Challenges in the automotive industry’s business model

How have 21st Century technologies allowed companies in the automotive industry to change their business models?

Since the beginning of the 21st century new players from the technology and communications sectors are entering the automotive industry and dramatically changing its chain value and traditional business model.  The main segments that were altered significantly are production, sales experience, key partners, product innovation and R&D.  Today the companies that follow have a chance to leap at the front of the game and those ahead might stay behind if their business model is not flexible at its core.

1)     Transition from push production to demand pull and modular production

We have seen this change in an innumerable amount of industries but Dell is the first name to come in mind when talking about modular production.  The automotive industry has been taking in at a late stage technological advances that arise in other industries.   In this way production transitioned to offer products with attributes selected by the client, sometimes ordered through internet and delivered within 15 days; for instance, Toyota’s upstart Scion.

2)    Changes in sales experience

Car dealers as sale points are being swept out as in the case of BMW and Tesla.  BMW chooses to change the buying experience by introducing the ‘BMW product genius’ who will educate the customer on all the lines of products.  The motivation of ‘BMW product genius’ is not to sell (they do not earn commissions per sale) but to build customer loyalty.  It certainly takes after the service offered in Apple Stores.  As to Tesla S1 electric car sold directly to customers is more aggressive and is reprimanded by car dealers.  Not because they are direct competitors (Tesla’s sales represent 0.1% of US auto market) but because out of fear that other brands might follow.

Technology has disrupted the way people make their buying decisions; today people use platforms to determine who to trust and what to buy.  Above that, consumers today value innovation in automobiles.  They want to buy from the companies they perceive as brining new technology first to the market.

3)    Product Innovation and R&D: Sustainable cars, Electric cars, Autonomous cars

In the ‘2016 EU Industrial R&D Investment Scoreboard[1]’ 6 automakers are among the top 30 and the number of patent filings in the automotive industry also reflect an increase.  Volkswagen was the company with the highest investment in R&D worldwide, until it stated struggling after falsifying environmental testing protocols.  Innovation has become a top priority for automotive companies.  Today there are at least 50 hybrid models in the market whereas in 2001 there were only 2.

Focusing only on downsizing internal combustion engines and fuel efficiency may mean leading companies may fall behind innovative companies in the future.  Changes in their products must be timed as to gain acceptance and not lose their loyal customers.  

The main product changes from mechanical to hybrid to electric to partly automated which shifted the sales motto of ‘faster, stronger’ to ‘sustainable, innovative’.

4)    Shared ownership

Going a step further the ‘Car2Go’ by Daimler and ‘DriveNow’ by BMW services suggest no ownership.  Another different example is ‘Autolib’ where the service is run by the government, a key partner, and the company providing the cars is unknown to the public.

Altogether there is more to technology innovation than changes to the product itself.  It enables new business models and relationships between stakeholders.  The emerging model is still to come but it is certain it will be driven by technology.  The chain value and business model will be shifting as new stakeholders enter the industry with the advances in electronics, communications, alternative fuels and materials.

 

REFERENCES:

[1] https://www.iriweb.org/sites/default/files/2016GlobalR%26DFundingForecast_2.pdf

SOURCES:

Ø  www.forbes.com

Ø  www.bcgperspectives.com

Ø  www.bain.com

Ø  www.bloomberg.com

Ø  www.economist.com

Ø  www.kpmg.com

Ø  www.ibm.com

Ø  https://www.iriweb.org/sites/default/files/2016GlobalR%26DFundingForecast_2.pdf

 

 

I graduated… now what?

There are several types of crisis in this world and we all have experienced them at some point in our lives. Parents suffer when their kids grow and leave home, you can suffer a nervous crisis waiting for the grade of your last exam, we also have experienced as a society political, socioeconomic, financial and of course, existential crisis. But nobody anticipates the crisis that you are going to live when you have already passed half of your twenty decade … reaching your 30’s.

We are determined to follow an established pattern of stages to accomplish as we grow. We have a guide since our childhood that tells us what is the next phase that we must overcome. But what happens when you finish the cycle by which we are all immersed?

Knowing our path, that’s the importance

After a lot of effort, coffee cups and sleepless nights, you finish the major that you were forced to choose at your early 18s. You get a job, you become independent and you live your life day by day. It sounds like you’ve reached the top, but the truth is that you’re just starting to get to know yourself. There is no more pattern to follow. There’s only you. You and the decisions you make.

