Strategy

WeChat is ubiquitous

People that have never lived in China might never understand the importance of WeChat in the Chinese market. It is truly ubiquitous, as messenger, service provider, payment system, and general app for the everyday life. If you build a business in China, building on the WeChat platform is already the next evolution step of mobile first: it is “WeChat first”.

 

WeChat had already morphed beyond its roots as a chat service to become a one-stop app for everything, from banking to shopping to dating to dining. With each new feature and service it adds, users have fewer and fewer reasons to leave it, or to download other apps. Mini programs may eliminate the need altogether.

WeChat’s App Revolution

Disrupt yourself

Interesting interview with Ford CEO Mark Fields on looking into new business models and making the company ready for the future. Ford has recently spun-off their next generation mobility services into a new company. More and more leading car OEs and suppliers are trying to leverage the environment in the  Silicon Valley in order to embrace change and explore new business fields. Disruption of an existing industry happens in most cases due to new entrants from the outside, and the classic players in the Automotive industry have to get ready.

 

Our approach is to first, disrupt ourselves. That’s why you see us creating things like Ford Smart Mobility, the LLC, creating FordPass, really thinking differently about this from a consumer-end standpoint. Thinking about experiences, and then how does technology, hardware, and software deliver that, as opposed to the other way around. I think we’re really disrupting ourselves.
Meet the new Ford, a Silicon Valley software company

Order your Volvo the Tesla way

A while ago I wrote about Tesla’s different approach to sales and distribution of their cars, employing online direct sales for a customer experience from build to customer service. For their new S90 flagship model, Volvo has gotten some inspiration from this direct-to-customer approach.

 

Volvo has a new system in place for the launch of its flagship S90 sedan that kind of mimics that experience: you can spec out the exact car you want online, then submit it to a “Volvo Concierge” who will finalize the order for you within a day or two.
The Verge – Ordering Volvo’s new flagship sedan is a little like ordering a Tesla

 

The order process looks indeed similar, however you still are not buying your Volvo directly from Volvo. A Volvo dealer is handling the fulfillment and delivering the car to you. The full Tesla sales and distribution process (and thus cutting out the dealer) is very difficult to imitate for a “classic” OE such as Volvo, as they have legacy structure of existing dealerships and service locations to maintain.

 

Volvo S90 - volvo.com

Volvo S90 – volvo.com

"Comply or Die" for Uber in China

Uber is usually not afraid to go on the offensive with regulators all over the world in order to facilitate its rapid growth and expansion. Be it by filing complaints against several governments in Europe at the beginning of 2015, or using it’s large venture cash pool to hand out aggressive cash incentives to drivers in India in order to go against opposing “old-economy” taxi monopolies.

In Uber’s most important growth market China, however, Uber’s management is much more cautious and obedient, knowing that their usual strategy of disrupting the market could possible come to a dead stop at anytime at will of the strong central government. Additionally, Uber is still only the minor player in China, competing with the extremely strong local competitor Didi Kuiadi that has around 80% of the market and gets significant invest from sources close to the Chinese government.

Uber therefore seems to go now for a strict compliance strategy in China. After China’s Ministry of Transport has published a draft of a new rule set for private e-hailing services, bringing in far-reaching regulatory demands on licenses, drivers and IT infrastructure, Uber is happy to comply with any new rule. Unlike Uber’s usual way of ‘acting first and (maybe) asking for permission later’, Uber has already announced that “the company is in close communication with Chinese regulators and would follow all new rules”.

Additionally, Uber will fully separate its China business from its other business by setting up an own Uber China company, and is trying to work more closely with local partners in order to get a better standing in the Chinese market. It is a “comply or die” situation, and Uber is likely to go for the survival option.

 

Uber said that to localize its Chinese business, Uber China has officially registered in Shanghai as a separate entity called Shanghai Wubo Information Technology, run by Chinese managers. It has obtained the requisite licenses and qualifications as an Internet company and placed its servers in China, the company added.
China Tightens Oversight of Private Car-Hailing Services

 

Uber CEO Travis Kalanick speaks during the Baidu and Uber strategic cooperation and investment signing ceremony at Baidu's headquarters in Beijing December 17, 2014. REUTERS/Kim Kyung-Hoon)

Uber CEO Travis Kalanick speaks during the Baidu and Uber strategic cooperation and investment signing ceremony at Baidu’s headquarters in Beijing December 17, 2014.
REUTERS/Kim Kyung-Hoon)

Privacy and data protection as a competitive advantage?

Porsche’s 911 sport cars are incredible driving machines. And the automaker’s upcoming 2017 model is no exception. High-end sports car like this one usually not only offer great driving performance, but also spoil its owners with latest connectivity and entertainment technology.
Interestingly, according to a Motor Trend Article, Porsche decided to not integrate Google’s Android Auto into its latest car, and only offers Apple’s Car Play in their head unit instead. There is not really a technological reason behind this decision, but Porsche decided based on privacy and data protection concerns.

