Digital Disruption Drives New Business For Auto Industry

Holger Masser

Disruption is driving change in the auto industry.

Digital innovation means companies will develop new approaches to doing business. Rethinking business models provides opportunity at every turn. Bold companies with new models discover new products and services to offer consumers.

The digital economy is a large reason for this shift. New drivers are pushing change. Auto companies that see possibilities in these changes have a decided advantage.

Digital drivers

We live in a hyper-connected world. Smart devices collect and share data with each other. Massive computer systems and platforms now allow for rapid data analysis.

Consumer expectations are shifting, too. Today’s consumers want to do more with what they buy. Consumers want experiences through their products. They expect dynamic relationships with the companies that make those products.

In the auto industry, these drivers present themselves throughout the value chain. Design, production, distribution, and retail are all ripe for reimagining.

Already, many auto companies are diving in and embracing this new digital economy.

For example, sensors and computers play an increasing role in vehicles. By recording and sharing vehicle data, companies can gain remarkable insights. These tools also now control key vehicle functions. In turn, connected vehicles provide analytics on performance and maintenance needs.

Consumers shop for and buy cars online, responding to digital marketing. Value-added services such as in-vehicle telematics are expected.

For companies that innovate, new possibilities will emerge.

With the rapid speed of change, companies might consider several core questions as they develop new business models. What profitable business models do new technologies and trends present? How does relationship-based selling work in new wholesale and retail business models? What market spaces do disruptive competitors such as Google find attractive? Who are good possible partners?

Creating new business models

In a volatile market, value will come from aligning the four core business operations in new ways. Restructuring the value chain will guide many of the successful new business models.

Let’s look at four areas where new business models are emerging.

Mobility

Mobility today carries new expectations. Transportation networks need to be agile and smart. Traveling for both short and long hauls is defined differently.

Today there is demand for service bundles that combine mobility with other ancillary services. Mobility becomes a commodity as the industry shifts from a product focus to a service focus.

Demand is growing for car sharing and fleet sharing. New possibilities include in-house solutions or joint ventures. Mobile connectivity opens up new ways to engage consumers and customers.

Vehicle networks

Connected vehicles can lead to further new business models. More historical, predictive data is available in real time about cars, traffic, and drivers. This information can guide product design, marketing strategy and bundled services.

Autonomous driverless vehicles are now possible thanks in part to a vast array of technology. Vehicles today are loaded with sensors, digital maps, cameras, lasers, radar, and wireless service.

Driver tasks are automated through new technologies. Emergency braking, adaptive cruise control, automated parking, and lane-changing assist are marketable services. Data leads to better diagnostics and vehicle health, dealer maintenance alerts, and onboard notifications.

Business networks

Digital growth allows for streamlined collaboration throughout the supply chain. Single access points, better supplier onboarding, and improved risk management services are possible.

Imagine a digitized business network. Connected partners share data from sourcing to production. Global commodities are measured in real time.

Supply volatility measurements are current. Partners share data to propel transparent transactions and information on long-term demand. Consistency grows in procurement, shipping, and invoicing. Payment processes are uniform.

Omnichannel commerce

Today, customers can connect anywhere at any time. With easy access to online resources and new technology, customers are driving change in many industries, and the auto industry is no exception.

These touchpoints across channels let companies offer seamless experiences. In the store, in the car, and online, opportunity is there.

There can now be a single view of customers, products, configurations, and orders. Commerce processes can be unified driven by these views.

New platforms that are agile, modular, and extensible allow growth. B2C, B2B, and B2B2C possibilities are waiting. The shopping process can be optimized with personalized functionality.

Potential at every turn

Experts agree that the possibilities are nearly endless for auto companies.

A 2015 report by Oliver Wyman predicts that automation alone will lead to new vehicle types within 10 years. Fully automated cars operate in closed areas like campuses or airports. Semi-automated cars will take control in traffic jams or on a highway.

Monetizing that expected functionality is a new avenue of growth. Every passenger spends an average of 50 minutes per day in a car, according to McKinsey. That’s also the average per capita amount of private Internet time. With potentially 1 billion passengers worldwide in 2030, McKinsey projects each of those 50 minutes translates to 5 billion in revenue.

Conclusion

The numbers are heady. For companies that recognize that digital disruption means opportunity, there are limitless options. By looking at mobility, networks, and omnichannel possibilities, creating new business models becomes imperative.

The digital economy allows for new relationships with customers and consumers. It opens up the potential of agile systems and collaboration throughout the value chain.

The trip to take, and the road to follow, are clear.

To learn more about digital transformation in the automotive industry, click here.


Holger Masser

About Holger Masser

Holger Masser is global vice president of the global business unit Industry Business Solution of the Automotive Industry at SAP. He is responsible for the entire solution portfolio spanning from automotive supplier, automotive OEM, and automotive retail, and importer business. He joined SAP in 2011 and has been working for more then 20 years in the automotive industry, with 10 years in Asia. Masser has profound knowledge in the entire value chain of the automotive business, implementing long-term IT strategies aligned with corporate company objectives and business strategy. In Asia, he primarily focused on logistics, sales, aftersales, production and financial services on automotive OEM, retail, wholesale, and regional and headquarter levels.