The Impending Transformation

Ben Stanley works for IBM (us.ibm.com). But it is, perhaps, not IBM as you might think of it in terms of things like Watson. Rather, Stanley is the Automotive Research Lead at the IBM Institute for Business Value, Global Business Services.

Stanley researches the industry. Deeply researches the industry.

Back in 2008 he and his colleagues did a study projecting the state of the industry in 2020. As you will recall, 2008 was not a good time in the industry. Stanley says that the focus then was the optimization of the industry, looking for the ways, means and locations to achieve value. In 2015 they did another study, this one going out to 2025. That study, he says, had a lot to do with digital disruption in the auto industry.

“We’ve had the disruption,” Stanley says. “Now companies have to figure out how to accomplish reinvention.” Which is what he and his colleagues look at in the latest study, “Automotive 2030.”

Know that this is anything but a superficial study, as they surveyed 1,500 executives and 11,566 consumers to determine what may happen in the context of what’s been happening in the industry, which is seeing changes wrought by things such as Uber, Waymo, Tesla, things that weren’t necessarily even thought of by anyone back in 2008 (i.e., while Tesla was established in 2003, it didn’t have its first product on the market—the Roadster—until 2008, and that year it delivered some 2,500 of them).

Stanley says that there are three big areas that companies need to grapple with: the viability of the brand; the importance of establishing an experience; dealing with the skills and expertise gap brought about by the changing technologies becoming part of the industry.

“Brands today,” Stanley says, “are built on driving.” Think about that for a minute. Any TV ad for a vehicle has people driving their vehicles along twisty two-lane roads in some exotic locale or show people going out on the town in their luxe conveyance. One brand might emphasize 0 to 60. Another might focus on styling, as in how good a particular vehicle looks in someone’s driveway. “But if people aren’t driving,” Stanley says, “what happens to the brand?”

Realize that there is tremendous value in a brand, whether it is Ford or Chevy, BMW or Lexus. People pay to have a particular nameplate, often in excess of what the parts, materials and labor would add up to. You can have the most efficient production operation in the world, but unless there is something special about that offering—and sometimes that specialness is completely intangible—then the returns are going to be slim at most.

According to the IBM study, “48% of consumers say the vehicle brand wouldn’t matter to them in an autonomous, mobility-as-a-service paradigm, but cost and convenience would.”

Think about that: nearly half of those surveyed would no longer be brand loyal. While this might seem to be the sort of thing that someone might say in response to a survey (the same way they probably fudge on how often they exercise or floss in surveys of a health-care nature), recognize that when you order a Lyft, you probably don’t care what brand it is, only that the vehicle is in reasonably good shape. Even that puts brands at risk.

But there is another finding that I find to be absolutely startling: “For many people, getting into a car and going somewhere is a waste of time.” Sure, there are some automotive enthusiasts and always will be, but clearly the industry is facing a shift.

What do people want when we get to the autonomous, ride-hailing world? First and foremost, according to “Automotive 2030,” safety. That rates 68%. But then it is followed by a raft of digital wants: “Integration with other personal devices (66%); configure/personalize to the occupants (62%); connect into other aspects of a person’s life such as health, work (59%); data security and privacy (57%).” And so on.

Which leads to a need for OEMs to address the digital and experiential aspects of what they build. Which leads to the need for OEMs to have the personnel capable of executing all of that. Or, as the study puts it, “Eight-two percent of executives say incorporating new ways to work will contribute to the success of their companies. These include integrating design thinking, co-creation, agile processes, and data-driven decisions into their organizations’ cultures. Seventy-eight percent of executives agree that promoting agile and flexible business processes and technical architectures are critical to their success.” It’s not that OEMs are going to stop building vehicles, but the vehicles will be of another nature.

Ben Stanley: “A vehicle is the only device you get into.”