Digital transformation in the automotive industry: 5 trends that are driving the incremental change

Within a year, the debate around digital transformation shifted from educating about its importance to educating about its consequences: “Uber yourself before you get Kodaked“. For too long, automotive incumbents were stubborn to accept the imminent threat of data-based business models.

The recent “Dieselgate scandal”, as well as the undisputed success of Californian companies, have led up to today’s tipping point: the century-old propulsion technology has reached the end of its technology life-cycle.

New mobility concepts vs. perfectly built vehicles

Concurrently, digitization is disrupting the automotive industry. New players and concepts surface on the horizon, ranging from Uber and TrueCar to Local Motors. In light of these developments, does that mean perfectly built vehicles have become secondary? Not in my opinion; industry entrants have underestimated the complexity of automotive engineering, as well as its successful sales.

The process of creative destruction is well underway

Those ignoring Josef Schumpeter’s postulation of the “process of creative destruction” will inevitably face the consequences of digital change. The following five automotive-related trends will cast some light on the extent to which technology will drive the change:

  1. Electrification and hybridization of vehicle propulsion: CO2 and NOx emissions will be further reduced
  2. Connected vehicles in order to increase safety and comfort; core prerequisites are data and real-time data processing
  3. Autonomous driving to fully automated and autonomous vehicles. Here, competition between internet giants and carmakers becomes most visible. Those looking to benefit from unutilized time from vacant vehicles will gain competitive advantage
  4. New mobility concepts will complement the product portfolio, in which the car will be but one option
  5. The social movement towards a sharing economy, which will also advance the data-driven sharing of vehicles

The way of working will change, too. Results will increasingly come from interdisciplinary teams, deploying agile-iterative methods. This will mean prototypes instead of PowerPoint!

The trends indicate that focusing on process optimization using digital technologies is insufficient. Instead, it’s about novel technology-based business and revenue models, demanding companies to acquire technological and analytical competencies.