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Will ACES transform the future of our mobility?

ACES - is the new acronym on the block in the automotive industry. It stands for Autonomous Connected Electric and Shared mobility. Of course, these trends are already reshaping the industry in many ways. When you think about each of these trends - they are undergoing a transition or maturity. For instance, Autonomous driving has been evolving through Passive Driver Assistive System such as seat belts to Advanced Driver Assistance Systems (ADAS) such as Forward Collision Warning, Pedestrian Detection and such. Connected systems have evolved from basic safety systems (think OnStar) to advanced infotainment systems that are integrated with a larger ecosystem. Hybrid electric to fully electric vehicles, with advances in battery technology to combat driver anxiety. Shared mobility continues to evolve from ride hailing to car sharing to ride sharing with variants in each one of these models as well. 

The perspective is very different depending on your vantage point in the value chain however one thing is for certain that the future presents a tremendous opportunity landscape for all the players. The value chain itself is the palette on which many of the non-traditional players are differentiating to design and amplify the value delivered to the end 

There are some key shifts that are happening in the automotive industry across the ACES dimensions and a quick look into scenarios of today and tomorrow will provide us the canvas for assessing how car makers must adopt their strategies in the future. The top 5 automakers list has gone through a dramatic upheaval in the last 15-20 years, with Renault-Nissan (RNW) and Hyundai-Kia displacing Ford and Daimler Chrysler. There is disruption in the horizon, driven by technology, demographic, and regulatory changes. Back to our 4 ACES, and the shifts happening. These are based on reports from various analysts. 

  1. By 2025, Level 1 to 3 autonomous vehicles will be mainstream and Level 4/5 from 2030 onwards
  2. Electric and hybrid vehicles will dominate new car sales by 2030 
  3. Connected vehicles will be mainstream i.e. available by default starting 2020
  4. Shared mobility will mature into shared autonomous riding services i.e. the current car sharing, and ride hailing will evolve into fully autonomous by 2030
While the numbers, and timelines are estimates based on modelling - the underlying message is that there are dramatic shifts happening. Some observers argue that legislative changes will accelerate the adoption of electric vehicles. It is apparent that ubiquitous connectivity, a steep decline in battery and sensor costs are fueling the ACES adoption. Of course the digital natives have a paradigm shift towards vehicle ownership. 

So, what does it take for auto OEMs to navigate their next in this fast changing paradigm of mobility as service. My view is that many OEMs have started thinking in this direction and need to accelerate their investments to transform into digital businesses catering to digital consumers. It always starts with the user, and their personas which will drive their needs. Once the needs are understood, what does it take for OEMs to address these needs and how do they transform to address these needs. Let's now understand each of these dimensions further

  • The end user view is being largely shaped by a plethora of digital services that is being consumed, so it will be no different for integrated mobility services that combine the vehicle, software and services in a seamless, intuitive and personalized manner. The consumption patterns will be driven by holistic experiences, that may or may not be focused on the device. Auto OEMs need to accelerate their transition to a world beyond the vehicle

  • The second aspect that will drive the holistic digital experiences is an ecosystem of providers that are connected digitally through a web of structured and ad-hoc contracts. The ecosystem when expanded globally requires partnerships at multiple levels, with different customization requirements and monetization models. Auto OEMs needs to fasten their transition to a world of thousands of digital partners beyond their traditional supplier base
There are clear parallels with the consumer electronics industry where there is commoditization of hardware, with software and electronics being the differentiator amplified through an ecosystem of services. While the connected services evolution pushed the auto OEMs and the entire value chain into this new world, ACES will accelerate the transformation. The fundamentals of this new way of running business are quite different from the traditional ways such as - real time interactions with customers through direct interactions without intermediaries, instant feedback amplified through social networks, services - in essence a fully digital business that is integrated with the devices. Of significance, is that the core manufacturing process to produce a safe and sturdy vehicle where the services are integrated is also being impacted through IOT based technologies

This transformation has implications across the entire industry including the suppliers, insurance companies, the financing arms, and after-market. Specifically, the OEMs have to make changes in their operations to succeed in their services portfolio. Let us now take a look at some of these changes

  1. Encourage, accelerate, adopt and scale innovation - there is rapid innovation happening in the ecosystem with digital first businesses. Adopting the ecosystem innovation is key, because there is migration in the value chain - players developing competencies to differentiate in the services domain. While doing this, automakers must have the right amount of control to ensure that fundamental safety aspects are not compromised. A platform based approach that integrates with the ecosystem will help in providing integrated digital services

  2. Organize to deliver faster - embracing agile, interdisciplinary teams that define the product, build it, test and ship it are mantras by which the digital first companies live by. In some cases, automakers have hived off newer "startup" like environments and increased their Silicon Valley presence to accelerate their capability to deliver faster driven by a new way of thinking. Decisions around owning strategic functions, while partnering for non-core functions have to be made. The second aspect of organization is to build capabilities to run end to end operations - given the new paradigm of services that provide integrated digital experiences. This includes onboarding new services, partners, customer provisioning and privacy, service delivery and customer care. Maintaining the brand oneness across these multitude of customer touch points is crucial 

  3. Scale up investment on R&D - it is essential for OEMs to continue to invest and scale up on R&D. Areas such as autonomous, and electric vehicles require significant investments from design, development and of course lots of testing. There's also a need to revector some of the investments into services and software. Investments have to be hand in glove with organization structures, and innovation. In addition, these investments have to be done looking forward into the future and to balance the ownership paradigm changes. Automakers may have to relook at their investment philosophies but scaling up is inevitable. 

  4. Lead and engage in the industry transformation - transportation and mobility is an integral part of our lives. Given the rapid technology evolution, much of the standards are yet to be defined and there is a clear opportunity for the automakers to engage with regulatory authorities, city planners and other technology partners to define and chart the way. Despite the lack of precedence, there's a need to explore new partnerships and learn quickly. The auto industry is known for establishing rigorous manufacturing practices, and standards and this now needs to extend into the services domain as well. 
These are exciting times and we are at the inflection point witnessing industrial shifts at a scorching pace driven by multiple influencers. Organizations that are resilient, adaptive and innovative will lead through these times - while I have discussed some key points in this commentary, I am certain there are dynamics that are ever changing forcing the companies to adapt quickly 

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