Category Archives: Observations

Sergio’s Last Stand: Sell Chrysler To Google, Spin off Dodge-Jeep

I’ve written a few posts on our good Italian friend and leader of FCA, Sergio Marchionne, over the last few years. Most notably, I was incredibly critical of his view that combining FCA with any other carmaker was not the way forward. Since that post which he undoubtedly did not read, Mr. Marchionne has not had much luck in convincing any automaker of the argument.

In fact, he’s recently alluded that before his tenure as CEO is up in 2019, he may be changing his tune. Adam Jonas, a Morgan Stanley banker I wish I knew and who’s best known for his provocative bets on Tesla’s success, asked Marchionne if spinning off Jeep and Ram would be possible, to which he replied flatly “yes.”

Mr. Marchionne’s change in tone could signal that it’s more than just possible, but the suitors for who might buy the spun-off brands, or whether they’re just spun into their own public entities that Marchionne still runs is yet to be seen.

For me, FCA has some jewels and some not-so-jewels. The jewels are the red-hot Jeep and Dodge brands that are distinctly catering to unique customer segments very successfully, while Fiat and Chrysler have struggled to produce anything of substantive value. So here’s my thought:

  1. Spin off Jeep-Dodge into their own company. These brands are the most complementary brands in the game in both customers and technology, as can be seen by the now-famous Hellcat and HEMI engines that are advertised and found in both Jeep and Dodge brands. This is a specific example of a brand-transcendent product that is actually extremely hard to get right. Jaguar-Land Rover would look at this pair with extreme envy.
  2. Make Ram a sub-brand to Dodge again. It’s selling well right now in the latest SUV boom, but that’ll come to an end eventually, and I’d not want to be caught holding the bag when that music stops and you have only one product. The new Ram Raptor-fighter will benefit from the awesome engine tech that Dodge and Jeep share, and it’d give the brand back its performance edge on the ultra-hot F-150 and Silverado.
  3. Sell Chrysler to Google. It did not taste well coming out of my mouth, but given Google’s cash hoard, their current dominance in self-driving taxis, and existing partnership with Chrysler around making the Pacifica a self-driving taxi machine, it wouldn’t be a stretch to imagine why Google might want to make this work. Assuming it doesn’t lose money, it’d be like what Google and Apple and all the other tech players that have dominant products do – buy the supplier. In this case, Chrysler’s manufacturing footprint is established and has the processes in place to produce at least as many robo-taxis as Waymo requires. Also, imagine we’re in 2020 and carmakers are competing feverishly with Waymo, Uber, and Lyft for robo-taxi customers. Do you think the automakers are going to be willing to supply their competitors with an unending supply of quality cars? I wouldn’t bet on it. If Google already owned a carmaker, they could dominate this market (something they might do anyway).
  4. Add Alfa Romeo to Ferrari. Ferrari boosted its production when it IPO’d which made shareholders happy and the CEO angry enough to leave, but that won’t keep investors satisfied forever. To maintain the exclusivity of Ferrari while driving value as a company, tucking Alfa Romeo into Ferrari’s fold makes great sense. It also will bolster the reputation by association of Alfa Romeo, a brand that outside of Italy is virtually unknown, but that has strong roots and a distinctive character that could one day put it on the same course as Porsche (maybe). Either way, Alfa could be Ferrari’s growth plan, which would take the pressure off of Ferrari from diluting its brand while injecting some finer breeding into an emerging brand.

As Sergio contemplates his legacy, he’s definitely looking towards not just what to do with FCA, but where and how to leverage FCA’s brands and assets most efficiently. A combination of spin, sell, and move could be in the cards before he hangs his hat for good.

Better Together: A Case For Modular Transportation

Creativity without restraint is a hard concept to grasp because the restraints are generally self-imposed: “what will people think of my answer? Will they think I’m stupid? Or worse, naive?” When posed with a big question like “what should the future of transportation look like?” or “what’s the next big thing?”, most people, myself included, would immediately start mentally searching for the latest report or most dinner-party-friendly response; one that evokes the audience’s polite head tilt and petite frown, signaling they had considered your response in all its nuances and determined it suitable enough.

