Behind the hype about the “internet of things” is a very real trend of devices becoming more computerized and more reliant on network connections. Nothing in this category promises to change the world more than the self-driving car, which now seems tantalizingly close to becoming a commercial reality.
Among the experts in this field is Greg Kahn, CEO of the Internet of Things Consortium, a group that hosts networking events and an online community for the $1 trillion Internet of Things market. Kahn will speak at the Princeton Tech Meetup on Monday, March 26, at 6:30 p.m. at the Princeton Public Library. The event is $5 to attend. For more information, visit www.meetup.com/princeton-tech.
Kahn, who also owns GK Digital Media, a Princeton-based consulting company dedicated to the Internet of Things market, is well connected in the industry and follows the latest trends closely. He believes that all the hype about self-driving vehicles has overlooked a gigantic emerging market: human-driven “connected cars.”
By connected cars, Kahn and others refer to vehicles equipped with internet access and wi-fi, able to optimize their operation and maintenance also manage information for their passengers.
A recent McKinsey study showed that, “while drivers are eager for the benefits of car connectivity, they also express concerns that may hamper its rapid and broad adoption. First, consumers worry about digital safety and data privacy.” They also indicated they were reluctant to spend substantial sums of money on the new technology.
In a recent post on LinkedIn, Kahn explained why connected cars are more important than most people realize:
by Greg Kahn
Given the media attention lavished on self-driving vehicles, it’s not surprising that a recent study by INRIX shows a third of Americans believe they will see the technology “widely deployed” in less than five years and 70 percent within a decade. But while GM, Ford, Uber, Lyft, and others race to commercialize autonomous cars, advisory firms McKinsey, Strategy&, and Accenture all estimate such vehicles will likely comprise only 15 to 25 percent of new unit sales in 2025 to 2030. Mainstream penetration and meaningful industry revenues are forecast to come even later, with challenges up to that point including everything from technology standards and government regulation to slowly adjusting consumer behavior and long product replacement cycles.
As an industry, we must not confuse autonomous driving with connected vehicles. Research estimates from Strategy&, Accenture, and BlackRock show 90 plus percent of vehicles will ship with connectivity by 2020, potentially generating tens of billions in new revenue across automotive and other industries. By focusing so much on the latest autonomous vehicle advances, pilot tests, and future purchase orders, the media is glossing over the more immediate story of Connected Cars.
Vehicle software complexity is skyrocketing (McKinsey estimates it has doubled in the last 10 years and will quadruple again by 2030!), enabling and even necessitating entirely new business models. Remember that mobility-as-a-service is still a relatively new concept for consumers, but as shared mobility services continue to proliferate and improve in quality, greater awareness of the ideas of total cost of ownership/usage will further challenge traditional car ownership. That model is already eroding as vehicle lease rates continue to climb (+91 percent since 2012), with consumers’ desire not to be locked in to (soon-to-be) dated technology often cited as a leading contributor.
Emerging vehicle subscription services such as BOOK by Cadillac and Care by Volvo are cutting edge variations, offering customers the latest technology while meeting rising expectations of personalization and flexibility that have already restructured industries like media and entertainment. Consider that only 10 years ago, consumers most likely purchased/rented movies physically, a la carte; now they can access thousands of titles, with personalized recommendations, for a commitment-free $10 a month — a revolutionary customer experience.
Next-generation services, perhaps offered by a mainstream OEM with a broader portfolio of cost- effective vehicles, will take subscriptions further, enabling customers to switch vehicles even more frequently depending on their needs. The consumer model of selecting a single vehicle to satisfy all expected (future) circumstances will eventually give way to one of vehicle usage (i.e., a truck for weekend shopping, a compact BEV for weekly commuting), supported by a unified customer experience across the platform. Developing such services will not be easy, requiring cross-vertical partnerships to form these new ecosystems of non- core functionality, content and services.
As cars become increasingly connected and autonomous, their role is likely to expand beyond transportation to mobile-venue of entertainment and retail experiences. Consumer expectations for vehicles are already shifting, with 73 percent of Americans indicating they’ll soon consider vehicle-independent products/services in their decision-making and 60 percent that their top criterion will be what a vehicle enables while in transit.
With A.T. Kearney estimating that by 2030 almost 32 billion hours of time will be newly available (globally) thanks to long-distance level 4+ autonomy, a new “fourth screen” ecosystem of in-vehicle services will develop to fill the void. While those of us in the industry may pour the new-found time into greater productivity, most consumers will spend it on entertainment, first via infotainment systems and then through AR/VR and flexible displays; the increase in per-capita media consumption will ripple across media and FMCG.
Digital assistants will be instrumental, providing a seamless UI between Connected Home and Work and coordinating with event-based automation platforms like IFTTT and Stringify to enhance the value of each. With the Connected Car’s ability to combine geolocation with identity (whether personally identifiable or merely digital), advertising becomes possible on the micro-level in real-time, opening new avenues for reaching customers.
Imagine front-facing cameras, or biometric voice systems, that detect driver fatigue and then push a promotional offer to a favorite nearby coffee chain, with the ability to complete the purchase while still in route. Maybe even mobility itself will become free, supported by some combination of advertising and revenue-sharing agreements for any resulting retail purchases, as GM’s new Marketplace platform is exploring.
Even if not, payment providers like Mastercard will be crucial to this future, with their role in powering in-vehicle transactions not only ushering in a new era of retail with “Buy Anywhere, Pick Up Nearby” availability, but also supporting transportation-related services like smart parking or congestion tolls.
Those services are just one reason Connected Car is integral to achieving many of the promises of smart cities. When the Department of Transportation estimates that 30 percent of urban congestion is caused by people searching for parking, even slight improvements in efficiency reduce traffic and pollution while improving citizens’ quality of life (and potentially spurring local growth by easing shopping friction).
Fully autonomous vehicles will one day solve the 90 percent of crashes attributable to human error, but in the meantime, incremental improvements in autonomy and the rising ubiquity of (V2X) sensors can reduce pedestrian accidents or even prevent vehicle-based terror attacks.
Harder to quantify, but certainly important, will be the greater inclusivity of cities when less-mobile populations like the elderly or disabled are able to get around. Faster, more ubiquitous connectivity is essential for handling the explosion of downstream (to consumers) and upstream (vehicular) data that will fuel this vision, helping propel investment in 5G and other technologies. The revolutionary speed and latency improvements of 5G likewise enable interesting solutions like emergency remote operation of (semi) autonomous vehicles. IDC predicts that by 2020, connected cars will account for 30 percent of worldwide 5G traffic, driving a self-reinforcing cycle of digital infrastructure investment.
While the connected car is closely intertwined with each individual vertical the IoTC covers (cities, retail, homes, and wearables), its relationship extends well beyond 1:1 synergism. The average American spends around 13 percent of their gross income on transportation and 48 minutes a day in traffic, and the connected car’s ability to shift those scales (in either direction) will have far- reaching impact across IoT, even society as a whole.
As connectivity and connectivity-enhanced services begin to penetrate one of the last areas of daily life without it, consumers will increasingly appreciate the benefits of connected living and never look again in their rear-view mirror.