The Power Of Ecosystems - Why 2016 Is The Year Of The Automotive Ecosystem
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The consumer electronics world is defined by companies which have ecosystems and those which don't. The haves, like Google and Apple, lead the world in value, revenue and profitability. The have nots like Samsung and Yahoo struggle to achieve valuations, revenues and profits that match the competition. As cars become connected, ecosystems will play just as important a role in defining the winners and losers of the connected car market is they have done in the mobile phone market. This presentation presents analysis and insights into the role that ecosystems will plan in defining success within the connected car market.
The Power Of Ecosystems - Why 2016 Is The Year Of The Automotive Ecosystem
- 1. 2016 Is The Year Of The Automotive Ecosystem Presented at CES January 2016
- 2. OEMs Can Master Their Own Destiny Executive Summary 1. By 2020 OEMs who have successfully mastered ecosytems will lead in profitability and market share. 2. The best way to get to an ecosystem is by partnering with suppliers. 3. CloudMade understands ecosystems and helps guide you through the ecosystem puzzle. 2
- 3. Engineering & Design Team: Kyiv R&D: Munich Design Studio: CloudMade Fleet: Management Team Past Successes: Here To Serve You Taras Bublyk Product Management James Brown CTO Nick Black CPO Pavel Stelmakh Program Management Juha Christensen Chairman & CEO Jean-Marc Matteini Product Planning
- 4. Piecing Together The Puzzle 4 Design Professional Services Development Systems Integration CloudMade Learning Solutions Partner Ecosystem
- 5. What’s An Ecosystem And Why Does It Matter?
- 6. 2001 20072006 2010 20132012 2014 2015 Ecosystems Define Success iCloud Music Apps Storage User Profile Billing iOS + Mac OS
- 7. Through Ecosystems OEMs Get 77 Retain Customers Higher Sales Better Margins Boost Sales, Retention & Profitability
- 8. Connected Car Forecast: Sunny With Storms On The Horizon
- 9. 9 Connected Promise Yet To Be Realized
- 10. Software Is Eating The World 10 2000 FEATUREPHONES RULE Functionality a bare minimum of what users require to make calls and send messages Market controlled by: Over 80% market share controlled by Nokia, Ericsson, Motorola & Matsushita Nokia market cap $229B Apple market cap $83B 2010-2015 SMARTPHONES REDEFINE INDUSTRY Functionality is driven by rich eco system from which users can find apps that solve their needs and wants Market controlled by: Apple and Google (90%+ of market share) Nokia market cap $15B (before sale) Apple market cap $600Bn 2016 – Connected Cars Functionality a bare minimum of what users require to drive from A to B and connect with the Internet to find POIs Market controlled by: Toyota, General Motors, Volkswagen, Renault-Nissan, Ford, Fiat-Chrysler, Daimler etc. Toyota market cap $220B Self Learning Car Leader: Market does not exist 2018 – Self Learning Cars Functionality driven by cars that learn and anticipate consumers’ behavior and provide functionality accordingly Market controlled by: The OEM market will experience significant market share shifts between 2015 and 2018 Toyota market cap in 2018 ?? Self Learning Car Leader: To be determined
- 11. New Competitors At The Door 11 Competitor Strategy Impact For OEMs Use data to offer world’s best ad product • Reduces OEM differentiation • Erodes OEM margins and flattens market share Car sharing, fractional ownership, new OEMs ??? • Reduce OEM differentiation • Threaten to change fundamental business models of the industry Design and sell world’s most desirable consumer electronics • Exceptionally tough competition at high end • Threaten to change fundamental business models of the industry Own the worlds on- demand transportation network • Lessens the need to own, lease or rent vehicles • Reduces OEM pricing power Compete with Uber via partnerships • Lessens the need to own, lease or rent vehicles • Reduces OEM pricing power
- 12. The Business Case for Ecosystems
- 13. Through Ecosystems OEMs Get 1313 Retain Customers Higher Sales Better Margins • Build lifelong relationships with customers via the cloud. • Delight drivers with stunning user experiences. • Offer vehicles with uniquely differentiated features that attract broad customer demographics. • Lay the groundwork to build future additional revenue streams. • Improve pricing power by increasing differentiation vs other OEM brands. • Leverage mass customization to build more experiences from fewer platforms. Boost Sales, Retention & Profitability