The obvious problem is that dinner parties are not generally the venues from which groundbreaking thinking flows. And while I’ve generally tried to write the dinner-party-friendly version of my ideas and observations over the last few years, I’m now thinking of, well, not doing that.

My self-posed question is “what does the future of transportation look like?” Here’s my immediate, uncensored thought process:  Connect them. Not in the dumb IoT type of way. When I was little, my grandfather made me my own custom train track to build, but I used it for driving cars on. Would that work? Can we make trains of cars utilize train tracks? What about a train of cars? Isn’t that essentially what a highway is?

Overall, as I try to reconcile nature-based design with the future transportation networks, I am left with the notion that whatever the ultimate answer may be, it has to revolve around the idea of “better together.” The individual modes of transport in the future need to be more efficient when there are lots of them than when they are individually operating. In today’s world, the situation is very much the opposite, as can be discovered quickly between the times of 7 and 9 am and 5 to 6 pm every week day.

The idea of “better together” actually comes from birds, bison, and a host of other herd-like animals that can achieve more efficiency or more safety together rather than apart. Juxtapose this: a bunch of birds in a V-shape all traveling to the same place more efficiently against a bunch of cars going to the same place at an equally slow speed due to congestion. Could we create a train of individual modules (or cars) that are all roughly going to the same place, and then allow individual cars to attach and detach to the train as needed? For longer trips, could we have a skeleton of a train that individual modules can fit into and then collectively power the whole unit? Scale that to planes, could we have a bare-bones, UPS-like plane that a bunch of individual modules power?

The amount of power that you provide to the unit directly affects the price that you have to pay – similar to how if you have solar panels on your roof you can sell the power back to the grid? As a nod to this sharing economy concept, if all of these individual modules are making up the backbone of a plane or a train or a highway-type train, can you “sell” other seats of your module to other people looking to go to that same place? Could we design cars so you still feel separated if you don’t want to necessarily converse with the other person who’s sharing your module on your flight to Miami?

 

Designing From Nature Yields The Biggest Breakthroughs

Diverting from the usual, I want to talk about design, and I want to talk about it outside of the context of high-priced consulting firms (for which I work) and Amazon Echo and the iPod. In fact, I quite literally want to talk about design outside. Nature’s design, besides being a popular buzzword among church clergy, has and will continue to shape what we consider beautiful like the Echo and iPod. Perhaps more importantly, design derived from plants and animals has and will continue to lay the groundwork for the most beautiful and innovative man-made creations in history.

This last statement seems dramatic, but over the last few months, I’ve run across a few examples that demonstrate the evidence that nature does not just inform the finer arts, but widely inspires groundbreaking technologies. For concision, I’m going to select just a few examples of how nature can change the course of human progress, past and ongoing, to prime a further discussion.

Wilbur Wright was inspired by birds in flight. This is a fairly well-known piece of history, but until reading the brothers’ biography by David McCullough, I did not understand the depth of intense study that Wilbur conducted in order to comprehend the science of flight – why buzzards had a certain wing shape, why certain birds were able to fly without wind, and even why birds arched or flared their wings to remain at their preferred height. The design of different birds inspired part of the design of their initial Flyers, and Wilbur continued to leverage birds to test his theories and formulas of aeronautics.

Microsoft is storing data in the form of DNA. As a contemporary example, Microsoft teams are developing a revolutionary way to store data, using DNA as their template. Through the use of A,C,T, and G to store information instead of the standard binary 0 and 1, they’re able to store exponentially more data on the same amount of space. 

These are 2 examples of conscious design derived from nature. But plenty other inventions that have shaped human history were undoubtedly inspired by mimicking nature. The compass is a direct interaction with natural magnetic fields, and SONAR is used by dolphins for communication.

We’ve learned a lot from nature, and in many ways we have profoundly increased the velocity of human progress by listening to it. It’s hard to believe that there aren’t many more groundbreaking, history-altering natural designs staring us square in the face.

From a transportation perspective, can we learn from nature as to how to integrate forms of transportation in the most efficient and safe ways? How does the largest organism on earth, a quaking aspen tree network, deliver nutrients and information correctly and evenly in order to stay alive?

