Automotive
Point of view
Customer driven
How the auto industry is transforming to let
customers lead the way
Highlights
The biggest drivers of change in the
automotive industry today are the
customers. Empowered by technology,
transparency and an abundance of
information, they dictate the terms for
how and when they engage car makers.
IBM experience from decades of
working with auto manufacturers
shows that those who are able to
quickly transform to an innovative,
customer-centric approach are those
best positioned to succeed.
The automotive industry is central to the economic vitality of nearly every
nation and economy—and even other industries. Cars and trucks are the
final leg of most supply chains, carrying a steady stream of food, appliances, office equipment and clothing to their final destinations. They are the
primary mode of transportation to and from work and leisure destinations
for millions of people around the world. And they are also the symbol of
the fulfillment of an aspiration for many, a reflection of achievement and a
statement of personal freedom.
Of course, the automotive industry is an important economic
engine all by itself. In a given year, the industry can produce more than
60 million cars, vans, trucks and buses. Around the world, the automotive
industry accounts for more than 5 percent of total manufacturing
employment. If auto manufacturing were a country, it would be the
sixth largest economy in the world, with annual gross revenues of nearly
€2 trillion.1 All of this is why nearly everyone—from economists to
policymakers to the average consumer—takes an abiding interest in the
health and future of this all-important industry.
It is also why the auto industry is under near-constant pressure to change
and improve itself for the benefit of its customers and society in general.
Today, the drivers of that change vary across the vast industrial landscape
of auto manufacturing. As always, there are significant regulatory
pressures around building safer and more reliable cars, but there is also
widespread concern around fuel-efficiency and sustainable manufacturing.
Automotive
Point of view
A smarter approach to the industry
There are sweeping technological changes that affect nearly
every aspect of the design and development of cars. And there is
the macroeconomic force of globalization, which is driving new
dynamics around the way cars and trucks are manufactured,
distributed and marketed.
Exceeding the demands of customers and embracing new
markets is what will separate the winners from the losers in the
automotive industry. At IBM, we have worked with nearly all
the top automobile manufacturers around the world, and we
have seen in practice the key elements of innovative, customercentric, forward-thinking operations. They are as follows:
But perhaps the biggest drivers of change in the automotive
industry today are the customers. Today’s car buyers are a new
breed of consumer. They are empowered by technology,
transparency and an abundance of information. They expect
to engage car makers on their own terms: interacting when
and how they want, through physical, digital and mobile means.
These consumers compare notes, championing a brand or
sullying a reputation with the click of a mouse.
Rapidly launch increasingly complex, sustainable vehicles
and e-mobility services
Consider this: a typical automobile today has around
30,000 parts, 2,000 functional components, and 100 million
lines of code. And that is just the beginning of the complexity!
Today’s customer expects all of the technological conveniences
of their home and work lives to be reflected in the makeup of
their vehicles.
One of the top customer demands today is for fuel-efficiency.
In particular, these connected consumers are the driving force
behind the nascent but growing market of hybrid and electric
vehicles. In this new market, the automotive industry is asked
to create a new consumer experience, not just by eschewing
gasoline, but also by aligning with the digital lifestyle to which
consumers have become accustomed in other parts of their
lives. But to succeed in this market it will take more than just
sophisticated, technologically advanced vehicles. It will also
require collaboration with adjacent industries like electric
utilities and telecommunications companies, and it will require
innovative, new business models that capitalize on the digital
capabilities of the new vehicles. It will require a smarter
approach to the automotive industry.
To meet consumer expectations for new features, fuel efficiency
and safety, more and more of the control systems in cars are run
by software. Electric and hybrid electric vehicles are especially
dependent on software and electronics, and automakers are
developing deeper competencies in software development,
which includes the integration of innovations coming from
partners and suppliers. Auto manufacturers also must have rapid
product development in order to keep pace with personal
technology and shifting customer demands. All of this must
be achieved without additional risk to deliverables and
especially to warranty performance.
2
Automotive
Point of view
A leading automotive manufacturer deployed a suite of
advanced collaborative and modeling solutions to design,
prototype and build a new vehicle in half the time it usually
takes to bring a new automobile to market. Creating a new
vehicle from scratch and getting it to market in record time
required creativity, coordination across the enterprise, and the
tools to maximize team effectiveness in order to bring it all
together. The solution this automaker implemented simulates
real-world driving conditions and consumer preferences, which
resulted in an exciting, smarter automobile that requires minimal gasoline and delivers new levels of Internet connectivity
and smartphone-inspired controls.
Stronger, ongoing relationships with customers require a
greater investment in developing and integrating data from the
most common car consumer activities. Outperforming companies use relationship-based consumer data to understand and
cater to their customers, and they engage in social media
conversations to differentiate their brands. As one recent
IBM study indicates: “Customers are waiting and willing to be
won over, but one needs to ‘listen to the noise on the wire.’”
For example, one major European automobile manufacturer
uses predictive scoring to serve up teaser messaging to website
visitors. This technology keeps customers engaged, converts
them from anonymous to registered users, and has increased
vehicle sales. Fiat—another major car company—uses sophisticated analytics to drive customer retention and vastly improve
the way they target and convert prospects into buyers.
