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Digital Transformation – Towards the Disruption

Cars have a very low usage time, being parked most of the time. In the future as they become “services” their usage will increase significantly. Here the Digital Transformation is both the result of a value perception change and enabler for the change.

Let me now consider what may happen, in terms of Digital Transformation, in the area of private transportation (cars).

It helps looking back at how the car market evolved. At the very start cars where an artisanal product, there was no standardisation and no rules of operation (the roads were not paved, you did not need a driving licence, nobody was out there to fine you if you dared to floor the pedal). That all changed with the birth of assembly lines (Ford in 1913) designed to produce affordable cars, even a blue collar could dream of buying: cars started to become available in the thousands and then hundreds of thousands, by 1918 most US States enforced a registration plate, started to test the driving abilities (a driving license like the one we have today came later, in the 1930ies) and put regulations in place (in other parts of the world the timeline might have been different but the sequence of steps from artisanal car to mass market was the same).

However, affordable is a relative term: because of cost very few people could afford buying a car (until the 1950ies) and public cars, cabs, started to appear in response to the biz opportunity (1908 in New York, at the turn of the last century in Europe). Car rental was soon to follow (in 1916 in Omaha later bought by a certain John Hertz…, in Germany Sixt started in 1906).

Whilst cabs were the response to the huge cost of owning a car, car rentals leveraged on the increased effectiveness of having a car shared by multiple customers, thus ensuring the splitting of cost and increased usage.

As computers increased the efficiency in managing rentals and smartphones made easy to interface with web services we have seen a growth of car sharing services (rentals on the go, Uber, Bla Bla cars…). They all leveraged on the fact that cars are seldom in use and it makes sense to exploit their unused time, thus sharing cost.

As you can see from the graphic even in the best situation a shared car is not actually used very much (although it may double the usage time of a private car that is estimated in the US to be around 5 %, 4% in the UK).

This is not a Digital Transformation as a whole but for sure it has put a dent in the taxi business and it is starting to affect public transportation. The fact is that the private transportation area is not solely depending on technology, it is very much a cultural shaped landscape. People consider car ownership as part of their freedom, it enables them to go where they want when they want. It became part of the youngster dream for the last 50 years. In these last few years, however, the mood has shifted. In several cities millennials consider the car an unnecessary cost, much more effective to use a share-car service whenever you need one. No more issue with parking, no more ownership burden (maintenance, …).

This mood shifting is likely to be accelerated by the coming of self-driving cars. A self driving car will likely be perceived as a public transport, rather than a private one since you lose control of driving. Once your perception shift to a public transportation means why not benefitting from the lower cost of public transportation?

Some recent studies show that with less than half the number of cars urban dwellers could get the same level of service, in terms of transportation availability, they get today by owning a car. In addition, the cost will decrease by some 80% (in the long run) as cars are becoming a commodity and their usage time increases significantly, in the range of 30% (see graphic).

This will extend the Digital Transformation and disrupt the car manufacturing players. No longer they will be able to sell cars advertising their speed or acceleration. No longer will they be in a Business to Consumer market, rather in a Biz to Biz market. Selling cars as commodities and selling just half of them (in volume) is likely to depress the market and consolidation among car manufacturers will accelerate.

At the same time we might see a new market emerging for delivering personalised services, creating sort of personalised cocoons that people will be willing to pay for. There are already some ideas of cars splitting into a commodity moving platform upon which a personalised living shell can be created. This latter may remain in the private ownership domain (and be commercialised by the likes of Gucci and Armani) whilst the former will be a public or large corporation domain.

Still, growing the efficiency (usage time) to 30% is not really amazing if you think about it. What if one could imagine moving platforms that can reshape themselves to carry (mostly) people during daytime, when people need them) and carrying goods in night time? That may really boost the usage of these movable platform beyond the 50% and that will be a disruption in the whole transport value chain.

Personally, I am betting on this to happen, possibly in 30 years time (of course starting sooner in niches).

I wanted to discuss the Digital Transformation in the transportation sector because I see it being not fuelled by technology evolution but rather by societal changes. Clearly advanced technology will be needed but it will not be the deciding point. Regulation and cultural aspects will be the dominating factors. Additionally, the digital transformation in the transportation sector is likely to happen in niches and in phases. In the longer term niches will expand and phases will evolve. Along the way the whole industry and our perception of cars will be changed.

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.