This is the type of question that I believe could provide some exciting answers.

The Valley Can Only Juggle So Many Auto Goliaths

Tech companies, especially those that self-identify as “disruptors”, tend to build their businesses around the idea of pushing the establishment out of their own industry, portraying them as inefficient and greedy dinosaurs that make customers worse off. In many cases this is true, but there may be ways to incentivize them to work with you rather than against you. 

Most trendy tech chooses the obstinate path – confronting the establishment head on. It’s never easy, but, as Netflix and HBO will attest for their respective industry, the results are almost infinitely positive. There’s a big difference, though, between taking on Big <insert industry> and confronting Big Auto. That’s because when you try to disrupt this particular industry in the way that Tesla, Google, and others want to, you don’t just get hunted by Big Auto – you get hunted by Big Oil, Big Gas Station, Big Insurance, and Big Auto Dealer. Any of these 5 groups would be a mammoth to take on, but all 5 is pretty much suicide. They collectively have enough money and lobbying power to probably ex-communicate Tim Cook from America if they tried hard enough.

I actually love the David-and-Goliath mantra of Tesla and Google, but I also think that within this endless war between incomer and establishment, there’s an interesting and perhaps more lucrative proposition for a young auto tech company looking to try their hand.

What would happen if you came up with a solution that made at least some of the incumbents money? You would be the industry white knight that no one (or at least fewer people) was trying to constantly beat into submission.

What would it take? Well, let’s look at where the different incumbents feel cornered:

Big Oil is my number one spouse if I’m trying to get an incumbent to play ball. They’re petrified of lithium-ion batteries because they have no expertise or IP to leverage or commercialize. That’s why they’ve been enthusiastic in flooding Hyundai and Honda and Toyota with funding and R&D support in developing hydrogen fuel cells; this is still a new fuel that no one has cornered yet, and they can retrofit their existing gigantic network of pump stations (that outnumber supercharger networks by like 1000:1). What would happen if a young tech company tried to get a new type of battery funded by Big Oil that they could realistically profit from?

Big Auto is afraid that they will become simply hardware suppliers to Apple and Google like Foxconn is to the iPhone. This is probably an overblown worst scenario, but showing carmakers where they can own the driver experience above what their smartphone can do may perk some ears. 

Big Insurance is worried that their profitable auto insurance business will shrink into oblivion with the dawning of crash less vehicles. I honestly don’t have an good thought here other than people will likely not want their driving habits to be monitored 24/7 in order to determine their insurance rates. Because if everyone is like me, we enjoy getting away with semi-illegal “fuck it” U-turns when we blow past the Taco Bell going ten over on one of those laughable 25 mph main streets. 

Big Auto Dealer has a target on Mr. Musk’s back for challenging the dinosaurs of a pre-digital shopping era. Over the past several years, dealers, content with profiting mightily off of the carmakers’ actual work, failed to transition or react to consumer changes. As such, Mr. Musk takes one for the team, and the industry will be better off for it. 

Point being that perhaps a few incumbents deservedly need to be taken on, but the world of New Auto will undoubtedly still contain many of the same players in the world of Old Auto. Best to choose your battles wisely, and perhaps consider the fact that many incumbents maintain assets and capabilities that could advance new technologies faster and more efficiently than the cash-flush tech companies – gasp!

Connected Cars: Moving from gimmicky jargon to the bedrock of future cars

connected_car_litmus_loop
Photo courtesy of litmusautomation.com

Quick pedestal rant: with anything new or trending, media outlets and business leaders love to name and then profusely overuse their bestowed name for a movement, new business trend, or scandal. They add “-gate” as a suffix to any trivial scandal that probably takes away from the severity of Watergate and they add the words “disruption” and “innovation” to situations and ideas that are probably not either in the hopes of garnering audience attention.

No doubt this type of jargon showboating is effective in bringing new ideas to the public. In the automotive industry, “autonomous”, “access over ownership”, “internet of things”, and “connected” sound cool enough to go viral, yet vague enough for leaders and the media to use them superfluously without ever actually having to explain what they mean or how we accomplish them.

