Is Vehicle Data Monetization at a tipping point? Act Now to Participate!

Automotive connectivity is changing faster than ever, significantly increasing the potential for data monetization for players across the ecosystem. Vehicle makers and other players have faced immense challenges to monetizing vehicle data, the industry is now at an inflection point, where they must focus on key imperatives to accelerate the progress amongst others.

Vehicle life-cycle monetization and new business models

The automotive industry has already begun moving toward life-cycle monetization, rather than focusing on revenues at point of sale and in the aftermarket. As per Mckinsey By 2030, about 95 percent of new vehicles sold globally will be connected, up from around 50 percent today. On a per-vehicle level, connectivity could deliver up to $310 in revenue and $180 in cost savings per year, on average, in 2030.

Every player in the automotive value chain can take advantage of connected use cases during the entire life cycle, Players along the value chain have been slow to form the ecosystems required for data monetization. Certain organizations may sometimes receive more benefits than others. For example, dealerships can capture data-driven sales efficiency improvements, insurers will benefit from usage-based insurance offers, and infrastructure players gain the most from use cases that leverage car-sensor data to monitor road conditions. In general, however, multiple players are required to generate full benefits. OEMs are present in nearly all use cases and will receive a certain share of value, given that today’s gatekeeper function could change because of future regulations. Telecom players are also critical to most use cases, since they provide the data connection, and data aggregators and marketplaces will also commonly be involved. OTA updates, R&D hardware optimization, and sales and service efficiency will deliver highest impact to the OEMs and Customers.

Choose an operating model for a digital business

Companies will need a cross-functional team consisting of R&D (user interface and experience, E/E, and back end) and marketing and sales staff, supported by legal and finance teams. Such teams, which can jointly develop and deploy use cases over the whole vehicle life cycle are still rare in automotive or struggle to integrate with the remaining legacy organization. They are firmly established in other industries, including telecommunications, insurance, mobility services, and SaaS.

Cross-functional teams help players develop use cases quickly, since they provide important input about product characteristics—for example, marketing can provide insights about what features are attractive to customers, legal can advise if offerings meet current regulations, and R&D can help determine if products are technically feasible.

In addition to core staff, cross-functional teams should include customer-success managers who help increase retention and reduce churn by ensuring high-feature uptake and usage. This applies to both B2B and B2C use cases. The value of such managers has already been demonstrated within the cloud-service, data-marketplace, and consumer-technology sectors. In those industries, leading players spend nearly twice as much on customer-success functions compared with the average company, helping them perform three times better with respect to customer churn and retention.

Double down on a customer-centric approach- as Consumer-technology is raising the bar!

OEMs will face even greater challenges, as customer interactions with smartphones and other consumer technologies will continue to raise the bar. In other words, automakers must compete not only with their peers but also with the best high-tech players. The approach that new EV OEMs are taking to address this problem differs from that of traditional companies. They leverage customer feedback and constantly improve their products based on the information. EV OEMs also have very short reaction times and are willing to ship beta versions, which they later improve with OTA updates. Consumer-technology players are also leveraging their internal expertise to develop operating systems (OS) that provide access to a full ecosystem of internal and external applications, such as maps. Again, their approach is more similar to that for smartphones than cars. OEMs and suppliers still have a long way to go to become fully customer centric. As in consumer technology, where features are constantly updated, OEMs and suppliers must continue developing their offers beyond SOP to stay relevant. This capability will necessitate ongoing user testing after initial delivery to identify improvement opportunities, as well as continuous software updates, releases, and features, to ensure high customer engagement. If done correctly, the upgrades will allow players to create differentiating “signature moments,” similar to those iPhone users now enjoy after OS upgrades and new app releases.

After developing and deploying features, players must ensure that customers actively use them. To do so, they must create customer-satisfaction teams that collect usage and interaction data along the customer and vehicle life cycle. The teams can then use this to inform decisions and provide input for the next release. For example, real-time tracking of feature usage could be used to determine which ones are most popular. Companies could then advertise these features to other customers who are not yet using them. Usage of features and functions would increase, thereby raising their perceived value, and customers would be more satisfied with their vehicles.

Act now to participate in Vehicle-data monetization

Automotive connectivity is changing faster than ever, significantly increasing the potential for data monetization for players across the ecosystem. Data suppliers, such as OEMs and vehicle fleets, are well positioned to benefit, as are insurance players, companies in the automotive aftermarket, cities, infrastructure providers, and other data customers. Importantly, all stakeholders must act fast.Those that fail to act now will miss the opportunity to differentiate themselves in one of the industry’s key customer-facing spaces. Those that harness the opportunity before the traditional OEMs may unlock new profit pools for the industry and enable new, profitable growth.

Note : Inspiration from Mckinsey research!