- 14. Ecosystems Lead To Success 14 Revenue and Net Margin are Q3 2015. Market cap as of 22nd Dec. The Failed To Builds The Want-To-Haves • Facebook, Xiaomi, Microsoft, Alibaba and others are investing billions of dollars to create their own ecosystems. The Haves Apple $51.5Bn revenue 21.5% net margin $602Bn mar cap Google $18.7Bn revenue 21.3% net margin $514Bn mar cap The Have-Nots Samsung Electronics $44.0Bn revenue 10.6% net margin $150bn mar cap Yahoo! $1.2Bn revenue 6.2% net margin $31Bn mar cap Nokia $229Bn mar cap 2000 ê $15Bn mar cap 2014 Blackberry $220Bn mar cap 2000 ê $9Bn mar cap 2016
- 15. 15 Google Yahoo! • $3.50 $2.63bn in revenues from 749m Android users1 • $0.42 $252m revenue from 600m mobile users1 Google Takes 9x More ARPU Average Revenue Per User 1 - http://www.radiofreemobile.com/yahoo-out-of-options/ & Radio Free Mobile “Mobile Ecosystems – Gated communities” • 63% The percentage of Digital Life services such as messaging, social networking, games, e-commerce, etc. Digital Life Coverage • 73% Yahoo! lead in this metric largely due to their recent acquisition spree of various mobile properties. • Users are heavily engaged How many of the ecosystems services do users use, for how frequently and for how long? Engage- ment • Users are lightly engaged Yahoo!’s ecosystem does not entice users to do much more than check mail, read a blog post or read a news article. Conclusion Google wins the ecosystem battle hands down against Yahoo!
- 16. 16 Four Ecosystem Pillars Digital Life Coverage • Services like music, social media, local search that are relevant to the driver and their journey. Compatible Business Model • One or more business models that are driven by the ecosystem. Rewards Users For Loyalty • User experiences that leverage data, analytics and frequent updates to continuously win, re-win and reward users. Data Sharing Between Domains • Interconnections between different parts of the ecosystem that lead to fun, easy to use experiences. Google STRONG STRONG VERY STRONG VERY STRONG OEMs Today LOW MEDIUM VERY LOW LOW Key ingredients for a healthy ecosystem are:
- 17. Case Study: What Happens When Google Enters The Market
- 18. From Good To Bad To Ugly To Commodity 18 July 2012January 2012 May 2013 January 2014July 2013 Oct 2014
- 19. Hardware Differentiation Isn’t Enough 19 • Apple is the only OEM to have successfully adopted a vertically integrated strategy of owning key ecosystem components. Microsoft and Blackberry have failed with similar strategies. • Samsung is the only Android OEM to share industry profits. Their huge scale (108M units in Q3 2015, 23% market share, 3.2x more units than the Huawei, the no. 2 Android OEM) and their semiconductor business are the key to their success. • Huawei, Lenovo, LG, HTC and others all loose money in their mobile phone businesses. As Google enters the automotive as they did the phone industry, why would we expect the outcome to be any different to that shown here? Apple Samsung Blackberry Nokia / Microso8 HTC LG Sony Ericson 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2007 2008 2009 2010 2011 2012 2013 2014 2015E Smartphone industry share of EBIT margin since 2007 for top 8 smartphone vendors
- 20. 20 Path A: Take Google’s or Apple’s Ecosystem Path B: Do It Yourself Short Term Impacts • Offer a weak, nascent ecosystem to customers. • Hugely increase R&D costs. • Spend 2-5 years building and assembling ecosystem. Medium to Long Term: • Opportunity to differentiate is balanced by the cost and complexity of maintaining and developing a full stack automotive ecosystem. • Swelling R&D costs cut into margins, impacting performance. OEM Short Term Impacts • Get access to a buoyant Android ecosystem. • Reduce R&D costs. • Get customers hooked on Google. Medium to Long Term: • Become 1 of 20 OEMs with the same Google Car OS. • Reduced differentiation leads to falling sales and margins. • Reduction in R&D spending further reduces innovation and differentiation. Path C: Partner With Suppliers Short Term Impacts • Plug in various ecosystem components to start quickly. • Maintain & focus R&D costs. • Get customers hooked on OEM’s own products. Medium to Long Term: • Become an OEM with a uniquely differentiated product. • Improve sales and margins via improved pricing power. • Own the customer profile, leading to hugely improved customer retention. Three Paths To Choose
- 21. The Connected Cars gives OEMs the opportunity to build lifelong relationships with the their customers.
