A hot topic for companies across the globe, digital transformation has been often found to be on top of the strategic agenda for most 21st century enterprises. Gartner describes digital transformation as “the process of exploiting digital technologies and supporting capabilities to create a robust new digital business model.” It clearly indicates that current business models will not be resilient enough to withstand the test of time and, hence, our jobs will also change.
Digital transformation is all the more relevant in the automotive industry which is currently undergoing the most significant change management processes since its existence.
Digital Transformation: A Change Generator
As a leading disruptor of our time, digital transformation is generating change throughout the automotive industry. It is believed that in the next 20 years, the industry will change more than it has in the past 100 years, all thanks to the wave of digitization. Here’s a look at the major aspects driving digital transformation in the automotive industry.
In today’s world, connectivity has become a standard request of each vehicle’s owner. More than navigation, drivers now desire access their social media accounts, send instructions to Alexa, listen to music apps, and chat with friends while in the comfort of their vehicle. Essentially, vehicle occupants want to remain connected inside the vehicle the same as they are outside.
Such digitally-empowered consumers are spearheading the demand for connected cars. Beyond the consumer demands for connectivity, manufacturers also have developed their own benefits. Software repairs can now occur over the air while vehicles rest in driveways. Vehicles speak to each other resulting in improved safety responsiveness.
Lastly, digital transformation brings a new concept has arisen, enabling on-demand vehicle feature enabling. Imagine you have an opportunity to drive on a German Autobahn, and at the same time can make a purchase from your car that unlocks added horsepower temporarily on your vehicle. Vehicles are becoming a platform of features, not just a way of getting from point A to point B.
Digital buying: An Advanced Approach
Digital transformations already motivating auto retailers advancing towards the digital world by offering digital showrooms via augmented reality. Consumers don’t have to step into a showroom to experience sensory stimulation associated with a new vehicle purchase. Augmented realty offers seemingly real visuals, 3-D sounds and simulated driving experiences.
The traditional business model of full service physical retailers is starting to experience disruption. Tesla’s success selling cars through its website is one indication of the changing times. Most recently Tesla has made the decision to close its physical stores and sell vehicles exclusively online.
Autonomous-driving trucks and vehicles are already a reality in locales where test pilots have been supported and granted by governments however, there remains significant challenges ahead in autonomous driving. Governments must decide how to regulate, insurance companies have liability concerns and traffic management has a risk of increased vehicles on the road and from an ethical viewpoint, in a two-car collision, which vehicle bears the brunt of the damage.
Most governments do require drivers of autonomous vehicles to keep their hands on the steering wheel, even though these vehicles can handle all necessary navigational tasks such as holding the lane, braking, accelerating and obeying speed limits. Although many of these hurdles described are regulatory in nature, technological challenges, too, remain unbridged.
It’s predicted in the near future a lesser number of people will own cars as the preference shifts to sharing, renting or subscription vehicle programs. New business models like Uber, which has significantly contributed to the reduction in taxi costs, or ShareNow, a car-sharing joint venture by Daimler and BMW, are emphasizing these new vehicle ownership alternative programs. Large investments are being made in ride-hailing or vehicle sharing apps that best utilize when vehicles are lying idle.
Considering that vehicles are typically parked 90% of the time, sharing makes a lot of sense. The entire sharing model is dependent on apps and digital payment methods and therefore requires a heavy digitization push.
Manufacturers are sitting on a treasure trove of big data collected from decades of warranty claims and connected car information. Driving patterns, routes, traffic patterns and even the musical choice of consumers is already known to many manufacturers. This data can be used to offer new services to the driver and create personalized experiences.
The days of holding the data within the manufacturers’ universe is over. Using the available data to provide new business models is one of the new approaches that manufacturers are emphasizing. This basically means that the automotive manufacturer provides its data to third-party service providers via APIs.
Industry leaders such as General Motors and Ford have already emphasized API-based integration. Automotive manufacturers can also generate revenue from the service provider for usage of its data. According to a report, by 2020 the connected car industry will cross $141 billion in revenue with futuristic API-based features.
So, what’s the catch of Digital Transformation?
While all the described topics are more related to technology, the most important element for a successful digital transformation is people. A recent article published by HBR describes that 70% of all digital transformation initiatives do not reach their goals. It further elaborated that digital transformation is not about technology but about people, and I agree with this thought.
In software development, which is at the foundation of digital transformation, people must adapt into a new mindset. Agile development and DevOps are just two concepts which will become increasingly important in order to react quickly to the needs of the customer and to put the focus on customer value.
While a lot of automotive companies are moving into this agile mindset, it will still take time to fully comprehend this mindset and implement across all levels. Managing this change will be the key for companies to implement a successful digital transformation and I have no doubt that this will happen.
We at ATCS are helping our customers to implement digital transformation concepts using agile and DevOps methodologies. ATCS’s core business is to implement software solutions to support digital transformation and make our customers successful. Furthermore, our consultants are bringing customers to the next level in providing innovative ideas on how to transform their business into the digital age.
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