But despite clearly dominating the customer interface in the Western world, Uber continues to lose money year after year, $8.5bn in 2019 alone. Competitors and other sharing providers find themselves in similar situations. While they have the value proposition — sharing — and the customer interface figured out, the economics behind their business models are not adding up. With a pure platform play, profitability seems out of reach.
Platforms are only worth the tech they are built on
To make its business model financially sustainable, Uber is betting big on technological advancements. Its Advanced Technology Group (ATG), the business unit responsible for autonomous driving technology, was valued at $7.3bn in a pre-IPO funding round — 10% of the total valuation. All while generating no revenue. Sharing providers have begun to recognize their platforms are disconnected from the physical and economic realities of current mobility systems. To make them work requires reimagining and rebuilding technological foundations in a way that enables sharing to really flourish.
Innovation in autonomy, electrification, and connectivity are concerned with bridging this divide between our physical and digital worlds. And it’s incredibly important that this bridge is both solid and seamless given the experiences we’ve come to expect through the evolution of personal computing. Our smartphones now allow us to hail rides; rent scooters, bikes, mopeds, and cars; buy mass transit tickets; and access delivery options for our favorite restaurants. To enable these business innovations, many new business models build on top of old systems — focusing primarily on the shared element of CASE. Like CASE, these new business models have worked to an extent. They have mainly given us a taste of what the future could look like when our digital and physical worlds are truly connected. The logistics and transport systems that provide the right service at the right time and the lowest cost are restrained by the circumstances of our digital-physical disconnect. To really succeed, new business models need to be underpinned by ACE innovations.
CASE closed
The time has come to reorganize the CASE framework. Instead of a horizontal, parallel relationship, we know sharing builds on top of ACE, leveraging the technology to build new business models. More generally, we know there is a disconnect between the physical and digital realities of mobility. The current framework does not support the future-oriented business models we would like to realize.
By now, even automotive companies have run into problems with their own framework. Daimler and BMW are drastically reducing funding for their ShareNow venture, scrapping the service across various geographies. Their new CEOs are returning focus on core business — building cars. It’s time for a new framework. One that is better suited to depict mobility innovation. CASE singled out four very well-defined areas of innovation and positioned them horizontally. However, these four well-defined areas — Connectivity, Autonomy, Sharing, Electrification — do not paint a comprehensive picture of the technologies and business models defining Mobility 4.0.
ISA: The new framework for Mobility 4.0
We propose a new three-layered framework called ISA which stands for Infrastructure, Systems, and Applications. Together, the three layers contain all components required to build future-proof mobility systems. Together, they bridge the physical-digital disconnect. In the future we will provide an article detailing each one of these layers, but we will introduce them briefly here.
- Infrastructure: The infrastructure layer is hardware-centric. We have seen how important the physical world is for mobility, so future systems start here. Most of existing infrastructure is “dumb” and unable to interact with its environment. There is a lack of infrastructure innovation. For too long, we have been stuck in the established ways of building more and more of the same (roads, tracks, bridges) without considering new, more modern possibilities. Infrastructure innovation will be the bedrock of new mobility systems.
- Systems: The systems level is where hardware and software meet. Systems coordinate, aggregate, and orchestrate. Even with “smart” infrastructure systems, software systems will be necessary to leverage information from individual infrastructure components, combine it with outside data, and derive the necessary heuristics and decisions. Systems will be mainly software-based, containing the algorithms on which the future of mobility will be run.
- Application: The application layer enables monetization and customer interface. Here, it is not only about software, but about interaction and optimized UI/UX. In a sense, the application layer re-establishes the link with the physical world of the consumer. Sharing business models are one example for an application, but there certainly will be others, especially in logistics and the B2B context, but also in B2C. It will be interesting to see how companies turn changing customer preferences into novel applications that interact with consumers but also business customers in innovative ways.
The ISA model is the future of mobility and has the advantage of painting a comprehensive picture of our sector as a whole. It is also well-suited to solve the current disconnect between the physical and digital world, because its components as defined address both of these worlds. In the articles in the coming weeks we will further flesh out our thesis. With that said,we want to know what you think. Please provide your thoughts and be a part of defining the framework of Mobility 4.0.
By Brian Hotani, Newton Davis and Christian Saur
