Clearly the darling of the auto industry today is telematics. The only problem is consumers haven’t been smitten yet by all this computer- and electronics-based wizardry. The auto industry is toying with a plethora of computer-based vehicle options, but none have yet unleashed high consumer demand.
Only by embracing the dot.com industry’s business strategies will the auto industry’s “bricks and mortar” firms learn what the market passionately wants. Its current approach is inadequate to reveal what those “killer applications” may be.
Telematics spans a dozen areas, including entertainment, safety, and communications. Volkswagen AG, for instance, estimates that over 80% of its current product innovations involve telematics in some fashion. Nevertheless, no single application is setting the market on fire. As a consequence, some big, auto-industry manufacturers are bundling several together in hopes an integrated package will do the trick. These firms include all of the OEMs as well as Delphi, Visteon, Motorola, Bosch, Siemens, Denso, and others.
Combining several telematics functions in one box creates its own problems. These include an excessively complicated visual interface required to navigate through a thicket of menus. Voice control is touted as a safer alternative for a driver. Automatic speech recognition, however, is still a work-in-progress.
In addition, prices for these integrated units make them prohibitively expensive except in luxury vehicles. Unfortunately, luxury vehicle owners—mainly drivers in their 60s—are not the segment leading the charge into the Internet age. Traditional auto industry business practices and strategies likewise hurt its forays here.
The take-up rate for telematics is sluggish. For instance, over a year ago Clarion (Lake Forest, CA) was the first to introduce a personal computer-based audio/communications system. Still the leader in this area, it has sold only a few thousand units to date.
Navigation systems employing global positioning systems have had some successes, notably in Japan. However, they certainly haven’t created a stampede in the United States. Navigation, nevertheless, seemed to be the most popular application exhibited by manufacturers at the March, 2000 SAE Congress in Detroit.
Another telematics area is entertainment. Through on-board entertainment systems, passengers can play video games or watch DVD-based movies. In the communications arena, a driver can make hands-free phone calls by placing a regular cell phone in a cradle and using voice controls to initiate the call. The Internet can be accessed, for instance, to hear one’s e-mail, stock quotes or traffic reports.
Mayday/safety features include having the vehicle automatically place a call to a 911 operator when an air bag triggers. Vehicles also can monitor and diagnose themselves. For instance, they may present warnings, suggest appointment times at a local service center or even display maintenance manuals.
All these options, however, overwhelm the typical driver. During product demonstrations, even the industry’s own telematics program managers get lost navigating through their thicket of menus. These demo snafus occur even in a stationary vehicle. One can only imagine how hard these systems would be to operate while dodging vehicles at freeway speeds.
A proposed industry answer is to replace doing menu picks on the tiny, seven-inch screen with voice commands. However, automatic speech recognition still is not ready for prime time. Sitting behind a steering wheel does not suddenly make this technology work. (How many people control their work or home computers using voice?)
Another drawback for the more bundled telematics approach is price. At $2,000 or more, a telematics option is priced right out of the mass market.
Hampering the more rapid introduction of telematics is also the industry’s own practices and traditional concerns. For instance, safety is of prime importance both as a selling point and to avert costly product-liability lawsuits later. Hence, the industry exhaustively tests new product ideas. These tests can stretch product launches out to years, however.
For instance, in 1996-97 NHTSA did field tests on intelligent cruise control (ICC). The results were not presented until March, 2000. Just for contrast, the Internet industry grew in this period from a nascent historical footnote to having a market capitalization several times that of the entire auto industry. Admittedly, ICC is on the street today but only in a few luxury vehicles (e.g., the Jaguar XKR and the Mercedes S-series).
The sentiment in the industry is that consumers will eventually come around and embrace telematics. A certain inevitability is assumed, and all these customers will drop in the laps of today’s “bricks and mortar” manufacturers. Merely extend the Web to the vehicle and a huge market will materialize, is the thinking.
Missing in this equation is a highly interactive exploration by manufacturers to learn just what vehicle occupants will become passionate about. In contrast, the dot.com firms developing land-based Web applications are introducing dozens of new applications and services every week. In the process, they are getting invaluable feedback and guidance for product development. This market feedback mechanism simply isn’t there for traditional auto industry firms.
For instance, despite GM’s much publicized “sense and respond” business strategy, the firm is doing very little “sensing” today. To do so requires product on the street, not just in the GM Tech Center or in concept vehicles.
Hamstringing the bricks-and-mortar firms is also a business model based on earnings. This contrasts with the dot.coms’ emphasis on lightening-fast innovation and hyper market growth. Indeed, if dot.com companies had insisted on profitability from the start, there would be no Internet today.
In sum, if the auto industry continues at a relative snail’s pace in its telematics offerings, it will be left in the dust. Dot-com upstarts, telecomm giants, media firms, and consumer-electronics companies are far more aggressive and market savvy. Killer applications are out there. It just requires a fresh approach to uncover them—first.