min read
March 22, 2017

4 Digital Strategy Focus Points for the Automotive Industry

Digital Strategy
Digital Trends

The automotive industry will never be able to predict all disruption or disintermediation. To handle this, auto manufacturers must have a robust digital strategy in place in order to move forward securely and profitability. The automotive industry is in the middle of a tech revolution. The implications of ride-sharing, electric cars, automated cars, telematics, personalization, augmented reality, driver assists and more are regularly discussed over drinks at a bar and across executives' desks. Understanding that there is a need for transformation is one thing, but the real challenge is: How do auto manufacturers, whose processes and employees often span dozens of countries and job types, even begin to transform themselves? How do you get from lumbering and primitive to agile and innovative? What does an agile multi-billion-dollar auto manufacturer even look like? Before auto companies begin to transform, they must first develop a strategy or "roadmap." To begin the process of crafting such a map, it's helpful to review the following four digital touchpoints:

1. Taking In the Broader Digital Landscape

Before a company can plot the best route forward in the digital landscape, it must first identify its current position. In the digital world, everything is relative; no company or industry can assess itself in a vacuum. The technology and digital wave affect all sectors, and in order to truly develop an innovative and effective digital strategy, automakers should look to digital leaders outside of their direct competitors and benchmark themselves against digital practices as a whole. To use an analogy, an auto company that looked intensely inward and focused on developing the best horseshoes in the world -- refining its process, iterating, testing and hiring the finest horseshoe makers -- might give itself a high grade for quality. However, once it began paying attention to its environment, it would realize that all its achievements were meaningless. This may seem hyperbolic, but digital can and does move this fast. Benchmarking against only yourself, or on a hard zero-to-five scale, is not possible. Manufacturers must look to their peers across all digital offerings to judge themselves on a relative scale.Volkswagen, for example, has a dedicated augmented reality page, which describes its plan for providing three-dimensional service information to aid the company's service people in managing repair tasks. Down the road, they hope to incorporate spatial augmented reality as part of the development and design process.These innovations, which VW admits have not been implemented yet, may lead the company to believe itself at the leading edge of augmented reality. However, by landscaping their peers, they can see they may be lagging. Lexus recently filed a patent for an augmented reality windshield -- something that could totally revolutionize the way dashboards are designed. Volkswagen must assess its situation based on leaps made by competitors. Lexus, must not only benchmark itself against VW, but must look at companies in retail, finance, and manufacture to understand its relative position.

Connectivity Is the Standard

As consumers increasingly live in a connected world, they expect their important tools and devices to be woven into this growing communication web. The Internet of Things (IoT) is expanding rapidly, and obviously, a product as vital to people as their cars will be part of the connected ecosystem. Survey results published in Digitalist Magazine note that a recent global survey of auto industry executives found that "connectivity is one of the three most urgent imperatives for industry decision-making."

2. Recognizing Customer Expectations

A second key touchpoint, which sometimes gets lost in the excitement of new technology, is the human being who shops for, buys and drives the vehicle. These customers range from digital natives, who have grown up with smartphones in their pocket, to digital immigrants, who have spent their lives driving non-connected cars through an analog world. Auto manufacturers must ensure that their strategy takes into account all of their customers' needs and expectations when it comes to digital functioning.This does not just mean understanding what a specific target demographic likes on Facebook or how many retweets a marketing video gets. It means mapping the customer's journey through their entire lifecycle with the company and integrating them with those social indicators to improve their experience. As they become more connected, customers consistently demand more personalization, more service, and more buying options.

