Making a Case for Digital Transformation - Automotive

August 1, 2017

According to McKinsey (below), Automotive & Assembly, together with CGP, are two laggard industries when it comes to perceived digital penetration, at 32% and 31%, respectively.  

So, what does a ‘digital laggard’ industry look like?

Here are three quick points of view for automotive (spoiler alert: digital still hits hard).

 

1. Car Manufacturers are Becoming Tech Companies

 

Without doubt, the automotive industry is undergoing significant disruption. This is primarily from electrification and autonomous driving. Volvo recently announced it would go all electric, saying that every new car will have an electric powertrain available from 2019. And according to Intel, self-driving cars will create a $7 trillion-a-year industry by 2050.

 

We are also seeing new business models for automotive, enabled by digital. We have Uber, obviously - which itself has spawned a new lexicon (we’re being ‘uber-ized’). But we also have vehicle sharing apps; Zipper, Zimride, Liftshare amongst many others.

 

And we can see other digitally-enabled transformations such as; in-car infotainment, new traffic services, and other ‘who-knows-yet’ models and services enabled through new levels of connectivity, infrastructure (IoT) and channels. I wonder what our in-car experience will look like in 10 years?

 

2. Tech / Digital Disruption is Attracting New Players

 

In April 2017, Tesla glided past Ford in market value. The following month it was GM’s turn to be overtaken. Tesla is now the largest car maker by market capitalization in the US.  This seems absurd when we compare the business stats below; Ford and GM are automotive titans that have built nearly 1 billion cars between them in a history spanning more than a century, Tesla on the other hand is less than 15 years old and has never made a profit!

 

 

3. Car Companies are Having to Reinvent Themselves

 

Ford Motor Company is 114 years old. When they established their innovation centre, they didn’t build it in Detroit (next to HQ). They set-up in Silicon Valley, with the tech start-ups. But this isn't the silver bullet.  This recent graphic from the Financial Times shows car makers are continuing a downward trajectory of global brand rankings, at the expense of the rising tech stars. If you thought digital was hype, or major car manufacturers could easily keep up, think again.

 

 __________________

 

So, according to McKinsey, the automotive industry is perceived to be one of the least digital industries ...but it looks pretty disrupted to me. I doubt my six year old daughter will ever learn to drive, never mind buy a car.

 

So, what can automotive learn from digital and what can Digital learn from automotive?

 

When thinking of a customer journey in the context of the automotive industry, most people imagine some sort of road-trip. In digital, however, we talk of customer journeys as contributing to overall 'customer experience', driven by data.  

 

The automotive industry needs to understand what’s driving customer experience (pun intended).  A journey now means the entire brand experience, from initial consideration, to active evaluation, to the moment of purchase, to the post-purchase experience and into the loyalty loop. Digital can play a huge role in this overall experience.  It's more than the physical car itself. In 2014, L2 claimed Tesla's digital footprint didn't live up to its reputation, claiming the brand had a strikingly weak mobile site.

 

Who did mobile sites well? Mercedes Benz, Porsche and Volkswagen. Why is this important? One in ten consumers pull up auto information on their smartphone when in a car dealership. In 2017, L2 revised Tesla to a winner status. Scott Galloway said it wasn't the electric engine but the proximity to the consumer driving Tesla forward. They have mastered the medium of PR and new economy platforms, incl. YouTube.

 

The experience is also far more than the initial buying experience and the car alone.  Many automotive companies are now building a massively-scaled data network from automotive fleets in order to offer real-time intelligence of road conditions, car conditions and geolocated services for automotive consumers - this is enabled with real-time event streaming platforms. 

 

And what about digital learning from automotive?

 

The automotive industry is the mainstay example of mass-production using an assembly line. It was Henry Ford who used the conveyor belt to increase speed of car production by 800%, in 1913. The very image of a “factory” depicts standardized components, processes, and management that work in a hyper-efficient automated way. Now the concept of a factory is gaining ground within digital.

In May 2017 McKinsey published a report: 'Scaling a transformative culture through a digital factory'. A digital factory is a highly efficient platform, or approach to assembling, manufacturing, and running the foundation for digital experiences.

 

Organizations that are implementing digital factories are realizing a newfound efficiency, allowing them to bring sites and digital experiences to market twice as fast than they could before, using factory automation and a standard approach.

 

We're turning full-circle.  it’s surprising the automotive industry ranks as one of the least perceived digitally penetrated industries. It looks both digitally disrupted and transformational to me. It’s clear this industry needs to learn from digital and learn quick. We need a reinterpretation of the term 'customer journey'. But digital can also learn from the automotive industry. The concept of a digital factory is continuing to gain ground.

 

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