Posts Tagged ‘innovation’

Different approaches towards the (fully) automated car

Google Chauffeur patent - source: Reilly Brennan https://twitter.com/reillybrennan/status/643846750718033920

Google Chauffeur patent – source: Reilly Brennan https://twitter.com/reillybrennan/status/643846750718033920

The race towards the fully automated car has only just begun. Car makers and their new potential competitors from the Tech industry have different views on the best approach for a driverless future.

While car OEMs like BMW or Daimler (and even newcomers like Tesla) are adding more and more driver assistance features such as lane-departure warning, brake assist, traffic jam assist, or parking pilot, in order to increase automation step by step over the next years, Tech industry companies like Google think of “leap-frogging” to as much automation as possible.

There are good reasons for both approaches. The classic step-by-step approach is very much in line with technology development and refinement, and with the slow moving other stakeholders such as governments and insurances. Ultimately a fully autonomous car would challenge the existing regulations and insurance schemes intensively, bringing up many unsolved issues of liability. What happens, for example, if a malfunctioning autonomous car hits a pedestrian? Driver or car maker liability?

The fully autonomous car, though, has the potential to be much safer than a car steered by a human, so naturally there is some incentive to go to as many automated functions as fast as possible. Especially as there are some indications that drivers in a only partly-automated car might be too slow to take over control in a situation that the partial automation cannot handle. As Chris Urmson, Head of Google’s Self Driving Car program, said in a recent article: “The better the technology gets, the less reliable the driver is going to get.”

 

Depending on the level of automation and intensity of alert, some drivers took an average of 17 seconds to respond to a takeover request and regain control of the vehicle, in a study just released by the National Highway Traffic Safety Administration and supported by Google and several leading automakers and suppliers. In that time, a car traveling at 60 miles per hour would travel more than a quarter of a mile.
Automakers, Google take different roads to automated cars

 

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.

 

Tesla's Secret Formula

Model X - teslamotors.com

Model X – teslamotors.com

 

A long and interesting read at Forbes on Tesla’s approach on building a car. Coming not as the classic ‘disruptor’ gaining traction only as an alternative slightly inferior product for the price-conscious customer (e.g.what Skype was compared to classic long-distance phone calls in the beginning), Tesla positions itself as ‘high-end disruptor’.

 

High-end disruptors produce innovations that are leapfrog in nature, making them difficult to imitate rapidly. They outperform existing products on critical attributes on their debut; they sell for a premium price rather than a discount; and they target incumbents’ most profitable customers, going after the most discriminating and least price-sensitive buyers before spreading to the mainstream.
Forbes – Decoding Tesla’s Secret Formula

 

While still losing money, Tesla is constantly refining its processes and products, learning from other industries than automotive. Customer experience – similar as Apple’s approach -is everything, even if it means to have to spend more money than necessary.

 

Learning in an environment of uncertainty requires a willingness to admit mistakes and move quickly rather than digging in and doing nothing for fear of admitting failure. In fact, obsessively attempting to avoid failure can lead to the greater failure of missing the big opportunity.
Forbes – Decoding Tesla’s Secret Formula

 

The Future of Driving is Non-Driving

Autonomous driving is a hot topic and will re-define our Automotive industry. The industry projections in regards to numbers are still early, though.

 

The Boston Consulting Group estimates driverless cars could make up 10% of global vehicle sales by 2035, worth about 12 million cars per year, while the market for driver-assistance systems could be $42 billion by 2025.
Get Your Portfolio Ready For The Future Of Nondriving – Forbes.com

 

And of course we shouldn’t forget the massive effect more autonomous driving could have on accident rates and the subsequent economic impact.

 

While these remain, a more compelling factor is driving innovation. Road accidents are the eighth leading cause of death globally, with 95% of road accidents caused by human error. Xavier Mosquet, who leads BCG’s Global Automotive Practice, puts the total cost to society of road incidents in the U.S. at $948 billion per year, or 6% of GDP. That includes the direct cost of damage to vehicles and acute health treatment as well as the lingering cost of disabilities. Environmentalists are excited about the impact driverless taxis could have on air quality and congestion in cities.
Get Your Portfolio Ready For The Future Of Nondriving – Forbes.com

 

In addition we are looking at potential new entrants of tech companies into the automotive space. It is not just about the market for components. Companies like Apple or Google might eventually try to build their own car, if they can find an profitable angle to that industry.

 

The market is gigantic: According to Morgan Stanley, annual new-vehicle sales total $1.6 trillion, versus $400 billion for smartphones and $266 billion for PCs.
Get Your Portfolio Ready For The Future Of Nondriving – Forbes.com

 

Everything combined we might look at the most fundamental shift in the Automotive industry ever. New technologies, skill sets, and an open mind for innovation will be necessary and crucial.