The challenges faced by original equipment manufacturers-Part 2

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Challenges faced by original equipment manufacturers

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Speaker 1: 00:11 Welcome to the second episode of Driving the Future. I’m joined by Mark Caesar and Sebastian Chudric. We’ll be covering some of the specific pain points of original equipment manufacturers in the current mobility ecosystem. The last time, we were talking about this time of incredible change in the automotive industry and upheaval. It’s a fascinating time but it really is a time of great upheaval for the original equipment manufacturers.

So I’m very pleased to welcome Mark and Sebastian. Welcome. Well, we’ll start with Mark. Please could you introduce yourself? And I should say that both of these gentlemen are digital automotive experts. Okay, so Mark, please introduce yourself.

Mark: 00:53 Yeah my name’s Mark Caesar, I’m working at [inaudible 00:00:56] in the automotive digital practice. Responsible for all the Connect topics, have many years of experience in consulting in the automotive industry. Looking forward to the chat with you.
Speaker 1: 01:15 Great, yeah, me too. And Sebastian, please introduce yourself.
Sebastian: 01:20 So I’m Sebastian Chudric, I have [inaudible 00:01:26] of experience in consulting with automotive companies. I’m leading the automotive digital practice here in the Dachau region.
Speaker 1: 01:33 Great. Great to have you both on board.

So, last time we were talking about sort of setting the scene of the mobility ecosystem in this time of great change. This time, I thought we’d visit some of the specific pain points. And I wonder if you gentlemen could list your top, let’s say, three pain points that original manufacturers face in the current climate.

Sebastian: 02:00 It’s hard to just name three, I would say, because this time is very exciting at the moment for the automotive industry. So, one pain point is that competition is changing. So, looking back a couple of years, you have these major OEMs producing and selling cars and that’s it, pretty much. Today, we have new tech players, we have new entrants such as Tesla or Byton who produce and sell completely new products and also ideas. That’s new, so the industry has been changing and is changing.

Number two is that we as consumers, that we as customers, we have completely different expectations than 10 or 20 years ago. So, your and also my expectation is very likely shaped by players such as Innoson when it comes to customer service, also when it comes to speed, when it comes to responsiveness and challenges.

And number three is that electric cars and new products and services such as connected services are not only untapped potential but also big turnouts for OEMs. They are well trained in producing and designing nice cars and then selling them to us. So this is new ground for them and unlocking this potential is something that brings us from a challenge to an opportunity in a way.

Speaker 1: 03:21 Okay so, perhaps Mark, you can give your top pain points? The ones that come to the forefront of your mind.
Mark: 03:29 Yeah well, if I had to sum it up I would say it’s really the transition from a very product-focused company to a more customer-centric company. And how does it turn out? And how does it show? On the one hand, it’s the transition that OEMs have to do from a rather engineering-driven company to a more data-driven company. So, gather that much data in order to be able to perceive what the customer really wants and to really shift that focus to the customer.

It’s also transitions from a product- to a rather service-centric company. So, the OEMs already talk about monetizing data out of different services, so the revenues will not come from the product anymore but from the digital product and services.

And I would also say that the development process is changing from a rather, let’s say, linear-development cycle to iterative and rapid cycles. These I would say are really some of the pain points that we see at the moment.

Speaker 1: 05:02 Would you say that it’s driven by the invasion of the digital players offering a more customer-centric approach?
Sebastian: 05:10 Definitely. If you look at yourself using, for example, Netflix at home: Netflix is able to update the services right at the spot a couple of times each day, a hundred times a week. So with this, you get updates all the time and you as a customer, you are used to that. If you compare that to the automotive world, then each time you need an update at the moment you need to go to the service station in order to be connected to some cables, some wire. And that’s not what the customer’s expecting.

First OEMs are showing that, like Tesla with over-the-air updates, that this is the right direction. Still we see a gap between what the customer is used to from his daily life compared to the automotive world.

