Technology is everywhere. More than halfway into 2018, the emergence of game-changing technologies have disrupted most, if not all of, the world’s industries. Whether it’s blockchain, the Internet of Things, cloud computing, data analytics, or artificial intelligence, technology is changing the way business is done all over the world.
The automotive industry is no exception. Following the lead of electric car makers like Tesla, companies like Volkswagen and Mercedes-Benz are finding new ways to innovate and incorporate the latest battery technology into their cars. Concepts like Volkswagen’s I.D., and Mercedes-Benz’s Concept EQ are exploring car design that has gone beyond the bulk and weight of combustion engines, completely taking advantage of newer, slimmer batteries to power the vehicle.
Meanwhile, tech powerhouses like Google and Uber are pushing forward with their plans for self-driving cars, igniting numerous debates and controversies in the process. Autonomous cars are becoming more sophisticated, as their software evolves to become more adept at interpreting the common road behaviors of other drivers and make intelligent decisions in response.
Yet that’s not all that is changing. Joe Vitale, a global automotive industry expert from the international consulting firm Deloitte Touche Tohmatsu Limited, pointed out in a report how the automotive industry is shifting its focus from a product-centered model to a relationship-centered one.
“For a long time, competition in the automotive industry has been around product, specifically product quality, performance, and safety. But as cars get better and better, we’re seeing diminishing returns on improvements in those areas,” he said.
“Instead, our research shows that consumers today value their experience with the brand as more important than vehicle design. At the same time, there’s a massive shift toward usage over ownership. Consumers are becoming more interested in mobility on demand, lower cost and higher convenience. That’s creating unique opportunities — and tremendous challenges for traditional business models.”
The more consumers eschew ownership of vehicles in favor of the convenience and flexibility of on-demand mobility through car-sharing or mobile car services, the larger the opportunity of building meaningful relationships with those consumers grows.
John Hagel, co-chairman of the Center for the Edge of Deloitte Consulting LLP, explained, “The automobile is becoming a rich repository of data about where, and when, each car goes. The value of that data is huge. If I own the car, the manufacturer gets visibility into my mobility patterns. On the other hand, if I take whatever vehicle best fits my needs at that time — through car-sharing, mobile car services, etc. — the data is about the shared vehicle. In that case, the customer’s smartphone becomes the best source of an integrated view of the individual’s mobility patterns, and the site of opportunity to build relationships with individual consumers.”
Increasingly, access to data is becoming more relevant across industries due to the sophistication of interpretive technologies like data analytics and artificial intelligence. If carmakers can tap into the wealth of data available to them and utilize it to enhance the overall experience with their brand, then their future is secured.
Mr. Hagel said: “You need access to data about the individual, so you can get insight through analytics, then use that insight to dramatically enhance the user experience. Next, you need to build a trustworthy relationship with the customer, where the brand promise is redefined: ‘Do business with me, because I know you better than anyone else, and I can give you much more value in return.’”
“The winner is whoever captures the most integrated, holistic view of individual mobility patterns. Who can deliver value in terms of helping people increase the value generated from, and the efficiency of, their mobility? We’re just cracking the surface of how brands evolve to satisfy different consumers, in part because consumer preferences are evolving so rapidly. Where people are in their life cycles affects lifestyle, and Gen Y, Gen X, and baby boomers will have different expectations for transportation. So how brands see their business will need to evolve from selling vehicles to providing mobility on demand for specific segments.”
“They’ll have to serve the consumer not only in the vehicle, but in public transportation, taxi services, car-sharing, bicycles. That creates a unique opportunity for brands that can do that across modes, with a focus on the broader customer experience,” he added.
Mr. Vitale noted that to do so, automotive companies will need to develop three major competencies: how car makers approach relationships, how they create an advantage using software, and how they think about ecosystems.
“The first is this notion of relationships, truly understanding the customer. Today, there’s an intermediary between most automotive companies and the consumer. They need to look beyond vehicle preferences to lifestyles, choices, impact — how people make mobility decisions,” he said.
“Second is software development and data analytics. Not software to enhance vehicle performance or features, but creating competitive advantage through software as a business model.”
Mr. Vitale cited Uber, a company that created a new business by using data to gain knowledge of customer behaviors and needs.
With a software-based business model, Mr. Vitale pointed out the need of the automotive industry to identify shifting market trends and respond to them very quickly, creating a completely different business model from those that they have been using for decades. Times are changing, and the cost is too great to be left behind.