Rethinking your business model for a data-driven world

Dirk WollschlaegerDirk Wollschlaeger, IBM General Manager Global Automotive Industry, about how data could transform the automotive industry.

Data has already transformed the business models of several industries, and the car industry is next. It’s a widely known fact that far fewer “millenials” (those born between the early 1980s to the early 2000s) are interested in owning a car compared with previous generations. Between 2007 and 2011, for example, the number of cars sold to people aged 18–34 in the US fell by almost a third.

A weakened economy is part of the reason for this trend. But a greater factor is that young people today don’t necessarily want to own a car. Many would rather just have access to mobility services.

The explosive (and controversial) growth of Uber, along with the rise of other ride-sharing and car-pooling apps and services, is making this point clearer by the day.

So is this the beginning of the end for the car-making industry? No, but the industry will need to rethink its core business model — and data is going to be at the heart of that.

The good news? The car industry has an overwhelming amount of data at its disposal, coming from a host of in-vehicle sensors — from GPS systems to tire- and oil-pressure gauges, and even in-car cameras. And the industry also has insights into traffic conditions and routes.

Combined with warranty and repair information, and other related data, this gives the industry in-depth insights into the specific behaviors of their customers. In fact, few consumer goods or electronics companies, barring those selling smartphones, know as much about their customers’ usage as carmakers could.

“Could” is the key word here, because few industry players are yet embracing the digital world. Many major brands are still bringing new vehicles to market that seem to ignore the potential of a connected, data-driven marketplace.

When my wife recently bought a vehicle from a showroom, we were stunned to find out that it couldn’t connect with her smartphone in order to stream music. An update had to be sent out several weeks later via post, on a CD. Can you imagine doing the same thing every time you wanted your phone to update?

But there are signs that the attitude in the industry is changing. Take Daimler, for example. Recognizing the need for a fresh approach, it has created a whole new business — moovel — which aims to provide consumers with an end-to-end mobility solution.

Via the moovel app, you can plan a journey from A to B, and not only access car sharing, but also trains, buses and other public transport options— even bicycle rentals. The company’s core aim is to “radically simplify mobility issues,” reinventing how people think about getting around.

Behind the scenes, this service is underpinned by data. If you fly from London to Munich and pick up a car at the airport, it’ll automatically adjust all of its settings to your specific preferences — from the height of the seat, to your preferred backup option if you run into traffic congestion.

It’s too early to say whether moovel’s approach will be successful. But it represents one of the first and most ambitious attempts to address the need for car companies to re-envision their future radically.

Of course, to deliver on this new vision, auto companies will require a wholly new way of thinking. And they will need to create a whole new ecosystem of partnerships outside of the auto industry itself — with, amongst others, content and entertainment partners, telecommunications firms and IT specialists.

This will obviously demand a new mindset, one that is much more open to collaborating with others, both within and outside of the business. And it will require the mastery of data, too.

None of this will be easy. But the reality is that those who fail to adjust will find themselves selling cars to a market that’s only really interested in buying mobility.

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