From, Friday, March 6, 2015

The car industry is currently mulling over the biggest transformation in its history since Henry Ford set up shop in
Dearborn, Michigan.

Before Ford, the automobile was an expensive plaything for the rich that had little effect on the prevalent form of
transportation - horse-drawn vehicles. Ford’s introduction of the mass production assembly line and product
standardisation (“any colour so long as it’s black”) brought his Model T motor car within the range of the masses,
fundamentally disrupting the market for transportation vehicles and sending millions of horses to the knacker’s yard.

Today’s disruptive force is already present in most people’s offices and homes and is carried in most people’s pocket
or bag: digital technology. It put a man on the moon in the sixties and sacked the CD in the noughties. But just as
digital technology has disrupted business models in the newspaper and music sectors, so the car industry is
contemplating just where digital technology will send it spinning.

While R&D departments experiment with the latest digital technology, producing driverless and open source cars, the
executives and strategists back at the head offices of automobile giants such as Volkswagen and GM are trying to
figure out how they will navigate their way through the digital wormhole. Will GM, Ford and Toyota step in to a
world full of new possibilities or on to a planet where they no longer exist?
Apple, Google, and the Future of the Car Industry
End of the Road for Car Giants?
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Warwick Business School Professor of Information Systems and Management Ola Henfridsson has spent the last
eight years consulting and researching digital innovation at GM, Volvo and Saab and, while he admits that he doesn’t
know what they will find either, he is sure the open platform car is coming.

Just as the smartphone has become a platform where users can download any apps they want and connect to the
cloud, so the car could become a giant mobile version.

“If you can develop an android community with so many useful apps, think what could happen with cars,” says

“Cars already contain so much more digital content, much of the value of the car and the cost of developing a car is
related to the digital technology in some way or another. When it comes to lowering fuel consumption or new safety
features it is very much about the digital infrastructure, which requires a totally new skill set for the people
developing the car.

“It used to be that competition within the car industry was very locked into the boundaries of the car manufacturers,
but suddenly there are non-automotive companies taking parts of the markets. Microsoft, are heading into it along
with Google and others. Why is it that Google has 10 driverless cars on the streets of California? Because they are
imagining a future where a car communicates with its environment, where at some point what will be important in a
car’s functionality is not something that GM or Ford or Volkswagen can deliver.

“Suddenly, you can see that the car industry needs to engage with the ‘crowd’, where anybody with £300 and a
good idea can become an entrepreneur.”

In the world of open platform cars a kid in a bedroom could become the next giant car company. Just as Mark
Zuckerberg has taken over the internet with Facebook, so the next major car development could come from a
dormitory at a US university rather than the R&D department of BMW. And that is what is worrying the car
manufacturers; opening up their cars to third-party developers could see them lose control of their own products.

Car executives are nervous, but they are now dipping their toes in the digital waters. Apps are in cars now, and Ford
and GM have started their developer programmes. In January Ford launched its open mobile app developer
programmer for iOS and Android. But it is limiting developers to its car’s entertainment systems to enable two-way
communication between the apps and the car. Also developers will have to submit an app to Ford for review by its
engineers to “ensure it works properly and is suitable for use in the vehicle.” Once it’s been approved, developers
get a distribution license so the app can be submitted to the relevant app stores and talk to the car.

More interesting is Google’s tie-up with Audi, GM, Honda and Hyundai in the Open Automotive Alliance (OAA)to
develop a common platform for Android apps on their cars. It was something that Helen Falkås was working on at
Saab until the company filed for bankruptcy in 2011.

“We were planning a similar system, using Android as a platform,” says Falkås, who is now Senior Project Manager
at Nordiska Interaktionsbyrån, a leading interaction design agency in the Scandinavian car industry. “We were
talking about a two-sided market where you have to give the developers the possibility to have some business
benefits with a large customer base and the customers are looking for good content, rather than the proprietary
market that the car industry has used. We were looking to lower the threshold of entry for developers to open up a
standard API (Application Programming Interface) so data could be accessed to create the open space.
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