The term “connected car”, above all other auto jargon, leaves a particularly unpleasant tang on my tongue – mostly because carmakers describe connected features more like cute gizmos that you’ll use as much as you use the cigarette lighter for it’s intended purpose rather than game-changing capabilities that enable the driver in unprecedented ways.

WiFi hotspots, a proprietary suite of apps, and using your car to pay for gas are the various touted features of connected vehicles. Groundbreaking. My iPhone does all the same things. There is no value to customers in these features, and there sure as hell isn’t a business case for them either. To be fair, things like WiFi hotspots will lay the groundwork for over-the-air updates which does add value, but carmakers seem very hesitant to say or do anything beyond these gimmicky features.

Ironically, the tables are turned on the autonomous front, technically also a connected technology. Every carmaker has checked the box for buying a very expensive “testing ground” for the technology, touting how fast they’re going to bring a fully-autonomous car to market while confusing customers through their lackadaisical distinctions between automated and autonomous driving, two starkly different concepts.

Another consequence of overusing jargon, terms like “connected” generally lose their meaning as stakeholders and journalists layer on their own definitions and point of view. Fundamentally, connected technology is based on leveraging the internal sensors, transmitters, software, and network connectivity to enable everything from autonomous cars to over-the-air updates to vehicle-to-vehicle communication and beyond.

Connected cars are truly the bedrock of the new automobile, centered around developing and honing the driver-car relationship beyond what we’ve ever been able to accomplish. We’ll create performance cars that respond viscerally to your fingertips on a screen, off-road SUVs that leverage on-board sensors to show the driver the most effective path to take through a HUD (heads-up display) windshield, and luxury vehicles that know your preferences and desires without you asking.

As mentioned, the basis of the connected car is the relationship with its driver. Cars have been probably the one product we purchase with which we genuinely bond. Connected cars will connect (sorry for the pun) people with their cars to forge deeper bonds than has ever been possible. In doing so, we’ll start alleviating some of the pain points with driving (namely traffic and crashes), create cheaper options and ownership methods to enable more people to access cars, and lay the groundwork for an even farther out vision of connecting multiple forms of transportation through the car (think of being able to jump in your car in San Francisco, take the high-speed train to LA, and drive to your office all without leaving your car.)

“The cars of the future will undoubtedly be amazingly connected,” but we’re passed the point at which it should be acceptable to end the sentence with that phrase. If we’re ever going to get there, we have to get beyond WiFi hotspots and proprietary app stores, beyond how fast fully autonomous cars will come to market, and focus on what is going to truly bring value to the driver. The question before any business decision is made with regard to new car tech should be: How does this strengthen the relationship between car and driver? Unconvincing answers should be scrapped.

How Design Thinking Can Help Cars Become More Than Smartphones On Wheels

September’s Harvard Business Review focuses on the concept of design thinking and its application to how businesses function and strategize across a number of industries. This is my take on how carmakers can integrate this design mindset to create a product that goes beyond any other device. (See original article here)

My mom’s old car that was handed down to my sister is a 2002 Acura MDX, a staple mom-car that sold as many units as it could make through the early 2000s. It has a decent, somewhat fidgety navigation unit that is also a touchscreen climate control built into a nicely wood-trimmed center stack, and has Bose surround sound and heated folding mirrors.

As I approach car buying thirteen years later, I myself would love a car with those same features, and if properly disguised, that 2002 Acura MDX could look a heck of a lot like the new models you can buy today. There’s more functionality in today’s infotainment systems, of course, but the systems aren’t any better integrated into the total car experience than they were in 2002. If I were to take a 2015 infotainment console from a new MDX and put it in my mom’s 2002 one, people who didn’t know cars super well would have a hard time differentiating the new car from the old. Why? Because the tech that they’ve put in cars from before 2002 and into 2015 has been designed as a slap-on – an extra option that doesn’t really belong in the driving experience, but sits on top of it all like a superficial nice-to-have. It has no real “roots” in the car’s physical design and experience – the screens still look like they’ve been pasted to the dashboards as an after-thought, the user interface is as much a nightmare as it was in 2002, and once you locate the gadget that somehow controls it all, everyone’s reaction seems to be along the lines of “what the hell am I supposed to do with this?” or “God this is taking forever,” and then they pull out their smartphone.

