Automotive Electronics I Comment
Manufacturers pay heed!
Could a local ‘run about’ car become a ‘sports’ car for the weekend? According to Bashyam Anant it could, through a mixture of “platform + apps + services”
G
oogle’s driverless car which was awarded a driving license in Nevada in May 2012, is a
bellwether for the technology-driven transformation of the automobile industry. Observers are dreaming up possibilities as exemplified by “if you give a car the abilities of race car drivers (instead of the average driver) and combine them with “conservative software” used for standard driving then you can develop a safer driving experience.” What if you were able to try out driverless features in your car for one month at no charge? If you liked it a lot, you could buy an annual subscription. When your subscription runs out, you could renew it through your smartphone. On a weekend, you might want to upgrade the driverless feature from “commuter style” to “race track style”, and be driven at breakneck speeds on a racetrack. Such possibilities are endless. At their
core, they speak to the imminent transformation of business models in the automotive industry – from a business that is characterised by occasional vehicle sales today to the “car as a service” future which creates an on-going relationship between auto manufacturers and consumers with recurring revenues from sales of apps and services. Note that Google’s driverless features were retrofitted onto a Toyota Prius, and were enabled by a combination of hardware platform (e.g. laser radars), breakthrough software and Internet-enabled services, the essential ingredients of a “platform + apps + services” recipe driving the transformation of automotive manufacturers discussed below. Until recently, comparing Apple to
Ford would have been dismissed as a meaningless exercise. However, it serves as an indicator of the payoff that automotive manufacturers can expect should they succeed in replicating Apple’s formula of “platform + apps + services” exemplified by the iPhone platform + iPhone Apps + iTunes content. Ford and Apple are roughly similar by revenue, but Apple’s market capitalisation per dollar of revenue is 10 times that of Ford’s.
38 May 2013 The good news, though, is that these
types of returns are very much within reach, and Ford, in particular, is already making progress in that direction. Ford Sync is an early example of a next generation vehicle information and communications system – a connected, software-driven dashboard in simple terms. Ford offers Sync in four editions based on levels of features, bundled services and optional subscription plans. Ford Sync illustrates several strategies
to grow revenues from a “platform + apps + services” approach. First, a single software product can be sliced and diced based on software features to create packages targeting specific consumer segments. This helps Ford create Sync offers at different price points based on customer need and willingness to pay, without having to incur manufacturing costs for a specialised hardware model for each need. For example, the “wifi hotspot” is available in one package but not in others. Simply put, this allows auto manufacturers to generate revenues from customers that care about such features without having to manufacture a hardware model. Second, there are several services bundled in Ford Sync, some thrown in as part of a package while others that require a subscription. For example, vehicle health reports send engine diagnostic information to the Ford portal – this service is included in all packages. Personalised traffic alerts and satellite radio, on the other hand, require a subscription plan. Lastly, features like HD Radio mimic iTunes in the sense that they use a “pay per song” model. With such a “platform + apps + services” model in place, an auto manufacturer’s revenue possibilities are really up to their imagination. For example, for consumers that don’t want to pay for a monthly subscription for navigation services, they could offer the option to activate navigation maps of a particular region for a short duration just for the weekend. For entertainment, they could offer movies or video games for rent for the duration of a long trip. Auto manufacturers can also dream up
Components in Electronics
additional services to deliver via the platform. Such as storing a vehicle’s maintenance history in the cloud and making it accessible to a new owner should the vehicle change hands. Just like General Electric’s TRUEngine programme which helps GE engine owners “maximize your asset's marketability and ensure it receives the full range of GE's world-class support. Through our online TRUEngine database, appraisers and buyers can quickly confirm an engine’s qualification status by Engine Serial Number (ESN).” Another example: Ford has partnered with an auto insurance provider to track and transmit mileage data which can result in better insurance rates for drivers. Besides providing endless monetisation opportunities and lots of recurring revenues, such imaginative services also grow customer loyalty, not just for the auto manufacturer but also its ecosystem, such as the Ford’s insurance provider partner. Like Ford, the electric vehicle segment
has already embraced many of these ideas. Electric car manufacturers like BMW have partnered with car charging networks like Coulomb Technologies. The dashboard of these cars feature services such as showing drivers maps of charging stations and the ability to reserve a charging spot in them. Like roaming user profiles in the desktop and smartphone world, we conjecture that in future drivers would be able to record and store their driving profiles in the cloud and download them to any vehicle they happen to drive. Imagine logging into any car, and when you do, your seat adjustments, thermostat settings, favourite radio channels, games and more would be available. At Flexera we see a tremendous opportunity for automotive manufacturers to grow revenues by transitioning to software-driven businesses. The remaining question is how one goes about it. In our experience, a software-driven business transformation will require auto manufacturers to: Re-think product packaging and
business models based on how consumers want to use cars and related apps and services. As the Ford Sync example illustrates, car manufactures will need to segment their customers more and create tailored “platform + apps + services” offerings at different prices points. Track and manage entitlements. Every driver and car could be configured differently based on the device platforms (e.g. dashboard system), related apps and services. Layered on top are the different ways drivers might have purchased apps and services, ranging from try-before-you-buy, subscription models, freemium models, pay-by-use, outright purchases and so on. All this can become quite complicated very quickly, but tracking and managing consumer entitlements is an essential pre-requisite to making “platform + apps + services” real.
Automate the entire app, device platform and entitlement lifecycles. These lifecycle processes include: app installation and activation; subscription management; firmware and app updates; device platform provisioning, configuration management, device monitoring and remote management; app upgrades and other changes to entitlements. Internet connectivity is a key enabler for automation of firmware and software updates, as it is for data uploads from and downloads to cars at the heart of many of these processes. While it is easy to describe the above
recipe, executing on it can be a daunting challenge especially since auto manufacturers have very little experience running software-centric businesses. Acknowledging these requirements and putting plans in place to address them is just what you need to unlock 10X financial returns and be the apple of your customer’s eyes!
Flexera |
www.flexera.com
Bashyam Anant leads product management for Flexera Software's back office solutions for software producers and high tech device manufacturers
www.cieonline.co.uk
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