The vehicles we drive are changing and so must the businesses that are built around them.
In the last 25 years, the automobile industry has seen increasing standardization and use of digital technology, resulting in improved safety, reliability and performance. Fuel efficiency and engine output have improved, electronic drivetrains and other driver-assistance technologies have become commonplace. In a decade or so, autonomous vehicles will begin to outnumber human-driven ones on the road.
But, even frontline automotive companies are yet to embrace innovation as an experience differentiator. It is most apparent in the car showroom. The car buyer, meanwhile, has moved on. Conditioned by a connected lifestyle, customers want an ‘omnichannel’ experience. They expect the same service quality and convenience they get in other spheres of their phygital lives.
To meet expectations in the age of shared mobility, automotive companies need a holistic approach connecting the user-experience touchpoints. Contextual analytics can come up with targeted content, cognitive systems can enable voice control, AI can personalize the driving experience, AR-VR could create a virtual ‘in-car’ experience and digital concierge could provide guidance and support. The integration of the car with other stakeholder systems in our lives, such as homes, makes for exciting possibilities.
One Journey, Multiple Stakeholders
How can companies make sales, vehicle experience and services more customer-centric when the value chain has transformed? Here are some opportunities:
• OEM-centric: The shift from ‘vehicle as a product’ to ‘mobility as a service’ is throwing up possibilities of exponential value creation. The connected vehicle provides potentially the best example of mass personalization. A business traveler using a rental car purchases fuel, parking slots, food and roadside assistance. Mining this data helps us understand not just preferences, but the popularity of outlets, the impact of advertising and driving behavior, which credit-card issuers and retailers can use to make contextual in-car offers. To unlock the potential, OEMs need to own the customer for life.
• Technology-centric: In currently connected vehicles, and more so in future autonomous cars, every rider will have free time on their side. Hence, each vehicle must house all the information, entertainment, convenience and connectivity that we have in our homes and offices. A leading carmaker now allows riders to buy coffee and make dinner reservations through their vehicle’s touchscreen. The possibilities are immense. Infotainment systems can recommend and make hotel reservations. Real-time feedback from the car can be used for on-the-go diagnostics and maintenance.
Both mobile-app providers and other app-based business services on digital platforms in cars can enable these capabilities. Insurance is a good example. About 70% US auto-insurance providers are expected to use telematics-enabled usage-based insurance (UBI) by 2020. Tracking individual driving digitally will help insurance companies arrive at a customized and dynamic price for their products. But there would be intense competition among several UBI solution providers who will start acting as aggregators of insurance services. Start-ups offering telematics solutions and fleet management systems will help their cause.
Dealer-centric: The last-mile connect with the buyer, the dealer, also has great opportunities. By virtualizing operations, they can reach out to more customers, and become service aggregators, marrying the OEM and tech capabilities with human connect. They can thrive, especially while the connected ecosystem is still emerging and there is an asymmetry of trust. The dealer also faces a threat. With a significant part of the pre-purchase action moving online, the dealer’s ability to provide the missing link with the physical world will be increasingly crucial.
At the Crossroads
The car buyer’s journey is a convergence of many drivers and touch points, and the challenge and opportunity lie in providing a seamless experience. Data-driven insights can enable superior engagement between the OEM and customer, but this will eventually impact the dealer. The movement from one-time ‘transfer of asset or service’ to transaction-based exchanges could mean an increase in the number of users and frequency of usage. It is not clear whether the net economic value in the collaborative model will be higher for all stakeholders.
The car is rapidly becoming a ‘digital-experience platform’ where data and time can be monetized. This will help the OEM to own the customer for life and the vehicle lifecycle. But will they be able to retain their hold over these lifecycles?
The confluence of automotive technologies, digital capabilities and data will place vehicles in a scalable ecosystem. Autonomy and electrification will eventually converge with connectedness, and the footprint of fleet and shared mobility services will increase, resulting in an even larger ecosystem of maintenance networks, insurers, car-sharing services, and associated service providers.
Going Forward: The Challenge of Customer Experience Ownership
The blurring of boundaries between what were once distinct and independent industries has led to new business, operating and revenue-sharing models. New in-car software features and mobility platforms are staking their claim on the profit pool. The battle lines are drawn. What can core players do to maintain their lead? More importantly, who in this confluence of ecosystems and journeys owns the customers, their experience and their wallet? This potentially is the most critical question around which the design of new business models will need to emerge.