The word disruption may be the most overused term in the tech industry and in the case of automakers could also be misplaced. I'm going to argue that the incumbent automakers got this disruption defense down and may even use a dash of offense.
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According to the tech chatterbox and various reports, Apple and Google are going to disrupt (ugh that word again!) the auto industry. So long, Ford, BMW, GM, Honda and Toyota. Hello, Google and Apple, which registered Google.car and Apple.car.
But there are signs that the auto industry sees the threat coming, is becoming tech savvy, using agile development and customer experience and leveraging core strengths that Apple and Google simply don't have. In other words, the automakers got this.
Now before you snicker, consider the following characteristics of the auto industry and recent developments.
First, the characteristics. An automobile is the ultimate integrated system. Safety systems, code, wiring, hardware, driver assist technologies and radar tools all have to work together. Simply put, an automobile isn't a smartphone that can be handed off. Yes, there are companies like Magna, which makes the Mini for BMW, that can take on a lot of contract manufacturing, but many automakers make their own products. Toyota is one of the best manufacturing companies in the world that just happens to make cars (and probably robots in the future).
Apple and Google would be hard pressed to replicate that manufacturing expertise. Yes, Apple has hired a bevy of Tesla engineers, but that doesn't equate to real plants and manufacturing. Tesla CEO Elon Musk has noted that cars can't follow the same model of outsourcing used by the iPhone and Android devices.
And then there's design. We'll give Apple's history of quality design some props and assume it can design a car. Frankly, I question that assumption, but will play ball. But Google?!? Puhleeze. Would you buy one of these even if it was automated?
You could, but there's a reason these Google cars haven't left the search giant's home turf: You'd be ridiculed in most parts of the U.S. in one of these buggies. You'd look cooler on a moped (and probably go faster). You may even look cooler in Google Glass. Design matters in the automobile industry. Tesla has become a key automaker through technology and customer experience, but its designs also catch your eye. It's also worth noting that Tesla hasn't made any rival extinct.
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And yes, I realize that the Google's car isn't a final design, but I'm not hopeful that the company can match Tesla's looks.
Perhaps the biggest argument for the auto industry is that it isn't standing still. Consider:
- Ford has a bevy of software projects underway as it aims to be more about mobility. Ford's efforts revolve around everything from being an app store in vehicle to developing standards to ramping autonomous vehicles. Ford has also stepped away from sweating the front end iOS vs. Android scrum to focus more on the middleware and back-end systems.
- Toyota has created an all-star lineup focused on artificial intelligence and assisted driving tools and automation that can handle events unforeseen.
- Automakers have figured out that car sharing services are key customers as well as rivals. GM invested heavily in Lyft and many auto manufacturers see the promise in subscriptions and services. Uber's model will represent a new market for car manufacturers. McKinsey argued that recurring revenue will be the fastest growing part of the industry. A traditional response from the auto industry would dismiss car sharing services as something confined to large cities. The argument would be that millennials will ultimately buy a vehicle.
- Car manufacturers are redefining themselves as mobility companies. Toyota argued at CES 2016 that it will transport people across the street, country as well as the living room. Ford has a similar pitch with its various experiments.
Bottom line: To be disrupted an industry has to have its head up its arse. There is no evidence that the auto industry is pooh-poohing the Silicon Valley crowd. Sure, some automakers will be too slow and miss key turns, but it's a stretch to say that the entire industry will be derailed.
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