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Digital is not the Enabler. It is the Business

   November 23, 2020

Digitalization has transformed how customers select and utilize products, consume services, and make purchase decisions. Digitalization is the catalyst to the sweeping transformation taking place across industries and is creating new value creation opportunities. The global automotive industry, in particular, is experiencing a paradigm shift due to the increasing adoption of digital technologies. The mindshare of global thought leaders and their commitment to ‘digital transformation’ is also amongst the highest in the automotive industry. Every major automotive Original Equipment Manufacturer (OEM) is offering connected mobility services in some form and is adapting to the realities of the imminently approaching digital era.

At a time when established automotive OEMs are trying to keep up with the fast-changing customer needs and aspirations, competition from new entrants, rapid proliferation of digital technologies and stringent environmental regulations, Digital is no longer just an enabler; it is the business. Going forward, the continuously increasing resolution of digital intelligence will fundamentally transform how we design, understand, and build vehicles and make them interactive and intuitive.

This cycle of change is primarily being powered by the ‘digitally aware and empowered customer’. Today, customers expect their vehicles to interact with them just the way their handheld phones do; delivering seamless connectivity, speed, interface and convenience. We are at a tipping point where the fundamental construct of the automotive industry is being redefined due to the transformational shift from mechanical vehicles to real-time data-driven smart mobility experiences.

Therefore, it is vital for OEMs to observe and comprehend the changes in customer preferences in order to develop, design, manufacture and sell vehicles. This new approach will also require automotive suppliers to work towards developing a customer-centric, digital DNA across the supply chain. One only needs to look to the unprecedented COVID-19 crisis as further proof. Since the onset of the pandemic, the need to deliver a touchless, digital experience to car buyers,  from selection through the delivery process, is not only a business necessity, but a customer imperative. Even aftermarket services, such as service request management, warranty management and vehicle diagnostics are moving towards digital automation and are readily accessible to customers at their fingertips.

With software code, cloud, cybersecurity and other digital technologies playing a critical role in next-generation vehicles, automotive organizations will also need to adopt first principles – systems thinking to reimagine how they can create engaging mobility experiences that are digital by design. This will require a combination of incubating the right talent, strengthening capabilities in emerging areas such as over the air (OTA) software updates, V2X connectivity, as well as redesigning manufacturing operations through Industry 4.0.

At the same time, the disruption being caused by digital is enabling automakers to explore the art of the possible. Digital is creating new monetization opportunities for the automotive industry across multiple paradigms:

  • Revenue generation via connected mobility services, personalisation features etc.
  • Cost reduction via usage-based insurance (Pay as you drive/ Pay how you drive), condition monitoring etc.
  • Increased safety and security via automated emergency services, predictive maintenance etc.

To put things into perspective, analysis suggests that there will be a $700 billion value creation opportunity from digital transformation of the automotive industry, mostly through initiatives such as digital omnichannel experience, personalisation services and other value-added subscription models. The value created for society is likely to be even higher – up to $3 trillion – through lower insurance premiums, reduced crash costs, fewer casualties, and significantly lower carbon emissions.

However, automakers are not only facing competition from technology players who want to participate in the connected mobility space, but also facing the challenge of defining unique value propositions for interested customers.

Getting the right business and pricing models in today’s VUCA (volatile, uncertain, complex and ambiguous) world is challenging. However, in a hypercompetitive scenario, the key is to be aggressive in continuously offering a captivating in-car experience by fully leveraging the power of digital technologies.

As ‘digital by design’ businesses, automotive organizations will need to transcend boundaries and raise the bar on innovation by relying on data continuously generated from user involvement, feedback, collaboration, and co-creation. The increasing resolution of high impact data will help automakers shape how customers and societies imagine the future of mobility. It is imperative for organizations to become more digital in every aspect of business, including products, plants, processes and most importantly people.

The cornerstone of this transformation lies in the ability to enable a digital mindset and to build a culture that thrives on collaboration, human-centred design thinking and a drive for constant innovation.

The digital opportunity is here and now. The industry will need to continuously look towards the emerging future to identify key trends and develop necessary capabilities to evolve and ensure all of us continue to stay responsive and resilient in the face of fast-changing customer needs, rising competition and increasing operating margin pressures.

 

   ABOUT THE AUTHOR

Mamatha Charmarthi,

      CIO and CDO, Fiat Chrysler – North America and Asia Pacific

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