This week quite a few people celebrate Lunar New Year of the OX. Wish everyone may turn your tables. And we’ll not only get out of COVID-19 sooner but also make the best of the opportunities. So how may the table turn for smarter cars? Call me crazy, but I wish for 3 open ecosystems for innovations 🙏.
3 Innovation Ecosystems
The 1st question has to be how to build a smart car (infotainment system) from scratch? Because one thing for sure, you will not get to the new world(smart cars) by staying on the old road(feature cars). Also even you may ignore new tech, methodology & know how, your competitors may not. One new way may be breaking down the value stack to 3 layers first. So, the industry can deal with complexity & enable collaboration in parallel & beyond company boundaries better. And then, 3 open ecosystems may emerge to accelerate the pace of innovation at scale.
Take iPhone as an example:
- App Store enables apps to add new functionalities & services by 3rd party. Users, in turn use them & rely on iPhone more. Which also allows Apple to profile from the app market maker business.
- Apple still fully controls the System & HW businesses. They are closed ecosystems, or rather a supply chain under Apple’s mercy.
Tesla took quite some inspirations form iPhone, but still in its infancy. They are both vertically integrated & fully control the device System & HW ecosystems. But today there is no Tesla app store nor ecosystem yet. It’s too early because Tesla just sold 1+M cumulatively in 2020. Even it’s a great milestone for a new EV maker, it’s just not big enough for service companies yet. But giving all the growth is in EV, which will account for ~50%/40M of new car sales in 2030, Tesla app store is coming sooner rather than later, I bet 😉.
Sure, the car app ecosystem will be different. It’s a niche comparing with other app ecosystems, such as mobile, desktop & web. Nevertheless, there is no much different fundamentally on what makes an app ecosystem ticks. If to build a prosper open ecosystem, at least 3 building blocks are critical.
- App API, SDK & tools to decouple app development from the car development process & life cycle. So new app/service innovation will be easier & quicker to the market.
- An app store as a channel to deliver/deploy apps to an aggregate user-base. So the target market size may be worth-wise for new app/service adventure.
- When the device distribution reaches to a critical mass, say ~10M, it may start to attract app/service providers to join the ride. So the virtuous cycle starts.
It won’t be easy for automobile because the market is much smaller than mobile, ~1/20: 80M car vs 1.5B smartphone sales annually. If to bootstrap, OEM apps will be the important first step. The trick is for OEM app teams think & act more like an app/service developers than a device maker. So the same building blocks are useful for both OEM & 3p developers. This’s actually a good thing for OEMs too. Today OEMs do have the first entry advantage to capture service businesses before others. Attacking the service businesses early is likely the best defense OEMs can do “yesterday” 😉.
The system layer is generally the layer between app & HW implementation layers on a device. Which is the key layer separating app & device ecosystems to develop & iterate independently. There will be 2 promising models for successful players on this layer:
- Premium players: typically it’s a game for top OEMs. Such OEMs need to own & invest heavily on their unique experience and therefore premium branding. In-house development provides the best control & speed to play this position right.
- Value players: typically it’s a game for mass market OEMs or turn key solution providers to serve multiple OEMs. Such players strive for the best price-performance ratio & include limited branding, e.g. skin/theme/feature-set customizations in a aggregated/standardized way. Furthermore, it also reduces the time to market while providing competitive infotainment systems to cost sensitive customers.
In the 1st round, it’s mostly the premium player’s game. Anyone out source this layer to vendors will have hard time to stand out due to high uncertainty and a longer lead-time. Not to mention, no one is going to pay a premium to “buy me-too” anyway.
Only when the tech. & market mature, new value players may rise on the main stage. Either way, the key advantage for winners are whoever can get to a critical mass early. Which allows they to maximize the user value from the same SW investment. It will be great for an single player can grow new car sales significantly, but really hard in the real business. So one easier way is for one OEM system to rule them all, across brands, model years and even HW platforms. Tesla is ahead other car OEMs to Grow Aggregated Happy User Base.
OEM & their Tier-Ones will continue to be the key players to own anything under the HW abstraction layer(such as firmware, kernel/driver & adaptors) for an open ecosystem. Some a smart SoC vendor may even aggressively take the position to be a turnkey solution provider. Due to limit in the market size, the tech will heavily leverage other vertical, such as mobile. The key enabler of an open HW ecosystem is solid HW abstraction interface & testability.
The opinions stated here are my own, not those of my company. They are mostly extrapolations from the news. I don’t have insider knowledge of those companies, nor an EV expert.