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The Connected Car Revolution Moves Beyond Cars

December 17, 2020in Thought Leadership

by Greg Ross, Connected Vehicles Practice Lead, motormindz

The Connected Car Revolution Moves Beyond Cars

Connected car technology is becoming an established proposition.  Most new light duty cars and trucks built in 2020 and 2021 will have a built-in ability to connect and upload vehicle data and driver data, and download commands and software updates in order to improve driver and passenger safety, ease maintenance and mobility, as well as the overall ownership experience.  There are varying levels of ecosystem sophistication among manufacturers, but generally, a level has been established where many OEM’s can deliver the following kinds of value:

  • Remote management of vehicles for greater efficiency and safety (Fleet Management services, Automatic Crash services, Teen Driver services)
  • Collection of vehicle usage data to inform product design and create new services (Usage-based Insurance and Financing, Media listening data, Quality data and predictive maintenance)
  • Delivery of over-the-air, or OTA software updates to address quality issues or deliver new features
  • Enablement of partnerships with third parties to create new services and new data products (Mobility services, Traffic, Parking, and Tolling services, In-vehicle merchandising, Package, Fuel, and Maintenance Service Delivery)

With all of these developments reaching critical mass in the traditional light-duty car and truck segment, the question now becomes: Will we soon see Connectivity coming to similar products – such as Construction and Agricultural Equipment, Heavy and Medium Trucks, RV’s & Towables, and Motorcycles & Powersports?  A quick review of these industries reveals the addition of Connectivity is already well underway in many of these industries, with some noteworthy innovations.

Agricultural and Construction Leads the Way

It may not be surprising to learn that connected tech is becoming a very significant feature of both the Agricultural and Construction Equipment industries.  For starters, each piece of equipment is very expensive, which allows needed margin to cover the inclusion of connected hardware and software.  A single large tractor, for example, can cost over $400,000.  Large farm operations and large construction projects can involve dozens of machines in coordinated operations at any one time, so connected technologies are a natural fit for keeping track of vehicle locations, predicting needs for fuel and maintenance, and coordinating logistics & optimizing usage.  Connected technologies can also be used to deliver OTA software updates and repairs to further reduce unnecessary downtime.  Deere provides a good example with its telematics program.  The program allows connectivity to many types of equipment to both pull data and deliver OTA software updates to key systems.  Impressively, Deere also allows for access to its systems for developers to create new solutions.  This kind of innovation platform will enable new software-based services, including the potential for innovation in automated driving.  One clear industry acknowledgement of Deere’s leadership was Ford’s hiring of Alex Purdy from Deere’s Silicon Valley office to run Ford’s Commercial Vehicle Connectivity efforts.  Caterpillar also has an extensive connectivity program, which also includes support for third-party developers.  Both Deere and Caterpillar use their connectivity programs to deliver more value through their products, but also to create “stickiness,” increasing loyalty and encouraging customers to use their products more exclusively.

Connectivity is Coming to Medium and Heavy Trucks

The rationale for connectivity with Medium and Heavy Trucks is similar to Agriculture and Construction, but the industry’s solutions are a little less developed.  These are also expensive machines, where downtime needs to be minimized.  They are also operated on public roads, so driver behavior and safety are critical.  Connected technology makes it easier to detect faults remotely and deliver OTA updates.  It can also be used to track location, speed, and idling, and to track driver performance.  Solutions achieving these goals are beginning to be rolled out.  Freightliner offers Detroit Connect for its trucks equipped with Detroit powertrains.  The system remotely detects diagnostic codes, determines the severity of the issue, and provides a recommended action.  In some cases, the system can also deliver OTA repairs.  There are similar connectivity offerings from Kenworth, Peterbilt, and Volvo.  One of the more interesting offerings is from Navistar, with its OnCommand system.  The system claims a reduction of up to 80% in failures resulting in a tow, and 30% reduction in annual repair costs.  Navistar also openly recognizes that many of its customers operate “mixed fleets,” meaning that they use trucks from a variety of manufacturers.  In a novel approach, Navistar’s OnCommand system works with both Navistar trucks and with competitors’ trucks, to deliver an integrated fleet management offering.  This is an example where a traditional OEM — Navistar — is hoping to both sell more trucks, but it is also using connected technology to venture into a new fleet management service business.  If successful with these new fleet management services, Navistar will also gain data insights about its competitors’ trucks.  Navistar engineers might be able to use to this data improve its own trucks in order to gain future sales.

Motorized RV’s and Towables

Recreational Vehicles saw brisk sales in 2020, introducing many owners to these vehicles.  Many top-of-the-line RV’s offer some amazing technology – including satellite receivers, solar panels, entertainment systems, and many comfort amenities.  As yet, though, there are relatively few connected vehicle offerings that would allow remote interaction with these vehicles through a mobile app, or to connect multiple vehicles into a fleet management system.  Some of the larger motorized vehicles are based on the heavy and medium truck platforms discussed above.  This creates the potential to provide some services to monitor and maintain powertrains for motorized RV owners.  Owners of towables can naturally use whatever connected technologies come with their tow vehicles.  Lippert Components has an interesting offering in its OneControl application.  This application allows remote control of key functions of trailers, such as leveling, awnings, generators, lighting, or HVAC.  Interestingly, the application also provides diagnostics and a connection to a service center that can help with repairs and location of service facilities.  Applications like OneControl could ultimately create a powerful platform for connecting RV trailers to manufacturers, service providers, and recreational facilities along the owner’s route.

