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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

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 Henfridsson.

"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
pounds Sterling 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.
Click here for page 2)
End of the Road for Car Giants?
Apple, Google, and the Future of the Car Industry