Shifting Gears: The New Requirements for the Automotive Industry

ConcentricStrategic Decision Making Shifting Gears: The New Requirements for the Automotive Industry
automotive industry simulation concentric

Shifting Gears: The New Requirements for the Automotive Industry

Years ago, I sent information via Telex, a tedious and expensive way to get our message out.
 
The day our first fax machine came in, I was ecstatic.  I could print a hard copy out and then lay it down and send it out.  All I had to endure was a high pitch eeeaaaah! and I was on my way.  Enter then email, text, sms, snapchat, kik, etc. The evolution was phenomenal, fast, and catastrophic to many businesses along the way.
 
As a buyer of products, I enjoyed the miniaturization and transformation. As a user of the equipment, I marveled at the value and productivity I received. I am not sure that I could have managed as a manufacturer. In my lifetime there have been over 17 changes to the way I communicate – a sea change every three years.

 
The automotive industry faces a similar scale of transformation. A meme is emerging throughout consumption.  Cars are no longer transportation. Brands exist in a world where experiences are more importance than things.  Consumers aspire to the ethereal more than they desire enablement. Let’s take a look at how experiences are rising in importance. Then, how experience will impact autos and what can manufacturers do about it.
 
[bctt tweet=”Brands exist in a world where experiences are more importance than things. ” username=”concentricmrkt”]  
PWC estimates consumers will spend more on expenses than retail goods this Holiday season.  That sales result is a first. Management consultants are quantifying the value of experiences.  Group XP has produced a list that rates brand experiences.  In fact, they have created taxonomy for measuring experiences and the equity tied to them. In the top twenty, Tesla is the only car company that makes the list.  As a threat to the incumbents, it has already won the first battle in redefining experience.  Their recently quarterly earnings show dramatic traction.   How did they reach the top?
 

  • Buying – The redefined the notion of a dealer.  Locations were different. Instead of the auto strip. They went to malls. Instead of high-pressure pricing tactics, negotiations are clear and crisp. Small, nimble, and designed for consumers are beating rigid laws and controlled environments.

 

  • Engineering.  Powertrain out. Gas out.  Battery, redesign the basic manufacturing.  Interiors luxurious.  Price for value delivered not for market share.  The rulebook went out the window, and the consumer needs replaced it.

 

  • Attitude.  The company matches its consumers.  Breakthrough. Breakaway. Environmental.  Cool. Good looking. These characteristics define the brand. They decided who they want to be and they became it.  The vision was for where they wanted to be not what was “doable”.

 

  • Software. Tesla has two systems in its cars.  The one that powers the vehicle and the one the powers the experience.  Their software is able to attenuate driving, enhance features, and add extra. They can do this as fast as I can download an iPhone app. Okay, a large one. Features evolve with updates.  The consumer experience has a better chance of staying relevant.

 
These big ideas link to small details that make a difference.  They have conceptualized a car from transportation to a dynamic experience that ever changes.
 
Most manufacturers are unable to redefine their entire lineup and dealer network. Yet, manufacturers must create new experiences. They must do so through new techniques where they cannot reinvent. They are doing many things to find new experiences. 
 

Most car manufacturers are unable to redefine their entire lineup and dealer network. Yet, they must create new experiences.
 

  • Measuring: On-board computers a vital part of the cars operating system. Manufacturers who export this data will find new opportunities.  They will be able to see when a car is idle.  Is this an opportunity for ride sharing, car sharing, or a direct to car delivery. Usage of the radio or auxiliary device will show new paid media opportunities. Speeds and mileage compared to parts replacement and service orders will improve engineering. Telemetry data is a means to discover experiences that are outside the car.

 

  • Observing: It is hard for consumers to remember what happens to them in a car.  They have feelings and memories, but they confuse reality with impressions.  In-car observations through cameras that match up their behaviors with car usage.  These comparisons identify what experiences are missing in the car.

