Driving the future: embracing digital products in the automotive industry

The automotive industry is at a pivotal moment, driven by rapid technological advancements and shifting consumer expectations. As companies like BMW and Tesla demonstrate, the future lies in viewing vehicles not merely as industrial products, but as sophisticated digital products. This transition is essential for automotive companies aiming to remain competitive in an increasingly digital landscape.

In this context, we’ll explore insights from Professor Venkat Venkatraman’s book Fusion Strategy: How Real-Time Data and AI will Power the Industrial Future, which highlights the need for automotive companies to embrace this shift. Venkat is one of the leading authorities on automotive digital strategy, and has consulted with companies such as General Motors, General Electric, IBM, Microsoft and Sony.

The shift in perspective

Traditionally, automotive companies have focused on manufacturing vehicles as industrial products; mechanical systems powered by combustion engines. However, the landscape is changing. Companies are now recognising that vehicles can be reframed as ‘computers on wheels’ that are continuously connected to the cloud and capable of receiving updates and enhancements. This shift requires a fundamental rethinking of your product design and business strategy.

For traditional automotive companies, failing to transition from an industrial to a digital mindset poses substantial risks. Companies that cling to outdated business models and legacy systems will find themselves outpaced by competitors who design with a digital core, which is a significant challenge for C-suite leaders.

Digital at the core

To thrive in this new environment, automotive companies must digitise their core operations. This involves designing products that can be continuously tracked, updated from the cloud, and controlled remotely. The integration of programmable hardware and embedded software is essential for creating vehicles that meet modern consumer demands.

Within the automotive industry, the prime example of a company with a core digital product is Tesla. They have optimised user data graphs and AI to design a business model that has dislodged many of the traditional automotive leaders. At Tesla, they collect data on drivers and benchmark it against how the algorithm would drive the car, and whenever there is a deviation, they collect data to understand more, whether it was driver error or a bad algorithm, and generate a score. This score is what helps the algorithm to keep learning, and is a great example of a digital product with scale, scope and speed in AI.

A new type of partnership

Some companies in the automotive sector have completely shifted the way they produce and look at their products, in favour of partnering and forming alliances with companies that can elevate their digital product. BMW uses Nvidia’s Omniverse platform to build a factory where humans and robots work together closely, and engineers collaborate in virtual spaces. They can also test cars by using simulations.

Fusion Strategy gives further examples of companies who have utilised partnerships, such as General Motors scaling their self-driving enterprise Cruise, in partnership with Honda, Microsoft and Walmart, as well as Motional, a joint venture between Hyundai and Aptiv, who have partnered with Uber to provide autonomous rides and delivery. Even Tesla could invite other automakers to use their system to enhance the reliability and safety of autonomous driving systems.

To embrace a fusion strategy (a blend of traditional and digital models to create new capabilities and value propositions), you need to be less firm-centric, and consider working with partners who can offer a deeper level and understanding of your new product design, which will likely resemble a computing architecture rather than an industrial product. For automotive companies, the partners that they need to have in order to develop their capabilities, are very different from the partners that they may currently work with. 

Venkat talks about how every company should be thinking about information technology (IT), and operations technology (OT) integration. OT is how products are designed, delivered and maintained, whereas IT is a process by which humans support the design, delivery and deployment of the data. As you develop the product and AI language that is specific to your company, IT/OT integration becomes important. It’s about multiplying human intelligence with machine power. Humans with a computer are better off than those without.

Unlocking growth and innovation

The automotive industry is facing a digital revolution. By moving from an industrial product mindset to a digital product, companies can unlock new opportunities for growth and innovation. To thrive in this new digital world, where vehicles are increasingly seen as digital platforms, automotive companies need to act decisively to stay relevant. The time to act is now. 

We’re celebrating a decade of delivering unmatched data insights. Over the past ten years, we've empowered countless clients to gain a better understanding of how data can transform their business operations and customer interactions. Now, we want to help you harness the power of a fusion strategy to thrive amid digital disruption.

Don't wait to transform your data strategy and elevate your business. Contact us today to start your journey, or visit our data insights page.