The study A2C: The Second Automotive Century documents the growing need to generate better returns for investors while strengthening consumer relationships. This means lower cost structures and new ways to differentiate products over ownership cycles. These drivers of change will lead to the redistribution of assets within the industry. Realignments of assets are occurring globally with the Delphi spin-off from GM and Visteon independence from Ford. Enterprises are stretching even more as Ford adds Land Rover to its brands, GM and Fiat knit together and DaimlerChrysler strategically moves financially and operationally to influence Mitsubishi's future. Further accelerating asset shifts will be the disruption of e-business and the eventual rise of collaborative e-commerce ("c-commerce") initiatives, permanently changing customer and supply relationships.
All of these events will change the way new vehicles are designed, assembled, ordered, financed, and delivered to consumers.
E-business Links Will Prove Essential
Casualties will occur at all levels of the extended enterprises and failure will be caused by two primary reasons. First, it will happen to companies that hold unneeded or redundant assets (facilities, equipment and even intellectual property) for too long. They will have cost structures that are too high and will lose customers even though they must have more business to balance costs. Second, failure will also occur when any company is effectively "unlinked" from the enterprise collaborative efforts to speed up their innovation of products and services.
Allies that learn new electronic ways to share consumer insights, new ideas, best practices and business intelligence will sharpen the attributes of their automotive product and services brands faster than competitive enterprises. Collaboration and mutual respect for allies' ability to add incremental value will be a new behaviour model.
At the centre of this new behaviour model will be the effective connection of supply chain management (SCM) knowledge with customer relationship management (CRM) knowledge between and among the alliance companies. The use of unfiltered consumer data, local market knowledge, and customer product use data streams by allies will speed new product and service development. This information collaboration will create competitive advantages for some enterprises.
Enterprises must have a sense of urgency for this phase of change because now is the time to build the collaboration around the new sharing processes. Today a limited amount of vital information must be linked to "push" products to market. But in a few years, robust data streams will be mined and shared for collective insight about customer wants and aspirations to speed up innovation.
For example, today dealerships link with customers at local levels for sales and service. Good dealerships therefore have insight on the authentic, local and repeating activities of consumers as shoppers, buyers and users of the products and services that comprise the differentiated brand position sought by the vehicle brand owners (VBO's). In the future, the increase adoption of devices within the vehicles that will deliver information, entertainment and communication capabilities, mean that the data stream will become more robust and reflective of lifestyle choices.
Hence learning how to share the current knowledge now is one of the new behaviours of c-commerce. Retailers, finance subsidiaries, engineers, and logistics providers all have information now about customer activity which must be shared more rapidly in the extended supply network to speed product and services innovation.
The first step is for the allies within an enterprise to start demanding such data as the basis of their own planning. That is to transform the use of customer information within an enterprise.
We call this transformation process with consumer information as a centrepiece of the enterprise as "consumer centricity". We call the new global enterprises "Vehicle Brand Owners" (VBOs).
Within 5 to 10 years, it's likely that fewer than seven VBOs, operating with something close to a global scale, will dominate auto retailing. Mergers between major VBOs will continue to be a part of the competitive landscape. Dynamic supplier networks and e-commerce portals will exist to auction products and capabilities to these global giants. With a growth imperative, the networks will be more fluid and collaborative around processes that help strengthen brands and differentiate products.
Look for manufacturers to allocate much of their present responsibilities for co-ordinating, sequencing and final assembly of vehicles outward to their supplier community. (Ultimately, production and assembly of entire vehicles could be outsourced to new mega-suppliers.)
Enabled by collaborative e-technologies, strong networks will acquire the vulnerable. Agile enterprises will devour the slow. Again, the "unlinked," including current companies that do not make the shift will fade.
Mega-suppliers will emerge as important members of the Second Automotive Century enterprise. By 2010, there will be no more than 20 to 30 major systems suppliers globally. But they will play key roles in the operation of the traditional VBO and will begin to occupy much of the traditional auto maker space. But both categories will need the information from retailers for key processes such as vehicle concept and brand development, new retail channel development and aftermarket alliances.
Innovation Equates Survival
The companies most likely to succeed in the Second Automotive Century will be those that can innovate the way that they develop, design and deliver products and services to the consumer. To do that, the enterprises need to be linked to consumer insight. The automotive enterprise of the Second Century will have completely rethought, realigned and redeployed its competencies and assets in co-operation with its supply-chain partners.
This is the time to ask how linked your company is to customers and future customers. The new behaviours will be designed by those who today are driven to find new and better ways to collaborate using electronic transfer of supply chain, customer and business intelligence information to speed innovation collectively.