- 26. Upgrading to Sports Car 26
- 27. 27 Max, 87 years
- 28. Build Your Connected Car Solutions With CloudMade
- 29. 29 Organizations Let Ecosystems Blossom Ecosystem Organization Product Planning User Experience Design Engineering Partner Management CloudMade’s role is to work with you to identify which of these capabilities you have and which you need, then to work with you to source and integrate them. Product Management Requirements Management Strategic Planning Software Platform Development Software Application Development Quality Assurance Program Management Project Management Data Security and Privacy Data Science
- 30. Build With CloudMade Navigation Offer in-car navigation experiences that are superior to smartphone competitors by offering drivers predicted destinations and journeys, a choice of personal routes like safest, least stressful and access to rich content like parking and POIs. Production Entertainment Design Offer in-car entertainment experiences that learn the preferences and habits of the driver and their passengers to make selection of entertainment easier, less distracting and more personal for the driver and their passengers. Communication Design Connect drivers and passengers with their friends and families in a safe and engaging way. Features like predictive call list make phone use in the car safer, Dayogram lets drivers share their journeys with their social networks. Coach & Performance POC Offer drivers applications that help them master their driving skills, become better, safer or more confident drivers. All drivers - from novices, to parents with teen driver to performance enthusiasts can benefit. Personal Assistant POC Use powerful machine learning techniques to offer a broad range of "personal assistant" features to drivers and passengers that help busy drivers stay productive, arrive on time and stay safe, happy and healthy through their driving lifetimes. Remote Analytics Production The only automotive specific analytics solution that lets OEMs and Tier 1s extract CAN data from their vehicles into a server side big data environment, allowing for over the air updates to specific signal collection and collection rules. CRM Design A range of features that help OEMs and Dealers sell more cars and improve customer loyalty, ranging from predictive maintenance to customer car, warranty optimization and management. Ads and Offers Design Lets OEMs deploy in-car advertising experiences that monetize the connected car and open the door for new business models. Leverages the driver and passenger profiles to build a detailed understanding of habits, likes and dislikes. Map Feature Extraction POC Turns the car and the fleet into probes that can create map layers such as pot holes, road surface conditions, dangerous and stressful spots and more, allowing OEMs to offer uniquely differentiated map layers to their drivers. Adaptive UI Production Gives the car the ability to anticipate the needs of the driver, letting the UI offer functionality to the driver and passengers as needed based on their profiles, their past behavior and the context of the drive. Fleet POC Gives OEMs a range of well differentiated services to offer to fleet customers like rental car companies and large, medium or small enterprises. Mobility Services POC A range of compelling mobility services targeted at drivers, passengers, public transport users, traditional fleets (e.g. hire cars), new fleets (e.g. on-demand taxies) that put the OEM in control of the future of mobility. Global Content Production Global content like POIs, weather data, gas prices, etc. from well local brands that drivers love is made available to OEMs and Tier 1s to integrate into their search and infotainment products. This set of 15 solutions is offered to OEMs and combines CloudMade’s software solutions with partners to deliver the self- learning car. EVs Design EV drivers demand specialist features to help them get the most out of their cars and help to reduce range anxiety. A range of features like EV route planning, up to date EV charging station maps and EV focused drive coaching apps help EV drivers. Comfort & Assistance POC Offer comfort and assistance features like cabin pre-conditioning, personalized heating and cooling, assisted onboarding of ADAS features like ACC, learning cabin settings like seating and mirror positions.
- 31. Master Your Destiny Executive Summary • Ecosystems can be key ingredients to high margin businesses. • The connected car presents OEMs the opportunity to assemble ecosystems that will contribute to their business success now and protect their businesses in the future. • Of the three ways to get an ecosystem, partnering with suppliers offers the best prospects of short and long term success. • CloudMade offers the parts of the puzzle in the form of analysis, strategy consulting, design and development, partner relations and a range of software solutions that turn the connected car into the self learning car. • We’re ready to work with you to build out your ecosystem in 2016. 31