Nissan autonomous prototype technology fitted on a Nissan Leaf all-electric car and shown in 2014 at the Geneva Car Show.
Photo by Norbert Aepli, Switzerland

Is our love affair with driving and the automobile dying?

America’s love affair with the automobile was made possible when Henry Ford introduced his assembly line model in 1913.  He not only made car ownership possible for just about everyone, but also revolutionized manufacturing of all kinds, how we look at jobs and work, and how we humans live our lives and build the communities in which we live.

Today, we are in the midst of another revolution – one that is being driven by new technologies and new perceptions of value.  How this revolution will play out is still unknown, but we can predict likely outcomes.  But make no mistake.  Whatever happens, the disruption we are now seeing is real, and the changes that this disruption will produce are going to be profound.

I grew up in Michigan.  Every year in the fall, my father and I would go together to see the new car models when they came out – one of the few things my father and I routinely did together.  As a result, very early in life I developed a fascination and love for cars.  I also worked for GM back in the mid and late 1980s – GM was one of my earliest revenue strategy consulting gigs.  During that engagement, I was instrumental in developing the concept that eventually became On*Star.  This was, as it turns out, arguably the first example of what is now referred to as a “connected car” technology.  It also became an example of one of at least six major disruptors that I believe will profoundly change the auto industry, how we humans think about and interact with automobiles, and how many of us earn a living.

Disruptor #1:  The “Connected Car” – made possible by on-board wireless technologies

Just before I began working with GM, the company rolled out its Northstar engine which had computer chip technology that could monitor and then store how well the vehicle’s major functions were performing.  We coupled that chip technology with an early cellular transmitter provided by the new formed Bell Operating company, Ameritech to have a wireless capability that could communicate information about the engine’s status to others.  Since then, wireless communications capabilities in automobiles have evolved dramatically.  Today we can talk on the phone, utilize GPS capabilities, connect to the Internet, stream entertainment for kids and other passengers, and, if one has On*Star today, automatically get help if involved in an accident.  Wireless connectivity fundamentally changed how we use and relate to our automobiles.

Disruptor #2:  Automobile “Awareness” – made possible by sensors + wireless communications + sophisticated computing technologies

The automobile is becoming aware of its environment – inside and outside. Sensors in the latest generation of cars are making it possible for automobiles – not just their drivers – to monitor and react to the environment around them. Sensors plus wireless communications plus on-board or in-the-cloud computing technologies are making new cars players in what we now call the Internet of Things (IoT).  These technologies are making possible Vehicle to Infrastructure (V2I) and Vehicle to Vehicle (V2V) awareness and communications.  Cars can communicate with other things including other vehicles. By combining these technological capabilities, newer cars can not only detect if other vehicles or objects are getting too close, but also automatically take corrective action if or when the driver does not or cannot. In the future, these capabilities will, among other things, also help people minimize drive time efficiency while simultaneously avoiding speeding tickets and other driving aggravations.

Disruptor #3:  New Electric and Fuel-Cell Capabilities – driven by new technologies and concerns about greenhouse emissions

Gasoline or diesel fuel are no longer the only viable options for producing the energy necessary to power a vehicle.  When oil prices were soaring, this seemed like a good thing.  Were it not for the increasing recognition that climate change is real and driven primarily by carbon emissions, we might not have as much interest right now in new kinds of vehicles like the all-electric Tesla or hybrids like the Toyota Prius or Chevy Volt.  But interest and demand are growing, and more and more of these kinds vehicles are appearing on our roads – especially out here in California where I live!

As preferences changes and demand grows, the economics of energy and automobile production will shift and force major changes in the supply chains and business models of producers and distributors of energy as well as automobiles. Old models will persist as long as possible, but they will eventually give way to new thinking or they will die just as surely as the Pony Express and Blockbuster!

Disruptor #4:  Self-Driving Capabilities – enabled by sensors and communications technologies, and driven by new concerns about safety and the desire for new forms of freedom

This is a biggie!  Of all the changes coming, self-driving capabilities may well be the most significant disruptor of all.  Why?  Because self-driving will change forever our perceptions of what it means to own and interact with a car.  It will also change what we think about “drive time.”  Being caught in heavy traffic may no longer be a waste of time, but rather an opportunity to relax or get more done.  A car will do our bidding without requiring constant direct oversight.  Concerns about flagging concentration on long trips or late at night could become a think of the past.