Motorcycles and Powersports

These vehicles are beginning to become connected in the same ways that cars and trucks are, but there are still significant opportunities ahead for greater development.  Harley-Davidson offers H-D Connect, which allows owners to remotely connect to find out about service diagnostics and service reminders and alerts.  Owners can also activate tamper alerts and stolen vehicle tracking.  This appears to be one of the first instances of a built-in connection in this space, and creates a platform for further services.  There are mobile apps offered by BRP, Polaris, and others, but these are not connected to the vehicle to obtain diagnostics or independently track location or usage.  Vehicles can be connected to a phone or WiFi for updates to on-board nav systems, and to share route information with other riders.  These “companion apps” are helpful for vehicle owners, but could do much more with a built-in vehicle connection.  Imagine, for example, a rental or subscription service for snow machines or water bikes enabled by a built-in connected app that could activate a vehicle for each new user, track usage, locate missing vehicles, identify vehicles needing service, and update vehicle software.  Or imagine what a manufacturer could do with data about vehicle usage, to target new features to unique types of users, or offer targeted accessories.  There are many more possibilities to be developed and activation is becoming easier over time – with falling costs for telematics hardware, falling connectivity costs, and with the deployment of the 5G wireless network.

Building connected technologies into vehicles and designing successful connected vehicle ecosystems can be an extremely complex undertaking – but the benefits from connectivity technology to both OEs was well as end customers alike are simple and straightforward. Approaches are similar across many industries, and new opportunities are emerging all the time for those manufacturers that are best positioned to take advantage of them. motormindz has an extensive network of industry veterans with deep practical experience in implementing manufacturers’ connected vehicle technologies, service offerings, business models & ecosystems from concept through financial & investment perspectives, through manufacturing & production, through technology & services development, and finally to customer and ownership experience fulfillment. See how we can provide both operational & strategic leverage as you consider your own position and goals in this highly competitive landscape. Reach out to our Connected Vehicles Practice Lead, Greg Ross to start a dialogue.

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Monetizing the Connected Car: Part 1

November 30, 2020in Thought Leadership

by Greg Ross, Connected Vehicles Practice Lead, motormindz

Monetizing the Connected Car, Part 1

The Search for Data Monetization Begins at Home

Ever since McKinsey and Company published its study, titled “Monetizing Car Data” in September of 2016, automotive OEM’s have been working to develop monetization opportunities from connected cars. Back then, McKinsey estimated that car-generated data could represent a new market worth between $450 and $750 Billion by 2030. Studies like this one helped convince most OEM’s to install both hardware and software for built-in connectivity in nearly all new vehicles, and most have then gone in search of new revenues to help offset the investment. For many, the first place to look has been externally, targeting insurance companies, fleet managers, fuel merchants, tolling providers, and consumers of parking and traffic data. Many of these initiatives are growing steadily, and beginning to produce revenues as the volume of connected cars grows. But while the ecosystem of third party data consumers grows, OEM’s should look closer to home for a return on their connected car investments. For a typical high-volume OEM, there are millions of dollars of opportunity in using connected cars for internal cost savings, quality improvements, and efficiencies.

OEM’s are Large Fleet Operators

A typical OEM is also the owner and operator of large fleets of vehicles. At any one time, there are thousands of vehicles moving through the logistics chain from factories or port facilities through rail lines and marshaling yards and ultimately to dealership inventories. With all of those vehicles connected, there are huge opportunities for operational improvements.  Vehicles can be tracked for more precise planning of deliveries, as illustrated in a recent announcement by GM Fleet and a startup called Motorq. Fleets gain efficiency by reducing the time waiting for new vehicles to come on line. The OEM that provides these efficiencies can see “monetization” by becoming a more preferred vehicle provider. Dealers can similarly benefit from more precise tracking of incoming deliveries. An OEM’s finance arm can largely eliminate physical “floor plan” audits of dealer inventories by remotely validating that a vehicle is located where it should be. Theft of vehicles in the logistics chain or in dealer inventories can be easily tracked or even eliminated through remote vehicle disablement. Diagnostics of vehicles in inventory can be pulled remotely, and addressed as needed. As OEM’s continue to expand their ability to deliver software Over-The-Air, new software “fixes” can be delivered remotely to vehicles while they are still in the logistics chain and before they reach customers.

OEM’s also control large numbers of vehicles used in product development, by employees in company vehicle programs, and by retail customers in service loaner fleets. Connected car capabilities can bring fleet management efficiencies to all three use cases and deliver savings to the OEM’s bottom line. Sources of value include optimization of the number of vehicles deployed for each use case, management of vehicle diagnostics, mileage and maintenance, and coaching and improvements in driver behavior. The scale of the auto business can make savings add up quickly. If enhanced efficiency can eliminate the need for one vehicle in each dealer’s loaner fleet, for example, this could mean a reduction of hundreds of vehicles across the fleet – and savings in the tens of millions.

Connected Cars can be Superior Sources of Data

Connected cars can also provide direct information on how vehicles are performing and how they are being used in the field. This data can be superior to traditional sources like customer surveys, social media posts, or warranty claims. Better data means faster responses and a superior understanding of the customer.  In the area of product quality, connected cars can deliver real-time diagnostic codes for analysis by the OEM long before trends are noticed from warranty repair data.  This connection creates the potential for proactive diagnostics, or “prognostics,” where Artificial Intelligence is applied to large data sets to identify and predict component failures before they happen. Customers benefit by having “predictive maintenance” done before a failure causes a breakdown. OEM’s benefit from greater customer satisfaction and from insights that can be used to eliminate future failures and warranty costs. And as more OEM’s develop capabilities to deliver Over-the-Air software updates, more can deliver software repairs without requiring a service visit. Through these technologies, customers will increasingly come to expect that their vehicles will never let them down, thanks to tight communication and coordination with the manufacturer and the dealer.