Transform retail and improve the customer experience
Sophisticated consumers are changing marketplace dynamics
and challenging automakers to respond to far-reaching changes
in access to information sources. A highly-informed consumer,
one who uses multiple information sources, directly engages
automakers in regard to their customer experience, demanding
high levels of service for loyalty. This empowered consumer
requires automakers to refocus the management of customer
relationships on new ways that demonstrate and sell value.
With the traditional dealer model under threat, automakers
must also navigate new, virtual sales channels that compete
for the sales of products and services. This landscape provides
automakers with the opportunity to enhance their brands and
develop a direct, personal relationship with consumers by
effectively assessing and responding to consumer needs.
Create new business models with intelligent,
connected vehicles
The introduction of intelligent, sustainable vehicles is redefining personal mobility around the world, and connected vehicles
are the future of the industry. This “connected car” is a vehicle
with multiple systems that are seamlessly integrated; one that
links consumers to their digital worlds. This trend requires
added competencies from automakers, especially in collaborating with new partners and developing the ability to pursue new
business models. Automakers need to have open, scalable and
flexible mobility services that are customizable and differentiated. It is imperative that smart automotive enterprises develop
an interdependent ecosystem of suppliers and partners to help
them deliver innovative services to their customers.
3
Automotive
Point of view
Build and optimize dynamic value chains
With demand shifting to emerging markets as well as to sophisticated, connected vehicles, automotive companies are working
diligently to alleviate severe stress across the value chain. In the
US market alone, 17.8 million cars were recalled in 2012—on
top of the 15.5 million vehicles recalled in 2011. The shift in
vehicle demand to emerging markets is also accelerating,
with Brazil, Russia, India and China now projected to account
for 30 percent of global demand. Now more than ever, automotive companies need unique operational capabilities in the
value chain, with strong ecosystems that meet the challenging
demands of today’s global marketplace.
To stay competitive and differentiated in the market, automakers are now providing their products with connected vehicle
telematics services. But for the market to truly develop and
ensure a positive user experience, automakers will need to work
closely with utility companies, local and national governments,
and telecommunications and technology providers. The
European Commission, for example, established a 42-member
consortium that was composed of municipalities, industries and
utilities to set standards and integrate processes for the development of electric vehicles. The consortium was able to use an
advanced requirements definition tool to design and model an
extremely complex array of processes to identify overlaps,
duplications and missing elements prior to rollout of the actual
Electric Vehicle Network, which serves electric vehicle
owners by providing a directory of charge points where the
vehicles may be charged.
To achieve lasting competitiveness, automakers require
production and supply chain capabilities that are efficient,
flexible and adaptable enough to respond to shifting market
demands. Successful manufacturers capture real-time production and logistics information and apply predictive analytics to
optimize material and production flow, reduce inventory and
improve responsiveness to market conditions. These organizations integrate processes and systems to create a transparent
view of what is happening across the value chain to reduce
management complexity and increase efficiency. Warranty and
service management are also optimized to accelerate problem
detection while improving product quality through analysis
of historical data.
Aside from smoothing the path to market for these important
new vehicles, these partnerships will open the door to entirely
new business models that can create new streams of revenue
and competitive differentiation. One example is the development of advanced mobility services, which include everything
from intuitive vehicle systems and in-vehicle services, to driver
assistance, diagnostics and infotainment.
4
Automotive
Point of view
A leading auto manufacturer in China achieved significant
benefits by transforming their production operations. The
company had struggled to manage the realities of demand
f luctuations and the rapid expansion of its production sites.
By implementing a solution that analyzed purchase order data
and automated business and production rules, the company was
better able to manage the flow of work and construct “what-if”
scenarios to improve decision-making. Overall, the company
achieved a 10 percent improvement in manufacturing productivity, and 15 percent reduction in production costs.
developed and continuously refined through implementations
with clients around the world. Our portfolio is augmented by
the applications of leading partners, and enabled through an
IBM solution framework which allows automotive industry
enterprises to accelerate the deployment of new capabilities to
speed time to market and cut costs. More importantly, IBM has
partnered with the automotive industry for many years, helping
transform its organizations while satisfying customer expectations—which is the biggest and the most important driver of
change in the automotive industry.
Conclusion
For more information
The automotive industry is increasingly complex, both in the
kinds of products and services that it produces, and in the value
chain that creates and delivers them. These complex systems
call for an integrated approach that provides the ability to see
how the parts fit and work together to meet the needs of a
fickle, sophisticated customer base.
For more on how to take a smarter approach to becoming
customer-driven, please visit: ibm.com/automotive
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IT solutions that your business needs in the most cost-effective
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For more than 100 years, IBM has helped industry after industry capitalize on complex systems. As a global manufacturer
ourselves, we understand the issues that automotive companies
face. Our automotive industry solution portfolio for product
and system development, advanced mobility, manufacturing
productivity, and marketing, sales and service has been
5
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1
International Organization of Motor Vehicle Manufacturers website:
http://oica.net/category/economic-contributions/
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