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Wheels with Software of Software with Wheels?

There have been rumours on Apple developing a self driving car, project Titan, never officially confirmed. However, there have been confirmed talks between Apple and car manufacturers on cooperation in the area of “future cars” but that has not cleared the fog on real Apple plans. Image credit: Trusted Reviews

Tesla has been leading the pack of automakers towards self driving cars and in a way it is an underdog in the complex world of automakers. Lately, major car manufacturers have unveiled plans and roadmaps to deliver completely autonomous self driving cars (that couples with electric cars) and a variety of start ups are busy at working solutions that can be both effective (meaning absolutely safe) and economically affordable. Software is the key enabler, both in terms of delivering safety and in making the self driving cars affordable. Artificial Intelligence, in particular, is the key enabling technology being explored (image recognition, awareness, decision taking, swarm intelligence….).

On May 23rd I attended the inauguration of the new EIT Digital Satellite location in Milan. To mark the occasion, and coherently with the Milan Satellite focus on Digital Industry (transformation), a panel of industry representative with the participation of Willem Jonker, EIT Digital CEO, discussed various aspects leading the industry transformation and what are the related hurdles, stumbling blocks and enablers.

Willem Jonker, EIT Digital CEO at the Milan Satellite new location “ribbon-cut”

One point raised by Willem had my brain rolling: with respect to the dramatic changes facing the industry he pointed out that the leading role of software may be played in two opposite ways and exemplified it to the area of self driving cars. Given that future self driving cars will be an ensemble of software and wheels (mechanical parts) what will be leading? Will the automakers grow their expertise to equip their cars with the right software – wheels with software – or will companies, like Apple, mastering the software enter the auto market adding the required wheels to their software – software with wheels-?

The point is not moot. As Willem pointed out we have already seen companies entering markets that were the private turf of other players and disrupt them becoming the new dominant players. Take Amazon and the cloud. Something that was clearly the turf of telecommunications companies has been invaded and colonised by a company that had a completely different business but that had the experience and tools to provide a completely different value proposition. Now when we think of clouds we think of companies like Amazon, Microsoft and Apple, rather than Orange, TIM or Verizon.

Apple has agreed a partnership with Volkswagen to create self driving shuttles for its employees, after unsuccessful attempts at cooperation deals with BMW and Mercedes. It has been, at least according to rumours, a downsizing of original plans to develop in house the hardware and software for an Apple self driving car. It might also be a way to better their software minimising the investments in areas (hardware/wheels) that are not going to be the winning factor.

The transformation of industry will make possible to transform the manufacturing plant into a commodity, usable by several parties that will bring in the value (software and design) to be embedded into the final product. Something like using a packaging company today.

The automakers world, and the manufacturing plants, are far from being a commodity today. The crucial issue is the scaling up (as it has been proven once more by the issues Tesla is facing with their –no longer– cheap model: making a car is all about cutting cost as you scale up, a very difficult problem).

I do not see this changing in the next decade but the situation may start to look different beyond 2030, and, by the way, that is approximately the date when self driving cars will start entering the market in a significant volume.

At that point, also considering the progress of Industry 4.0, we might start to see the transformation of manufacturing into a commodity and that could be the point when the value might shift to new players (new, that is, in the automakers world).

My bet is that the key aspect in this potential shift, however, will be rooted on the perception of value, not on the predominant role of software. And that is tied to the change of perception that will be induced on the market (on us) by self driving cars. We, as buyers, will no longer get the car for its breathtaking acceleration, sporty in negotiating turns… The car, all cars, will abide to road regulation, they will be transformed into pure transportation tools. The only remaining feeling of ownership and personalisation will be its interior and the services, like entertainment, augmented reality through the windshield and windows, comfort and business pod… These are all areas where the automakers are not leaders (at least today). General Motors, as I pointed out in a previous post, is very well conscious of the impending shift in value perception and it is looking at how they can transform themselves.

I point this out because the fight to own the car market in the future will require software prowess (and still exceptional manufacturing skill) but will be won on intercepting and delivering new values.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.