STRANGE BEDFELLOWS in the
CONNECTED VEHICLE ARENA
HOW SHOULD OEMS ORGANIZE DATA RELATIONSHIPS BETWEEN and AMONG THE CONNECTED CAR ECOSYSTEM and its PARTICIPANTS
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In the long evolution of the connected car, we’ve seen the vehicle OEMs evolve from years of relative discomfort and often indifference related to the value of connectivity and data, to finally waking up to the fact that we are entering a new era of user centered, data-driven services and values.
From a traditional auto industry OEM perspective, today’s discussions of smart systems focus almost exclusively on communications — the “pipe” — and very little on the data and information value. Focusing on the communication element alone as ‘first-order’ business value amounts to grabbing the wrong end of the technology stick. Communications alone steals the limelight and potentially eclipses the real revolution — utilizing new networking technologies and embedded intelligence to liberate information from sensors and intelligent devices to leverage collective awareness and intelligence.
Since the advent of vehicle connectivity there have been three generations of technology and architecture: the first cycle focused on safety, fleet management and relatively simple applications; the second cycle largely comprised of infotainment and entertainment innovations; to where we appear to be today – with a rapidly growing community of innovators enabling “hyper aware” vehicles that can sense their surroundings.
What is important about the next generation of smart vehicle and transportation systems is the combined impact of these legacy cycles of innovation. While there is standalone value in each cycle of innovation – embedded software, communications and information services – it is the combination of these innovations that will inform significant disruption moving forward.
It is against this background, our work in this area has identified five themes that highlight how players are organizing the data relationships between and among participants in the connected vehicle market:
» Edge Is Where Strange Bedfellows Will Meet
» OEMs Are Planning for the Day You Will Not Buy a Car
» We Need Data and Interaction “Orchestrators”
» Data and Connectivity-Always on Connectivity Enables Cloud to Vehicle Communications
» Integration and interoperability — The Car Is Becoming a Major Integration Point
EDGE IS WHERE STRANGE BEDFELLOWS WILL MEET
In its most basic and practical form, the story surrounding “edge” innovation is “enterprise and consumer software applications meets embedded device computing.” But that’s not as simple as it sounds. Capturing the real value of Internet-connected devices goes much further than providing connectivity. For example, software application services will allow networked, embedded vehicles to execute remote applications as if those applications were part of the internal operating system. At the end of the day, the convergence of collaborative systems and vehicle communications implies a total paradigm-shift in technology suppliers, OEMs and users. The depth of this shift has begun to suggest itself, but it is by no means accomplished. It’s a shift from knowing “what happened” to knowing “what is happening”—all the time—and then automatically alerting and controlling systems with that knowledge.
With connected vehicles gathering so much data, manufacturers have to limit what data is processed and sent to the cloud. Edge processing at the vehicle gateway allows for identification and transmission of only the most important data elements; for example, rules can be set so vehicle data would only be sent to the cloud when a mechanical issue or erratic driving patterns are detected.
With so much required at the edge, and this being the future environment where a lot of applications will run, here are a few interesting “edge” computing factoids to provide a bit of understanding what is going on today:
» 90% of all data created to date has never been analyzed
» We are creating data as 2X the rate we are building bandwidth
» 60% of all data loses any value for analysis in milliseconds
» By 2017 there will be more processing power in smart phones than in all the servers and storage devices in data centers
People in cars continuously interact with both the vehicle and the surrounding environment including virtual points, such as future restaurant reservations. This is really the collision of two entirely different computing and data interaction legacies and technology architectures. For mobile device manufacturers its about the interoperability of vehicle systems with smart phones, while network carriers are focused on providing a value-added services layer on top of always-on connectivity. Recently, AT&T announced plans to provide DirectTV to vehicles in the near future. For technology innovators, its about disrupting existing business models by providing new application services that are enabled by embedded computing and connectivity. The automotive manufactures are faced with an opportunity for creation of value or massive destruction of value as the car becomes commoditized and competition for on-going service revenues intensifies. All of the stakeholders mentioned above have an opportunity to act as the integration point, but its those who partner with strange bedfellows who will succeed in the next chapter of the connected vehicle market.
OEMS ARE PLANNING FOR THE DAY YOU WILL NOT BUY A CAR
Ride-sharing applications portend a world of increasing cooperation between consumers and municipal infrastructure. An example of cities and its citizens adopting mutually beneficial pervasive technology can be found in Los Angeles. In a recent TED talk, Uber CEO Travis Kalanick explained that in the first 8-months of Uber Pool, the company’s carpooling service, took 7.9 million miles off the roads and 1,400 metric tons of carbon dioxide out of the air in Los Angeles. By reducing the number of cars on the road, Lyft, Google with Waze Pool, and Uber are impacting demand and buying behaviors of future car purchasers. This shift has automotive manufacturers sitting on the outside looking in, and paranoid that they may lose out on potential revenues.
