DETROIT, Michigan – Each day the auto industry readies itself for more culture shock as it embraces technological change by an order of magnitude. What are the innovation factors driving the technology curve in global automotive development? Connectivity, safety, personal mobility, comfort, convenience, and more. With the arrival of technology giants Google, Apple, Microsoft and others to the auto industry, the strategic research and development conversation is shifting dramatically as cars are transforming into autonomous computers on wheels.
The intersection between Detroit and Palo Alto is today what’s connecting innovation and relevance in the auto space. The convergence of technology and innovation in our daily lives by means of our vehicle is mostly consumer demand-driven. Automotive OEMs are vigorously looking for technology to complement and differentiate their products, but their hesitance to be leading-edge (versus a fast follower) stems from obsolescence issues, how to control costs, and the ease or challenge of integrating technology into their manufacturing and product processes. Cost is the constant delta in how and where to apply technology. Even though technology costs at times outstrip the economic value of the product itself, demand for new technology adoption in the automobile remains steep.
The nature of disruptive innovation is changing by means of strategic discipline, new product marketing, and new innovation methods, and mostly because of the arrival of Silicon Valley to the auto scene. Collaboration is the only affordable and proven path to innovation, as today we see unprecedented collaboration between Detroit and Palo Alto. Partnerships with Silicon Valley companies provide automotive OEMs with the means to participate in a wide range of development projects that would otherwise be cost-prohibitive, such as the connected vehicle and the autonomous car.
Nevertheless, as exciting and leading-edge as these projects are, the path to move them to commercial success has many legal, warranty and regulatory hurdles, to name a few. Detroit understands these complex obstacles well, Silicon Valley not as much. In the battles to build and hold markets, issues of principle, fighting and losing may seem to be a better outcome than compromise. But is inflicting pain preferable to gaining new perspectives of leading-edge technologies? In the end, if there is revenue to gain, and if indeed the pie is increasing rather than shrinking, why not collaborate? This is a lesson that business has learned and it’s being applied correctly in the auto space, where each party brings its own valuable and unique experiences.
The business and technology collaboration between Detroit and Palo Alto is not without some risk. There is both risk and opportunity ahead as Silicon Valley now shapes much of the automotive conversation. The future technology trajectory is tricky when you consider historically how different Detroit is from Silicon Valley, from its traditions to its planning processes and its people. The traditional automotive industry is risk averse as it continually faces severe regulatory rigors – in contrast with the attributes of the high-tech industry: risk tolerant, open innovation, open culture. When we acknowledge that the vehicle may be evolving into a rolling IT platform, we must both respect and challenge these “mindset” differences between Detroit and Palo Alto.
Silicon Valley and its “internet of things” thinking is a boon to the automotive industry at this time because it is forcing the OEMs to approach problem-solving and “ideation” differently. But the issues driving technology alliances between auto and tech companies go wide and deep, creating blurred lines between who is competitor and who is partner. The spin-off markets being created – such as V2X (vehicle-to-everything) – are vast and, when coupled with new infrastructure investments, they force OEMs to re-think their purpose and strategies. The tech firms are shaping these innovation discussions largely because their products and ideas are what’s driving consumer preferences.
What we’re seeing throughout the industry today is much more than the sizzle of new trends or simply idea generation for the sake of it. We’re now seeing fresh ways to link consumer needs to radically different methods of evaluating, selecting, prototyping and commercializing new concepts, which are transforming traditional areas of planning, engineering, and applied design. The unique vehicle connectivity alliances now in place signal an acceptance of innovation as a new way of life. And, it brings a fundamental change in how the industry views its competition, solves problems, and creates new products within the context of new mobility.
“Facing competition from technology-based mobility-sharing companies, most of the top ten automotive manufacturers have ventured into car sharing, either through tie-ups with existing players or by establishing their own new business lines. It is clear that automotive majors will need to move from a product-centric to a service-oriented mindset if they are to remain competitive,” Randy Miller, EY Global Automotive Leader, said recently.
So, perhaps we all need to pay attention to the merits of new models of collaboration. “Picturing yourself on the side of goodness in a battle between right and wrong is self-satisfying, but it can blind you to practical solutions that wouldn’t require anybody to violate their values,” said Michael Wheeler, Professor at Harvard Business School. Wise words. Helping the other side see the middle ground or a new point of view is worthy when making progress is otherwise thwarted. Detroit and Palo Alto have brought together their traditional and progressive views and are making a significant impact working together. Now if only Washington could be made to cooperate instead of clash…
Phil Biggs is Executive Vice President for the Nashville, TN-based technology company, NeXovation.