In my personal case, when I was 26 I suffered a strong stakeout in my life. I graduated and at 23, I came to live to Buenos Aires. Leaving your country makes you to live more intensely. Even though I was stable with a good job and a temporary department to live, I had my activities with friends and sometimes I got to travel, I felt deeply empty. That’s when the imminent question comes… where am I going? The end of the eternal adolescence hits you hard. According to Dr. Ricardo Rubinstein, Psychoanalyst of the Argentine Psychoanalytic Association, “we live in times that are characterized by burning stages with urgency. There is a social pressure to achieve everything right away”. After spending several weeks locked up and having finished almost the 10 seasons of Friends in just one night, I decided to make a change. That change was going to depend on me and only me.

The million dollar questions

Before any decision, you need to organize yourself: What am I passionate about? What is my talent? What am I investing both my money and my time? What makes me happy? These are some of the questions I asked myself to start this new path. It sounds very cliché, but if we do not start to question ourselves is difficult to reach a goal.

In my case I felt a strong need of learning new things and I realized that it was not as simple as it was in the past. I started ukulele classes that, even though I’m really bad at it, distracted me from my duties and I could expose my brain to activities that required different attention. At the end of each class I felt exhausted and is to be expected since playing music is for the brain the equivalent of a complete physical training.

In my innovation journey, I joined UX Design classes. I’m intrigued to learn how to program and I knew that to get to that, I had to start from the basics. I’m still in the process of reaching that goal, but setting small short-term goals makes it easy to not get lost on the road.

Since I’m always willing to help my community, I decided to get into the TED world. I  took the license to organize TEDxRecoleta and with a group of friends, we organize the first edition of this event. This kept me busy for seven months in an activity that was completely extraprogrammatic bringing something positive to my community . We were able to make an event for 100 people that was a success and the satisfaction you feel after having achieved it, is indescribable (watch the talks here!).

As I am passionate about traveling I decided to get to know at least 3 new places every year. They didn’t have to be far away from where I live, just destinations I had never visited before. In some journeys I was alone and in others accompanied, but I never left apart what makes me smile, traveling. At this stage I also quit my job and now I work in a completely different area from the one I was used to. I have constant challenges that test me in all my capacities and it has helped me to know myself in facets that I had never experienced before.

This month I went to the Vital Global Partnership Voice Mentoring Walk, which takes place simultaneously in more than 80 cities around the world. The initiative consists in couples conformed by young women with potential of leadership, in which both are involved in the reflection on the professional and personal challenges. This was an unique experience in which I had the chance to talk with my mentor about the problems and questions I currently have in every scope of my life. She was the one who insert in my mental hard drive a new question and that will be the 2017 question for me… for what I do the things that I do.

It is important to know that there are years that ask questions and years that answer them. You only regain control if you start living more focused on your interests and values. The small goals that we propose define ourselves and we need to have that turning point to decide what course will be taken in our future. Do not be afraid of losing the guide we once had before and let’s take every opportunity to reinvent ourselves every day.

The technological revolution: freedom or servitude?

We live today a period of acceleration of time and complexity of the space. The moment when a new type of society is born. This is reflected in the constant transformations, both from the macro point of view, at the state level and the global order as well as in the micro level: attitudes or way of doing things in everyday life.

The application of technological advancement holds many advantages but also many challenges. Within the first thing we can list advances that have been simplified, improved and even prolonged human life. On the other hand the risks of this fourth revolution are not only challenging but also dangerous.

The application of the technological revolution to the labor market represents a serious challenge to the quality of life of millions of workers. It is a global risk the concentration of wealth in hands of a global minority. Today we live in a structurally unequal world, where a group of hundred people concentrate the same percentage of wealth that half of humanity, 3.5 billion people.

Technological developments and their profits concentrated in few hands will only lead to the end of society as we know since such conditions can not sustained in the medium and long term. Technology has increased the gap substantively. It has left many out of the benefits from the technological revolution and  it has concentrated the fruits in a few hands.

The concentration of wealth and high levels of inequality are contrary to liberal democratic state. But this is not the only thing that affects the state as we know

The real challenge of this new revolution is considering the human being in the heart of it. Scientific progress and technology development is meaningless if it is not serving humanity.

It is therefore essential the role of governance, both local and international, to guide the changes in benefits of all and thus enable sustainable development in the medium and long term. It depends on this a successful and fair transformation of our world.

Finally doing an analysis of our current situation, we are not very encouraging in the short term as global structures and effectiveness of state for allocating resources does not work properly. Perhaps the complexity of today’s world and the resurgence of anti-establishment and extremist elements can be understood from a model that does not answer to the needs of the human being.

In the policies adopted at regional and global levels we will see if the challenges become or not a opportunity to live in not only a more efficient but also more fair world. The fruits of innovation belong to humanity.