Google and the automotive industry share more historically than what most people are aware of. Falk Bothe, the Director Digital Transformation at Volkswagen, is tasked with the waves of change that the car in all its forms and facets has faced, from it being reserved for the use of the very wealthy to it becoming used by the masses, to the car being an everyday object. Bothe sees these analogies between the history of the automotive industry and the current of digital disruption happening at the moment as astonishing.
Mr Bothe, let’s start with the history of the automobile: What is its role in how consumers have adapted to current purchasing trends?
Consumer needs have evolved throughout history: We’ve gone from placing our purchases in a real shopping basket at the supermarket to adding what we desire to an electronic shopping cart. Everything today is accessible on demand with a click due to e-commerce. The origin of all of this started with the car: With the invention of the conveyor belt Henry Ford opened up the possibility of purchasing goods like a car to a wide audience that went beyond the previous privilege, although one has to add that this invention left next to no room for meeting individual needs.
But isn’t much of what the industry does now aimed at doing exactly that: catering to individual needs?
Well, yes, of course. With Ford, we went from mass production to the complete individualization of products. Take Nike ID for example. Consumers can customise their dream shoe online. Today’s consumers expect products to be individualised; they want them tailored to their specific needs. What’s even more interesting: Many companies don’t even have a physical product anymore. Look at Google: How did they become a multi-billion dollar complex without a real product? It’s because they based their results and algorithms on the people who used their search engine and looked for information. In addition, they used the data they gained from this to set up a completely new model of advertising. To this day that remains the core of their business model.
So what does Google’s algorithm have to do with the automotive industry?
It set the example for platform thinking and new economies like AirBnB or UBER. Because of Google’s premise, it was suddenly possible for everybody to market and monetise themselves. And from this new business models have had the chance to disrupt traditional markets entirely – much the same as the car did a century ago. It is exactly these disruptions that have affected the automotive industry. The analogy lies in the historical comparison of economic relevance.
You’ve used the word “disruption”, which gets thrown around in every context these days. How are these “disruptions” showing up? What are their characteristics?
For instance, the big touchscreens we now see in new cars, bigger than the steering wheel, are just one visual indicator of this development. Consumers expect products to be multi-functional. The traditional use of mobility, of having a vehicle, was to get from A to B. But from the moment where Steve Jobs introduced the first iPhone as a “widescreen iPod, revolutionary mobile phone, breakthrough internet and communication device,” consumers expected more. This was a revolutionary moment. And today, it is the status quo for products to have multiple uses – like the Thermomix, the personal scale or the car.
Can you elaborate on what you mean by that?
Cars don’t only transport people and goods from A to B anymore, people expect them to take care of everything that happens in between. This means a multitude of services. From on-demand communication to entertainment, recommendations for sightseeing, restaurants etc. We have only just started to explore what services and the car as a platform or interface can deliver.
How do you see this developing in the future?
To really understand the consumers’ needs and develop the right services, we need a different approach to traditional automotive product development processes. Steve Jobs with the iPhone created a platform that developers could use to create products and services. Only with the open innovation approach by Android the multiple uses of products expanded rapidly. The result of their open platform is an app for almost everything. Smartphone users themselves started to find new functionalities in addition to the regular possibilities of the device. Today, after having solved complex, creative problems, technology takes care of the complicated production process. And by means of digital possibilities, it is possible to create a service without having any assets to speak of, or to go into mass production with individualized batches. Nike ID is a perfect example of this. They asked themselves: How can we individualise a shoe and still use the scaling effect of mass production? Upon solving this question the software could take over and can now steer the process without human intervention.
What has to change at Volkswagen to keep up with these changes?
To face the challenges of consumer needs, demand for multiple use products and disruptive business models, the next generation of Volkswagen needs the right people to drive the change, a common understanding of digital transformation and the right technical solutions. In the near future, the car will be the interface for services, embedded in an ecosystem that combines technology, innovation and collaboration to provide mobility at the right time for the right purpose as a seamless part of daily life with maximum individualisation and flexibility. Volkswagen is a leading provider of sustainable mobility globally – even more so with the right partners on the way.
Thank you, Mr Bothe, for your time.