It has been confirmed, Apple is building its own autonomous car. With Apple’s entry, it’s clear. The automotive industry has opened up again. The manufacturers we’ve become so familiar with over the last century — Daimler, Ford, BMW, Volkswagen, Toyota, and General Motors — aren’t necessarily the vendors we’ll be thinking of in the future. Competition is increasingly going to come from tech firms like Tesla, Google, and Apple, each of whom is building towards a future of autonomous vehicles that are basically highly advanced computers on wheels.
We may be entering an era in which cars are built in entirely different ways — and we might be surprised by what comes out the other side.
For a little bit of context, I’d recommend traveling back in time 50 years and looking at an entirely orthogonal industry: shipping.
Up until the late 1950’s, anyone interested in sending bulk product across the globe placed that product in 60-pound burlap sacks, sent those to the docks, and entrusted longshoremen to tuck them efficiently into nooks and crannies in the hulls of merchant vessels. When the sacks arrived at their destination, the shipper had to trust that a foreign group of longshoremen would be able to locate the right ones and help them find their way to their destination.
It wasn’t until the late 50’s that the standard shipping container emerged. This allowed merchants to put their product in locked containers at the point of production — containers which could be efficiently loaded on and off of trucks, trains, and ships. It was clearly a superior method of managing commerce. It made trips that could last months possible in just days. Its superiority can be seen today in any modern port, each of which has landscapes dominated by shipping containers, the cranes needed to lift them, ships designed specifically to carry them, and a constant dance of boxes to and from various locations.
But to capture the full potential of the shipping container, we needed to change how ports operated, how union employees were compensated, how ships were designed, and the very structure of business in the logistics industry. All of this despite the fact that the technical change itself was quite “small.”
Adding self-driving capabilities to a car seems like a similar shift. Cars will still have complex computers, four wheels, comfortable seats, and the like. Today, we can imagine a new “autopilot” feature being added to our Audis, Toyotas, and Hondas. Maybe we’ll hop in the back seat and catch up on email or the news as we ride to work — essentially being chauffeured by the computer.
But what’s more likely is that in order to take full advantage of this new technology, everything will have to change.
The very beginning of this transformation is apparent in the rise of cloud transportation services like Uber, Zipcar, and others. But in a world where cars are capable of safely and efficiently moving themselves around, it will be more than the likes of Uber that change how cars need to be designed and manufactured.
Namely, three questions stand out in particular:
What happens when accidents can be avoided entirely?
Early autonomous vehicles have been modified from those we use every day, and look pretty similar. But what happens when the technology is good enough that accidents can be avoided entirely? We certainly won’t need driver’s seats any longer. Cars will probably be able to have less metal and more glass. Companies will likely be able to experiment with the shape and size of the cars they make.
Clay Christensen used to advise auto manufacturers to focus on their customers’ jobs-to-be-done, understanding when their customers were looking for mobile offices and when they wanted family transport vehicles. In a world where cars can drive themselves and passengers don’t need to look at the road, we can imagine cars being built around conference tables. We can even imagine bedrooms on wheels, where passengers looking to go long distances hire a car for a night, go to sleep, and arrive upon waking in their destination.
What happens when the fleet is owned by profit maximizers?
The rise of cloud transportation implies that more and more of the automotive fleet will be owned by businesses who rent them out to individuals on an as-needed basis. And businesses often make buying decisions in fundamentally different ways than individuals do.
Ridesharing companies such as Uber will care less about incremental features that add to personalization or comfort and more about gas efficiency and cost. As the ability to resell automotive assets into the consumer population dwindles, companies like Hertz and Zipcar will care more and more about the lifetime drive miles of their cars and the ability to quickly refresh car interiors.
Businesses may also push automotive manufacturers to align their designs with transportation vendors’ business models — the way Boeing and Airbus ensure that they build planes to be the most profitable investments for their partner airlines. Since cars will be able to take themselves to the mechanic, you can imagine automakers being asked to deliver much more frequent maintenance schedules, designing cars to be tuned up quickly and ensuring that the chance they’re scrapped is next to nil. We might even see car manufacturers take over large maintenance contracts for their cloud transportation customers, ensuring that Uber is always up and running at a standard cost per drive mile.
What happens when brand stops mattering?
The Super Bowl is a great indicator of the importance of brand today. It costs millions of dollars to produce and place a 30-second spot to grab the attention of potential US customers. Last year, almost a full 15% of Super Bowl ads were paid for by car companies trying to grab the hearts and minds of consumers. What happens when that all changes? When individuals are requesting cars on demand that suit their needs at a particular moment, the brand of that car may no longer matter. The Chief Marketing Officer of Mercedes likely won’t be spending millions on 30-second spots.
Individuals often make irrational economic decisions based on the importance of brands. They find themselves affiliating with companies and gaining utility from their association. Apple is a perfect example. Individuals will buy Apple products regardless of feature comparisons. That’s wonderful for Apple, a company that makes the most personal product imaginable — the computer you keep on your person at all times.
When businesses are buying your product, however, brand isn’t a strong differentiator. For automotive companies, my intuition is that this might become the hardest shift to deal with. Today, they have expansive marketing infrastructures and models designed to appeal to the individual buyer. Adapting to a world where more rational buying decisions are made means redirecting those marketing dollars towards product improvement or price cuts. Inside a large company, that means shifting power dynamics and reorganization — never an easy process.
We can’t know for sure what the impact of driverless technology will be in the future. But we can bet it will mean a lot more than a robot chauffeur for the car you already own.