Going to hit the wall? Where OEM’s need to urgently start transforming…

This year at CES, trends are getting confirmed. Autonomous and smart mobility seems closer than ever.

Let’s be clear: Level 5 (the autonomous car you will buy and that can go everywhere) is a Grail that will not be achieved easily. It is now understood by (almost) everyone that you won’t own a car without a steering wheel before years if not decades and most likely you will never own one.

But who cares? You will never want one. Depending on where you live and where you want to go, you already don’t always use a car. Trains, buses or planes are already often the preferred if not the only mean of transportation for long distance. So-called level 4 geo-fenced autonomous services will start in some areas for specific usages. And not waiting for autonomy, new forms of mobility have already started to spread…

The question is where, when, for which usage and what?

“Where” and “for which usage” are more important questions than “when”. In the case a mix of different means of transportation becomes available, more convenient and economical than the burden of owning and maintaining a car, ownership will decline. In fact, it is already happening in big city centers today…

As young generations are more inclined to adopt new forms of sharing economy, this will accelerate.

Autonomy will be the next trigger for further acceleration, as it will significantly reduce cost and solve the problem of lack of availability of drivers in many regions, and as it will improve the safety and efficiency of transportation.

For the last 3 years, I have always predicted that those new forms of autonomous mobility will first appear in 2020 in experimental form before spreading rapidly from 2025. There is no motive to make me change opinion, on the contrary.

What will those new services and products be? It will depend on which usage and where.

Let’s take some examples: In San Francisco,  the #1 problem is scarcity and cost of real estate. Having people starting working when they leave home and reducing commuting time will increase the size of livable extended city. In Japanese countryside, the problem is ageing population in a country where driving license is not automatically renewed after a certain age and where lack of manpower makes public services like buses or even taxis become scarce. For spreading of e-commerce services, logistics is a bottleneck and will require new solutions. In Indian megacities where density of population is already at record level and constantly increasing (27000 people per km2 in Mumbai for example), individual ownership is simply unfeasible. New forms of commuting for big “3 shifts” I.T. help-centers for example will exist together with goods delivery and will require innovative people and goods movers.

None of the vehicles optimized for the 4 above examples exist today (mobile offices, autonomous low speed shuttles for disabled and aged passengers, optimized delivery pods and drones, versatile usage shuttles for dense areas) and the number of different use cases will reach dozens or hundreds… So will the local requirements by type of usage (because of infrastructures, political orientation of local governments, purchasing power, customer preferences, density of population… and simply because it is in human nature to want to differentiate and innovate…)

And this is where the problem lies!

OEM’s are currently totally unable to meet this increasing number of requirements in a timely manner.

Today most, if not all, OEM’s product planning process freezes portfolio 5 years in advance (after a period of exploratory stage in case of innovative vehicles). Then, a concept phase of generally 2 years converges to detailed level of innovation and design and is followed by 3 years of development.

And all is done at central level!

In short in 2019, OEM’s will be deciding the portfolio of global vehicles that will be launched in 2024 with little flexibility to modify them afterwards.

There is a reason for that: the current level of constraints, in terms of financial and technical resources, marketing and manufacturing capabilities is such that this complicated equation with multiple unknowns has only few solutions. And this equation has to be resolved every year.

This means that 2025 line up is to a large extent already known (not of course in the detail of design, options or features but in terms of number of main variants, technologies, regions of destination, mains characteristics…).

In a volume industry where economies of scale are critical and where regulatory and customers needs are to a large extent similar in all parts of the worlds (safety, technical solutions offered by an always smaller number of suppliers, typical usage in terms of speed, load, maximum number of passengers…), it is not an issue.

