We all know that our clocks are running in the same clockspeed around the world, operating in different time zones, but it doesn't mean that everyone has the same speed of operating on his culture-, business model or process-level. You could say, we work and deliver in different clockspeeds, creating a clockspeed dilemma. Where is this difference in clockspeed coming from and how does the automotive industry respond to it?
Connectivity & digitalization change the world
For us, there is no surprise this year: executives have changed their opinion. In comparison to 2015, they now see connectivity and digitalization as the number one key trend until 2025. It is rising at an unimaginably fast pace and fundamentally changes the way we live our lives, interact, consume or travel – having the consequence that nothing will be the same as it was before. Innovative products and even more services are capturing the market at a much faster speed (clockspeed) than in the past. New players are entering the automotive ecosystem, industries are converging and the future of mobility will face a new era of accelerated innovation.
What does this mean for the automotive industry?
The automotive industry is experiencing pressure from all sides and facing unthinkable disruption ahead – a disruption a significant number of executives are more aware of in this year's survey. The travel mentality is transforming towards mobility-on-demand services, consumer behavior is changing and in the near future customers will increasingly demand the car to be equipped with service-oriented functionalities that enable efficient usage of their driving time to be online anytime and anywhere. And finally: the customer's priority has changed from a product driven culture to a service and TCO (total cost of ownership) driven culture, where classical car product features are losing the game against technology features customers know from other industries.
How does this impact the business model?
The business model of today is outdated and will not enable traditional OEMs (original equipment manufacturers) to generate sustainable revenue streams in order to stay ahead in tomorrow's marketplace. In a ubiquitously connected future, it becomes ever more important for automakers to detach themselves from being merely product and technology driven. That means a new segment of premium will be defined. To differentiate and generate premium prices it will be indispensable to develop a business model that is service and consumer oriented and in which data is the fuel. Only then can traditional OEMs emerge into becoming the grid master, meaning that by providing vehicle dependent and –independent products and services, OEMs can manage the mobility grid and dominate the valuable customer relationship along the entire customer lifecycle in and around the car. This way they do not need to lose valuable market share to rising players from the converging ICT industry, all striving to break new ground in the auto industry.
What does that mean in practice?
Different industries have different clockspeeds. This becomes clear when comparing the ICT (information and communication technology) industry, start-ups and PE (private equity) companies with the auto industry. This cultural difference between industries has to be taken into account now as the industries operate in the same value chain. Furthermore, different components require different product development processes. For example, this requires decoupled and more flexible product development cycles for vehicle-independent hardware and software features that are faster than the traditional cycle and have the ability to keep up with the speed of innovation. The era of one PDC (product development cycle) is over. It has to be split up into a minimum of three: long term (3-5 years) metalsmith based, mid term (1-2 years) software / exchangeable components based and shortterm (1 month to 1 year) release on-demand based. Finally: the automotive industry will need new human resources with a different thinking who have already lived in different clockspeeds to succeed in today's fast-paced global and digital environment.
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.