Speaker 1: 06:10 For just a bystander, a layperson such as myself, you know a really fascinating environment. But what happens, if I can be blunt, if original equipment manufacturers don’t react to this huge sea change or sort of see it as a huge opportunity rather than a risk or a threat.
Mark: 06:30 Well, first of all, it is important to understand where to play. And without the fields, I call them profit pools, where it makes sense for car manufacturers to really look at and to focus on.

Secondly, it’s an understanding that they can’t do everything by themselves. So they need to find new partners, they need to partner up with new players to bring this to life.

And number three is that the understanding and this ever-present belief or culture of “we are great manufacturers, it’s great design and engineering and clients want what we produce.” That needs to change.

So, if it’s about looking at what the customer really likes, if it’s about partnering up with new players, but also suppliers, completely new parties such as insurers, banks, cities, when it comes to smart cities and new mobility, when it comes to charging infrastructure for electric cars – that is something which is not in the DNA of automotive OEMs. It’s not in their core belief that they are strong, and they are the greatest in producing a car to a relatively good cost ratio and bringing it to the market with good quality. So that’s what they are well trained in, and everything that now lies ahead is different. It’s different in terms of capabilities, in terms of skills, in terms of culture. And that is very likely the biggest challenge to them that they do not adopt.

Speaker 1: 08:14 Is it a fact that they’ve been on this course for so long it’s quite difficult in some cases for them to quickly and suddenly change direction in to this new reality?
Sebastian: 08:25 Of course it is and I feel that’s pretty normal. If I had to put myself in to the shoes of a top manager from a car manufacturer, so I made progress in my career by exactly doing what I’ve been describing, by designing, producing, and selling cars. That is linear and it has been working over the past decades and there has been steady growth. Now, realizing that this growth comes to an end, and that new growth and pools need to be explored, also needs a radical rethinking, a radical culture change, and that is tough. We experience that each and every day and I think its normal if a industry gets slowly but surely disrupted; you need new blood, new thinkers, you need impulses from outside but also from inside. And that is very likely the toughest challenge to really accept that OEMs and the whole industry is about to change and need to change.
Mark: 09:32 For me, the shift that is necessary comes really from the customer. If you look at the customer, what he really wants, it’s mobility. It’s not just owning a car but it’s going from point A to point B. So OEMs have to react to that shift in demand by the customer. They have to be able to integrate in to that ecosystem that is now building up and they have to connect to that ecosystem consisting of not only OEMs but, as Sebastian said, consisting of the infrastructure out of the cities, out of other service providers. So therefore, the transition is really from a product to a service which is first of all necessary by the OEMs.

And then second, as mobility is changing, as the customer is moving from the driver’s seat to the passenger’s seat, if you think about autonomous driving which is coming, then there are great opportunities for OEMs to really fill out that time that the driver and now the passenger has in the car. So there is free time for the customer which an OEM should be able to fill up. If the OEM doesn’t do it, there are other service providers doing that. And so, therefore, OEMs have to step in that spot and fill the gap.

Speaker 1: 11:32 Okay, so we’ve covered some of the pain points and I guess the threat faced by OEMs, but it’s also a time of incredible opportunity. And there are so many opportunities to be had gentlemen, could you talk a little bit about this?
Sebastian: 11:47 Absolutely, I mean it has never been feeling more exciting to work in the automotive ecosystem, as a consultant or an employee or manager of an automotive OEM.

Why is that? Because over the past years, progress and also innovation has been, I would say, overseeable in a way? We saw linear progress in the whole industry, in products, in innovation technology, in sales. What now lies ahead of us is a complete upheaval of the automotive industry and what the automotive industry tends to be in the coming 10 to 20 years. So, shaping that industry from inside-out but also from outside-in, helping automotive OEMs and all the players in the ecosystem to create new business models to get prepared for the future, that feels so exciting. That looking at the pain points, also we need to look at great opportunities, the opportunities are so abundant that I feel, as I said, it has never been so great working for the automotive industry than it’s today.

Speaker 1: 13:04 Thanks so much to our guests Mark Caesar and Sebastian Chudric. And next time, we’ll be talking about the opportunity to connect to customer-connected services, products, and the customer engine. So thank you very much, and until next time. Thank you. Bye bye.