New Mobility: Clock Ticking to Make a Move

I recently had the privilege to attend the University of Michigan Transportation Research Institute (UMTRI)’s conference, “New Mobility Trends: Business Models That Are Growing a Trillion Dollar Industry Cluster”. Especially encouraging was the diverse make-up of attendees including major automakers, global transportation planners, venture capitalists, start-ups, Tier 1’s, professors, and existing mobility players.

While each participant had their “own vision” of what the future held to solve the world’s crippling traffic, parking, and congestion woes, it was increasingly clear that we had reached a ‘tipping point’ for commercial disruption of the 100 year old+ model of designing passenger cars and selling them to private individuals. One speaker (who asked not to be quoted by name) even suggested that if major automakers did not embrace the shift to mobility within 20 years (or only about 5 generations of vehicles if you are keeping score at traditional automotive cadence), they would fail to exist as companies. Is the shift from the top of the food chain happening fast enough?

While Uber is by far the most well-known (and highest valued) of the emerging standalone mobility newcomers and experiencing growing pains of its own, the mobility tent (or so-called “Internet of Moving Things”) is for the most part open and includes everyone from car and ride sharing companies, to App start-ups, to smart parking meters, to bike-sharing schemes, to emerging players with three-wheeled electro-bikes for helping apartment dwellers get their stuff cheaply across town to a new place. One of the conference organizers described ‘New Mobility’ as: “Moving Goods, Moving People, Moving Less.” Moving Less (which should seem to make each single trip that much more valuable)?

Mosaic of Mobility? – Numerous speakers, including Chris Thomas of Fontinalis Partners (a dynamic Bill Ford co-founded VC firm here in Michigan focused exclusively on mobility) spoke about the need for mobility initiatives to ‘fit’ into a broader canvas of transportation programs, private vehicles, government initiatives, and start-ups – basically the move away from disconnected, isolated ‘point to point’ projects which only offer narrow solutions without broader ecosystem integration and flexible business models. Fontinalis has already invested in 14 companies trying to make that happen.

Less Cars, More Utilization? – Private asset utilization is a key to the economics of most mobility transportation business models. ZipCar cited the need for only 1 physical vehicle for every 40 of its members (as well as decreased private car ownership by a full -15 vehicles for those 40 members). Ford’s mobility speaker also shared that private ‘vehicle utilization’ was heavily tracked, and is supporting 8 pilots in the shared vehicle space alone.

Who Will Own the Mobility Value Chain? The conference debated whether governments, carmakers, wireless carriers, or IT companies would ultimately “control” the local mobility value chain. And at the end of the day, the end consumer will optimize mobility choices in their own best interest. This sounds a lot like the race to organize one’s home automation system or even living room (with lack of standards and tough business models of their own). And as consumers increasingly organize themselves around their phones (47% of consumers globally already use a Smartphone to plan their own transportation according to Ford research), shouldn’t Google and Apple be in a great position to impact the value chain from end-to-end (maybe a Google or Apple ‘car’ could be entirely virtual)?

How Do Incumbent Organizations Embrace Change? SBD is about to publish a major study on the impact of organizational structures on connected vehicle success at automakers around the world. Some automakers like Ford and GM already have dedicated mobility teams in place, and several others also have venture capital arms investing aggressively herein. How do Silicon Valley teams fit in? How do 1-off Mobility initiatives become a central part of every automaker’s DNA? The players that get this right will win with improved decision-making and match the tremendous pace happening in mobility transformation already underway.

Hurrah for Experimentation, But Show Me the Money? BMW, GM, Honda, and numerous others are all placing various bets on focused mobility initiatives. Daimler now owns Ridescout and myTaxi which make broad mobility and transit information available via Apps in dozens of major cities. At the UMTRI conference, Ford spoke about 25 current mobility experiments already in place (broken into 14 trends, and 11 partnerships), which followed upon CEO Mark Field’s keynote at the Consumer Electronics Show 2015. But when almost all OEM profits are still derived upon physical vehicle sales and captive financing programs, how do automakers make product and services revenue part a material part of their business models and counted upon in quarterly financial statements? A tough call to balance the core business and rampant disruption.

SBD will be publishing a new report later this year, “Automotive Mobility Solutions: A Viable Alternative to Car Ownership?” which will help sort out a number of these questions. Please let us know what you think in the meantime.