But in 2025, usage will become more important than just cost… Cost was already replaced by Total Cost of Ownership (TCO) and will be replaced by value of usage at best cost when ownership will give place to usage. If you are a logistic company with bottleneck been the ability to recruit drivers, saving a few dollars on the vehicle makes little sense versus the possibility of increasing your level of productivity. For passenger cars, increasing, from 4% to 20 or 30% (or from 1% per seat to maybe 15%), the usage rate is more important than reducing production cost by an additional 5%. And all requirements such as durability will have to be reinvented…

In short, the rules of the game are completely changing…

Together with new development software and electrification of powertrain, new players are already coming: Tesla has become, in a few years, the leader in EV or simply the leader of premium segment in many countries, StreetScooter, a startup purchased by German Post DHL, beats traditional OEM’s offer for electric last mile delivery  in Europe, Navya or Easymile are testing their autonomous shuttles in many places around the globe, and so many others are coming, small of big: GLM, XYT, Nio, Byton, Zoox…

And many are not even known today. In fact, I discover new actors every week if not day! In China alone there are at least 60 startups proposing or about to propose EV’s. 

Suppliers are also showing, as we saw at CES, they have the capabilities to develop their own vehicles… as well as giants coming from other industries: JD.com, Baidu, Apple, Google, Dyson, Ola…

When I think that only 10 or even 5 years back, I believed only established OEM’s would ever develop, produce and sell cars.

And beyond cars, new means of transportation are coming on roads (2, 3 or 4 wheels), below ground level (Hyperloop) on in the air (drones)…

This is where the gap is. It is a huge gap between established players offering a lineup of centrally decided, long in advance, limited number of vehicles targeting average new car buyers (in the best case intenders) and new players ready to meet, in a timely manner, a variety of new needs that are still waiting to be discovered.

Current product planning processes cannot give the answer for 2025 multiple forms of mobility…

This is why OEM’s will have to dramatically transform in 3 areas:

  1. On a long-term basis, the technical bricks to be prepared need to change their nature. Historically until the 70’s, each individual car was designed from scratch. In the 1980’s the idea of shared technical platforms was invented. It allowed starting mutualizing production costs and development. Then, to accelerate spreading innovation in always more diversified line-ups, mechanical module strategy was implemented in the 2000’s. In turn, this will give place to what is called Model Based System Engineering or MBSE in the 2020’s. To make it simple, MBSE means that on top of mechanical modules you add a layer of logic. To do a vehicle with a certain level of autonomy, you need to define upfront what the role of each module will be (in terms of censors, actuators, electronic architecture and software for example) otherwise the parts, when assembled, won’t deliver the requirements. This is why it is also called RFLP (What Requirements? Avoid accidents, drive alone in certain conditions… What Functions? Brake, accelerate, turn… What Logic? Inform, communicate, compute, actuate… What Physics? Parts, components, software…)
  2. Secondly, the place where solutions are built need to shift from central to local. To be able to meet clients’ requirements (or even better, anticipate them) the level of customer understanding needs to be dramatically improved. And this needs to be done at an unprecedented level of granularity, locally and in terms of usage…This means that from a central product planning function, OEM’s need to build a network of entities that are able, based on the existing or coming modules, imagine, design and execute optimized services/products. This will require a paramount change in the structure of the local organization. From distributors, pushing cars, local entities will become market and data analysts understanding the potential of state of the art technologies, customers’ businesses and needs and be able to design and deliver outstanding experiences. This will also require new forms of capabilities and tools. Collaborative digital spaces in forms of open and digital, data driven internal or external “market place” platforms will be necessary.
  3. This will require a huge effort in the mindset and decision process of OEM’s. On top of technologies, tools and organization, mindset of OEM’s will have to transform. Today, car executives, and I was one of them, like saying they are the father or mother of such or such car. Deciding products, freezing designs, selecting campaigns is part of top management preferred activities. They have to just forget about it. Their roles will become, more than now, to write and share corporate vision, associated with business models and core technologies, define brand promises and ensure their execution. Then, local entities will have to be able to deliver in a short period of time coherent products and services to serve this frame of vision and promises. They will need more freedom to decide close to the local field, Japanese would say Gemba, and the guidance of a collective strategic frame. This is the essence of The Third Road of Management: freedom within a frame.

If automotive companies want to be ready for 2025, they will have to be operational at least in some areas with resources and capabilities available by 2023…

There is no time to lose…. Some companies, not all, have already started to build their MBSE bricks but few have even imagined the other implications in terms of organization and mindset…

Not closing the gap means OEM’s will lose their relevancy. They have a huge advantage in terms of market presence, know-how, technical expertise and financial power… But this will not be enough in 2025.

They need to transform their product planning process.

It is time to do it. Now!




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