In response, we are seeing ecosystem creation and management becoming a key focus area for automotive companies to gain a foothold in the ride-sharing market. BMW recently announced an investment in Scoop, a carpooling service that automatically connects co-workers and neighbors who live in the same neighborhood and travel to the same work area. General Motors invested $500M into Lyft to develop the Express Drive program, a short-term car-rental service intended to increase the number of Lyft drivers in the near-term. The higher-order vision of the GM-Lyft partnership is focused on providing a fleet of autonomous vehicles that Lyft users can call up on-demand. General Motors through this investment could obtain a new channel to sell its cars to ride-sharing companies, as the number of consumers buying vehicles decreases over the long-term. From a channel perspective, Toyota partnering with Uber allows for the company’s drivers to lease vehicles through Toyota’s financial services arm and apply their Uber earnings to lease payments. Furthermore, two companies are developing in-car applications to support Uber drivers, accelerating their respective research efforts, and establishing a special fleet program to sell Toyota and Lexus vehicles to Uber drivers. All of this activity is driven by the misalignment between the OEM vehicle development lifecycle and the vehicle technology architecture lifecycle, which leads to a de-coupling of innovation between these increasingly interconnected player types.
WE NEED DATA and INTERACTION 'ORCHESTRATORS'
According to Harbor Research, the number of connected car shipments is expected to grow from roughly 15 million vehicles in 2015 to over a 100 million vehicles in 2022 per year, a compound annual growth rate of 40% per year. The ongoing transformation of the transportation venue is being led by seemingly unlikely partnerships between automotive and tech industry players—creating several discontinuities across the vehicle including:
» Data orchestration, management and brokerin
» Data privacy and ownership
» Lack of standardization of platforms for in-vehicle app development
One example of a company trying to solve the data interaction and orchestrator problem is Microsoft. The company understands the need for partnerships across the automotive value chain with platform providers, automotive manufacturers, tier 1 parts suppliers, service providers and technology companies. Earlier this year, Nissan, Harman, Volvo Cars and IAV announced separate partnerships with Microsoft to advance their individual connected car strategies. Harman is collaborating with Microsoft to integrate Office 365 services and allow for drivers to interact through intelligent personal assistant software to schedule meetings, hear and respond to important emails and make skype calls when in park or in autonomous mode. IAV, an automotive engineering firm, will work with Microsoft to leverage Cortana Analytics, and data from a vehicle’s surroundings to improve safety by anticipating and mitigating accidents with humans and other vehicles. Nissan Motor Company and Microsoft are working together to provide Connect Telematics Systems powered by Microsoft Azure for the LEAF and Infinity models. Volvo Cars is integrating the Microsoft Band 2 wearable with a Windows 10 smartphone to create new ways for customers to interact with their vehicles, including remote start and other functions like turning on air-condition or heat in the car.
Through these partnerships Microsoft is reaching across its product suite (from Cortana, Office 365, Windows 10 and Azure) to orchestrate and integrate several data types to allow for people to interact with the vehicle as well their surrounding environment. It illustrates the importance of cross-industry collaboration and the increased focus on establishing “ecosystems” of service providers, content providers and vehicle manufacturers.
DATA and CONNECTIVITY — ALWAYS ON CONNECTIVITY ENABLES CLOUD to VEHICLE COMMUNICATION
In consumer and commercial transportation applications, “always on” wireless connectivity to both people and vehicles is essential. The transportation market is investing in device networking capabilities to extend direct services to customers like user-based insurance, preemptively predicting vehicle and route problems, delivering customizable services, providing real-time feedback to users on driving performance and maintaining vehicle health. Emerging needs include faster wireless throughput, better integration among mobile devices, and improved user experience/interfaces. Although the Transportation market was an early adopter of wide area connectivity, the applications mentioned above demonstrate that significant future growth lies ahead for the connected vehicle market. As 4G, LTE and 5G technologies become more widely implemented, the connected car market as a whole stands to benefit from the increased functionality and new services that will be available.
For commercial fleets, always on connectivity enables visibility into driver performance, theft prevention, fuel management, electronic data logging and other services that can decrease costs for enterprises who own and operate fleets. AT&T and Globecomm just announced a partnership to provide hybrid cellular and satellite networks to create always-on connectivity for fleets so that even if the vehicle is in a remote location, fleet managers can still monitor vehicle location and performance. Calamp, a platform provider for fleets, acquired LoJack to deliver vehicle theft recovery systems and advanced fleet management solutions.