Connected cars can also collect data on how vehicles are actually used, rather than relying exclusively on customer surveys or sample observations. For example, it is possible to see how often seat belts are actually being used. This could be used for worried parents to coach new teenage drivers, or it could be used by fleets to coach its drivers and reduce their risk of injury on the job. Product planners can see how often ABS braking, Traction Control, Lane Departure, Blind Spot Detection, Automatic Braking, or other systems are deployed, and under what conditions. Engineers can use this information to fine-tune these features and improve their performance. And it is also possible for an OEM to take these unique insights to create new services. Last week, GM announced that it would apply its unique data and insights to create better, lower-cost car insurance. Planners can also look at how often various settings and features in the HVAC or Infotainment systems are being used. This information can be used to optimize the performance of these systems and design vehicles to meet customer needs and real-world usage. The “monetization” in this case comes from having better insights into customer usage and needs, and translating that into better vehicles and greater customer satisfaction and loyalty.

Internal Uses Builds Skills Needed for External Monetization

In order to turn external parties into paying data customers, OEM’s will need to build an infrastructure to securely collect and store data, and then make it available in an easily consumable form. Third-party data customers will also have expectations for system reliability and data quality. Fortunately, the systems that OEM’s develop to serve their internal efforts build much of the same infrastructure needed to serve external customers at scale. So an OEM’s internal savings effort can provide both immediate cost savings and efficiencies and build a platform and skills needed for future growth.

The global OEM’s are enormous, complex enterprises. Each one owns, operates, or indirectly manages vehicles worth hundreds of millions of dollars. And each one spends hundreds of millions to billions on product development and warranty expenses. The path toward “monetization” of connected car investments runs through a robust program of internal benefits and uses.

motormindz’ Connected Vehicles Practice provides unique, proprietary leverage to help you successfully monetize your connected data & technologies at scale. Our subject matter experts have directly led large operational teams at the major OEs to widespread success in doing exactly this. If you’re interested in harnessing the power of Connected to grow and scale your business, reach out to us, or join one of our programs. Connect quickly, as space continues to be limited.

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Will Lynk & Co Succeed Where Other OEM’s Have Failed?

November 16, 2020in Thought Leadership

by Greg Ross, Connected Vehicles Practice Lead, motormindz

Lynk & Co is a new sub-branded line of cars, formed as a subsidiary company of China-based Geely Auto Group, and launching with a hero vehicle based closely on the Volvo XC40 SUV. The brand launched in China in 2018 using a traditional dealer-based distribution system, but Lynk & Co proposes to use an all new business model when it launches in early 2021 in Europe, and later in North America. According to interviews with Lynk & Co’s CEO, Alain Visser, the brand hopes to tap into three major trends that are especially popular among urban Millenials: The Sharing Economy, Subscription Models, and Connectivity. Several OEM’s have experimented with various forms of car-sharing and subscription models, but none have been a breakout success. Is Lynk & Co on track to arrive at a different destination?

Can Lynk & Co do “Sharing” like Airbnb?

The first issue Lynk & Co must address in its planned launch in (slated for early 2021) is the issue that we are all still currently dealing with  the global COVID-19 pandemic. With this as backdrop, some prospective customers will shy away from sharing cars with strangers until the risks are firmly in the past. Still, Lynk & Co have taken some interesting steps to build sharing into their offering and their business model. The first step is to design vehicles to be easily shared through software. Owners of a Lynk & Co vehicle can indicate that a car is available though an in-vehicle application or through a mobile app. Owners set their own rates, and Lynk & Co manages all transactions at no charge.  Lynk & Co provides connectivity to each vehicle so that it can be located by a renter.  A mobile app can be used to gain access to a rented vehicle, to start it, and to pull down cloud-based personal vehicle settings from the user’s profile. To take further friction out of sharing, Lynk & Co vehicle pricing plans include insurance for both owners and any other users with whom the car is shared. In fact, owners are encouraged by Lynk & Co to make cars available for sharing as a way to offset vehicle costs.  Overall, Lynk & Co’s sharing features appear to be some of the more innovative parts of their offering.

Lynk & Co’s sharing features are a great illustration of the potential for some key Connected Car technologies.  The mobile app that unlocks and enables the vehicle, plus the built-in connection that monitors vehicle usage both provide a way for Lynk & Co to identify and learn about each individual user.  This will give Lynk & Co unique insight into usage patterns and behavior.  Lynk & Co also indicates that there will be an ability to deliver unique services and information to displays inside the vehicle, and that it will be possible to update vehicles with new software-based features.  Together, these technologies will create the potential to create new services and revenue streams for Lynk & Co, for its customers, and for prospective platform partners.

Can Lynk & Co do “Subscriptions” like Spotify or Netflix?

Lynk & Co’s CEO has emphasized in several interviews that his intention is to challenge the traditional automotive business model, and focus firmly on a subscription approach. He points to the ways that companies like Netflix or Spotify have disrupted the video or music industries by giving customers a huge range of choices for a reasonable price.  These companies have then observed their customers’ usage closely and delivered improved content and features over time.  Lynk & Co hopes to do the same, using connected technologies and analytics.  Lynk & Co also hopes to model subscription-oriented companies with a focus on developing and maintaining close subscriber engagement.  One way to do this is to replace traditional showrooms with “Clubs,” like the one recently opened in Amsterdam.   Clubs are places to hang out, enjoy a coffee, see unique entertainment, and so on. There is a vehicle on display, but it is not the center of attention. Vehicles that need maintenance or repair are taken to a remote site.

