Smart, connected, autonomous cars are in the process of radically revolutionizing the automotive industry. For over 100 years, the automotive industry has been at the core of an unchanging industrial structure. Now, after 20 years of development in cloud computing, big data, social networks and mobile/connected technologies, the automobile is evolving from an assemblage of mechanical moving parts, to a complex system combining hardware, processing, sensors, data, and a complex ecosystem of applications.
This transformation will ensure that the automotive industry undergoes its most important transformation since the advent of mass production at the beginning of the 20th century. However, the seemingly limitless opportunities these new technologies are bringing about are also disrupting value chains, strategies, existing capabilities and market positions in a powerful process of creative destruction.
To survive in this new environment, automotive companies need to identify and attract a new kind of forward-thinking automotive executive who can navigate these changes in business, technology, and culture.
The Talent to Survive
Smart, connected, autonomous vehicles are creating major human resource requirements for automotive companies. The most immediate need is to recruit individuals with skills that go beyond mechanical and automotive engineering. Software developers, systems engineers, cloud experts, big data analysts and other top-flight talent from the world of technology are all being courted by the automotive industry.
Simultaneously, technology companies have been attracting talents from the automotive sector. It was recently reported, for example, that Apple hired automotive executives for its Titan project. Other technology companies such as Google, NVIDIA, Baidu and Tencent, and wireless carriers like Verizon have all been investing in technology and human resources to compete in the automotive industry.
These trends will only accelerate. Leading companies understand that visionary executives able to bring innovation and transformation to the automotive industry are they key to prospering in the coming years. Companies intent on staying ahead of these trends need to act now to identify, recruit and train exceptional talents who understand how the automotive will function as part of a wider connected ecosystem.
The Rise of New Technologies
Analytics, monitoring, driver safety, driver assistance, and autonomous driving are just some of the technologies automakers, suppliers and technology companies are now racing to develop. New technology paradigms are also creating new business models that are transforming the automotive industry.
Automotive analytics was initially designed to evaluate driver performance and perform vehicle diagnostics in real time for large commercial fleets of vehicles, we can expect this technology to greatly impact the insurance and after-sales markets.
Closely related to analytics, monitoring is allowing manufacturers, suppliers, marketers, after-sales service providers and insurers to monitor the car’s condition and operation. Using the data allows companies to track vehicle operating characteristics and better understand how they are used. This data can serve to alter the design (aligning with actual use), marketing (analysing customer usage patterns), after-sales (improving the quality and efficiency of services offered), and will radically transform the insurance industry (allowing companies to correctly analyse risk, transform the market for high-risk individuals, etc).
Driver safety features that can now be found in premium vehicles are, perhaps, the most important new connectivity features found in modern vehicles. Sensors, lasers, cameras, night vision and radar are helping to create smart driver assistance, parking assistance, and collision avoidance systems. Advanced driver assistance systems often include automated lighting, adaptive cruise control, automated braking, GPS/traffic warning, driver alert systems and systems that keep the driver in the correct lane or show them their blind spot. Current advanced driver assistance technology is usually based on camera systems and sensor technology, but they will increasingly use wireless connectivity to leverage vehicle-to-vehicle and vehicle-to-infrastructure technology. These systems will become more and more common and will gradually evolve to create fully autonomous vehicles.
Autonomous cars will completely revolutionize personal transportation. Autonomy will free the driver to occupy his time as he sees fit, meaning that the car will increasingly become a place of work and entertainment. It will also improve safety and alter our automotive usage and consumption habits. Automotive executives who are not ready for this transformation will fail to compete and their companies will suffer.
Beyond new features, new business models are also being developed. Shared car usage models, such as Zipcar for example, are providing customers with a personal mobility solutions when and where they need it. It is clear that this model will be strengthened by the development of autonomous cars. We can envision a more efficient taxi, whereby a car is ordered through a cellphone application and a driverless car shows up at our door to take us to our destination before heading out to its next customer, all of it with minimal wait and maximum efficiency. Traditional automakers are clearly aware of the threat as they have also entered the car-sharing market with products such as Dash from Toyota, Turo (formerly RelayRides) from GM, and DriveNow from BMW.
Increasingly, successful automotive executives will be the ones who understand how customers interact with these new technologies. They will have to develop new business models that fit the needs and habits of a connected market base. Further, these executives will need leadership and political skills to push changes in an industry that has been very stable for more than a century.
New Competitive Landscape
New vehicle functionalities and capabilities are transforming the automotive competitive landscape by introducing new competitors and threats. Innovations are also shifting industry boundaries, so that technology companies are increasingly entering the automotive space and vice-versa.
Smart, connected cars are offering OEMs new strategies for product differentiation that go beyond price points. Increased customer data will give automakers a greater understanding of customer segmentation, therefore, allowing for better customized products, price setting and opportunities to provide additional value-added services. These opportunities, however, will only be available for companies with the skills and talents in place to understand the evolution of the market and the ability to develop appropriate strategies.
