This article also appears in
Subscribe now »

Connected-car scenarios outlined by Peter Schwartz. The OEMs need to capture value from the hyper-connected car for the fastest march to highly connected driverless cars.

Connected/driverless car future seen in any of four scenarios

Looking into the future doesn't require a crystal ball or ouija board if you're able to enumerate the wide range of possibilities and expound logically on them. This type of visualization is far short of trying to predict the future. It's more like "these are the options and how we react determines the outcomes." And it's what strategic planner/"futurist" Peter Schwartz did when he looked at the connected car and outlined what he saw as its future possibilities both here and abroad, and the different scenarios involving success and failure. He spoke at the Connected Car Expo of the 2014 Los Angeles Auto Show.

He called the connected car a "future of transit," noting that the customer has shown acceptance of intimate computing in other industries, and regulatory mandates for safety and the environment, and how they've led into increasing complexity, including drivetrain electrification. He also noted improvements in connectivity, greater on-board computational power, with many sensors and improved human-machine interfaces, including voice (although better recognition needed), and from work to increase bandwidth from 4G to 5G. Further, the vehicle can always be connected to the cloud, and as the vehicles on the road become better equipped, the cars themselves become part of an intelligent fleet, Schwartz said.

Capturing value

This is all potential, he asserted, for the development of the future vehicle that depends on who captures how much value from the market—OEM or suppliers or both, and how well they satisfy the customer. He cited the famous example of the personal computer invented by IBM and its view of the product's future, which consisted of a few years of growth and then a declining market. So instead of developing its own PC operating system, it "saved effort" by adopting the one already developed by Bill Gates that evolved into Microsoft Windows.

With the connected car, however, he said the OEMs have a "direct engagement with the customer for the first time" and see the high value in the data generated and its potential for monetization. They also see the ability to get ahead of vehicle problems by analysis of the data and the potential benefits for dealers and their technicians.

Going from a "connected car" to the ultimate step of a connected and driverless car has to bring public attitudes into the picture, and that raises questions of its own.

Schwartz cited a 2014 survey in the U.S., China, Germany, and Brazil by McKinsey & Co. that indicated 56% of new car buyers are specifically interested in car connectivity. That survey showed that for such features as augmented reality navigation, streaming media, personal assistance and health monitoring features, and vehicle tracking, motorists were willing to spend €1200-1800 for a package. The remainder were purists/minimalists who did not feel the need for continuous connectivity and/or were very price-sensitive, even for as little as €500.

He pointed to the need to cover in connected-car planning such "fractional" ownership models as Zipcar and its new competitors.

He did not predict a timeline or even what the possible transition from driver assistance and partial automation to any of the three levels of automated driving cited in SAE International's J3016 (conditional automation, high automation, or full automation; see He chose to focus on the business scenarios and customer reaction.

For the industry, however, his question comes down to this: "to whom does the value accrue?" The suppliers would have major roles, because at least they would be delivering the bandwidth, sensors, electronic control modules, and certain segments of the data including from their own cloud servers. However, Schwartz saw these potential scenarios:

Who will dominate?

The OEMs dominate, producing highly connected cars that the public loves, which moves the industry, with driverless cars becoming "increasingly common" in perhaps 10 years.

Or the suppliers dominate because the OEMs fail to adapt. He saw this scenario as repeating the IBM-PC history, in which the supplier (Microsoft) shaped the industry and IBM ended up out of the PC business altogether. The OEM would continue to build cars, but the driverless models would be slower to develop, restricted to a few areas (he saw cities as the primary locations) and customers would face compatibility issues.

Wherever the failures originated, Schwartz said, the result would be costly if there were technology issues that shattered trust, leading "to minimal use of connectivity." The OEM might have invested a lot, particularly in acquisitions designed to enhance their technical capabilities, and would be left with nothing more than a specialty niche of driverless cars. Another potential issue, he said, was strong regulation that slowed innovation.

If there's "digital retreat"

Digital retreat was his most fearsome possibility. He saw it as a scenario in which driverless cars are used only in a few state-initiated-and-controlled projects such as Chinese cities. The retreat would encompass business failures by connectivity startups, limits imposed by privacy issues, and the connected vehicle basically going "out of fashion." However, the OEMs in this picture would not have a major financial loss—little reward but with little financial risk, with any major risk borne by the failed supplier companies.

This is not a remote possibility, for the McKinsey survey showed fear of the car being hacked with dangerous results was seen by 43% of Americans, and they were the "optimists." The percentages were 53% in China and 59% in Germany and Brazil. The privacy issues were cited by 51% in Germany, 45% in the U.S., 37% in Brazil, and 21% in China. An additional concern: 37% of all respondents said they would not even consider a connected car, so unless their views change, the connected/driverless car infrastructure would have to be tailored for both, adding to its engineering complexity.

Continue reading »