The Birth of the Connected Supplier

I am happy to join The Future of Cars with Game Changers throughout this year to help bring readers insights from the people in the driver seat who are making this happen. We’ll delve into industry challenges and solutions that support ecosystem industries, all to help you succeed in transforming your business and business networks for success in the new digital networked age. Tune in to the business channel to hear today’s top technology and business strategy, thought leaders share expert insights on how the automotive industry is shaping the future of change. The following abstracts are taken from Episode 03 of the Future of Cars “The Birth of the Connected Supplier” which aired on March 29, 2016. To listen to the full podcast visit the host site here or use the Soundcloud plug in, below.  Follow the conversation on Twitter at #SAPRadio and #TheFutureOfCars. Want to learn more? Attend the SAP Manufacturing Industries Forum 2016 on June 14-15 in Lombard, IL. For details, please visit the forum’s website.  

Intros 12:20:
My introductions speaking on the Coach Wooden quote, “Be Quick But Don’t Hurry” UCLA legend Coach John Wooden admonished his players to always be at the top of performance but not be careless and move to fast. Auto Makers and Suppliers need to be laser focused on driving margin content in their operations, products and aftermarket offerings.

Second Segment 31:40:
Comments on the topic of security and the connected vehicle and platforms.

Bill: I think Rick brought up a really good point. Security issues have been around and the more we go digital the more the security issues need addressed. I mean you look at Jeep actually, they had a planned hack of their vehicle years ago. I mean it was by design just to see how penetrable their security, on-board security was and even if you just take a step back several to the last decade Vice President Cheney had his blue tooth monitor on his pace maker disabled because you know there was a personal threat that somebody might want to harm the Vice President.

I think you know as we move more into the “update in your driveway” vehicle type of model, this will give us some opportunities to really be proactive, but then the question back to today’s topic is how do suppliers respond to that. You’ve got Delphi who wants to connect vehicle to everything (V2E) – that was their big theme of you know, computer electronic show in January. You’ve got Bosch that want to connect the driver to the car to the house to the refrigerator and appliances so if you’re going to create a platform to broker all of that information, how do you make that secure and how do you make it able to integrate and inter-operate with all of the other platforms that also have to be secure. I think that’s—I think netting it out, that’s really one of the big challenges that both auto and tech and a number of other cross industries face right now.

Segment 39:50:
Comments on the topic of analytics and the connected vehicle and platforms.

Bill: I think analytics brings really two great opportunities for suppliers so the first one is following in the footsteps of the OEMs and the brand automakers so as I’m providing more functions and services that are going to be subscription based whether it’s I’m using the car on a ride sharing business model or I’m going to use satellite radio or I’m going to use certain features. I think in the future we’ll be able to a la carte and menu select much like we would do a trim package or a power train today. What we actually want in the car and just as a classic example you can pick whatever digital platform for your infotainment you might like and it’ll render whether it’s Apple Car Play or the Google Auto version. You can bring that up in your car today and so you do have some customization and those are going to be service driven.

The other interesting opportunity I think for suppliers around this is just like we’re going to have cars that can update themselves in the parking lot so you don’t have to go into the service bay you can just do it digitally overnight or wherever or real time when the car is not operating and it’s in receive mode. I think there’s real opportunity for suppliers to be able to create new products and without having to ship a new component actually change the firmware software digitally on the platform that they’re developing and then you know incrementally charge more to automakers and then again to the driver consumers for that capability. Hardware not withstanding auto assist front braking is a classic example. Yes, there’s some additional firmware that was needed, but that’s mostly a software fix. You’re not going to do a lot of changes to the actual electro-mechanical dimensions of the car and the braking system so there’s an incremental service add feature that a driver can have. That’s all being run on analytics. It’s up both on the board and behind the curtain in your will for the automakers in terms of what you have on the car, how you use it, and how it gets updated.

The “One additional thing” Bonnie wanted to talk about 48:00:

Bonnie: Bill Newman, I want to address one thing additional in your notes. I talked in my opening about what top global automotive suppliers are going to have to do to stay on top of their game, but what happens to the mid range or shall we say the low-end suppliers. Bill let me just read a comment from your notes here. You say, “Top global automotive suppliers will be bifurcated in the next decade as brands and OEMs for the consolidate as projected by Roland Berger and IHS,” but here’s what I want to—I want you to talk about it just briefly.

You say, “The low end suppliers will build volume to garner deep market share for simple components while high end suppliers will add the connected content services into the platform.” Without naming names, what about these low-end suppliers? Are they still part of the ecosystem build? Do they still need to be there? Will they still be a value, will they still make profits? Any or all of the above?

Bill: Yes so kind of the squirmy way out is is that all of the above, but I mean the real math is that strategically, a supplier is going to have to figure out where are they going to make their money from? It’s either going to be a commodity driven type of venture, you know like we have today. I mean our people who make parts and they make a lot of parts and you know a lot of electromechanical parts, but in order to grow you’re going to have to scale and so what that means is is that the people in the commodity driven sector are going to need to buy each other up rapidly. That’s the only way they’re going to keep their growth targets on in a increasingly competitive market niche.

On the top end and we’re already this with many of our suppliers, whether you’re talking about tires or whether you’re talking display panels as a classic example, the margins are just so much greater. Orders of magnitude greater to be able to provide those connected digital components and they’re the ones that are going to grow both organically and inorganically, but they’re going to grow faster. Now maybe you know like Delphi is an example, Delphi is actually buying cable suppliers that do the fiber optic cable so that they can their parts so you might see some of that collapsing in the market place where you actually have commodity suppliers being gobbled up by the platform makers. In the supplier space, the platform makers are going to be the ones that drive growth in the future particularly as brands you know, as those studies you mentioned, the brands consolidate and a lot of cost is taking out of the industry in the next ten years. That’s why I think, you know, earlier when I think Bonnie, you were saying wow that’s really fast, it’s because there’s just so much density in the marketplace today and there’s so much change shifting from you know what a car looked like. I think Rick to your point, you know five-ten years ago to what a car is probably going to look like in another five to ten years.

And finally my big predictions for the Connected Supplier 54:10:

Bill: I think  … what you’re going to see … is this bifurcation and auto supply. It’s going to be really interesting to figure out how people make their bets. You know, to Jeff’s point, we really didn’t get into some of the other digital industry that could actually collapse as we go vehicle to everything, driver to home and health and you know, then the question becomes particularly in Europe what are people going to be able to do with the technology given different privacy laws. So many times, tech gets ahead and I think what we’re going to have to do is kind of sort all of that out moving forward, but it’s definitely going to be some exciting times.

Advertisements

2 Comments

Filed under Uncategorized

2 responses to “The Birth of the Connected Supplier

  1. Pingback: Top 5 Trends In Automotive For 2017

  2. Pingback: Top 5 Trends In Automotive For 2017 | The View from C-Level

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s