Car manufacturers: embracing evolution to create new value
Netflix is an astonishing company; it was created during the VHS/DVD era and now thrives in the digital economy. As companies had to adapt their technology to survive, we saw the likes of Kodak, who hadn’t embraced digital technology, lose its leadership position due to a lack of reactivity. In contrast, the Netflix business model embraced evolution and found new ways to create value. From the VHS/DVD era, Netflix moved to renting movies to individuals. As technologies were evolving, Netflix finally progressed to a technology as a Service provider with all movies directly available online. The user now pays for the Netflix service, no longer owning – even on a temporary basis – a movie.
Car manufacturers, on the other hand, are facing a similar challenge now. For the last few decades, they focused on an integration role with an increasing share of the component manufacturers. The core technology and point of differentiation was associated with the expansion in engine technology. We now see that this critical leverage point, the petrol-based engine, will be obsolete around 2040 as it will be banned from a number of major cities. The technology of the future appears to focus on electric engines with fully autonomous driving.
FROM OWNERSHIP TO ALTERNATIVES
The relationship of customers with their cars will also probably change from a framework of statutory ownership towards shared use and pure transportation. Already, we have started to see an evolution in the user mindset from a car that reflects our personality and requires a major personal investment to a car that is a cost and a pain due to time lost in transit, the need to manage repairs, and the search for parking spaces. On the other hand, companies such as Uber, GAFA, … invest heavily in the automotive sector, mainly around automatic driving. They are not and do not intend to be manufacturers. Instead, these companies see new added-value opportunities for tomorrow: the mining of Big data generated from following all transport by car users and the replacement of taxi fleets and even of all private city second cars.
Sopra Banking Software, Sopra Steria Consulting and Axway expect a major shift towards more shared fleets of "pay per use" cars in cities. With this shift will come a different end-user attitude.. Increasingly, end users will ask vehicles to enable them to do all they do at home, such as surfing the internet, while travelling to a destination. Sopra Banking is already active in this market, through its Cassiopae financing software for leases and loans. Sopra Banking is also a technology provider on the IT side with payments, Blockchain, and service provider solutions. The company’s strategy includes supporting the coming evolution with new, innovative solutions to enable these new requirements and players.
LEASING BUSINESS - EVOLUTION THROUGH TECHNOLOGY
Nicolas Ullmo, Cassiopae marketing product director by Sopra Banking Software, expects at first, a significant growth in the leasing business with more and more entrants in the shared car business, especially in cities. These actors will differentiate on cost, but also largely on the quality and the extensiveness of non-transport related services in the cars. Technology must be carefully selected to facilitate external service providers rather than link to the manufacturer or the leasing company.
We truly believe that some form of Open Blockchain interaction will have to be defined in order to provide complex multi-company, new technology-enabled service such as:
- secure instant payments from a car,
- real-time interaction with service/maintenance/repair providers as soon as the car detects (on its own) that some action must be taken,
- extensions of the service proposals we already see with GPS systems such as Waze,
- Big data support to car manufacturers on the transportation usage of their customers,
- parking as a service,
- on-demand servicing of the vehicles,
- chauffeur companies (high-end rental, support to disabled), …
The development process and delivery of these technology-enabled services are well aligned with the skills of the Sopra Steria Group.
Which leaves the question, do you plan to control your destiny like Netflix or to adapt to stay alive like Kodak? The choice is yours…