 

As part of the agreement an automaker would have to enter with Google, Porsche said certain pieces of data must be collected and transmitted back to Mountain View, California. Stuff like vehicle speed, throttle position, coolant and oil temp, engine revs—basically Google wants a complete OBD2 dump whenever someone activates Android Auto. Not kosher, says Porsche.
13 Cool Facts About the 2017 Porsche 911

 

Although Google disputes this statement, it did not provide a full list of collected data to further clarify the situation. It might be that Porsche made its decision to a time “when Google initially approached automakers concerning Android Auto, it requested a deeper data set than what is currently required”.

Nonetheless, Apple might be on the right track here in regards to privacy and data protection. Ultimately, Apple earns the majority of its revenues and profits with products and not with your data, providing a fundamental difference to the Google strategy.

 

Our business model is very straightforward: We sell great products. We don’t build a profile based on your email content or web browsing habits to sell to advertisers. We don’t “monetize” the information you store on your iPhone or in iCloud. And we don’t read your email or your messages to get information to market to you. Our software and services are designed to make our devices better. Plain and simple.
Tim Cook – CEO Apple

 

Apple Car Play

Apple Car Play – theverge.com/2015/9/4/9258013/apple-car-play-review

 

The Tech Industry’s Interest in Cars is increasing

Google Self Driving Car - google.com

Google Self Driving Car – google.com

 

Tech Industry players, such as Apple, Google, Samsung, Baidu, or Alibaba, are increasingly looking for potential future growth opportunities in the automotive industry. The activities are manifold, ranging from providing data services to even building a (self-driving) car.

 

Increase in patents from tech companies in automotive area - forbes.com

Increase in patents from tech companies in automotive area – forbes.com

Forbes magazine had a close look on the innovation / patent side of this development. Interestingly, if looking at the number of new patents in the automotive area that are filed by tech companies, we can observe two things. Firstly, the number of new patents did not really take off until 2013. Secondly, the overall number is still low compared to the thousands of patents from car manufacturers and suppliers which are filed every year. The increase in patents since 2013 shows quite well the increasing interest in the automotive market, though.

The biggest contributors to the increasing number of patents were Samsung and Google, followed by Microsoft and Apple.

 

But in terms of who has the biggest war chest in patents so far, Samsung far exceeds all its competitors. For automobile-related patents filed in the past 10 years, Samsung leads with 510, Google GOOGL -1.70% with 308,Microsoft MSFT -0.98% with 222, and finally Apple AAPL -0.47% with 83, according to patent numbers pulled by SmartUp Legal.
Samsung Amasses Largest Patent War Chest Among Tech Giants For Cars Of The Future – forbes.com

 

Samsung obviously contributes with a lot of patents from its batteries division, however we can see as well patents for HMI components such as a transparent Head-Up-Display, which would make Samsung compete with Tier-1 suppliers such as Continental. On Google’s and Apple’s side Forbes notes down the main interest in digital data processing and navigation, as well as autonomous driving (Google) and User Interface / Interaction (Apple).

 

 

Never underestimate a potential new competitor

Apple Watch

Apple Watch

There is usually not much that connects a Seattle-based IT company (Microsoft) with a Swiss-based watchmaker (Swatch). Unless you look a bit closer on what former and current chief executives of the two companies think about competitors and innovation.

First, enter Steve Ballmer, former CEO of Microsoft. In 2007, shortly after the launch of the first iPhone, Steve Ballmer made a legendary statement to USA Today about the new innovative iPhone coming from Apple, and was even literally laughing at the iPhone in another video statement.

 

“There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”
Steve Ballmer – CEO Microsoft – 2007

 

Smartphone OS Market Shares - IDC.com

Smartphone OS Market Shares – IDC.com

Yep. Sounds about right… The 2% or 3% are going to be for Microsoft’s Windows Phone, though. What has happened over the next years – Microsoft buying Nokia assets, Microsoft writing off Nokia assets – is history.

How does the Swiss watchmaker come into play now?
Enter Nick Hayek Jr, CEO of watchmaking corporation Swatch. Nick has been in a quite comfortable situation so far, heading a diversified watch company with products and brands from entry-level to luxury, and around 9.5 bn USD sales with a 15% profit margin in 2014. Nick wants to occupy your wrist with his watch products. And as a good CEO – of course – he is always on the lookout to survey the market and the competitive situation. What do you do if you have suddenly a twenty-times (~180 bn USD) bigger company than Swatch that is launching a watch product? A product that directly competes for the same space on customers’ wrists t as your own products?

Well, it seems that Mr Hayek is not particularly impressed by Apple’s Watch that launched this year – and “only” sold a couple of million units so far. For Mr Hayek, the new competitor product is only an “interesting toy”:

 

“The Apple watch is an interesting toy, but not a revolution. These devices, which all eat so much power that they last no longer than 24 hours without needing to be plugged in. In addition, the user immediately loses control of their data. I personally don’t want my blood pressure and blood sugar values stored in the cloud, or on servers in Silicon Valley.”
Nick Hayek Jr – CEO Swatch Group – 2015

 

Let’s hope that the toy will not suddenly appeal to a large group of adult customers.

