Digital Transformation in Practice: Showcasing Actionable Strategies for OEMs on Autonomous Driving and Future Mobility 2019

At the beginning of April, I spoke at the Autonomous Driving and Future Mobility 2019 conference in Berlin. As the term “digital transformation” either makes automakers’ blood run cold or causes skeptical eye-rolling, my mission was to showcase efficient approaches for OEMs to successfully implement it.

Now, I’ve decided to share the highlights of my presentation with you.

Being a successful automotive company today is cool, but it’s not enough

Having production of robust hardware equipment in their DNA and having led the industrial revolution for over a century, carmakers might lose their power soon. Analysts claim that the car market might decline by half in the next 3 to 5 years, as consumers are already changing their car-related habits and routines.

Let’s face it: software companies rule, so automakers have to catch up.

Tech-savvy consumers are driving change that OEMs can’t ignore — the demand for digital. To stay afloat, carmakers need to find ways to meet consumers’ demand while keeping their automotive DNA.

And here’s the solution: instead of just selling the product, OEMs have to look at cars as a potential data generation platform and build their business strategies around the generated data. To empower such a transition to a data company, automakers should go through what we call digital transformation.

Nobody knows what digital transformation is

I start all my presentations at conferences with this bold statement. Actually, you can read thousands of articles on this subject and each one will describe something different. What seems to be generally agreed upon in the automotive industry is that digital transformation is going to be powered by car connectivity.

Car connectivity will enable secure data transfer to cloud platforms, opening new possibilities for OEMs to use this data. There are also three general trends in automotive today that will force the adoption of digital transformation.

Electric, autonomous, and shared vehicles will drive the industry shift in the coming years. First, electricity is what powers cars from the inside and the way we aim to make them move. Second, autonomous driving is the future of vehicles. As the way users interact with cars changes, the traditional UI/UX for drivers will also change. Drivers won’t have to concentrate on the road: instead of spending hours behind the wheel, they can use this time on other things. That’s another opportunity for automakers to make money: by engaging customers and offering them services and value they’ve never had access to before. When it comes to the consumption model, we’re already observing the change: it’s becoming more shared and subscription-based. OEMs have to catch up here as well, offering car-sharing services and car subscriptions.

The transition itself: key elements, strategies, and focus

Digital disruption demands absolute readiness from automotive companies. I’ve analyzed what a successful transition requires and put it into the Transition Radar, which indicates if your business is ready to change.

These are the key elements I define as critical for a successful transition:

• Unique and high-value product (that’s what the automotive industry already has, by the way)
• Large base of loyal users
• Proprietary and exclusive data
• Isolated access channel (if your user can be reached otherwise)
• Essential features are in place and carefully selected to protect own brand and market share
• Proper security framework in place
• Smooth integration with allied ecosystems

When it comes to transition strategies, I define three possible paths automotive companies may follow.

Each of these strategies has its pros and cons, and OEMs can pick what’s most important for their particular business model. The first strategy is to build a proprietary ecosystem, which is a long, expensive, and quite risky undertaking. The second strategy is to make alliances with other companies or corporations, which usually results in poor quality and low margins. Another way to adopt digital transformation is to join a third-party platform, and this strategy often focuses on core automotive systems and allows OEMs to reuse things.

Future of automotive

Car-generated data — not the car itself — is the primary value holder. Today, OEMs should look to the future of transportation and not consider cars as products to be the main revenue source. It’s time to think of effective ways to monetize the information collected with the help of vehicles.

Investing in sibling industries like logistics, transportation, and tourism will allow companies to leverage datasets generated from mobility use cases. When carmakers start embracing and extending innovation in sensors, they’ll get a lot more things to sell.