Auto Sales and Marketing are Adapting to Digital

The digital revolution in the automotive industry is not solely centered on the manufacturing end; dealers are also making changes in their procedures. Auto dealers are discontinuing their traditional advertising campaigns faster than most other industries, spending $14 billion on digital advertising during 2016. This figure represents over 60 percent of the dealers' media budgets.This heavy spend on digital marketing has been based on customers' emerging habits and preferences. Between 50 and 70 percent of automobile buyers have already decided on the make and model of car they want before they ever visit a showroom, and more than half of these buyers have made their decision by doing online research. Over 80 percent of auto shoppers use their smartphones to look up information while purchasing a vehicle, and 63 percent of customers do this mobile research while physically in the auto showroom. Many of these in-person shoppers go on to visit a competing dealership, and fully one-third of them are lured to that competitor by a mobile ad they viewed while they were in the first showroom. Lotlinx, a new software, analyzes car shoppers' online behavior and recognizes patterns that indicate when a customer is close to the point of purchasing. Lotlinx then gives that user a link to the precise vehicle details page on the dealer's site that will meet their needs.Auto manufacturers have an advantage over other consumer product lines in that cars are something customers rely heavily on upon add-ons. People spend large chunks of their lives in their cars and develop an almost personal relationship with them. This relationship, in tandem with the new tech-related add-ons like telematics and GPS, creates hundreds of digital touchpoints that can be used analyze and improve customer outcomes. Some manufacturers are already using this wide array of opportunities to inform and fuel their digital strategy. Volkswagen Group Australia has begun to roll out a new customer integration plan that marries customer data with real-time feedback and insights from dealers to help improve their customer experience.VW and other automakers must continue to work on obtaining, interpreting, and acting on these vast swaths of data to improve the entire customer journey: from initial marketing touch points, through point of sale, to the driving experience.

3. Laying Groundwork for Future Agility

Hiring a CDO or an in-house think tank that can envision fully electric cars or automated vehicles (that sell themselves to customers) is helpful, but it cannot be the entire strategy. As noted above, the future changes fast in digital. A company must not only envision the future but should also envision the practical methods for how that future will be realized. This level of practical planning needs to be an identified tactic within a company's digital strategy. A company won't be considered an innovator unless it delivers on its futuristic visions consistently.Toyota Australia provides a unique case of both good and bad strategic habits. The company is shutting down manufacturing in Australia and transitioning away from its legacy systems to refresh its Australia wing as an entirely new sales and service company. This dramatic move is necessary and laudable and it showcases how companies may need enormous changes to stay relevant in a digital world. It is also a cautionary tale: Toyota and other companies, should plan their digital strategy to avoid needing to take such a drastic step in the first place. The new CIO has consistently highlighted how that although they are ahead of the game now, competitors will inevitably catch up. To be able to stay innovative, Toyota must maintain this same high level of agility and plan a digital strategy that incorporates continuous change.Not all innovation and delivery is on such a grand scale, but Toyota's leap is emblematic of what a company that is behind must do. The speed and effectiveness at which a company can vision, design and deliver new ideas is a critical part of any digital strategy.

4. Expecting Digital Disruption

Digital disruption is the final digital touchpoint for auto manufacturers. Auto companies don't just sell cars, they manufacture, repair, service and design goods that consumers can use for years. They have a grip on many parts of the consumer food chain, which means there are innumerable entry points for disintermediation and disruption.Famously, Tesla has tried to eliminate the dealer model by opening showrooms while confining sales to online transactions only. Although this has been fraught with regulatory and legal concerns, Tesla has gained a foothold in some markets, and this more streamlined approach gives them a competitive edge.Services like Uber and Lyft provide a completely different transportation paradigm, disrupting the auto industry by demonstrating that people with smartphones in urban areas don't need to personally own automobiles at all.

Vehicles Serve as Information Sources

Another source of disruption arises from all the data that's now generated by in-car sensors. Digitalist comments that "our vehicles are rapidly moving toward a time when the vehicle itself will be an extension of data." The stream of data generated by each individual car can facilitate feedback to third-party players such as insurance companies. Insurers have been able to implement their own set of onboard vehicle telematics and have been using them to set premium rates according to individual driver habits. Similarly, third-party access to automobile service information can propel car owners to a network of service centers different from those owned by the manufacturer. However, telematics on an individual driver's behavior or the service status of an automobile are only the leading edge of a tidal wave of disruption.Clearly, auto manufacturers will never be able to predict all disruption or disintermediation. However, they must have a flexible and adaptive plan in place to respond effectively to unexpected changes. Developing a digital strategy is uniquely difficult when the technology of a company's product is changing as rapidly as the methods of marketing and selling that product. Auto manufacturers must have robust digital strategies in place in order to move forward securely, and the four touch points covered above are a great starting place for building a sustainable strategy.

Centric Digital