Three levels of subscription are available.  The basic level is free, where subscribers download the app, have access to vehicles to share (rent), and get access to Lynk & Co “clubs” and events. The next level costs 500 Euro per month, and includes a vehicle, maintenance, and insurance. Owners can offer their vehicles for sharing at any time through the Lynk & Co app. Subscribers to this monthly plan can cancel at any time with only one months’ notice.  Finally, it is also possible to purchase a Lynk & Co vehicle outright for 39,000 Euro, and also make it available for sharing on the Lynk & Co app. The 500 Euro/month program does appear to be more of a true “subscription,” in that it can be easily cancelled.  Over time, analysis of subscriber behavior and usage should provide Lynk & Co with insights that it can use to adjust and target subscription offerings and prices.  In-app and in-car display capabilities should also provide Lynk & Co with opportunities, over time, to generate new revenue through targeted features, based on its growing understanding of its subscribers.

Starting out, Lynk & Co will only offer one vehicle, the “01,” in two color choices and two hybrid powertrains.  It makes sense to start simply, with a popular vehicle configuration and limited variations.  This maintains the focus on developing an engaging subscription service that meets the needs of a core group of users.  To be a truly successful subscription service like Netflix over time, Lynk & Co will need to then show that it can engage closely with its subscribers, analyze their usage, and respond quickly to deliver on un-met needs.  This may come in the form of new software-based services, or in new vehicle or powertrain configurations drawn from the global Geely/Volvo portfolio.

Can Lynk & Co Lead in Connectivity?

In an interview at Lynk & Co’s new Amsterdam club, Alain Visser was quoted as saying, “It may sound strange, but in the car industry today, the biggest challenge is not the mechanical parts, it’s the software.” Visser was describing the software required to enable Lynk & Co’s extensive sharing model, and the extra time that was required to do the coding. Earlier interviews indicated that Lynk & Co intends to have extensive connectivity. This would include Over-The-Air (OTA) delivery of software repairs and features, as Tesla does. It would also include a Developer Platform to enable third parties to create new software-based features for Lynk & Co subscribers.  Lynk & Co is on the right track with its focus on software to continually upgrade and update the vehicle and the user experience.  Visser is also right to observe that this has not been a strength of the traditional OEM’s.  To really succeed, Lynk & Co will need to make sure that its vehicle systems are well-designed for updating, and that it is ready to engage with a robust developer community.

As Lynk & Co kicks off its launch in early 2021, it will be exciting to watch their progress and the adjustments that they make as they engage with their first subscribers.  As the most successful subscription companies have shown, it is not essential to launch with the perfect product.  It is absolutely essential though, to listen closely, learn quickly, and move fast.

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“Right to Repair” and the Connected Car

November 5, 2020 in Thought Leadership

by Greg Ross, Connected Vehicles Practice Lead, motormindz

Voters showed strong support for Question 1, indicating high levels of interest in access to telematics data and open data standards.

Among all of the important decisions made on November 3, there was one in Massachusetts that may significantly affect auto dealers, manufacturers, independent repair shops and auto owners.  Question 1 on this year’s Massachusetts ballot expands existing “Right to Repair” laws in the Commonwealth to require auto OEM’s to make data from telematics systems available to independent repair shops.  The law, which appears to have been approved by a wide margin, will require all auto OEM’s to place telematics data on an independently-operated data platform.  The data on the platform will then be available, upon customer consent, to any independent repair shop.  The law requires this data platform to be in place in Massachusetts beginning with the 2022 model year.

New Business for Platform Providers

The first opportunity will be for one or more  platform providers to build the “independent” platform that the law requires.  There will be significant work to be done to take data in from all telematics-equipped OEM’s and prepare it for distribution to hundreds of repair shops and potentially other end-users.  This will not be a simple task, since most OEM’s are just at the beginning of their telematics implementations.  There is no common data standard.  Different OEM telematics systems have access to different kinds of data, with different reporting frequencies, and widely different reliability.  The platform will also have to be highly secure, in order to honor customer expectations for privacy and control over which parties should have access to data.  And finally, the platform will need to enable billing, as there will presumably be a charge to cover the cost of data collection and processing.

New Opportunities for Service Providers

Question 1 was strongly supported by independent auto repair shops and auto parts and repair chain operators in Massachusetts.  Their coalition successfully framed the question as one of “closing a loophole” in the current Right to Repair laws.  They said that repair shops need data from telematics systems in order to repair vehicles.  As their opponents — led by auto manufacturers — pointed out, this is misleading.  Independent repair shops can already get the data they need to perform diagnostic and repair services.  Once a vehicle is in their shop, independents already have an ability to use the same diagnostic tools available to franchised dealers.  What the independents really hope to gain however, is a direct connection to the customer.  My own Chevy Colorado can serve as an example.  Today, when the diagnostic systems on my truck indicate the need for an oil change, Chevrolet is authorized to use the built-in telematics system to notify my Chevrolet dealer.  Whenever my oil life gets down to about 20%, I get a call and a text from my dealer to schedule an appointment.  Question 1 will make it possible for customers like me to give the quick lube shop down the street the same connection.  The tire shop could be notified when tire pressures are low.  A fuel provider could be notified when a fill-up is needed.  CarFax may ask for permission to keep track of diagnostic, maintenance and mileage activity to help owners prove the value their used vehicles down the road.  And so on.

