Executive Summary: Rapid changes in the mobility sector allow firms to collect, store, and mine more data than ever before. As a result, the automotive sector now faces both incredible opportunities for monetization and unprecedented regulatory challenges. Monetization opportunities in this sub-field are incredibly diverse, ranging from infotainment to crash prevention. But in order to capture this value, firms must transform their business practices, customer experience, and attitude to collaboration and data sharing. Privacy is an additional challenge facing the industry. Firms must grapple with geographically variable, complex laws as they refine their security and consent management practices.
Executive Summary: Rapid changes in the mobility sector allow firms to collect, store, and mine more data than ever before. As a result, the automotive sector now faces both incredible opportunities for monetization and unprecedented regulatory challenges.
Monetization opportunities in this sub-field are incredibly diverse, ranging from infotainment to crash prevention. But in order to capture this value, firms must transform their business practices, customer experience, and attitude to collaboration and data sharing.
Privacy is an additional challenge facing the industry. Firms must grapple with geographically variable, complex laws as they refine their security and consent management practices.
Today, the average car generates 25 gigabytes of data per hour – an already large number that is set to rise exponentially with the emergence of electric and autonomous vehicles. From fleet management to targeted advertising, leveraging that data is the key to profit in the new mobility ecosystem. At the same time, however, firms face unprecedented data and security challenges, as well as new and ever-changing regulations.
“There’s a lot of complexity,” said John Paul MacDuffie, Director of Mack’s Program on Vehicle and Mobility Innovation (PVMI) and Wharton Professor of Management. “You might call the current situation ‘the promise and the peril’ because everything that looks advantageous from a value chain and business strategy point of view with respect to these data also raises perilous questions about data privacy.”
This duality inspired the Mack Institute’s 2021 Winter Conference, Data and the Evolving Mobility Ecosystem, convened by MacDuffie and Rahul Kapoor, Wharton Professor of Management. Bringing together representatives from both academia and industry, the conference explored major topics related to automotive data from a variety of perspectives. Below is a summary of the major ideas and discussions.
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“Vague and Strict”: Dealing with Data Privacy Regulations
Panelist Maya Nassie-Neeman, General Counsel at Otonomo, laid out the challenges of remaining compliant in the face of complex regulations. She described emerging data protection laws as simultaneously “vague” and “strict,” as well as geographically variable. Understanding these regulations and communicating them to stakeholders must be a pillar of a successful data strategy.
“This is how I see the main role of in-house counsel: to take a proactive role, working together with the product and sales teams to explain the legislation in plain words that everyone can understand, while also building a product which will be successful and compliant,” she said.
Nassie-Neeman identified two main buckets of valuable data produced by vehicles: anonymized data aggregated from many vehicles, and identifiable data tied to a single individual. Each requires different types of processing to remain in compliance. For example, aggregated data must undergo several rounds of “de-identification” and “blurring” to protect the drivers’ privacy, while personal data requires a robust identification and consent management system.
Overall, Nassie-Neeman stressed that compliance shouldn’t be viewed as an obstacle to creating a great product but should be integrated into product design and sales.
“Obviously, legislation shapes the world in which we live and we need to work within those boundaries to build compliant products that give value to businesses, to drivers, to everyone,” she said.
A Modern Customer Experience Is The Key To Standing Out
Monica McDonnell, Automotive Industry Consultant at Teradata, believes that data is the key to standing out in the rapidly changing auto industry.
“The actual performance of the vehicle is merging within the vehicle categories,” she said. “So automotive manufacturers are increasingly looking at customer experience–how people use and experience their brand–to differentiate themselves.”
But to create a competitive customer experience, manufacturers need to achieve what McDonnell calls “analytic maturity.”
“You really have to understand an individual person and the vehicle they’re driving to make sure you can offer what they want and give it to them when they are actually most likely to take it on board,” she said.
She believes manufacturers face two major hurdles to implementing cutting-edge strategy. The first is an internal hurdle of “communication and coordination” that leads to data being siloed. Many different players have useful data (the sales team, the warranty teams, independent dealerships), but they need to collaborate and pool information in order to create value.
