Why ‘Autos Plus Tech’ Is the Best Path for Automated Vehicles

Neither auto companies nor tech companies can come up with winning mobility offerings on their own. Instead, they will have to work together to create products, services, and business models to meet the needs of users.

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An MIT SMR initiative exploring how technology is reshaping the practice of management.
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For more than a century, the business of moving people has been dominated by the automobile, with major automakers manufacturing vehicles and selling them to consumers. It has always been a capital-intensive business with extremely low margins. Now this business is on the cusp of dramatic technological change. A new vision has emerged where mobility is a service, enabled by automated vehicles (AVs) that are accessed on demand and operate without the need for human drivers. The new entrants — which include tech giants Google and Apple, ride-hailing pioneers Uber and Lyft, and suppliers such as Nvidia and Mobileye — have technological expertise, ready access to engineering talent, and deep venture-capital pockets on their side. Many observers, including prominent Wall Street analysts, think tech challengers from Silicon Valley will have the upper hand over auto companies.

In our view, however, that outcome is by no means assured. The most important question isn’t “Who will win?” but “How do you win?” Having studied the history of supply chains, the dynamics of competition and value migration, and the diffusion of new technologies in the automotive industry (and other manufacturing sectors), we think the future of mobility isn’t autos versus tech, but autos plus tech, based on collaborations that weave together products, services, and business models to meet the needs of individual users across wide-ranging use cases.

Neither auto companies nor tech companies have the ability to come up with winning mobility offerings on their own. Auto companies will never be that good at running service-based businesses or monetizing data; technology companies are unlikely to enter the complex and low-margin business of vehicle manufacturing. And not every collaboration (which may include joint ventures, acquisitions, and policy coalitions) will prosper. Even if it’s many years before AVs are driving on our streets, the planning needs to happen now. The various players will need to sort out a variety of complex issues, including how to handle concerns about safety, who controls the data, and who reaps the value. In this article, we will look at some of the possible scenarios.

The Power of Systems Integrators

In recent decades, the dominant narrative of technological disruption has centered on how new entrants introduce early products into rapidly developing markets, stay off the radar screens of incumbents, and then become industry-dominating leaders.

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Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
See All Articles in This Section

References

1. M. Jacobides and J.P. MacDuffie, “How to Drive Value Your Way,” Harvard Business Review 91, no. 7 (July-August 2013): 46-56.

2. J.P. MacDuffie and S. Helper, “Collaboration in Supply Chains: With and Without Trust,” in “The Firm as a Collaborative Community: Reconstructing Trust in the Knowledge Economy,” eds. C. Heckscher and P.S. Adler (New York: Oxford University Press, 2006): 417-466.

3. J.P. MacDuffie and T. Fujimoto, “Why Dinosaurs Will Keep Ruling the Auto Industry,” Harvard Business Review 88, no. 6 (June 2010): 23-25.

4. P. McGee, “Robotaxis: Can Automakers Catch Up With Google in Driverless Cars?” Financial Times, Jan. 31, 2019, www.ft.com.

5. R. Visintainer, “Ford Acquires Quantum Signal: Here’s How It Advances Self-Driving Vehicle Development,” Medium, July 30, 2019, https://medium.com.

6. D. Zipper, “Cities Can See Where You’re Taking That Scooter,” Slate, April 2, 2019, https://slate.com.

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