Implications for Dealers

The Independent shops in Massachusetts clearly hope to use this new initiative to gain business from franchised dealers (or prevent current business from being lost to Dealers).  In order to maintain and grow the dealers’ share of non-warranty repair and maintenance business, dealers will have to make excellent use of the telematics systems installed by their manufacturers.  Dealers start with a key advantage, which is the opportunity to start a connected service relationship with the customer from the moment the new or used vehicle is delivered.  Dealers must be sure to activate systems and secure customer consent to share service and maintenance data with the dealer.  Dealers then have to do a great job of managing data notifications to quickly schedule customers for any needed service work.  Dealers will have a very brief head start to fine tune their use of connected car service notifications, and they will need to take full advantage.

Questions Yet to be Answered

Now that Question appears to have passed, this is only be the beginning.  Given that state of readiness of most OEM’s, a model year 2022 deadline will be very difficult to hit.  The Commonwealth will still need to answer many questions about the kinds of data that must be provided and the types of consent that must be obtained.  A platform provider will need to be sourced, and there will be many questions about how a provider should be selected, who should pay to create the platform, and how its operating costs should be covered.  There will also be questions about who qualifies as a “repair shop” and represents a legitimate user of the telematics data stored on the independent platform.  Question 1 also says that the platform should not only collect data from telematics systems, but also deliver “commands” to connected vehicles to enable diagnosis and repair.  It is unclear whether this is intended to mean that independent repair shops should be able to deliver Over-the-air, or OTA software “patches,” or “updates.”  Though Tesla has demonstrated this OTA capability extensively, most  OEM’s will not be ready to support widespread OTA delivery of software updates by model year 2022.

As with so many other issues on the ballot this year, the most interesting thing will be to see what happens now that the election is over.

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GM and Taco Bell bring Car Radio into the Internet Age

October 27, 2020in Thought Leadership

by Greg Ross, Connected Vehicles Practice Lead, motormindz

New connected car technologies are revitalizing older in-vehicle tech.

According to a recent Forbes article, GM and Taco Bell demonstrated that it is possible to bring the same kind of measurement to old-school broadcast radio that has become an expected part of advertising in the digital age.  In a recent test, GM paired anonymized in-car listening data with Taco Bell’s radio advertising data to determine what kinds of ads were most effective in driving traffic to Taco Bell stores.  This is another great demonstration of the capabilities of a Connected Car.  It is relevant, too, because the “Share of Ear” study for Q2 of 2020 points out that the great majority of in-car listening is still devoted to AM/FM Radio.  With this news, it is interesting to think about what will likely come next.

Not just a “GM Thing”

GM certainly has a lead in the installation of Connected Car capabilities, beginning with the launch of OnStar all the way back in 1996.  But nearly every other OEM is now in the process of launching their own built-in Telematics capabilities.  So even if GM represents 50% of all 4G LTE capable vehicles on the road, as the article says, GM only has about 17% US market share.  As other OEM’s roll out their Telematics capabilities, it will make more and more sense to develop a platform for radio-listening data for all makes.  Advertisers and broadcasters will want to know about listening behavior regardless of the kind of car the listener is driving.  It could be that GM is hoping to build a data-sharing platform in cooperation with other OEM’s.  More likely, one of the emerging data aggregation platforms, such as Wejo or Otonomo (or both) will develop this as part of their platforms.  DriveTime Metrics is a start-up that has demonstrated the potential for this kind of measurement for both advertisers and broadcasters.

Never Mind Taco Bell, What About Dealers?

Taco Bell was a logical test case for this technology.  There are a lot of stores, and changes in the number of visits can be measured relatively easily.  But Car Dealers should be asking when this tech will be used to measure and improve the effectiveness of their radio advertising?  According to InsideRadio, local Dealers represented the number one category of radio advertisers in 2019, even after significant increases in spending by Insurance companies and others.  Car Dealers, whether through their Dealer Councils, NADA, or individually, should be aware of the increasing availability of data from Connected Cars at all of the OEM’s.  The data can be used to measure and improve radio ad effectiveness on New and Used Sales, Service, and Parts.  It can also be used to help manage dealer inventories, track loaner fleets, improve customer retention, and to create value-added services.  This announcement by GM is one more indication that the time is right for Dealers to become aware of the capabilities of ConnectedCars, and articulate a POV on the data and services they expect from their OEMs.

Targeted Radio?

This pilot test is really only an initial step toward making broadcast radio measurable and more targeted.  With this demonstration, broadcasters and their advertisers can know that anonymous drivers of certain types of cars and trucks are listening, when they are listening, and approximately where they are listening.  In order to know even more precisely who is listening and where, driver consent will be required — the equivalent of accepting “cookies” to enable tracking on websites.  If web advertising is a guide, we can expect that OEM’s, Broadcasters, and their Advertisers will be working to develop incentives for drivers to accept individualized tracking.  We may eventually see the ability to deliver more individualized radio content, based on the identity of the listener.  I am sure that the National Association of Broadcasters, or NAB is busy imagining the possibilities.

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Automatic Bites the Dust

Automatic, a leading aftermarket provider of Connected Car services, informed its customers on May 1 that all services would end, effective May 28, 2020.  Automatic cited the COVID-19 pandemic as the immediate reason for cancellation of the service, due to reduced vehicle sales.  While slow auto sales could certainly be a factor, it is more likely that Automatic’s corporate owner, SiriusXM, has concluded that Automatic is not worth further investment.  This is a striking turnaround, considering that SiriusXM purchased Automatic only three years ago, in April of 2017, for over $100M.  As recently as February 13 of 2020, SiriusXM issued a joint press release with AutoNation to call attention to their expanded distribution plans within the AutoNation network of dealerships.  So what happened?