So why are the technologies from my mom’s ’02 MDX no better integrated than today’s ample technologies? Because automakers are so obsessed with keeping pace with the smartphone by cramming more features into the screens that they don’t see past the features themselves to creating a holistic car driving experience. Hence, the “smartphone on wheels” was born.

I think we can point at a number of factors behind the “smartphone on wheels” mania that has occurred, but it boils down to the automakers being absolutely petrified of Apple and Google, and for good reason. Customers today care about the tech (particularly smartphone) elements in the car equally if not more so than the technical, physical elements. But that’s only the beginning of the story – if automakers better integrated the digital experience to enhance and cater to a deeper physical experience, I’m willing to bet more people wouldn’t just care about being able to use apps from their smartphone.

The real magic that has made smartphones increasingly more valuable as time goes on are the apps that they run and the products they connect to that are powered by non-Apple/Google companies. This is why Apple/Google drool at the car – because there are huge possibilities for what the phone can do in a car, not unlike what a phone can do with smart appliances like thermostats.

So really what keeps OEMs up at night is the possibility of becoming just another app, just another appliance like a smart thermostat whose real value proposition is that it is controlled through the user’s coveted smartphone. If this were to be the case and all everyone cared about was the fact that the car connected with their iPhone, there would be fewer automakers producing cars for much less profit.

So carmakers need to decide whether they want to be the app company or they want to try their hand at beating Apple/Google. While Apple/Google are light years ahead of automakers when it comes to digital design and experience, carmakers excel at physical experiences. And the beauty of knowing how to create an awesome physical experience full of emotion is that integrating the digital experience can deepen and bring to life the physical experience of the car.

I tend to think carmakers can win the battle in creating a holistic experience designed to integrate both digital and technical features. But in order to do so, they have to stop playing by Apple/Google’s rules of cramming endless features into screens, stop trying to make a better smartphone on wheels where virtual and physical experiences are silo’d, and start focusing on how the design of the digital and physical user experiences together could make a car way cooler than anything Google’s little self-driving teletubbies could pull off.

The first step to this strategy is realizing that although the definition of what a car means to certain people has changed since the ’60s, cars still can and do evoke a range of vibrant emotions for the people inside, and, if done correctly, the digital component can enhance the physical and emotional feel and relationship we have with cars tenfold further than simply integrating smart phone capability. The car must be digitally and physically what people need it to be when they need it, meaning it should be able to transform seamlessly from soccer mom carpool car to personal assistance commuting pod to track-ready performance car in a matter of seconds.

One teaser example: you bought a normal car and got one with special features catered to racing and performance. You have a free bit of highway in front of you on a casual Saturday and the light is about ten seconds from turning green. You bring up the performance screen, which tells you that a combination of torque vectoring, a higher RPM rev rate, and a lower center of gravity will produce the optimal balance for you to leave everyone else at the line. You adjust different aspects of the car on-screen based on its recommendations and hit submit, and in a matter of seconds you feel the car growl a bit louder and sink a bit lower to the street as it sets its new stance (whew – I just got goosebumps thinking about it). You may very well say that the days of performance cars are over, but sales figures say differently. Just ask the people in charge of the Dodge Hellcat line or the Mercedes AMG line what their bonuses look like this year compared to their peers.

Second more mundane example: you’re late for a meeting, so the self-drive mode isn’t going to fly today because it’s too cautious and slow for right now. You’re trying to edit the final moments of a presentation while also driving like a lunatic. The car knows your route to work, and is suggesting lane changes to weave through traffic through your heads-up display, while asking if it’s ok to alert your teammates that your ETA is three minutes after the meeting starts so they might want to consider kicking it off without you. The car also notices that your eyes are on the road only about 6 of every ten seconds, so it becomes extra vigilant about detecting possible collisions, and when necessary, making a lane change or overriding your lead foot. You speed to the front of your office and find an open parking place and run inside without feeding the meter. You check your phone after the meeting and your car says that it detected you parked in a reserved space, so it moved around the corner and fed the meter. The only thing missing to this exchange was “I hope your meeting went well!”

