Skip to content

The auto industry of the future is collaborative and borderless, says IBM

IBM’s recent automotive industry executive research study generated some surprising results

At the recent Automotive Megatrends USA conference, IBM’s Kal Gyimesi opened proceedings with a breakfast briefing. Gyimesi, Automotive Marketing Leader for IBM Analytics, discussed the key findings of the company’s recent research study, “Automotive 2025: Industry without borders”.

Megatrends shape industries, and the speed at which change occurs can be accelerated with support from disruptive technologies.

The ‘automobile’ was a major disruptive technology when it was introduced around 130 years ago. Since then, the automotive industry has enjoyed the luxury of being closed to outsiders, responding to the challenges of exterior forces through continuous improvement and technological developments. Now, however, a number of technologies have grown and evolved to the point where they have the potential to be disruptive; when combined, they present the industry for the first time with a genuine challenge. Traditional, clearly-defined boundaries are becoming blurred lines.

The automotive industry’s survival is inevitable, but what’s not certain is what the survivor will look like, or how the business side of the industry will move forward. With a few exceptions, automotive OEMs struggle to turn a profit anywhere near the levels enjoyed by many of the companies seeking entry into the automotive space, companies that are free of the cost and management burdens of huge manufacturing networks. At the same time, exciting new business models are being explored, while consumers demand more – for less.

Blurred lines

IBM’s “Industry without borders” study looks at how these disruptive forces look set to shape the automotive industry of a decade from now – and alongside some increasingly familiar topics, the study produced some surprising findings.

IBM interviewed 175 executives in 21 countries. “When we did a similar study five or six years ago, it was all about the BRIC markets and finding new markets and new customers,” said Gyimesi. “Now the leading growth opportunity that executives identified is around collaborating with other industries, and making the car a part of a larger ecosystem that includes the home, energy infrastructure and all the other things that people do in their lives. The biggest change that the ecosystem is expecting over the next ten years is not around OEMs, suppliers and dealers, but around the influx of non-traditional industry participants, companies that don’t have a history in the industry.”

The findings of the study fall into three broad areas: Consumer and product; Mobility; and Collaboration.

Now the leading growth opportunity that executives identified is around collaborating with other industries, and making the car a part of a larger ecosystem

Consumer and product

Although consumers are becoming increasingly “digitally focused”, said Gyimesi, the automotive industry has considerable catching up to do. “Other industries have been at this much longer than automotive companies. Auto companies have focused on this for the last few years, but retailers, communications companies, media and entertainment companies have been chasing the digital consumer since the dotcom era. Consumers want auto companies to catch up to that.”

In terms of product, it’s important for the automotive industry to be able to tap into different types of “crowds” to design and develop products and new ways of doing business, he explained. “Consumers are interested and willing to be engaged in that, but they have to be compelled to do it. It involves tremendous levels of creativity to draw in the crowd. That has to become a new competency for auto companies.”

IBM has coined the phrase “self-enabling vehicle”. This concept focuses on three things: it helps its occupants and drivers, it helps itself, and it works well with other vehicles.

The self-enabling vehicle “will be self-integrating and self-configuring,” said Gyimesi. “People have complex digital personas out there in the cloud, and as the car taps into that, we expect it will be able to integrate different types of devices and configure itself to the way that the consumer may want to use it. The car will be self-learning and self-healing.”

Double jeopardy

In 2011, IBM’s Watson cognitive system defeated top contestants on the television show ‘Jeopardy!’. Since then, said Gyimesi, IBM has been “working hard to commercialise that technology and bring in software acquisitions to make cognitive technology a reality in everything that we do.”

Gyimesi expects cognitive technology to “very rapidly come to places like the automotive industry, where your vehicle will learn about you and your tendencies, interests and driving patterns. The vehicle will also learn to heal itself. It will recognise when something is going to go wrong and fix itself so it doesn’t have to sit in a dealership and wait to be fixed.”

Unsurprisingly, executives also discussed the impact of self-driving cars. In terms of definition, IBM sees “automated driving” enabling the driver to take over the driving task when required or desired, while the term “autonomous driving” is used for fully self-driving vehicles. “The industry sees less opportunity for that [autonomous driving] by 2025, but some of the growth in autonomous driving may come from outside the industry, from companies like Google and Uber.”

Alliance management is going to be a key hallmark for success

Ill prepared

However, it is in cross-industry collaboration where IBM identified the greatest opportunities for the automotive industry. When asked, “Where will the industry grow?”, executives said growth would come through collaboration with other industries, and the ability to partner in new and dynamic ways will become a core competency for successful automotive companies.

“This requires being able to partner in a consistent way with companies that aren’t traditional auto suppliers. These will be companies that have 5 or 10% of their business in automotive, and can’t be dealt with in the same way. Alliance management is going to be a key hallmark for success.”

In the report’s overview, the authors write: “Cars fit into an increasingly complex web of transportation options. Looking forward to 2025, the enterprises that welcome openness are setting the stage for success”. Consumers want – expect – the automotive industry to rapidly accommodate their expectations. Two words here are key: rapidly and accommodate. Both are powerful on their own – even more so when they’re together.

Given the detailed and insightful responses supplied to IBM by the interviewed executives, the answer to perhaps the most important question of the study is the most surprising. IBM asked the interviewed executives how prepared they felt their companies were to respond to these disruptive forces.

“Only 19% felt that with the direction they were headed they were ready to tackle these kinds of challenges,” said Gyimesi, wrapping up his talk. “More than 80% of the executives interviewed felt that they still needed significant transformation before they could adapt their enterprise and organisation to the way the industry was expected to change, and as nimble and agile companies push the industry from the outside, these changes could be coming very quickly.”

Martin Kahl

Welcome back , to continue browsing the site, please click here