Automatic was an Early Star

Automatic was not the only service provider using an Onboard Diagnostic (OBD 2) “dongle” to collect and process vehicle data.  But it was one of the best known and best regarded.  Automatic was founded in 2011, and earned early recognition  for the quality of its user interface .  Automatic also received a strong distribution boost through partnerships with Best Buy, Target, and Apple.  Since it was seen as a market leader, Automatic was also able to successfully develop and support a developer platform. Developers brought forth a good range of  individual applications and user-created services enabled by IFTTT.  Automatic’s leading position led them to be acquired by SiriusXM in April of 2017 for over $100M. 

Failing  to Meet Expectations

SiriusXM presumably hoped to build a large and profitable user base around Automatic’s services.  In this, it would have aspired to reach volume and scale similar to SiriusXM’s other businesses.  SiriusXM Satellite radio, for instance, had nearly 35M subscribers at the end of 2019.  SiriusXM’s Pandora had 66M Monthly Active Users in the same period.  SiriusXM also offers white-labelled Connected Car services for several leading automotive manufacturers representing several million vehicles. SiriusXM does not break out OEM Connected Car Services volumes in its public reports.  SiriusXM also does not break out volumes for Automatic, but I suspect that it has never reached volumes that are comparable to SiriusXM’s other lines of business. 

Difficult to Scale an Aftermarket Product

Several OBD-based players have reached reasonable volumes through targeted partnerships.  Insurance companies have distributed OBD dongles as a part of Usage-Based Insurance programs, such as  Progressive’s Snapshot or Allstate’s Drivewise.  Fleet Telematics companies, such as Geotab, have used OBD devices to enable fleet management services for large business customers.  But Automatic and SiriusXM aimed to reach retail-scale volumes to tap into the tens of millions of un-connected vehicles owned by retail consumers.  Automatic found that it could not reach that scale through retail distribution at Best Buy or through on-line sales.  OnStar had a similar experience with it’s “FMV” aftermarket product, distributed in a similar way.  Despite having a well-known brand and several million loyal customers, OnStar was also unable to reach large-scale volume with an aftermarket product.

Dealership Distribution

SiriusXM apparently hoped to reach large scale volumes by distributing Automatic through auto dealerships.  After purchasing Automatic, SiriusXM introduced a dealership program and announced a partnership with AutoNation, which is a large dealership chain.  In a February 13 2020 press release, SiriusXM and AutoNation reported that the partnership was expanding.  AutoNation reported that 97% of customers who took delivery of a vehicle equipped with an Automatic device remained “engaged” with the service one month after delivery.  AutoNation also reported higher maintenance and service retention for Automatic-equipped customers.  Despite this apparent progress, SiriusXM seems to have concluded that the effort to recruit a large number of dealerships to distribute Automatic in high volumes was going to take too long and be too great an effort.  The COVID-19 auto sales slowdown must have contributed to that conclusion. 

Takeaways

There was nothing wrong with Automatic’s service.  Over 9 years of operation, Automatic accumulated many loyal, satisfied customers.  Reading the Twitter responses to the shut-down announcement, it is clear that Automatic will be missed, and that many current customers will be seeking out alternative service providers.  But if the goal is to reach installations in the millions, it is not clear that an aftermarket installation will be the way to get there.  Over time, built-in OEM platforms will provide a large installed base of connected cars.  Most OEM’s are installing built-in telematics hardware today, and nearly all have announced plans to do so.  In the meantime, smartphones provide a partial substitute for some (though not all) of the services enabled by OBD2 devices.  And, of course, smartphones provide the widest possible distribution platform.  Until OEM platforms are more widely available, it seems that the best use of aftermarket devices will be for targeted applications.

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Ford’s Connected Insurance Offer is Incomplete

Ford Partnership with Nationwide Insurance

Ford announced this week that it would partner with Nationwide Insurance to offer Ford Insure and Lincoln Motor Company Insure to Ford #Connectedcar customers. This is a very good use of the connected car technology that Ford is rapidly rolling out to all of its cars and trucks. The service features easy enrollment via the FordPass or Lincoln Way apps, and provides the prospect of saving customers up to 40% on their insurance by demonstrating their safe driving. But Ford will likely find that the solution falls short for its customers in several ways.

Customer Experience Gaps

Following are some gaps in the offering that Ford will likely hear about from its customers:

Limits on Customer Choice

Nationwide is a leading insurance provider with a very strong brand and reputation. But there may be many reasons why Ford or Lincoln customers won’t want to switch to a new insurance carrier. Customers may have well-established relationships with other carriers that will keep them from switching. A better offering would allow Ford and Lincoln customers to take their connected car data to the insurance carrier of the customer’s choice.

Limits on Customer Control over Driving Data

This program requires the customer to enter into an insurance contract before knowing what his or her driving data looks like, and how it will affect insurance rates. Savings, if any, won’t be applied until the customer renews the initial policy. The customer doesn’t know ahead of time whether he or she will be likely to save. A better approach would be for Ford to give customers their driving data and help the customer understand whether the data is likely to lead to savings on insurance. The customer should have this data before deciding whether to share it with an insurance company.

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For TaaS Providers, Engagement is Everything

More OEM’s Offering Subscriptions

Over the past weeks, we have seen more announcements from OEM’s intending to become Transportation as a Service — TaaS — providers.  Nissan announced a subscription pilot called Switch.  And Hyundai announced a partnership with the startup Canoo.  Canoo intends to offer its vehicles only by subscription. 

New Metrics for New Challenges

For these companies to be successful in a TaaS business, they will need to learn lessons from service businesses that came before them.  And importantly, they will need to learn all new ways to measure business performance. 

OEM’s are accustomed to measuring customer satisfaction in terms like Quality, Durability, and Performance.  These are all product metrics, and they are the metrics that matter if the main objective is to sell the customer an expensive product once every couple of years.  But how should metrics change when the customer is buying a service, with the ability to cancel or change every day?  In that world, Engagement is Everything.

