Back from Telematics Update: Suits or no suits? Own or share? Drive or ride?
Suits or no suits? Own or share? Drive or ride?
Recently, I attended the Telematics Update conference and my first impression as I walked the floor was “Wow, everyone is wearing a suit jacket? I worked in the auto industry for 15 years and I thought we had moved past suits, waterfall planning, and stuffy meetings? Shouldn’t car people have car grease under their finger nails and jeans on for the most part?” OK, maybe I was being a bit over the top with my stereotyping, but as we look deeper and think about the desire and attraction of working for automotive companies in the future it reveals a necessary change in culture.
As the car becomes a rolling compute station, software plays a more integral role in safety, look and feel, brand retention, revenue generation, and service delivery. According to Giles Shrimpton, CEO of NNG, “Today’s Luxury cars have at least 100 compute processors and over a million lines of code.” The increased reliance on software will drive an increased dependency in hiring software talent, which means a cultural shift for the automotive industry. I have been working professionally for 20 years now and my days of wearing suits, going to meetings just to meet, and planning a project using waterfall methodologies are over. I think this is a common thread among most of the workforce in the software related field. The successful companies are focusing on lean startup principals and getting users involved in the development process early. As the software needs in the vehicle grow, the culture of the industry must change to meet the demands of this software work force. The demand of work life balance and cultural engagement in the workplace has become necessary and essential to obtaining and retaining high quality employees. This drive to put more software in the vehicle will result in the necessity to adapt to the software company culture. The phone and app industry has changed the perception of the typical consumer. Consumers have expectations that vary greatly from the historical views of the automotive industry. Constant feature deployments and bug fixes are typical expectations for consumers now. This type of constant and sometimes free feature deployment is a shift in development style and skills needed in automotive. New skills are needed for continuous integration and test, user adoption and feedback measurement, and flexible development processes that empower the developer to make design decisions. So, what indicators are popping up in the automotive industry?
With the rise of Tesla Motors, the enormous spend from Google, and the ever lingering rumor of Apple Car, traditional automotive companies are scrambling to reinvent themselves around this culture. An example of shifting culture can be found in Ford Motor Company. According to Don Butler, Executive Director of Connected Vehicle Services at Ford, “even reporting structures have changed.” Don actually reports to two business units, IT and Marketing. This is mostly due to the need for constantly understanding technical impact as well as consumer need for mobile business opportunities. Don stressed the need for thinking beyond the car and more about ubiquitous mobility needs of cities and consumers. Ford Smart Mobility, LLC was established to embrace this customer engagement model. Ford Smart Mobility is focused on the entire mobility equation: connectivity, the mobile experience, autonomous vehicles, customer engagement, and data and analytics. Apps like FordPass move to extend the automotive experience beyond the car to a “mobile” experience overall. According to Don Butler, “Ford is working with cities for total mobility solutions and will be making announcements around these details in the coming days.” All of these are a major shift in the current, traditional, approach of stamping iron and selling it through a dealer network. Ford is even transforming their Dearborn Campus to drive an innovative culture in to every aspect of their business. This is a 10-year transformation that will collocate 30,000 employees from 70 buildings to two campus locations. For more information, you can watch videos here: : Ford Dearborn Campus Videos. The focus of this major renovation is to create a company culture more like one of a typical Silicon Valley software company, but located in the Midwest. This culture change is built around a desire to reinvigorate innovation and collaboration through modern, flexible, and environmentally conscious facilities.
Many acquisitions are happening around the autonomous vehicle space too. GM is purchasing Cruise Automation, a developer of autonomous vehicle technologies for around $1 billion. This acquisition is focused on creating a self-driving vehicle team quickly within GM. Ford invested $182.2 million in Pivotal, a cloud-based software company, to further strengthen its core software capabilities for vehicle and general mobility.
We’ve spent some time discussing the traditional automotive companies for a while now, but there are some who think there are even bigger game changers at play here. Zipcar President, Kaye Ceille, spoke about the vision of car sharing and how people won’t own cars in the future, they will just pay for what they need when they need it. Zipcar refers to this idea of car sharing as “paying for the trip, not the car”. Zipcar is in 8 countries, 500 cities/towns, and over 400 zip codes. They have over 1 million members and relationships/partnerships with Ford, Honda, and others. Zipcar even has a future vision of a society built around this idea called Ziptopia. A quote from their site: “At Zipcar, we’ve always envisioned a world where car sharers outnumber car owners, and we believe that the broad adoption of autonomous vehicles will be what turns that vision into a reality.” As noted in this McKinsey study, “The automotive revenue pool will significantly increase and diversify toward on-demand mobility and data-driven services. This could create up to $1.5 trillion (30%) more revenue potential in 2030.” These services include on-demand mobility services, e-hailing, paying for the trip, feature upgrades, and more. The article goes on to state: “We already see early signs that the importance of private-car ownership is declining: in the United States, for example, the share of young people (16 to 24 years) who hold a driver’s license dropped from 76 percent in 2000 to 71 percent in 2013, while there has been over 30 percent annual growth in car-sharing members in North America and Germany over the last five years.” When you look at the trends of car ownership declining, the increase of e-hailing and ride sharing, plus the potential of increased profit margin through service selling in mobile platforms, then you can understand why the traditional automotive OEMs are scrambling to reinvent themselves. The president of Inrix, Bryan Mistele, spoke on how 30% of urban congestion is people looking for parking. If you have never heard of Inrix, they are a global SaaS company that provides internet and mobile services pertaining to traffic and drivers. They have been involved in traffic data and connected cars for many years. The common theme from presenters at TU-Automotive was autonomous vehicles and ubiquitous mobile services will decrease car ownership, increase the willingness to “pay for the trip”, and increase the offered and desired services on your trip. This new holistic solution will then reduce urban congestion and allow us to re-imagine the city as we know it today. Cities could have downtown areas with more parks, more European style walking areas in the inner city, all because of the resulting decrease in congestion. Reading between the lines exposes that this new city “nirvana” has many hurdles before being actualized.