The expansion in capabilities for smart connected cars could also lead to a costly features arms race as competitors strive to outdo one another, eroding industry profitability in the process. OEMs have already readjusted their priorities to focus on innovation. BCG’s 2013 survey found 14 automakers in the world’s top 50 most innovative companies, with innovation being carried out in powertrain, new materials, connectivity, and safety/assisted driving.
OEMs have also developed new innovation paradigms to drive developments in this field. Ford, for example, has developed the OpenXC platform to speed up the development of applications for its vehicles. Companies with leader who are able to incorporate development paradigms from the technology sector will have an advantage over their competitors moving forward.
The development of smart, connected cars is also introducing powerful new suppliers. Sensor makers, software providers, operating systems, analytics experts, network security firms and other companies providing new technologies. Some of these companies are important players in their own industries and they have the talents and capabilities now needed for automotive manufacturers to compete. Lacking the specialized capabilities and knowledge to independently develop these new connectivity function, OEMs don’t have the leverage over suppliers they traditionally enjoy.
This new competitive landscape is evident in infotainment and internet connectivity systems. While traditional automakers have already developed their own systems (Onstar by GM, Sync by Ford, and IDrive by BMW), it is clear that technology companies see onboard connectivity functionalities as a major opportunity to leverage their existing consumer base and technology platforms. Apple has developed its multimedia platform, CarPlay, while Google has unveiled its competing Android Auto product.
Infotainment also reflects how connected automobiles will require additional localization. While engines, transmissions, emission control and safety features can be unified across the global market; user interface, network connectivity, and application development for technology products need to correspond to the cultural habits, internet ecosystem, and market realities of every locality. Automotive companies cannot approach connected technologies from a global standpoint. They need talents who understand local trends and preferences; talents who can adapt the global vision of the company to these local realities.
Connected Vehicles in China
The new reality of the automotive industry is perhaps best exemplified by looking at China where, in the present landscape, global technology companies are facing more and more oversight. Concurrently, Chinese online habits and the local internet ecosystem are often very different from those found in North America and Europe. This is opening up the market for competing Chinese technology firms. China’s three biggest internet companies (Baidu, Alibaba, Tencent) have already made a major play for the automotive connectivity market, and they can be expected to compete in other Asian and developing markets as well. .
Baidu launched its in-car infotainment platform, CarLife, and already has a partnership in place with Hyundai. Baidu has a number of other automotive related initiatives, including a similar product called CarNet. It is also rumored to be developing an autonomous vehicle.
Alibaba purchased a leading Chinese map and mobile navigation supplier, AutoNavi, in April of 2014. Alibaba has also developed a partnership agreement with SAIC to develop connected cars.
Meanwhile, Tencent released its first connected car product, the Lubao box, in 2014. Tencent has elected to work independently of major OEMs to develop its product as an aftermarket plug-in solution.
Other companies are also making a play in the Chinese market, Microsoft opened its first automotive centered R&D center in Changchun. The center is expected to focus on automotive information system, cloud mobile solutions, and big data.
China Unicom has partnered with Tesla to offer 3G and 4G services for cars sold in China.
Widespread adoption of new technologies by Chinese users combined with the clout of Chinese internet giants and generous government support ensures that these new technologies will be rapidly commercialized in China.
With China now leading the world in new vehicle sales, the Chinese market will be at the forefront of this important automotive revolution. As in other sectors, such as mobile and online banking, China’s dynamic market also ensures that it will not only be a fertile ground for technological innovation, but also the testing ground for new business models.
The Chinese auto industry as a whole has clearly indicated its intention to be a global leader in the new smart, green, connected paradigm. The rise of Chinese mega-cities, high rates of adoption for new mobile technology, and a competitive landscape that promotes new, alternative transportation and ownership models basically ensure that China and Asia will be at the forefront of this new automotive revolution.
China is the biggest and most important developing market in the world, but the realities facing automotive companies in the era of the connected automobile in China are similar to what they will be facing in other markets such as Russia, India, Brazil, South Africa, Indonesia, etc. Automotive companies hoping to succeed in these markets will have to localize their offerings to fit specific customer habits and ecosystems. This will in turn require automotive executives who understand the technological and cultural necessities of the locality; leaders who can motivate and guide local sales or product development teams.
The automotive industry that is now emerging will require a new generation of automotive executives to create new business models and understand new vehicle ownership trends. Executive who are able to bridge the divide between the traditional automobile and “the internet of things”. And, they will have to understand cultural and local particularities to ensure that products are well adapted in every market. Because in spite of the ever changing machinery and technology that underlies automotive products, people have always and will remain to be the greatest driver of success in the automotive industry.
Editors Notes:
Human Capital Partners is a retained executive search consultancy & talent management consultancy that specializes in the global automotive sector. We place high quality candidates in CEO and top management positions through succession planning, market scanning and pipeline management to ensure a smooth transition for both our clients and candidates. Our passion for the automotive industry and our unique approach ensures that we fully understand your business. This results in any potential risks being mitigated or carefully managed which ultimately means successful placements and satisfied clients.
PR Contact: Vanessa Moriel, Managing Director Asia (Contact Vanessa)