Between these two scenarios, the first one makes you feel like a total bad ass, and now you and the car share this special “don’t tell your spouse” moment. In the second, the car is like any number of under-appreciated assistants on any number of TV shows and movies – you feel like you owe them something for all the sacrifices and help they’ve selflessly given you. Has your phone ever made your blood rush and feel like a bad ass or feel like you owed it something on an almost-human level?

Going back to my statement about seamlessly transforming to what a driver needs a car to be in “a matter of seconds” – that “matter of seconds” is in itself a cornerstone of what separates a car from a smartphone on wheels, and it only happens if the digital and technical aspects of the car are in complete harmony. Neither of the two situations elicit the same emotional feel without a thorough design strategy. In the first example, I never would’ve gotten goosebumps if I wouldn’t have felt the car sink into its haunches and snort as a result of my finger touching buttons on the screen. It makes you feel a bit on edge thinking about what you just unleashed under the hood. In the second example though, I want the car to know what’s happening without having to click an “I’m late please help” button. You never would’ve felt true empathy for the car had it not instantly known that you were late, known who your teammates were, known which route you always take, and instead of telling you to slow down like a pre-programmed system would, it gave you help like any co-pilot would and went one step further, a step that you wouldn’t have noticed until you came out and your car had been booted.

Does your smartphone need to be involved for these things to work? Probably for some things. But that’s not the point. The point is that the car owns the experience, and the phone is merely an aid, which is a different direction from where many automakers feel they’re headed – a car that’s just a smartphone with wheels.

A phone can tell you you’re going to be late, but it can’t physically help you be less late. A phone can recommend how to make your car perform better, but itself cannot move you from 0 to 60 faster. And a phone can tell you you’re parked illegally and then show you via a live camera feed the cop writing you a ticket, but it can’t do anything about avoiding the ticket. Car companies are great at creating beautiful physical experiences – the noises, the feel, the rhythm, even some of the self-driving tech is already applause-worthy. But in an age of technology inundation, carmakers need to realize and embrace the notion that tech isn’t superfluous or an add-on or bad.  With a cohesive design strategy based on integrating the virtual with the physical, a driver can forge a deeper emotional connection with the car – one based on a true relationship. 

Could BlackBerry’s Security Prowess Make QNX Unbeatable?

Source: engadget.com
Image Source: engadget.com

Say what you will of BlackBerry’s future in the cell phone business or in general, but the company that was once the name brand in smartphones and unbeatable security could once again become a front runner – this time in automotive technology. Having your brand be known for titanic security was, until a few years ago, not a totally compelling selling point, but that’s all starting to change with the increasing number of high profile hacks plaguing the news. In 2010 during some of the darkest days at BlackBerry, they quietly purchased a small company that would soon become BlackBerry’s QNX infotainment processor. Eventually, all the new Apple CarPlay and Google Android systems will come to be built on the QNX platform, making it possibly the most integral piece within the blossoming car tech value chain.

Fast forward to a few days ago when a  Democrat from Massachusetts published a report detailing the ease at which vital car functions are able to be hacked in a variety of ways. While actions that hackers can take are dependent on the level of technology present in the car, chances are good that the findings will scare the public and politicians enough to take another look at how their car tech is guarded. As everyone’s nightmare came true, DARPA (a government agency specializing in all things cyber-terrorism) hacked a basic Chevrolet sedan and was able to make the car accelerate and brake without the knowledge or action of the driver.

This to say that BlackBerry may have an even more lucrative place within the auto industry than just the production of auto processors. Concerns are high when it comes to guarding company secrets and government plans on computers and smartphones. But stakes are exponentially higher when it comes to people’s lives, making BlackBerry’s reputation and unique abilities all the more appealing to automakers and automotive suppliers. In an industry undergoing significant technological upheaval, BlackBerry could very well emerge in the foreground as the safest, most secure auto tech in the business. Now there’s a selling point.