Metrics for a Services Business

I was reminded of the power of Engagement when I had a chance to listen to the weekly “a16z” podcast from Andreessen Horowitz.  The title of the podcast was “Metrics and Mindsets for Retention and Engagement.”  The purpose of the podcast was to provide an overview of the key metrics that have been used by some of the internet’s giants, like Facebook or Pinterest or AirBNB.  These same metrics have been used in automotive service businesses like OnStar or SiriusXM. Some key takeaways:

Think in terms of three key metrics:  Acquisition, Engagement, and Retention.

  • Acquisition is how many customers were added in a given time period
  • Engagement is how frequently those customers use the service, and how many of the services they use
  • Retention is how many stay with your service in any time period

Of these three, Engagement is the most critical.  It predicts Retention and its opposite:  Churn

  • Engaged customers stay longer
  • Engaged customers are happier
  • Engaged customers recruit other new customers
  • Engaged customers spend more on your services

A service provider needs to be great at measuring and tracking Engagement

  • Watch how engagement changes over time from new users to experienced users
  • Compare engagement for different cohorts of users, and drive to increase engagement as a core business metric
  • Compare engagement for different types of users
  • Understand what behaviors predict increased or decreased engagement

And a service provider needs to test and learn relentlessly

  • Test different ways to create the best new customer onboarding experience and launch early engagement
  • Test different methods to drive greater and more frequent engagement
  • Test methods for re-engaging customers who have fallen off
  • Test methods for preventing Churn

Takeaways for an OEM moving into TaaS:

So what does this have to do with the TaaS plans of the major OEM’s?  Isn’t Nissan’s Switch or Canoo’s subscription just another form of auto financing — building the cost of maintenance and insurance into one monthly price?  Without a focus on Customer Engagement, they will be, and I think they will likely fail to attract (and retain) large numbers of customers.  With a focus on engagement, though, these services have the potential to create real value for customers.  Because another way to think about engagement is to ask how often the customer is coming to the TaaS provider for additional help and additional service solutions.  Engaged customers will keep coming back to their service providers for additional transportation problems and — if they’re good — those providers will keep coming up with more and better solutions.  

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Car Buying for the Connected Customer

I had a recent experience with buying a beautiful new Chevy Colorado that showed me that much progress has been made to meet the expectations of connected buyers, but also revealed how much remains to be done.

Web Shopping Experience:

I had a great experience with the Chevrolet website and its integration with local dealer sites. From driving a friend’s truck, and from prior experience, I had already decided that I wanted a new Colorado. The Chevrolet website helped me navigate effectively through the many decisions that a new buyer needs to make – particularly for a new pickup. Once I knew exactly which truck I wanted, and in what color, the Chevrolet site then did a good job of searching for local dealers who could sell me one. Unfortunately, a search of my local dealers’ inventory showed me that nobody had the combination of trim, accessories, and color that I was looking for. I was not discouraged though, as the site also made it easy to contact three local dealers to let them know what I was looking for. I was also able to include a note, to say that I was looking for this specific configuration, and that I was ready to buy. 

This work was completed on a Sunday evening, and I received confirmation from Chevrolet of the truck I was looking for, and the dealers I had selected. I was very pleased to be contacted by all three local dealers first thing on Monday morning. This is where the opportunities for improvement started to show.

Three Dealers, Three Different Experiences:

All three local dealers started with prompt contacts via both email and text, as I had requested. This is where the breakdowns began:

Breakdown #1: Dealers Waste My Time

All three dealers asked me to re-send the specification for the truck that I was looking for. I re-sent each one the email that Chevrolet had sent me, but why should that be necessary? It was that same Chevrolet website that had helped me identify the dealers that should contact me.  I don’t know whether the dealers actually didn’t receive the specification sheet or if they didn’t feel that they could rely on the information? In any case, it was an unnecessary bit of extra work for the customer.

Breakdown#2: Dealer Stuck in the Stone Age

The first dealer contacted me to confirm my information, which I provided. They also confirmed that they did not have the truck I was looking for. I asked Dealer 1 if they would help me either order or locate my truck, and if they would give me a price. Dealer 1 would not do any of this until I agreed to come in to meet the “Truck Specialist.” I confirmed that I already knew exactly what I needed, and that I didn’t need the Specialist. Dealer 1 would not do business with me unless I agreed to waste my time. Dealer 1 was out.

Breakdown#3: Dealer Thinks I’m a Deadbeat

Dealer 2 took my (repeated) information and conducted a search within a 400 mile radius. The closest match was not very close, including $1,500 of features that I did not want. Dealer 2 said that they could order the truck that I wanted, but it would take 10 weeks to arrive. Dealer 2 required a $4,000 deposit to place an order. Further, if I didn’t buy the truck, the deposit would only be refundable if/when the dealer sold the truck. Dealer 2 explained that this large, semi-refundable deposit was required by dealership policy, because the dealerships had been “burned before” by customers ordering what they wanted. Dealer 2 was out.

Breakdown#4: Dealer Gets the Order, but 8 Weeks and more Data Re-entry

Dealer 3 took my information and offered to order a truck with a $500 deposit. I agreed to give Dealer 3 my business and dropped off a check. Amazingly, Dealer 3 told me that the order could not be entered for another 3 days or so. My first question is why the order that I had carefully completed on the Chevrolet website and routed to the selling dealer would have to be re-entered by the same dealer? These two systems aren’t (or can’t be) connected? And the next question is why it should take 8 weeks for a standard order to be processed? This is inconsistent with customer experiences formed by next-day deliveries. It is also inconsistent with the Chevrolet website experience, which guided me to the precise truck that I wanted. The rest of the system needs to be aligned to deliver that specific truck promptly in order to meet connected customer expectations.

