BMW and the Impact of Digital Transformation
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” – Charles Darwin
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” – Charles Darwin
The automotive industry has been perhaps one of the most popular and publicized modern industry transformations as it moves further and further into the digital world. That transformation has arrived and presented itself in the form of new revolutionary entrants to the market (example: Tesla) starting essentially from scratch with an entirely disruptive business model, and in the form of more traditional incumbents in the industry (example: BMW) who have sought to bring a constant evolution to their more traditional business models to survive and thrive in the digital age of autonomous and integrated transportation. BMW is constantly changing its business model, its operating model, and foremost its product offerings in order to remain atop the food chain in this rapidly changing industry.
When Henry Ford last revolutionized the automobile industry, the Automobile was a purely mechanical product. It helped you get from A to B (with your control of course), and over time, it did so more efficiently and more comfortably. But the car of the past is hardly evident in the car of the future. The most obvious transformation as the automotive industry moves into the digital age is the transformation of the product itself. 100 years ago you drove the car. 100 years from now the car will drive you. The automobile itself has set off on a paradigm shift from being a product to being a service, and the integrating of the automobile into each aspect of our everyday lives is strikingly similar to the transformation the cell phone endured as it grew from a rather basic utility to an essential, necessary, and fully integrated part of the user’s everyday life. Shared mobility, connectivity services, autonomous parking and driving capabilities, and mobile device and system integration are driving a rapid evolution of the automobile, and BMW (despite being tenured in the industry) has been at the forefront of developing the digitally integrated car of the future and adapting both their business model and their operating model in the process.
In its beginnings, BMW created value for its customers by delivering a robustly designed and engineered piece of machinery. It was fast, it was fun, it was beautiful, but it was entirely mechanical. The value that BMW’s offerings now create for their customers has grown to include so much more by fully integrating seamlessly into the digital life of the customer. BMW’s project i 1.0 focused the company on developing and integrating new technologies of electric vehicles, and now refocused, the BMW project i 2.0 will focus on an even more ambitious path of fully automated and networked driving, placing key segment focus on high definition digital maps, sensor technology, cloud technology, and artificial intelligence. The end result, is delivering a package to a customer that is an exquisite, efficient, safe and intelligent transportation experience that far surpasses the mere physicality of the product. The digital transformation of BMW’s business model has created, and will continue to create, immense new value for its customers.
Enabling digital transformation of the product requires digital transformation of the business model, and both can only be accomplished with major transformation of the operating model. Half a century ago, BMW’s headquarters was stock full of mostly engineers (the mechanical kind), an occasional business person, and of course the marketing department. As BMW and other large market players adapt in the digital world, they have undergone serious organizational overhaul to enable digital transformation, and a company that used to be completely dominated by traditional engineers, now employs thousands of software engineers and digital and technological subject matter experts who are integrated into every facet of the business, from R&D, to product development, to manufacturing and operations.
The evolution of the automotive industry is an exciting transformation, but I urge BMW and others pushing the boundaries of autonomous automobiles to prepare themselves for the challenges that lie ahead. I have no doubt that the technology for full automation will soon be readily available. However, I fear that technology will ultimately not be the limiting the resource in this transformation. At the heart of artificial intelligence lies the challenge of programming machines to make decisions that humans even dread making; potential life or death decisions. There are ethical and cultural dilemmas that must be addressed and overcome in efforts to program morality into machines, and it these problems that will be toughest to tackle as the industry moves forward.
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Sources:
- By Paul Gao, Hans-Werner Kaas, Detlev Mohr, and Dominik Wee. (n.d.). Disruptive trends that will transform the auto industry. Retrieved November 15, 2016, from http://www.mckinsey.com/industries/high-tech/our-insights/disruptive-trends-that-will-transform-the-auto-industry
- Porter and J. Heppelmann, “How smart, connected products are transforming competition,” Harvard Business Review (Nov. 2014), https://hbr.org/2014/11/how-smartconnected-products-are-transforming-competition
- Bhartiya, S. (2016). Ten Digital Transformation Quotes. Retrieved November 15, 2016, from http://robllewellyn.com/digital-transformation-quotes/
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Great post Chris! I totally agree with your point on autonomous vehicle development; if auto companies want to play in the mass market in the future, they will need to find a product offering that includes autonomous driving. However, I do wonder whether companies like BMW, the “ultimate driving machine” will be able to profitably make the jump to “autonomous transit machine,” given all the investment and pedigree they’ve put into the experience of driving. To me, our current transition is vaguely reminiscent of the transition to motor-driven cars from horse-driven cars, where the majority of individuals not wedded to the act of horseback riding switched to cars, and a niche market for horse riding enthusiasts spawned out separately. Do you think companies like BMW should position themselves to play in the niche driving market of the future? As a manual-owning, driving-loving citizen, I sure hope so.
Awesome post Chris! I definitely agree with you that there are huge challenges ahead when it comes to machine judgement on the value of human life (i.e., choosing to swerve into pedestrians to avoid a crash because). That’s one of the main arguments that is keeping military pilots in the cockpit for the time being.
That said, there’s no doubt that, if successfully executed, fully automated cars will reduce driving fatalities, traffic congestion, and driver stress. Hopefully car companies are planning to ensure that their systems are able to communicate across car maker. I also see opportunities for companies like Waze to start partnering with car companies and integrating their systems into the cars themselves.