In the near term, self-driving may be primarily limited to “park me” capabilities.  But as the new Chrysler commercial with comedian Jim Gaffigan illustrates, that alone might be a hugely attractive value proposition.  And as people get used to the idea of letting a car park itself, the idea of letting a car drive itself will – sooner or later – become less scary and much more attractive.

Disruptor #5:  Changing Perceptions of Value – driven by our evolving perceptions in what is important in today’s economy

Let’s consider for a moment the value of car.  Members of the Millennial generation, like many New Yorkers have been doing for a long time now, are questioning the value of owning an automobile.  In the “sharing generation” the idea of pay-per-use or use-on-demand options are looking more and more attractive to many, and especially to those burdened with high student debt or living where the costs of garaging a car can be prohibitive.  Why own a car if all you want to do is get from point A to point B quickly and efficiently when necessary?

And for those of us who live in cities like Washington, D.C., or Los Angeles we have to ask, “Is driving really that much fun?”  Yes, there are probably many who identify with the sentiments in the recent Mazda ad featuring the song by Patsy Cline “Back in Baby’s Arms.”  But how many of us really love driving the winding roads seen in the commercial, let along in choking, relentless rush hour traffic?  If one could have the freedom without the responsibilities of driving, wouldn’t that be a really attractive value proposition for many if not most of us?  Seniors us would never have to give up the privilege and freedom of driving.  Teens would never have to give their parents nightmares when they begin driving.  And parents might not need to give up their lives to play chauffer for their kids – unless they really wanted to.

Disruptor #6:  New Ecosystem Requirements and Impacts on Jobs – driven by a changing landscape of players and production methods

This is really where disruption will be most acutely felt – and where new business and revenue models will be essential. The technologies describe above when combined to produce driverless, connected cars fuel by new forms of energy other than gasoline will force massive changes in just about everything associated with producing, distributing, owning, and operating automobiles – in fact, all vehicles. These changes in turn will produce major economic pain for some and terrific new opportunities for others.

Not only will car manufacturers have to evolve (even more than than have already), but so will governments and those that build roads and traffic control systems. If more people begin to prefer on-demand usage rather than ownership, new business opportunities will emerge even as old models suffer.  If the automobile is no longer seen by even a portion of the population as a necessary capital purchase, but rather as an on-demand commodity, car dealership and rental services models will have to evolve. Gas stations will have to become new kinds of refueling locations.  And the entire ecosystem surrounding car production and distribution will change.

How disruptive will these factors be?

The full scope, velocity and magnitude of the changes, what all they will entail, or exactly how they will evolve, cannot be easily forecast. Yet these forces have the potential to alter current industry structures, business models, competitive dynamics, value creation, and customer value propositions.  We may be on the threshold of change as great as any the industry has ever seen.  And they will impact jobs.

What matters is not if self-driving, autonomous vehicles will change the world, it’s how. And to a greater degree how much?  Consider what the drone is doing for aviation and product delivery already.  Consider what robotics have done for manufacturing. Self-driving vehicles have the potential to be equally revolutionary, and their impact promises to be as far-reaching as any modern technological breakthrough.

Now consider the potential impact of self-driving vehicles on the following:

  • Insurance
  • Mass transit
  • Shipping and trucking
  • Farming and mining
  • Ride-share and for hire drivers
  • Postal delivery
  • Automobile finance companies
  • Auto body repair facilities
  • Replacement body parts companies
  • Product liability
  • Emergency room care

There’s no doubt major changes are driving the transportation industry, and they are coming soon.  Millennials will likely be the first generation to embrace the self-driving car, and their children might be the first to grow up never needing a driver’s license. Safety is the altruistic goal, but profit is the goal of business.  At some point in between will be the consumers, happily playing or working on their mobile devices as their autonomous vehicle delivers them safely to their destination.

So what do you think?

Does is all sound too far-fetched?  Perhaps.  As I said, I love cars and I’ve loved driving.  But I believe this kind of change is coming. The question now is not if, but rather, how soon will it be upon is. The most dangerous thing is business is failure to anticipate.  That’s why my goal is to help my clients be prepared if and when they face this kind of change.

Write to me and let me know what you think.

TBG photo

Timothy Gendreau is a Revenue Strategist at The Gendreau Group

Timothy is an expert in developing new revenue strategies to produce real and sustainable revenues and enhance a company’s valuation