What mobility can learn from a quarter inch hole
Mobility is transforming, not only itself but our behaviors, cities and economies too.
by Jochen Renz
Ted Levitt’s much-quoted mantra that “people don’t want to buy a quarter-inch drill, they want a quarter-inch hole” is useful in that it succinctly sums up the philosophy behind the changes that the automotive industry is witnessing today.
Taking the manufacturing of mobility products as a starting point. If you look at Europe and the United States, OEMs drive a lot of sustained innovation with an evolutionary, not revolutionary approach. They are value chain masters. Only 20% of the vehicle is being produced in-house and 80% of the value add comes from other supply chain players. Within their existing ecosystem they are kings, but in a world where that paradigm is changing, automotive giants become vulnerable.
It is no longer about the car. It’s about addressing people’s mobility needs, getting from A to B regardless of any single product. When you look into the assembly line of your traditional OEMs, the entire cockpit is delivered by Tier 1 suppliers just in time and in line, sequence specific to an individual assembly order. The orchestration of a complex supply network and the speed and precision at which cars are assembled with minimal defects is nothing short of impressive. But what happens once the car rolls off the assembly line and is delivered to a dealership for sale? From a car maker’s perspective nothing much. Automotive brands spend a lot of money on marketing their brands, but they fail to engage their customers over the entire vehicle ownership life cycle. This is what the industry calls “Ship to Forget”. Apart from a product recall or warranty claims, consumers have little if any touch points with carmakers.
But the OEMs of tomorrow, take Tesla for example, are playing the game in an entirely different way. Teslas are more like computers on wheels than just a car. They “Ship to Remember” first and foremost – constantly staying in touch with their owners. They see how customers use the vehicle on a daily basis and create passionate brand enthusiasts along the way. To a point where consumers happily share data from their onboard systems to help Tesla not only improve their cars, but teach them how to drive autonomously. Through over the air updates Tesla provides new features and monetizes the relationship with the consumer beyond the initial purchase.
Elon Musk understands that the car of the future is part of a larger ecosystem, so he opted to build it. Besides a comprehensive network of electric charging stations, Tesla is also in the business of generating renewable energy using SolarCity and more recently through the Tesla Solar Roof. But the shift towards ecosystems goes much further.
Traditionally the industry has been organized alongside horizontal silos: suppliers, OEMs, dealers and customers. The future of mobility might be a less car centric and more about intelligently connecting different modes of transportation – not just shared cars, but public transportation, new forms of vehicles such as electric bikes, personal electric vehicles, skateboards etc. We might even want to encourage people to walk – and redesign our cities to become more walkable. The new mobility world may allow cities to repurpose parking spaces and create more liveable cities by giving public space back to the community. To create pedestrian zones, street cafes, parks and playgrounds.
In the United States, any car has a total of four parking lots and spends 96% of its life stationery. The cost of providing parking space for the community of vehicle owners is largely carried by society. Not only is space being wasted, but it is being wasted unnecessarily. The norm right now means that the drill is only being used 4% of its lifetime. Tesla is introducing ideas to combat this wastage – if a Tesla isn’t being used its owner can make it available to others and the car might be able to pay for itself. In 2014, approximately 440 million parking spaces across Europe, split between the functions residential, work, shopping, airports, railway, hospitals and leisure.
There might always be users who like to own a car. And one of the main questions today is why do people own cars today? What do cars mean? What does property mean for us? Ultimately people like to own something, especially if it has an emotional value for them or is a representation of their status. Is the shared economy compatible with our very DNA?
With ageing populations, increased urbanization and a younger generation that wants to free itself from the burden of ownership, we will see a decline in car ownership in favor of on demand access. Mobility evolves, but, like the horse, older models of transport will never disappear entirely – there will still be privately owned Porsches and Ferraris. But for the everyday person, car ownership might go away. At the end of the day, autonomous taxi fleets will create a compelling cost advantage over owned vehicles. A recent study by Rethink estimated transportation-as-a-service (TaaS) using a shared fleet of autonomous electric vehicles could be four to ten times cheaper per mile than buying a new car in 2021 and two to four times cheaper than operating an existing vehicle in 2012.
The sharing economy will emerge in different forms in different places. In the developing world we have countries where this model is the only hope in providing affordable mobility to a large part of an underserved population. Africa skipped landlines and went straight to the cell phones. The same thing might happening in car ownership – many will never own a car but will have access to mobility. In the developed world, the sharing economy might be our best chance in avoiding gridlock in view of the finite capacity of existing infrastructure and global warming. We simply can no longer afford to waste our life in traffic jams, sitting in a 2 ton car all by ourselves.
We might end up sharing assets. And we might not even own cars in the future. Instead, we will access them on demand whenever we need them. But is the sharing economy we see today really a sharing economy? Given the importance of mobility to provide access to education, jobs and social life, should we really make ourselves dependent on powerful platforms that extract profits from every trip? Do we want platforms that provide a mobility service without owning assets or taking social responsibility for their drivers?
Ride-hailing services are multi-sided platform businesses that essentially leverage data to match demand for mobility services with supply created by independent drivers and their vehicles. They establish trust between the requesting passenger and the driver and facilitate financial transactions. In a true ‘sharing’ economy we are ‘prosumers’ – driver today, passenger tomorrow. We rent an underutilized vehicle to a driver to monetize the vehicle by transporting passengers. Just like we borrow a drill today from our neighbor.
What if we could leverage technologies to establish trust between peers without a central intermediary? What if we could set our own terms in our local communities and provide a living wage to drivers as members of our local communities? What if we could engage in a true peer-to-peer sharing economy without the need for platform intermediaries? Blockchains and, more generally Distributed Ledger Technologies, form the basis for such a future. They create a shared, self-sovereign identity to create access to a variety of mobility services and enable peer-to-peer transfer of assets and monetary exchange.
Distributed Ledger Technologies also enable us to retain control and ownership of our data. Today we generously give away our most personal data to platforms in exchange for “free” services. Our data is valuable. More valuable than most people realize.
Should we give up ownership and control of our data, the key asset that fuels the new age of mobility? Given that data forms the basis for machine learning and AI, we must more than ever care about who has access to our data. Shouldn’t we have our very own personal digital assistant learn our unique patterns and find that best ever quarter-inch hole? After all, there are many ways to drill a hole in the world of multi-modal, on demand mobility.
Maintaining control over our own data is not selfish but smart. The people in a community share an interest in clean air and a functioning, affordable transportation system. As local citizens, we might be willing to share certain data to mesh it with data generated by public infrastructure across our smart cities. ‘Data as a Commons’ enabled by Distributed Ledger Technologies provides smart cities the data required to make smart mobility and transportation a reality without impacting our privacy or giving up the rights to our data.
The ultimate problem for the mobility sector will be how to address our individual mobility needs as part of a thriving community of shared interest. Cities and people will all have to adapt to the rapid changes that are coming and solve their own quarter inch drill conundrums. New promising technologies and business models will emerge. But we should always keep in mind how critical access to affordable mobility is to social mobility and the wellbeing of our communities. In that sense, mobility is almost as important to a society as affordable and clean energy.
The world of mobility will see profound change in the years to come. Traditional product-centric supply chains make way for consumer centric business networks that seek to deliver the best quarter-inch hole. This year Ford changed its name from the “Motor” company to the “Mobility” company and replaced its CEO to embrace this transformation. Other automakers are following a similar path, knowing that they will need to adapt to survive. The auto industry can either be a part of the problem, or a part of the solution.