From a data perspective, we have seen a significant shift in the last three years as technology innovators enter and disrupt the automotive space. Data has become the currency and value driver of investments in smart vehicle technology and services. Massive amounts of data will require supercomputer levels of processing in all vehicles–not just in $100k+ luxury cars. It is estimated that a connected vehicle will send 25 gigabytes of data to the cloud every hour, this will require high-speed, yet cost effective network capabilities. Recently, Cisco and Hyundai announced a partnership to develop in-vehicle network for high speed data transfers, which enables always-on cloud connectivity.
Data is being leveraged to advance new high definition and 3D mapping technologies for autonomous vehicles and intelligent transportation infrastructure. HERE, a collaboration between Daimler, BMW and Volkswagen, is integrating HD mapping tools with weather and traffic data to provide real-time road conditions—and this technology will eventually provide the backbone for HERE’s autonomous driving initiatives. HERE is also in talks with Amazon and Microsoft to leverage their cloud environments to help drive data integration across the various physical and digital inputs to provide the 3D mapping tools. In a separate announcement, Bosch just announced a partnership with Tom Tom to develop smart mapping technologies that also leverages data from intelligent transportation infrastructure.
One example of strange bedfellows in the smart mapping space is the Nissan and Toyota partnership in an effort to develop intelligent maps by 2018. Both companies see a need to create standardized mapping technology for autonomous vehicles. Uber acquired mapping start up deCarta 2015, and recently acquired Microsoft’s mapping technologies. This could be a sign that Microsoft is going to leverage its partnership with HERE to address mapping capabilities in its connected car strategy moving forward.
INTEGRATION and INTEROPERABILITY — THE CAR IS BECOMING A MAJOR INTEGRATION POINT
Users will require that connected product device ecosystems are not siloed. For example, vehicles leveraging geo-fencing technologies can communicate with the driver’s smart home to turn on the lights when the vehicle approaches, or open the garage once a vehicle arrives at home. In the future, consumer purchasing decisions will be driven by seamless integrations of hyper aware vehicles and their surrounding environments. Manufacturers need to anticipate the types of integrations across adjacent markets like retail and the smart home.
Ford and Amazon just announced an integration where Echo smart home products like Alexa can tell an individual if their car is locked, or send a command to start the car. Recently there was a video released where a homeowner programmed their Amazon Echo and gave Alexa the command to start a Tesla in the garage and pull it out into the driveway using Tesla’s autonomous vehicle ‘Summon’ feature.
Consumers now demand vehicle infotainment technology and connectivity as standard, and they are also beginning to recognize the value of integration into larger systems; therefore, technology suppliers and OEMs need to develop technologies with an eye towards use cases that integrate vehicles with smart parking systems, virtual applications like Open Table, and other adjacent offerings that can enhance the user’s experience. It’s certainly an exciting time for the transportation venue, as smart system integration and automation will rapidly transform this space in the coming years.
WHAT ARE THE CHALLENGES FACING THE CONNECTED VEHICLE SPACE TODAY?
We have entered a new era of “strange bedfellows” in the smart transportation arena. We are rapidly evolving beyond “hub and spoke” connectivity and simple narrow function applications to a new cycle of continuous innovation from very diverse players.
Though their business models have begun to intermingle today, all of the major categories of players in the connected car arena have historically operated within well-established business models that reflected the distinctive competencies that each group believed to be at its core. The advent of Smart Systems, particularly the emergence of device and usage data, is causing a blurring between these legacy business models forcing all the major players in the connected vehicle world to re-think their strategies and re-consider their relationships across the vehicle system.
Our analysis points to many significant challenges in realizing the value of such a community of innovators, including:
» Challenges in adopting non-traditional business models that are intended to provide new innovative services and solutions;
» De-coupling of innovations between these increasingly interconnected player types due to misalignment between the OEM’s vehicle development lifecycle and the vehicle technology lifecycle; and,
» Anticipation of new smarter systems and service innovation modes that are not widely adopted today because the fragmented landscape – data is a potentially a huge control point, but automotive OEMs have no idea what to do with it or who to partner with in order to make it effective
Although the automotive sector was relatively stable over the past 20 years, there is no-doubt that established players in this market are facing a potentially massive disruption in the next 3-5 years. In order to create value, companies must partner with strange bedfellows to drive new smart services for their customers and users.