The automotive industry is reaching a turning point. In our Data Insiders podcast, we discuss its potential futures with Elektrobit’s Moritz Neukirchner and Tietoevry Create’s Piotr Romanowski.
But what does it mean for the industry and its customers when manufacturers must quickly pivot to a world driven by software and data?
At its core, the automotive industry has traditionally operated with clearly defined roles. The car brands we know and love primarily focus on building the hardware, which is why they are called OEMs – short for Original Equipment Manufacturers. But now, to meet the evolving demands, the same companies need to quickly adopt a tech-company mindset, a transition that has proved to be anything but straightforward. Are there ways to turn these challenges into better customer engagement and new data-driven opportunities?
In the new episode of our Data Insiders podcast, we seek answers to this question with some of the brightest minds working in the heat of this revolution. Moritz Neukirchner is the Senior Director of SDV Product Management at Elektrobit, an automotive software company known for its forward-thinking solutions. Joining him is Piotr Romanowski, Manufacturing & Automotive Principal at Tietoevry Create.
The resulting discussion covers a wide array of topics: what constitutes an SDV in the first place? How should automotive companies transform their business models? What does the new approach mean for user experience?
For most people, a car is one of the most significant investments they make in their lives, second only to buying an apartment. As connectivity, frequent upgrades and new features have become the norm in most expensive devices, it makes sense that the customers expect that their vehicles should be no different.
As a buzzword, SDV has perhaps been used a bit too eagerly by marketers. This is why Neukirchner has proposed a classification system that helps both companies and consumers make sense of their expectations.
“A car only really starts becoming an SDV when the end user sees that it gets better over time with additional functionality and new services,” Neukirchner explains.
“For example, live traffic information or security patches do not count. The vehicle needs to offer upgrades, not just updates.”
The highest level of the classification system – yet to be reached – is when a car becomes an innovation platform for both the OEM (Original Equipment Manufacturer) and third-party developers, offering the same constantly improving features and customizability for both old and new car models. It’s easy to see how this philosophy could create value for both the end-user and the companies – so why has the automotive industry been so slow to make it a reality?
“OEMs are not software companies,” Romanowski notes.
“Understanding this, it’s easy to see why the progress towards SDVs has not been as swift as in other industries.”
Neukirchner agrees: compared to automotive, the tech world has been operating by a very different playbook. This means that the entire supply chain needs to be reworked, and new collaboration methods between OEMs and software providers created from scratch.
When we envision how SDVs should work, the world of smartphones is an obvious point of comparison. However, both Romanowski and Neukirchner warn against following the app store model too closely.
“With private customers, it’s difficult to get them to pay for features they already have on their phones,” Neukirchner says, suggesting that the expectations for copying this kind of monetization model are sometimes too high.
Where SDVs can offer massive, and still largely underutilized returns for investment is in data. Neukirchner believes the potential to be tremendous – but a clearer focus on what makes driving a car such a unique use case is required.
“A modern car is essentially a big moving sensor. It has business cases that no smartphone developer would touch because they are so specific to that environment. This is also where the true value lies for the high amount of data these vehicles can produce.”
Romanowski elaborates on this idea:
“Data acquired from vehicles can be leveraged by providing access to different companies, developers and service providers. There’s a lot to gain for OEMs in this business model that goes way beyond selling cars and spare parts.”
With increased connectivity, another aspect that SDVs have the potential to revolutionize is the interplay between the car brand and the end user.
“Right now, OEMs mostly stay in touch with the customer via dealerships where they go for service,” Neukirchner states.
“With SDVs, this model is changing: you really want to have a continuous relationship with the customer throughout the lifecycle of the car.”
Increasingly, we will see the familiar car brands expand their role into service providers. The organizational changes this requires will no doubt be significant.
In the end, this need for a new kind of customer-centric culture might just be one of the most essential components to which companies will eventually end up as winners in the SDV race. Neukirchner shares that at Elektrobit, this is always the approach when it comes to exploring new territory.
“We need to look at new technologies like AI from a customer-facing perspective – there is great potential in improving the user experience with context-aware solutions.”
With all its complexity, much of the discussion over SDVs ultimately boils down to a simple question: what would the person behind the wheel find helpful?
Interested in learning more about this topic? Listen to the full conversation on our Data Insiders podcast below!
Data changes the world – but does your company take full advantage of it? Data Insiders is a podcast where we seek answers to one question: how can data help us all do better business? The podcast addresses the trends and phenomena around this hot topic in an understandable and interesting way. Together with our guests, we share knowledge, offer collegial support and reveal the truth behind hype and buzzwords.