How a Connected Shopping Experience should work:

I’m now anxiously awaiting word from my dealer about production and delivery of my new Colorado. Over the next 8 weeks, I hope that I will see Chevrolet take advantage of opportunities that should come with a fully connected production system and a fully connected truck:

  • Build Progress: I should be able to track the progress of my order as it slowly moves toward production. I hope to get regular updates and indications of a likely production date.
  • Build Verification: Since the truck has a built-in telematics system, I expect to get an email or text from my new truck when it first fires up at the factory! Maybe a report on passing all of the end-of-line tests, showing no faults and readiness to be shipped?
  • Order Tracker: That connected truck should also let me track it as it moves from the plant to the dealership, and then text me when it arrives.
  • Personalization and Set-Up: Finally, before my truck gets delivered, why not let me input some of my preferences, so they are already loaded when I get in? Let me configure my radio pre-sets, set my preferred temperature, and configure some of the many settings in the infotainment system? I think I’d rather do that on-line before delivery. As an extra benefit, I could learn about all of the truck’s great features while deciding on my preferences. Seems like a better experience and a more efficient process for everybody.

We will see. Meanwhile, I’m looking forward to driving that brand-new truck.

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OEM to Transportation Service Provider — Easier Said than Done!

Intense OEM Activity

Over the past year or so, several auto manufacturers, or OEM’s, have announced their intention to make a shift from manufacturing cars and trucks to become providers of comprehensive transportation services.  And their announcements are backed up by multi-billion-dollar investments. 

In December, Hyundai announced its intention to “Transition into a Smart Mobility Provider by 2025” as part of its 5-year, $40B capital plan.  Following that, Herbert Diess, CEO of Volkswagen, said in January of 2020 that, as VW shifts to become a maker of electric vehicles and connected cars, “The era of the classic carmaker is over.”  In April of 2019, Ford implemented a re-organization, which placed Jim Farley as President of New Business, Technology, and Strategy.  Farley’s responsibilities include Ford’s Smart Mobility business, which is intended to invest in and create new mobility services. Finally, General Motors unveiled it’s “Origin” autonomous vehicle in January of 2020.  In response, a NY Times article covering the unveiling reported that GM’s plan was not to sell the vehicle, but rather to use it as part of an autonomous taxi service operated by GM’s Cruise subsidiary.  Other global OEM’s have made similar announcements.

Why OEM’s have their eyes on Transportation as a Service, or TaaS

The OEM’s interest in becoming transportation service providers is understandable.  They see growing interest of consumers in purchasing transportation this way through ride sharing, micromobility services, etc.  This causes the OEM’s to fear a shift of customer loyalty toward the providers of those services, and away from the manufacturers.  OEM’s are also widely installing Connected Car technologies, which allow for easier remote management of fleets of vehicles.  But it is not easy to become a service provider, and it is even harder to do it while continuing to be a profitable manufacturer. 

Challenge #1:  Running a Service Business Requires New Skills

Today’s OEM’s are very good at efficiently manufacturing huge volumes of complex vehicles with high reliability and consistent quality.  OEM’s are good at logistics and supply chain.  OEM’s are good at product and manufacturing engineering.  OEM’s are good at product design.  But OEM’s have very little experience with managing 1:1 customer relationships.  In managing a service, every single customer experience is unique.  To be successful, a service provider has to be great at listening to and evaluating customer feedback.  A service provider has to quickly adjust their service to match changing customer needs (no more 4-year product cycles!).  To be profitable, a service provider has to rapidly adjust capacity and pricing to match demand.  To their credit, many OEM’s are experimenting in these spaces through investments in start-ups and through services pilots.  They are certainly learning from these experiences.  But to be successful and to successfully shift their business models, OEM’s will need to gain a lot more experience.

Challenge #2:  The Services Business may not be Aligned with the Manufacturing Business

Several OEM’s have painted a vision of providing comprehensive transportation services for consumers — from bikes and scooters, to cars and trucks, to buses, planes, and trains.  No OEM has indicated that they intend to make every device in the chain, but most indicate that they plan to use their own cars and trucks within their transportation service.  The challenge comes when the OEM doesn’t happen to make the product that is best suited to the needs of the transportation service.  For example, suppose the transportation services needs a standard midsize sedan as part of its service suite.  What happens if the parent OEM doesn’t make the most space-efficient, or most reliable, or most fuel-efficient midsize sedan?  Should the transportation service have the freedom to buy the best vehicle for its service, or will it be forced to buy a sub-optimal sedan from the parent and eat the loss in efficiency or revenue?

Challenge #3:  Competition with the OEM’s Traditional Customers

Before it was called “Transportation as a Service (TaaS),” or “Mobility as a Service (MaaS),” this concept had another name:  the Fleet Business.  Rental companies and Fleet Management companies have been in the business of providing transportation services for a long time.  These Fleet customers can represent 20% or more of some OEM’s sales.  Fleet customers will see a move by OEM’s into Transportation Services as a shift from the OEM as a Supplier to the OEM as a Direct Competitor.  In order to maintain their sales volumes, OEM’s may have to choose between serving their traditional customers and building their new service businesses.

So, all credit to the traditional OEM’s for recognizing the growing customer interest in transportation as a service.  They can take credit, also, for seeing the potential for disruptive business models that are enabled by Connected Car and other technologies.  OEM’s may find, though, that their new TaaS businesses may need to quickly become much more independent in order to  be build the necessary skills to grow and become fully successful.