These hurdles were uncovered during one of the panel discussions between NHTSA, Nevada DMV, and Michigan Department of the State. This discussion focused on these topics: What is the regulatory difference between vehicles on the road for testing and actual deployed vehicles? How do you gather data with test vehicles while maintaining safety? How safe is safe enough? These topics become even more real in light of the most recent news on the Tesla Model S Crash. A quote from this post states: “Neither Autopilot nor the driver noticed the white side of the tractor trailer against a brightly lit sky, so the brake was not applied.” Not related to this crash, but another worrisome issue is the current state of autonomy and the bad habits it can enforce as seen here as a Tesla driver is asleep at the wheel.
A hybrid world of test vehicles, fully autonomous, non-autonomous, and retrofitted autonomous vehicles creates an extreme regulatory challenge. The average vehicle fleet turnover life cycle is 10-15 years. This means that if autonomous vehicles were made available today we would have the current fleet of non-autonomous vehicles interacting with autonomous vehicles for up to 15 years. This life cycle doesn’t account for cars that are restored, meticulously maintained, collectible, etc. Cruise Automation is providing solutions to bridge the gap between autonomous and non-autonomous vehicles by retrofitting current vehicles with autonomous capabilities. Realistically, this is costly and mandating all vehicles to be retrofitted to be autonomous would result in massive push back from the general population. The concern about this interim period of autonomy is resulting in the creation of new methods for safety standards and regulations. Dr. Mark Rosekind, Sr. Administrator of the National Highway Traffic Safety Administration (NHTSA), stated, “New deployment guidance will be available next month as well as tools for helping states understand integration and deployment of autonomous vehicles.” Nevada, for example, has been a progressive state for autonomous vehicle adoption. Jude Hurin, Department of Motor Vehicles Administrator for Nevada, had this to say in regards to the Nevada Center for Advanced Mobility (CAM), “On January 5, 2016 at the Consumer Electronics Show (CES), Governor of Nevada, Brian Sandoval, announced that Nevada would become a leader in the testing and development of technologies for the driverless vehicle industry; the Nevada Center for Advanced Mobility plays a key role in this effort. In addition, a Smart City proposal was developed with local entities (Regional Transportation Commission (RTC) and the City of Las Vegas) and was submitted to the U.S. Department of Transportation (USDOT) on February 04, 2016.” Another example of city and manufacturer collaboration can be found in Ypsilanti Township in Michigan at site of the old Willow Run Powertrain Plant. The Connected Vehicle Research Center will house new test facilities to enable the collection of data necessary to substantiate models for real world test scenarios as well as enhance OEM collaboration. This data collection and model generation ties back to the concern of “How safe is safe enough?” Mark Rosenkind addressed this concern by saying, “Today’s number of lost lives with non-autonomous vehicles are equivalent to a 747 crashing every week, so let’s set the bar at 2x better to start with for example.” To understand this safety validation challenge, you have to think in terms of scenarios that force weighted safety decisions. A document has been released by NHTSA to help people work through safety scenarios (Pre-Crash Scenarios for Safety Applicatons). There are multiple schools of thought around what data sources can validate software decisions for safety. Can models be used for validation? Do we need hundreds of hours of road testing? Mark Rosenkind stated, “New regulation techniques for supporting the need for nimble and flexible, in the moment, data analysis methods for making safety decisions will start to be released in July this year.” Other topics were mentioned, but no resolution was presented: Do driver’s license issuance and guidelines need to change? Will disabilities be reconsidered for fully autonomous vehicles? What training will be required for used car sales for individuals and dealerships for these autonomous vehicles?
The automotive industry is ripe for disruptive transformation. Fifteen years from now the automotive industry could look significantly different, much like the change experienced in the 50’s and 60’s when dozens of automotive manufacturers just disappeared (Nash, Packard, Hudson, …). The future needs in the automotive industry parallel the service and software delivery industries. This means that the common theme that threatens big automotive companies is waterfall thinking, top down committee driven product strategies, and rigid process driven development. Autonomous vehicles and mobility solution services need iterative development approaches and continuous integration deliveries stay relevant. Companies that follow this path will find a real world consumer value that enable them to establish dominance in this industry.
It could be a completely different world for transportation providers in 15 years. With all this volatility, there are lots of questions about where the industry is headed. I’ll close with some questions I find particularly intriguing:
Will the potential looming changes actually result in a drastic change in automotive over the next fifteen years?
Will the car become the new phone for service delivery?
Can the traditional metal stamping OEMs evolve and change to compete with nimble players in the field or will they lose their market dominance?
What happens to the car enthusiast? Do they become track racers or collectors?