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Will OEMs own the next generation of data-driven Automotive services?

Raid Naim • Head of Digital Transformation

As cars have become more and more connected – with each other, their users and their environments – a new age of data-enabled services has unfolded. In the last two decades, these services have gone through a rapid evolution from being simple, one-off offerings to becoming a network of complementary and long-term services combining elements from both the digital and physical worlds.

But this growing network is not yet an interdependent ecosystem, fueled by the data generated from vehicles, services and third-parties. When it finally reaches that point the real potential of the data economy to transform the auto world will fully emerge. There are signs that the building blocks that will allow this ecosystem to take shape are finally coming together, with hugely positive implications for carmakers and consumers alike.

This evolution is pushing carmakers further away from their core business as original equipment manufacturers (OEMs) – i.e. building and selling cars – and making them rethink the way their services are created, designed, linked, grown and operated. It’s a change that is symptomatic of the industry’s shift from intermediary-based product manufacturing to consumer and data-focused service orchestration.

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The Evolution Of Vehicle Data Enabled Services

From journey to life

The first generation of services evolved around the driver’s journey and usually within the heart of the OEM’s value proposition: providing a product (and now a service) that moves people from A to B. Some early examples are BMW’s DriveNow and Daimler’s Car2Go, which tapped into growing consumer demand for carsharing services.

The boundaries of these services were not only limited, but also defined by the product’s capabilities. The increased data generating capacity of modern cars as well as the enhancement of this data through the personal data of multiple car users (owners, drivers, passengers) enabled the widening of the service spectrum into new industries. This development represented the second generation of services, a phase in which most carmakers are still focused. BMW’s CarData is part of this new wave of enhanced services. The platform allows BMW car owners to use their personal and vehicle data to access services from multiple third-parties, such as garages, insurance companies and fleet managers.

However, although today’s cars are “data platforms” on wheels, they are still triggering services that are defined by whatever data the physical product can deliver, while mostly trying to claim ownership of both generated and collected data. Thus, the speed of service innovation and customer satisfaction is still heavily reliant on the product development cycle of the vehicle.

The next generation of data-enabled auto services will be a mix of product, data and consumer-triggered services that will mostly live outside of the vehicle’s value creation chain. It will no longer be the vehicle, but rather its data that will fuel the new service ecosystem. This ecosystem will be a web of interlinked data, physical products, product related services as well as public and third-party services. We’re seeing the early stages of this already with Peer-to-Peer mobility schemes and the more holistic services they are helping to facilitate.

From core to disruption

The business models of the 1st and 2nd generation of services are mainly aimed at elevating the core product by creating supporting services that enhance and personalize customer experiences. They took the automotive OEMs on an innovation journey exploring new business models that utilized the consumer’s vehicle as the main asset.

While this is viable in a product-based service environment, it becomes more difficult in the product-agnostic ecosystem of 3rd generation services. The products become less relevant than the data they are generating. This shift will change the way that carmakers look at issues like data ownership, privacy and compensation, as it will no longer be possible to treat their customers with one product, one journey or one-use case.

From ownership to partnership

While the flow, the infrastructure and most of the data of the 1st generation of services were owned and controlled by the service provider, aka the auto brand, it becomes a shared responsibility as well as shared property within the new ecosystem that is built on partnerships. The implications of this is huge for carmakers. Not only will they need to revisit their governance, but also adopt new approaches for reward and compensation of different players within the ecosystem.

The evolution of these services will also pressure carmakers to leave their positions as the central players in a manufacturing value creation chain and become key players in a service ecosystem that has the potential to elevate their products, but also enhance their business models and profitability. Making a success of this new approach will depend on carmakers being able to think outside the automotive box, and get much closer to the consumer by transforming their role from supply to partnership. Everything we thought we knew about the auto OEM is about to change dramatically.

Want to gain more insights? Then head to futurice.com/automotive, to learn more about our approach to the changing world of the Automobile industry.

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