Window On Technolgy Automakers Become Software Companies
1 WINDOW ON TECHNOLOGY Automakers Become Software CompaniesAs the smartphone market continues to expand and initiativeslike smart electric grids continue to pick up steam, anotherindustry has begun getting “smarter” with software and apps:the automobile industry. Ford, BMW, and other automobilecompanies are enhancing their vehicles with on-board software that improves the customer experience, and the autoindustry is working on technology that will allow cars to bemanaged via the cloud.Automakers are finding that software is a way of addingmore “value” and freshness to their products without haVingto invest so heavily in new vehicle production. It takes FordMotor Company, for example, about two and one-half yearsto plan, deSign, and build a new car. Design and production,including metal stamping equipment and assembly line setup,must be finalized long before the car rolls off the line. But theautomakers can create a new software interface for a car withinmonths and update it again and again over the life of the carwithout much lead time. This enables Ford and other automakers to significantly improve the passenger experience andadd new features to cars years after they are built.Ford is perhaps the auto maker doing the most to innovatewith software and apps. Its MyFord Touch interface is anin-dash touch screen available for select vehicles with controlsfor navigation, music, phone integration, and temperature.Ford has upgraded this interface and the Sync software behindthe interface, adding tablet and smartphone integration andbetter voice response. In 2010, Ford added support for theonline music streaming service Pandora, which is very popularamong young potential buyers. This update enables drivers toconnect their tablets and smartphones to the Sync system toaccess music and other apps using voice commands.Ford Chairman Bill Ford Jr. has championed the use of software to alleviate urban congestion by investing in technology that responds to the problems created by traffic in the biggestcities. Theoretically, technology might help cars to avoid trafficjams, to reserve parking spaces in advance, and possibly to evendrive themselves.To manage vehicles in this way, cars need to be connectedto some kind of central system, which would coordinatewith public transit and other transportation methods, and todo this, cars need to be equipped with software that canmonitor and enhance vehicle function at the most basic levels.The eventual system would require that cars feed increasingamounts of information to systems whose purpose would be tominimize highway congestion. The system would also requirean industry standard, which does not exist today. Ford hasdoubled its investment in vehicle-to-vehicle communicationtechnologies, and BMW is also continuing to develop waysfor vehicles to communicate with one another on the road toavoid collisions.With the inclusion of software in their cars, automakers areentering uncharted territory. They must now devote resourcesto updating and testing their software, as well as to establishingways to provide the updated software to their customers. Carcompanies need to coordinate their car development cyclesmore closely with their software development cycles. Also,many of the technologies included in automobile softwarepackages raise the same privacy concerns surrounding locationtracking that have often plagued smartphone manufacturersand app developers.Ford is grappling with the best way to roll out softwareupgrades to its customers. The company has been mailingUSB sticks to 250 000 customers whose cars have an advancedtouch screen control panel running the MyFord Touch interface. The stick contains a software upgrade that will improvenavigation controls, the music and phone features, as well as Information Systems, Organizations, and Strategyability to control car temperature. The upgrade also con- code that will upgrade system speed and improve the based on common criticisms from Ford owners. Ford says it plans to continue issuing software this way, the company hopes that customers will the habit of checking the Ford Web site for software on their own. TIlOugh most car owners are used to hnology in their cars remaining constant throughout of the car, newer cars are poised to change all of that. has hired “human-machine interface engineers,” job is to analyze how their customers interact with the in their cars. Often, these engineers use customer to make changes to the software. Customers com that too much information was available on each of the interface, so Ford moved the most commonly tures to more prominent positions on screen and their font size, relegating the rest to submenus. Feedhas been positive. Ford has also asked dealers to dedicatetime and personnel to hands-on technology training tocustomers master its interface.M, Daimler, and other companies are all developing newfor their cars that operate online in the cloud. Usersable to remotely track their cars (you will never forgetyou parked again) and diagnose problems with the car,low tire pressure or the need for an oil change. Corporawill be able to track employee use of company cars by’prlwpt-j na car sensors and engine readouts. Manufacturersbe able to aggregate and analyze the data from customcars to identify quality problems and, if necessary, quicklyrecalls. Just as with apps, the possibilities are limited onlythe imagination of automakers.GM “”ill allow its app developers to access its computerto improve app function, which raises a familiar set ofconcerns. Auto analysts believe that automakers will 85 make mistakes as they learn how to properly handle sensitivecustomer data and provide robust privacy options. On the otherhand, automakers are hoping that younger customers who havegrown up using Facebook are less likely to care about privacyand features that collect highly targeted information about acar’s location and driving habits.BMW is also investing more than $100 million in mobileapps, hoping to market them to their customers as “premiumservices.” Some analysts are skeptical ofthe decision to invest thatmuch money, but BMW believes that mobile apps will becomean increasingly attractive selling point for customers ofits BMWielectric and hybrid cars. Although the future of cars sharing information with other nearby cars is still years away, automakers areexcited by the possibilities afforded by smart software and apps.Sources: Ian Sherr, “Cars Pump Up IQ To Get Edge;’ The Wall StreetJournal, January 13, 2012; Chris Murphy, “4 Ways Ford Is Exploring NextGen Car Tech;’ Information Week, July 27,2012; Mike Ramsey, “AvoidingGridlock with Smart Autos;’ The Wall Street Journal, February 27, 2012;Joseph B. White, “New Driver’s Ed: Tutors to DecodeDash·boards;’ The Wall Street Journal, May 8,2012; Chris Murphy, “Ford is Nowa Software Company;’ Information Week, November 28, 20 II and “WhyBMW Suddenly Loves Mobile Apps;’ Information Week, March 2. 2011;Chuck Squatriglia, “Ford Brings SmartPhone Apps to Your Dashboard:’Wired, April 20, 2010. Case Study Questions1. How is software adding value to auto makers’ products?2. How are the automakers benefiting from softwareenhanced cars? How are customers benefiting?3. What value chain activities are involved in enhancing carswith software?4. How much of a competitive advantage is software providing for automakers? Explain your answer.