And while Nick Hayek Jr. is still laughing about the new competitor toy in his backyard, let us quickly remind ourselves that threats of new competitors entering our individual industries are more prevailing than ever. We are facing not only just increased pressure from known players in our current industry, but also from companies from other industries, which are looking at our market as potential future growth opportunity.

In the Automotive industry, for example, car OEMs might suddenly be challenged not only just by new entrants such as Tesla, but also potentially from “IT / Consumer” companies like Apple or Google. And on the supplier side, companies should have a close look at high-tech companies like Huawei that have the potential to enter the market very quickly and thoroughly. A “non-automotive-grade-quality-no-automotive-experience” company, product, or innovation, could potentially very quickly bring the the perfect storm even into an established Automotive industry.

This examples can be found for basically any industry, and it will be an crucial competitive advantage for strategic leaders to sense, plan, and act accordingly. Don’t laugh at your potential competitors, but try to learn from them instead.

 

Is Uber going to build self-driving cars?

The future looks bright for an Uber manager, thinking of all the fully-autonomous  vehicles that will roll through our streets in a couple of years. If you need a car you just fire up your Uber app, and a couple of minutes later you will get in a self-driving Uber car. No need anymore for Uber to sign up new drivers and make sure that always enough of them are on the street. Automatic algorithms can simply dispatch autonomous cars on the streets, depending on actual and expected demand. And all 160,000-something drivers of Uber can slowly be replaced with a safe and smart “robot car” … Everyone is happy! 🙂

As soon as all technological and regulatory challenges are met to have the fully-autonomous car ready for sale, Uber just hast to make sure to get enough cars for their business. So far, it looked like as they had already identified a potential partner – Tesla. Steve Juvertson, a Tesla board member, is pretty sure that Uber is going to fill Tesla’s order books:

 

“Travis [Kalanick  – CEO of Uber] recently told me that in 2020, if Telsas are autonomous, he’d want to buy all of them. He said all 500,000 of estimated 2020 production, I’d want them all,” Jurvetson said. “But he couldn’t get a return call from Elon [Musk – CEO of Tesla].”
[…]
“I’m not saying you’re all going to have robocars. But, for those of us who have a chance to be in one, there’ll be one of those epiphanies. You’ll never go back.”
Uber will buy all the self-driving cars that Tesla can build in 2020

 

However, it seems that Uber is not only relying on Tesla or other OEMs to build the car for them. Recently Uber has invested in a couple of areas that indicate their potential interest to build their own self-driving cars. First, Uber set up shop close to the Carnegie Mellon University’s robotics center in Pittsburgh, USA, in January 2015. From there they went on a hiring spree to get more than 50 people of the top staff from the robotics center for their newly set up subsidiary.

 

“They took all the guys that were working on vehicle autonomy — basically whole groups, whole teams of developers, commercialization specialists, all the guys that find grants and who were bringing the intellectual property,” recalls a person who was there during the departures. “These guys, they took everybody.”
Uber gutted Carnegie Mellon’s top robotics lab to build self-driving cars

 

Gov. Doug Ducey, third left, signs an agreement with University of Arizona President Ann Weaver, second right, and Brian McClendon, the vice president for Uber which will allow them to the test and do research on driverless technology in the Tucson area. (A.E. Araiza/Arizona Daily Star via AP)

Gov. Doug Ducey, third left, signs an agreement with University of Arizona President Ann Weaver, second right, and Brian McClendon, the vice president for Uber which will allow them to the test and do research on driverless technology in the Tucson area. (A.E. Araiza/Arizona Daily Star via AP)

Later on, Uber and Carnegie Mellon University announced that they will form a strategic partnership, with “focus on the development of key long-term technologies that advance Uber’s mission of bringing safe, reliable transportation to everyone, everywhere”.

This was not the last new development, though. In August 2015, Uber announced that it will partner with University of Arizona for self-driving car research.

 

Uber has signed a partnership with the University of Arizona focused on research and development in the optics space for mapping and safety. We’ll work with some of the world’s leading experts in lens design at the University to improve the imagery we capture and use to build out mapping and safety features. As part of this partnership, Uber will also be donating to U of A’s College of Optical Sciences — supporting the next generation of optical scientists and engineers as they make new exciting breakthroughs.
Driving Innovation In Arizona

 

I am not convinced that we will see a self-produced Uber car on the road, though. There would be much more invest needed in order to get to be able to produce a working car than just forming strategic partnerships and investing in knowledge. The necessary asset invest would be huge as well, completely going against the current Uber model. However, it is a good way for Uber to keep all strategic options open. They could, for example, partner with an existing OEM sometime in the future and add additional engineering capabilities to make sure to get exactly the right car for their future “driver-less” business model.