The second major hurdle is that most manufacturers’ existing digital strategy isn’t focused on in-vehicle data. For example, they might invest a great deal of money in a customer-facing website or traditional digital marketing ventures. But McDonnell emphasized that it’s crucial to focus on customers as drivers.
“Ninety percent of the way you experience your vehicle is driving the vehicle itself,” she said. “And so, to really understand the customer, you need in-vehicle data because that tells you how people drive, when they drive, the type of journey they’re going on, which allows you to tailor your offers and help the person experience the vehicle in a way that suits them.”
Despite the challenges, McDonnell says most manufacturers already have an untapped strategy for accessing valuable data: warranty recall analytics, which are used by major manufacturers to avoid costly blanket recalls.
“Most of the major brands are connecting vehicle data today to enable warranty recalls,” she said. “[You can] leverage the same data that you already collect for your warranty recall process to enhance your customer experience and get a lot more value from the same data.”
Solving Sticky Transit Challenges With Digital Policy
Stephen Zoepf, Head of Policy at Lacuna Technologies, sees opportunity for data to play a role in the realm of mobility policy and management, where the move from analog to digital has been slow.
“Mobility policy and management has been primarily analog: things like signs, curbs, paint, basic signals,” said Zoepf. “We’re talking about a cadence of months to make changes from the city side, [but] potentially minutes to change operations from a mobility company side.”
This disconnect has led to conflict, frustration, and occasionally chaos, with highly-publicized scenes of drivers abandoning their cars in traffic, or throwing rental scooters in bodies of water. Zoepf says the solution to this is to create mobility policy that is “dynamic, digitally-managed, and scalable.”
He cited the epidemic of “scooter saturation” in areas of Los Angeles popular with tourists as an example of how data-driven policy can drive innovative solutions.
“For those of you who haven’t really experienced this scooter saturation problem, that sounds kind of quaint, right?” he said. “But scooter saturation in areas where it was really an acute problem meant 2,000 or 3,000 devices per square mile. Imagine that. And people really are tripping over these things and getting so angry about their presence that they throw them into bodies of water or damage them.”
By analyzing the number of scooters in different areas of Los Angeles, the city was able to create a responsive policy that promoted equal distribution and prevented saturation. Zoepf says the same principle can be used to solve all different kinds of mobility challenges: incentivizing ride-sharing, managing traffic, or dealing with restrictions like temporary road closures.
“It doesn’t take too much of a leap of imagination to apply the same concept of digital policy and management to other modes like freight delivery, airport ground transportation, taxis, ride-hailing, transit, delivery robots, drones,” said Zoepf. “More importantly, it’s not just the different modes that can benefit from digital policy. We can use digital policy to reach different outcomes we want to achieve.”
Automakers Must Become Software-Driven Companies
Katrina M. Conn, Practice Director, Data Science & Customer Experience at Teradata, emphasized the need for a transformational shift from an “asset-based ownership to a service-based model.”
“Traditional automakers are already under pressure to reinvent themselves,” she said. “They need to become software-driven companies to compete in a fast-changing market being shaped by the next generation of connectivity.”
Conn spotlighted an incredible range of possibilities for connected vehicle data, ranging from emergency services to entertainment. Conn also emphasized that connected vehicle data is crucial for advancements such as electric and autonomous vehicles–for example, in locating charging stations, enabling remote driving features, and enhancing driver/passenger in-route services and experience.
But to reach this bright future, Conn says manufacturers need modernized data and digital strategies focused on connectivity and cloud computing.
“The journey to the cloud is the most effective and the quickest path to monetization and modernization of the future of mobility,” she said. “As enterprise moves to the cloud, an enormous number of add-ons and accelerators can be leveraged to solve any complex business problem…Cloud technology is a catalyst for end-to-end digital transformation, and it’s a catalyst that you can leverage without compromising safety and security.”
Overall, despite major challenges facing manufacturers and regulatory bodies, Conn says we have every reason to be optimistic about the possibilities represented by connected vehicle technology.
“Business ideas and innovation do not need to be constrained by technology anymore,” she said.
Cultural and Organizational Changes Are Just As Important As Technological Ones
Barath Indrakumar, Vice President of Digital Business Concepts & Solutions, ZF Group, also emphasized the need to adapt transformative business practices across the organization.
“It’s not only a technology challenge,” he said. “It has a lot to do with cultural and organizational changes that we have to adapt to.”