 

  • Segmenting: Traditional notions of segmenting often refer to differing types of consumers.  The importance of these traditional tools will not fade. But, future segmentations will be much broader and look at ways to segment the industry.  Government regulation will drive this approach too. Automakers must find segments to produce cars that meet fleet requirements for MPG. New entrants such as Tesla, Google, Apple? will also put pressure to carve out niches. Tighter business discipline in defining markets has many supply chain effects. Design will be closer to consumers and marketing will be closer to design. Product development times may not drop but effective share capturing designs will rise.

 

  • Scraping:  Social networks have always had a role in how consumers made decisions.  Researchers have found various ways to ask about a person network.  Who influences them and when. Consumer recollection of these interactions is blurrier than their actual car experiences. A new paradigm of research is emerging, digital ethnography.  This approach tracks behavior of individuals.  What did they post?  What did they read?  Who did they talk to and who talked to them.  Mountains of websites, Internet traffic, combines to create details social graphs.  Huge records of individuals create a wealth of social behaviors.  Ranking this data by activity volume will show what is important to consumers.  Car design and features that are creating new experiences will have new features.  If you are a tailgater – maybe there is room for a cooler.  Pick up elderly for your church; maybe there is a built-in step stool.  

 
The goal is to make sure that the gap between cars and consumer desires stays close. New combinations are the little things that create experiences.  
 

The goal is to make sure that the gap between cars and consumer desires stays close.
 
So the auto manufacturer to-do list is long.  Meet consumers’ new desire for experience. Thwart new competitors who are not bound by legacy infrastructures. Defend share against well-financed entrenched competitors.  Collect and process data and alarming levels of depth and complexity. Bring together divers global teams of experts.
 
To do all they must develop a new means of planning. Their process should lead to new models that deliver actionable insights.
 
1. Define.  Document the business questions you want to model. Frame the components of the market with direct and indirect competitors. Think about the outcomes to test and forecast before starting a project. Establish what past and future periods are in the planning horizon. The key skill here is the ability to tell a story.  What is the narrative of our future?
 
2. Integrate. Currently, most data resides in isolation.  As the new skills become more active, data will increase. It is unlikely that any one team will manage this data.  To bring all these inputs together, managers must think small.  Small data leads to actionable insights faster when paired with the right tools.  The connection between data and business question will never be more important.  The new skill here will be to scale back on data and scale up on the insights to fill new tools.
 
3. Validate. Most marketers confirm their decisions by using logic and reason.  But, these two will not work in the future. Marketers will have to improve their approach to decision making. They will need to move to a more scientific standard.  They must go beyond measures of success like sales and share.  They must include measures of accuracy in their forecast.  They will find confirmatory evidence to support their theory on how their market works.
 
4. Evaluate.  Managers will need to learn to test and check.  They will track their predictions and course correct when their forecasts veer off course. They will increase their dependence on systems and use them to augment their intelligence.  They will be looking for the latent and hard to observe.  Small differences will be the arbitrage that creates advantage in a segment.
 
5. Experiment. Companies will no longer explore new ideas in the market.  The cost of building and learning is too expensive. Systems like simulation will allow teams to test. Virtual competitive gaming will end bad ideas in minutes instead of weeks or months.  Speed to market will increase, as time wasted on bad ideas will end. Product design and engineering use simulation already for development. Now this technique will come forward to simulate market dynamics, competitors, and consumer preference.
 
The overriding requirement for this new process to succeed is a change in culture. Learning must be the new mantra. Teams committed to breaking out toward new experiences must fail fast. They must answer these question:  budget, social, marketing, timing, feasibility, positioning, launch and strategy. They must do so with new scientific precision and at a pace that is fast. 
 
[bctt tweet=”Those focused on creating new experiences for their customers must be open.” username=”concentricmrkt”]  
So the student must become the teacher.  Those focused on creating new experiences for their customers must be open.  They must be willing to experience a new way of doing things.  It is likely to be awkward.  It will be challenging. But it will be rewarding both in what it teaches and what it creates.
 

No Comments

Leave a Comment