Anyone paying attention knows change is looming for global automakers grappling with new technologies, stricter emissions standards and apps that have turned car buyers into renters or simply just riders. Automobiles are increasingly becoming connected, electrified, autonomous-driven super computers on wheels; because of this, the industry’s focus is turning more to passenger experience and mobility services rather than vehicles’ mechanical systems. This shift represents an incredible opportunity for new, disruptive business models, but generally, it has been framed as a point of conflict between the tech giants of Silicon Valley and auto giants of Detroit. However, I believe that true innovation and success can only be found if OEMs and tech can come together and collaborate, using their respective strengths to dominate the future of the industry.
A Clash of Two Cultures
With two completely different cultures in play, there’s so much room for companies on both sides to push boundaries and innovate. The Valley, for example, has a much higher tolerance for risk and failure than the traditional OEMs, what with their workforce and technology generally skewing much younger. Detroit automakers, on the other hand, have the benefit of 100 years of industry and manufacturing expertise under their belts, including an exceptionally disciplined approach to safety, reliability and risk mitigation. These strengths represent not only market domination, but weakness — the other side of the coin for both Silicon Valley and Detroit is, of course, that they lack the very things their “competitors” can provide.
Traditional automakers and suppliers, for example, can’t come close to the software prowess and entrepreneurial spirit embodied by Silicon Valley. The combination of state-of-the-art technologies—sensors, big data, machine learning algorithms and more—required for the future automotive business models is beyond the in-house capacity of most legacy auto manufacturers. Meanwhile, Silicon Valley start-ups and their peers have neither the discipline nor the know-how to establish the safe and sustainable manufacturing processes necessary to make things like self-driving cars a reality. In other words, Silicon Valley’s “move fast and break things” culture is perhaps ill-suited to the laborious process of designing, manufacturing and selling vehicles—Tesla notwithstanding.
The media-driven competition is already inspiring traditional manufacturers and suppliers to prepare for a battle for market share, but such a battle would ultimately do more damage than it would create success for either side. In trying to figure out how to beat the tech giants at their own game, they will need to not only completely shift the trajectories of their businesses but also amass an incalculable amount of new talent, skills and resources that are not available in the market as it stands. There are not nearly enough software engineers in the world, for example, to turn even the biggest OEMs in the industry into worthy competitors in spaces dominated by the likes of Google.
Collaboration at the Highest Level
The rationale for collaboration between carmakers and technology companies is pretty straightforward. Carmakers contribute automotive design, testing, manufacturing, assembly, sales, service expertise and infrastructure. This includes dealership networks — all of which are out-of-reach for a technology company to deliver, absent a major acquisition. Technology companies, on their part, are positioned to develop and contribute self-driving software, GPS mapping systems, telematics, data science, network security and related functions. Further, technology companies are insulated from the automotive industry’s short-term product development cycle, customer influence and labor politics, which affords them the space necessary to experiment with and gradually invent self-driving software over a long-term time horizon. Collaboration is not only important for business, it’s also vital for accelerating the future of the automotive industry.
Up Next: Learn about some of the ways automotive players collaborate for the purpose of innovation, in “It’s Silicon Valley and Detroit, not Silicon Valley vs Detroit (Pt. II).”