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The automotive digital enterprise: a today problem

Dreamer
Dreamer


(Listen to the podcast above)

What is the automotive digital enterprise, and how does it fit into the world of sexy tech modifiers –autonomous, connected and electric – routinely appended to any mention of cars today? And why should you care about it? 

 

The first question is easy enough to answer. The automotive industry is moving from a model of building and selling cars, towards mobility services, trips on demand, software services and new forms of transportation, like micro-mobility. The implications for this are both obvious and nuanced. [As just one example, consider how the industry is bandying about metrics that would have been odd or off-the-radar even a few years ago. In its S-1, Uber explicitly describes its TAM first in terms of passenger miles (11.9 trillion annually) and only second in terms of a dollar amount ($5.7 trillion). And thanks to Tesla and its self-driving chip, longtime auto observers are speaking about TOPS of computing power and per-watt comparisons of various chips, concepts that that until recently were faring mostly for a relatively tiny community of semi co nerds.]

 

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While the spotlight increasingly shines on questions about semiconductors, software, electronics and services, the coming automotive digital enterprise is getting less media attention. I'll put it out there that the application and process domains are inseparable. That is, you don’t get autonomous, connected electric vehicles at scale unless you embrace digitalization up and down your organization. Those companies that do so are likely to be the winners over the next decade.

 

This leads to the ‘why care?’ The question, and an answer that’s a bit more complicated though also more immediately important. The industry generally understands that process optimization through digitalization is needed, but there’s an underlying belief that this investment can perhaps be delayed or rolled out 'after we get embedded software and electronics' under control, or until the revenue opportunities of the mobility services market ($1.5 trillion in 2030 estimated by McKinsey) can be realized. Nothing could be more wrong, and increasing investments in digital technologies are starting to define who will be the survivors and winners in this new mobility market.

 

Digitalization is a word that is thrown around a lot and sounds like something owned by IT departments, and never really touching the product development world. This is also completely false. The true automotive digital enterprise connects R&D, IT, manufacturing, post-sale and deployment, and feeds back data within and between these domains, offering insight leading to significant market advantage.

 

BMW CIO Klaus Straub, who says his title might better be chief integration officer, had this to say in a 2016 interview: “In the past, we had the car world and the company world, and they were not connected. When our colleagues designed a car, the IT organization was simply not involved... Now when we are designing and implementing an automotive IT system, we have to decide, for example, which functions should be embedded in the car itself and which we bring in from the back end; what level of connectivity we need to have [for the vehicle]; and which third-party services we need to integrate. As IT handles the implementation, it needs to be involved in the discussions from the start.”      

The benefits of integration show up in cost-savings projections, not just quotes. For example, Roland Berger predicts that inventory costs will decline by 30-50%, the manufacturing cost base by 10-20%, and the ‘cost of complexity’ by a stunning 60-70%. Complexity is everywhere in automotive engineering today, from designing chips and embedded systems for sensor fusion to validation and verification of driver-assist and autonomous systems in city driving scenarios. More benefits still flow from the inevitable convergence of these disciplines. For example, to test software models of new chip IP inside a virtual vehicle architecture, then drive that in a virtual city, allows us to solve problems in ways that weren't previously possible.

 

This, then, is what digitalization means: compounding product development advantage and cost reduction by using data to drive engineering decisions, not only within domains but also laterally – electrical-mechanical – and making the 'best practice' available to everyone in the company as design-rules IP. Looking at it another way, if your competitor is two years ahead of you in creating their own automotive digital enterprise, they are two years closer to an aggregate 10-20% operational advantage over you. I'm not a finance person, but I do know that kind of headwind will put companies out of business. And long before that pot of gold at the end of the rainbow ever materializes, the $1.5 trillion discussed earlier.       

 

I suggest reading stories about investment in digital technologies through the lens of companies primarily addressing a today problem for survival due to the increasing complexity of vehicles, and demands for safety and security, and not just looking over the horizon at new mobility revenue.

 

Consider the case of VW networking all of their 122 manufacturing plants globally using cloud-based data analytics for operational optimization. Another example is Uniti, a Swedish startup that has set itself up as a pioneer in digital design, development and manufacturing. And note here that the automotive digital enterprise is not defined by size or manufacturing capacity. VW Group, one of the largest vehicle manufacturers in the world, sits alongside Uniti, a startup, as examples of companies making some of the same strategic bets.         

 

If you’re somewhere in the auto supply chain, then perhaps the best answer to why you should care about digitalization is that it allows you to take control of your own destiny, especially relevant at a time when everything seems up for grabs and the world’s car capitals seem suddenly vulnerable. The approach should be comprehensive and involve looking deep into processes for product development, agile manufacturing and post-sale deployment and maintenance.

 

Of course, partners can help define appropriate entry points, however, there is no one-size-fits-all approach, nor any single entry point for organizations looking to make this transformation. In some instances what’s needed is a full-scale enterprise data backbone connecting different engineering domains while in others, the first step on the ladder is to use lightweight code apps to connect existing systems and processes. About all that’s universal are the underlying imperatives – start now to define your vision, understand where your bottlenecks are, and implement data-driven, cross-domain solutions.

 

Toyota CEO Akio Toyoda has famously said that adapting to change is no less than a matter of survival. If he’s right, then the digital enterprise is not some theoretical model, it’s a lifebelt, one that’s rooted in hard data that any financial controller can measure objectively.

Learn more.

 

 

About the author 
Andrew Macleod is the director of automotive marketing at Siemens, focusing on the Mentor product suite. He has more than 15 years of experience in the automotive software and semiconductor industry, with expertise in new product development and introduction, automotive integrated circuit product management and global strategy, including a focus on the Chinese auto industry. He earned a 1st class honors engineering degree from the University of Paisley in the UK and lives in Austin, Texas. Follow him on Twitter @AndyMacleod_MG.