Digital Transformation (Part 2)

Digital development for the business sector is a process that involves the incorporation of digital technologies in all areas of a company, fundamentally changing the way it operates and provides value to its customers. It also involves a cultural change that requires organizations to continuously challenge the status quo, experiment, and feel comfortable with failure.

This development can include elements such as process automation, the use of Big Data and Analytics for decision making, the implementation of information technologies to improve operational efficiency, and the creation of new digital capabilities to improve interaction with customers.

It is important to note that digital transformation is not just about technology, but also involves a reassessment of the entire business strategy with a focus on the customer. This may require changes in the company culture, organizational structure, and operations.

In summary, digital development is essential for any company that wants to remain competitive in today's business world.

The shift towards digital transformation in the automaking industry aligns with broader digital transformation initiatives by focusing on the integration of digital technology into all areas of a business, fundamentally changing how businesses operate and deliver value to customers. In the context of the automaking industry, this shift is evident in the introduction of subscription services, new software, and fully connected cars. These changes are transforming cars from mere modes of transportation to advanced computers on wheels, reflecting a broader trend of digitalization and connectivity in various industries.

Digital transformation in the automaking industry has several practical applications. One of the most prominent is the development of connected cars, which are essentially computers on wheels. These vehicles are equipped with software that allows for a range of digital features and subscription services, such as remote start, dash cam features, and heated seats. Automakers are also using digital transformation to shift their business models. For example, General Motors plans to add 50 new digital features and subscription services to its cars by 2026, with the aim of building a Netflix-sized subscription service business by 2030. This shows that digital transformation is not only changing the way cars are built and function, but also how they are sold and used.

Automakers can effectively implement digital transformation in their operations by embracing technology and integrating it into their business models. This could include developing software for fully connected cars, offering subscription services for additional features, and using data analytics to improve customer experience and operational efficiency. They should also invest in training their workforce to adapt to new technologies and collaborate with tech companies to stay at the forefront of innovation. It's also crucial to have a clear digital strategy that aligns with their overall business goals.

Tesla's driver-assist subscription offers features like lane keeping and auto-parking. These features are part of Tesla's strategy to boost revenue through post-purchase subscription models and software features that can be patched in remotely. It's also worth noting that Tesla pioneered the trend of shipping cars with battery packs that had their range limited by software, with owners having to pay a fee to unlock the full capacity.

According to GM's prediction, car customers are willing to spend $135 a month on subscriptions. This is in addition to monthly finance payments.

Microtransactions play a significant role in the automotive industry as they provide an additional revenue stream for car companies. They are often used in post-purchase subscription models and software features that can be patched in remotely. These features can include remote-start capabilities, driver-assist features, voice recognition, and heated seats. For instance, Tesla initiated the microtransaction trend by shipping cars with battery packs that had their range limited by software. Owners would then have to pay a fee to unlock the full capacity. Furthermore, Tesla's driver-assist features like lane keeping and auto-parking cost an extra $199 a month.

Car companies can provide true value with their subscriptions by focusing on features that customers are willing to pay extra for. According to a survey, only 25% of prospective car buyers are willing to pay extra to unlock a vehicle feature. The most in-demand upgrades were additional horsepower and safety features like lane assist. Therefore, car companies should focus on enhancing these features in their subscription models. Additionally, they should also consider including features that customers believe should be part of the original price tag, to increase the perceived value of their subscriptions.

According to a survey of prospective car buyers, the most in-demand upgrades in vehicle features were additional horsepower and safety features like lane assist. Only 25% of the respondents were willing to pay extra to unlock these features.

Consumer willingness to pay for additional features significantly impacts the digital transformation of car companies. If consumers are willing to pay extra for additional features, it provides an opportunity for car companies to increase their revenue through digital services. However, if consumers are not willing to pay for these features, it could lead to a failure in the company's digital transformation strategy. For instance, GM earned a staggering $2 billion from in-car subscriptions alone last year, indicating a positive consumer response. However, a survey revealed that only 25% of prospective car buyers were willing to pay extra to unlock a vehicle feature. This suggests that car companies need to provide true value with their subscriptions to succeed in their digital transformation.

Electric and connected vehicles are expected to play a significant role in the future of the automotive industry. They are likely to become the new norm, replacing traditional gasoline-powered vehicles. This shift is driven by the need for sustainable and environmentally friendly transportation options. Connected vehicles, on the other hand, will enhance the driving experience by providing real-time information, entertainment, and safety features. They will also pave the way for autonomous vehicles, which are expected to become more commonplace by 2030. The demand for in-car entertainment like movies, TV, and online shopping is also expected to grow as these technologies advance.

The Digital Transformation presentation can help businesses adapt to changing conditions by providing a framework to develop a unique strategy. This strategy can help businesses stay relevant in an increasingly digitized world. It can guide businesses in assessing the realities of their operations and balancing strategic growth with preserving value. It can also help businesses anticipate future trends, such as the rise of electric, connected, and autonomous vehicles, and the growing demand for in-car entertainment.

The increasing digitization in the automotive industry could create several new revenue streams. One potential area is the development of in-car entertainment systems, as autonomous vehicles become more prevalent, the demand for in-car entertainment like movies, TV, and online shopping could grow significantly. Additionally, the data generated by connected cars could be monetized through targeted advertising or selling to third parties. Subscription services for software updates and premium digital features could also be a source of recurring revenue. Lastly, partnerships with other digital businesses such as ride-sharing or food delivery apps could open up new opportunities.

While specific case studies may not be readily available in the public domain due to proprietary reasons, there is evidence to suggest that implementing in-car infotainment services like Apple's CarPlay OS can enhance the user experience and potentially increase customer loyalty. For instance, Apple's CarPlay OS allows users to seamlessly integrate their iPhone or iPad with their car's dashboard, providing a familiar and intuitive interface. This can lead to increased customer satisfaction and potentially drive sales. However, it's important to note that automakers may prefer to control the entertainment hub themselves to maximize additional revenue streams and define their customer relationships long-term.

The main components of Apple's next-gen CarPlay OS that could redefine customer relationships in the automotive industry are likely to include advanced connectivity, enhanced user interface, and integration with other Apple services. Advanced connectivity would allow seamless integration with the user's iPhone or iPad, turning it into a car dashboard. The enhanced user interface would provide a more intuitive and user-friendly experience. Integration with other Apple services like Siri, Apple Maps, and Apple Music would provide a comprehensive in-car infotainment experience. However, specific details about the next-gen CarPlay OS are not disclosed yet.

Automakers can implement Apple's next-gen CarPlay OS in their operations to maximize additional revenue streams by integrating it into their infotainment systems. This would allow customers to access their favorite iOS apps and services directly from the car's dashboard, enhancing the user experience and potentially increasing customer loyalty. Automakers could also explore partnerships with Apple to share revenue from app purchases and subscriptions made through the CarPlay platform. Additionally, they could use the data collected through CarPlay to gain insights into customer behavior and preferences, which could inform future product development and marketing strategies.