We all certainly love our smartphones. Annual deliveries are now at about 1.5 billion new phones globally and over a third of the world’s 7.6 billion people have a smartphone line. Smartphones comprise around 3/4 of all mobile phones sold annually, up considerably from just a few years back, albeit growth is beginning to level off. More than half of internet use is via mobile. Mobile/smartphones are vital to economies from established to emerging all over the globe and have propelled Apple to > $1 trillion valuation status, the first such US company in history (highly influenced by iPhone).
Automobiles, on the other hand, have existed for well over a century with over 1.2 billion cars and commercial vehicles occupying our planet at last count, which is about 16 vehicles for every 100 people. The total number of vehicles is expected to double by 2040. Why is it that only 4 million plus are electric drive vehicles, expected to hit 5 million by early 2019? That is only about 1 out of every 300 vehicles on the planet that plug-in. Customers really love their electric drive vehicles, too, so why has their adoption not followed the growth trajectory of the smartphone? “The car is the ultimate mobile device, isn’t it?” said Jeff Williams of Apple back in 2015. Well, cars (and SUVs, crossovers and trucks) certainly could be the “ultimate mobile devices” if automobiles and the transport industry learned how to develop and leverage a “smartphone ecosystem” for electrified vehicles integrating the emerging trends of autonomous, connected and shared vehicles. This would advance the future of e-mobility like smartphones have honed their own successful ecosystems. Smartphone ecosystem development and leadership has determined the growth and the winners and losers in their respective industries. Do automotive companies have the vision to disrupt their existing ecosystem? Mary Barra, GM CEO, said in 2015, “We’re going to see more change in the next five to ten years than we’ve seen in the last 50.”
What is a Business EcoSystem?
Let’s first explore the ecosystem term (similar to the historic “value chain”) which is a bit of an overused buzzword today. Business strategist James Moore adopted the biological concept in his 1993 Harvard Business Review article “Predators and Prey: A New Ecology of Competition” whereby he paralleled companies operating in the increasingly interconnected world of commerce to a community of organisms adapting and evolving to survive. In Moore’s seminal work, he suggested that a company be viewed not as a single entity in an industry, but as a member of a business ecosystem with participants spanning across multiple industries. Controlling the evolutionary stages of the eco-system could lead to dominance, self-renewal or also-ran status which could also ultimately result in demise (Apple & Android vs. RIM-Blackberry & Nokia may be a relevant example). The evolutionary stages of a business ecosystem involve birth, expansion, leadership and self-renewal. It is clear that the smartphone ecosystem led by Apple and Android are well along the evolutionary path while autos and mobility are undergoing dramatic change and the new ecosystem is just being born. Which automotive OEM’s, start-ups or other key players will realize the importance of actively organizing and architecting the potential competitive advantage that resides in ecosystem control?
Is it the Phone or Everything Else?
Most of us remember the early days of mobile phones when connections were spotty at best and the first phones resembled block-like objects or foldable devices with awkward key functionality. Can you hear me now? We all had land-line phones and a phone was only a verbal communication device, not a pocket-sized personal computer with a myriad of other convenience features and functions. Today’s smartphone benefits from enhancements and advancements in so many other areas, a confluence of technologies converging at just the right time yielding a transformational shift in the world we live in and how we behave.
What would these marvelous devices be like without 3G, 4G and beyond – and 5G is coming? There is a whole separate set of powerful players battling for supremacy in providing wireless services. Global WiFi networks will soon reach 500 million, a 5x increase in only 5 years. Can you imagine such an increase in EV charging infrastructure allowing the electric drive vehicle hardware and this new energy technology to be further enabled (alleviating range anxiety further) as with the growth of mobile wireless networks? Connectivity enables access to the Internet (average adult now spends over 3 hours per day on their mobile phone) and is vital to so many new business models (try ride-hailing without your smartphone). Within the Apple ecosystem, there are over 2 million apps today, up from less than 5,000 just ten years ago.
Warren Buffett recently called the iPhone “enormously underpriced,” saying that it’s worth far more than the $1,000 Apple charges.
“I have a plane that costs me a lot, a million dollars a year or something of the sort. If I used the iPhone — I use an iPad a lot — if I used the iPhone like all my friends do, I would rather give up the plane,” he said. The recent September 2018 Apple event suggests Apple may have been listening.
