09 10 201544 New cars are becoming better all the time The prog ress is quite remarkable in areas such as engine perfor mance comfort and safety Smart use of digital tech nology is very much driving this progress Indeed there is virtually no single major function in a car that isn t affected by digitalization And improved performance driven by this trend will continue in the foreseeable future As a result consumers are getting dramatically higher value Normally this would be very good news for incumbents in any industry And for the car industry the radical improvement of the product itself promises a fu ture for automobiles However what seems to go almost unnoticed in automotive circles is how the continuing technological shift also will reshuffle who will be able to capture the new value created The current bet by leading automakers is that the existing business setup will continue and that they will keep relying on their capability to aggregate different subsystems into a well integrated and easy to manufacture product But there are a number of reasons why this approach is unsustainable and why digital giants are set to take a bigger and qualitatively different bite of the business value than the traditional au tomotive players First the architecture of digital technology is layered rather than hierarchical meaning that competitive leadership is achieved along a horizontal plane rather than within verticals For instance the power of Apple CarPlay and Android Auto lies in the wealth of their respective ecosys tems which stretch across multiple verticals The automotive industry is one of them The user value is obvious as rich vi brant ecosystems expand the ubiquity of people s digital lives and businesses More users will in turn strengthen the plat form ecosystems But the business value for automakers is more questionable Of course extending the user interface of the smartphone into the car dashboard for increased convenience and safe ty makes sense It will satisfy existing customer preferences and will drive some sales of hardware components such as screens and loudspeakers Yet it represents quite a passive approach to the digital transformation of the car that is tak ing place today Second cars are becoming internetworked which will ultimately change their role in personal mobility In contrast to traditional auto industry notions that the car will be at the center of these new networks it will actually be just one node in a larger network of cloud services Consider how global high tech firms envision cars within the context of sustainable and vibrant cities They re looking at new emer gency response residential and transportation solutions A key concern for automakers should thus be how to make the car a valuable node in such solutions Third new advances in safety solutions such as autonomous driving are likely to reshape existing ways of generating value If autonomous driving frees up time that can be used more productively it will drive new transport and logistics solutions where the actual vehicle is used much more efficiently The sources of business value cannot then come from the physical product but must be derived from the information that the vehicle generates High tech firms with connections to Silicon Valley rather than Detroit know how to create value from information The earlier automakers start thinking of cars as generators of information valuable beyond their local presence the bet ter they will fare The business future of the car is uncertain and betting on traditional revenue streams is probably the right thing to do in the short term In the long run however it probably isn t Ola Henfridsson is a professor and the head of the Information Systems and Management Group at the UK s Warwick Business School His research interests relate to the transformative poten tial of digital technology as it pervades modern business and en trepreneurship The Value Gamble By Ola Henfridsson data for Data takes you on a journey Helping people use it to reach a destination is what we do data for the people When used efficiently and effectively data can improve lives From developing software for designing smooth and reliable flight routes to creating automotive systems that alert drivers of road hazards sooner we help navigators arrive safely lt you re looking for a global partner with the expertise to create unique IT solutions and consult ing for your business and customers NTT DATA is for you The automotive industry is one of our core competencies Leading automotive manufacturers rely on NTT DATA s expertise in Customer Management Finance Transformation Innovation Product Life cycle Management Supply Chain Management Business Intelli gence und i Mobility Get to know us at nttdata com ntt anz autoITint a4 v2 pdf 1 03 02 15 14 23
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