“It’s particularly challenging for a company like us. We have a rich track record of more than 100 years in producing iconic and highly engineered automotive components. There is an inherent pride in the automotive industry in doing things on our own. We’re very proud of our inventions, but how do we work in an ecosystem of partners in a data centric playing field?”
His own company has attempted to break out of this mindset by creating a series of “internal startups” based on the venture capital model. While ZF previously had success coming up with innovative ideas and turning them into successful pilots and MVPs, they found it challenging to turn those incubated ideas into “money-making data businesses.” Bringing those ideas to an internal startup model (complete with venture boards and an experienced VC overseeing the initiative) has enabled them to bring more solutions to market.
Indrakumar says many of these solutions create new value streams for customers and partners, a “win-win” that encourages more collaboration and sharing.
“My submission is that if you have a good value proposition to show to your customers, they will be willing to share data, which in turn helps deliver new benefits to end customers and make money,” he said.
Leverage Data Through Partnerships and Collaborations
Hagen Heubach, Global Vice President and Head of Automotive at SAP, says the auto industry already has one foot in a vastly different future.
“I think we can all agree that automotive is fundamentally disrupted,” he said. “All the players from OEMs to the middle segments to national sales companies are somehow stuck in this nexus between running a very profitable automotive business [in the present day] while at the same time disrupting into the future mobility world.”
Heubach says that data-sharing is what unifies nearly all of the major areas of innovation: sales, mobility services, smart products, resilient supply chains and smart manufacturing. Like many of the other speakers, he also emphasized a workforce transformation in which “heavy-hitter OEMS” are moving from “classical engineering to a more software-driven company.”
Underpinning this transformation is what Heubach calls “human-centric data management,” which focuses on security, ethics and transparency.
“If we cannot ensure that both the vehicle data and the mobility identity data are secure, then we are completely lost,” he said. “Why? On the one hand, we cannot access what’s happening in the car to build new nice apps and business processes on it. But on the other side, if the end customer doesn’t trust us that we are responsibly handling their data for the identity, there is no chance at all.”
Heubach also spotlighted industrial data-sharing initiatives like GAIA-X and Catena-X. While traditionally the auto industry has lacked trust in data exchange, Heubach says that’s changing as firms confront their new reality.
“All of a sudden everybody has the incentive and the willingness to share data,” said Heubach. “We share the same challenges.”
Hybrid Models of Data Ownership May Be The Future
Avneesh Prakash, Vice President, Mobility & MOVE at Tata Communications, stressed the importance of parsing and understanding the context of data in the mobility ecosystem.
“The data which will allow you to prevent a collision is not fundamentally the same as the data which is required for predictive maintenance or infotainment,” he said. “The context of the data is very important in terms of where you process the data, how you process the data, and the security and the privacy around the data.”
However, all these data are unified by the “helper data” of connectivity, which Prakash believes has not been adequately explored.
“It’s a rich data,” he said. “Just imagine the case of a car manufacturer, heavily software-driven, wanting to run a security patch or a software patch. Today, the cost of the recalls is tremendous, right? [But ] when you analyze this data of connectivity, you’re able to predict the best connectivity…That can fundamentally change the assurance that an OEM has to run a successful SOTA [Software over-the-air] campaign.”
Touching on the question of ownership, he predicted a “hybrid approach” in which different types of data are owned by different stakeholders (OEMs, components suppliers, customers) but come together in a “responsible” ecosystem that allows collaboration.
Harbir Singh, Co-Director, Mack Institute for Innovation Management and Mack Professor of Management at the Wharton School, summed up the major ideas, giving special attention to the idea of collaboration, knowledge-sharing, and partner selection.
“There’s a bit of a first-mover advantage in terms of the best choice of partners,” he said. “You have to think about partner selection along with your ecosystem strategy.”
Kapoor said he was struck by the diversity of players, architectures, and activities in the emerging ecosystem.
“What’s fascinating for me in these last four hours is learning about how the range of activities have exploded as the automotive industry evolves through digital transformation,” he said. “To me, it’s a petri dish of an opportunity to see how those [different aspects] of the ecosystem are evolving at such a rapid rate and how different players are trying to stake important positions.”