We all agree on the apparent necessity of this device in our daily lives but where exactly is this value that we perceive derived from? If you perform a teardown and cost the many parts and pieces, it certainly isn’t from the material cost in the physical hardware.
On January 9, 2007, Steve Jobs introduced the world to the Apple iPhone. “Every once in a while, a revolutionary product comes along that changes everything,” he said. ‘Well, today, we’re introducing three revolutionary products of this class. The first one is a wide-screen iPod with touch controls. The second is a revolutionary mobile phone. And, the third is a breakthrough internet communications device. An iPod, a phone and an internet communicator, are you getting it? These are not three separate devices; this is one device, and we are calling it iPhone.” “Today,” he added, “Apple is going to reinvent the phone.”
Jobs was certainly right about that and then some. But he wasn’t always right from the start, on apps, screen sizes, etc. He certainly understood the many important elements that now create tremendous value and was instrumental in setting up many of the following ingredients (see the list of a dozen examples below with many also applying to the likely e-mobility ecosystem of the future) which are essential to the Apple iPhone ecosystem. In the early days, Apple disrupted incumbents (Nokia, RIM-Blackberry) and the wireless carriers globally. At that time, the carriers had the mobile ecosystem of services, distribution, and pricing locked down. Apple broke the chokehold on user experiences and later opened up the smartphone platform to developers, also serving as overseer of the ecosystem shifting power to those capable of delivering great customer experiences. So imagine how different you’d feel about your smartphone experience if it was just about the hardware without great connectivity, delightful user interfaces or apps galore (see list of major ecosystem elements). Can you hear me now?
- Wireless connectivity (cell tower / WiFi infrastructure) & Internet access
- App store, mobile apps including music & social networks
- Multi-touch screen functionality & UX
- Messaging, email and communications
- Cameras, calculators and personal assistance (voice, scheduling, maps, etc.)
- Computing power w/better OS, software updates, cloud services/storage, etc.
- Mobile commerce and business transactions
- Platform benefits and services across devices (watch, tablet, phones of many sizes, laptop, desktop, TV, etc.)
- Data, analytics and AI
- Batteries, charging and related & emerging technologies
- Materials & supply chains
- Manufacturing partners
At The Intersection of Autos/Mobility & Smartphones
Today, we see our beloved phones and their comforting user interface tethered to our car center stack screens via Android Auto or Apple CarPlay. The battle for control of the screens enters the automobile as well as the hope of monetizing the data behind the screens. Both industries share many of the same elements required to produce a successful ecosystem. Batteries are one especially interesting intersection as automotive applications have advanced dramatically in a short ten-year period (let’s not forget some recent challenges with Samsung batteries/phones and degradation issues in older iPhones). High volume manufacturing and reliable partners in the raw material and component supply chain are critical. Autos are shifting from hardware to software-centric with the emergence of autonomous vehicle (AV) systems and related driver assistance and safety features. Automotive telematics provides two-way connectivity to the world just as smartphones provide for navigation and so many other purposes. We enter the age of over-the-air (OTA) software updates for automobiles so they truly become smart-cars with Tesla serving as a pioneer. The Chevrolet Volt initiated the first mobile app in 2010 (see title image) leveraging the General Motors OnStar platform allowing for smartphone connectivity with your car to remote start, lock/unlock doors, schedule/initiate charging, etc. Some believe that the smartphone could actually replace your key fob someday. The wireless revolution will certainly extend beyond just information transfer via smartphone to wireless power transfer for onboard devices like smartphones as well as higher power, opportunistic, autonomous charging of high voltage traction batteries required in the future world of mobility.
Build the E-Mobility Ecosystem and the Future will Arrive
Electric drive vehicles are beloved by those that have experienced the modern incarnation beginning in 2010. The Model 3 sales have shown great promise in spite of Tesla’s most challenging production launch and other distractions. For those of us involved in this rebirth, we realized early that having great vehicles with superb quality and desired attributes was just a start or “price of entry” to compete against the strong, established status quo. So much more was required in order to shift the 100+ year paradigm of the automotive industry and its well-established ecosystem.
The concept of the new automotive e-mobility ecosystem was first recognized by Inc Magazine in their November 2009 cover story referencing the connected, electric car as the innovation machine that entrepreneurs could build around with new businesses and supporting innovations. The graphic below from the article depicts the initial building blocks of an e-mobility ecosystem.
A unique aspect of this “new” ecosystem is the relationship that must be developed with energy providers (the electric grid). The historic relationship between the automotive OEM’s and the oil companies was distant and co-existent. As long as the fueling stations were accessible to our shared customers at reasonable prices per gallon of gas, we marched on. As concerns emerged on the sustainability of oil as the only transportation fuel and regulations tightened, oil industry profits stayed strong while automotive OEM’s struggled mightily during economic downturns. Even tech giants like Google and Apple are realizing the importance of energy and have taken industry leading action to use renewable energy to power data centers and other operations. A great opportunity exists to forge a relationship with the electric utility companies to nurture a cost per mile advantage, utilize off-peak power capacity and smart grid technology, advance renewable energy solutions by integrating the mobile energy storage already residing in the electric vehicles to assist the grid and provide power when needed, perhaps even power your home.
Clearly, an area requiring significant attention to realize a prosperous mobility future is EV charging and related infrastructure which parallels close to smartphone’s need for cell tower infrastructure and we all remember the evolving coverage maps. A recent McKinsey study highlighted the need for chargers and investment to build the needed infrastructure for the EV/AV (autonomous vehicle) future expected.
Given the vital importance of charging, we are encouraged by the efforts of many to attack this need and other elements required for the future of mobility to be realized. From the VW settlement requirements of nearly $2 billion investment via Electrify America to Tesla’s SuperCharger expansion to the recent ChargePoint commitment of 2.5 million chargers by 2025 (a fifty-fold increase from current levels), we see positive signs. Cities are taking a leadership position and utility companies are beginning to take part. Many auto companies and other energy companies seem to be watching from the sidelines and the overall effort is at best fragmented with the looming capital requirements still unresolved.
Former Mayor Michael Bloomberg stated when commenting about “The New American Road Trip” initiative discussed recently at the Global Climate Action Summit in SF:
“Modernizing the highway system for electric and autonomous cars is essential to our economic competitiveness in the global marketplace, and unless we act, we will slip behind. China — is already miles ahead of the U.S. in high-speed rail and electric vehicle adoption . . .”
Certainly, many parties must cooperate and many have an integral role including community leaders and policymakers at the Federal, State and local levels. For EV’s, ubiquitous charging (even though most charging is done at the home or home-base for the vehicle) is somewhat equivalent to cell coverage/service for the smartphone, it still only represents, however, one key element required for developing and controlling the ecosystem and displacing the status quo for transportation.
Summary
What leaders, teams or partnerships will wrest control of the elusive challenge of creating a full system of complementary pieces to provide the customers and all key stakeholders with a better solution or a modern e-mobility ecosystem? Look no further than to the historic activity in smartphones and the initiatives to envelop all important aspects of value including raw materials from far away places to music/entertainment to user interface determining who emerged as predators or prey. Tesla seems to have attempted to cobble up the makings of their own ecosystem with Panasonic batteries, solar, SuperCharging, proprietary connectors, large screens, all-new vehicle architectures, unique autopilot, etc. but has focused on vertical integration and not developed the cooperative partnerships required to take full advantage of the power of the ecosystem.
We can only imagine the response from the market to a visionary coalition that understands the customer benefits of an EV/AV future and is willing to build an ecosystem over time unlocking the inherent value. This value resides from the seamless integration of renewable energy, connectivity, access to charging networks, smart use of parking and people-friendly spaces in cities, recognition of more fleet operators and the myriad of technology enablers required for self-driving (hardware, software, infrastructure, data & dynamic maps, etc.). Some have claimed that a car is only a smartphone on wheels. The future of mobility is so much more than that but the ultimate mobile device (the vehicle) can learn valuable lessons from the parallels and evolution of the smartphone and by building a similar ecosystem can accelerate the future that many of us are hoping for. The automobile as a tech hub could unlock all kinds of new features for customers and value for stakeholders and determine the future winners in more than a few industries.
