1 WINDOW ON TECHNOLOGY Automakers Become Software Companies
As the smartphone market continues to expand and initiatives
like smart electric grids continue to pick up steam, another
industry has begun getting "smarter" with software and apps:
the automobile industry. Ford, BMW, and other automobile
companies are enhancing their vehicles with on-board soft
ware that improves the customer experience, and the auto
industry is working on technology that will allow cars to be
managed via the cloud.
Automakers are finding that software is a way of adding
more "value" and freshness to their products without haVing
to invest so heavily in new vehicle production. It takes Ford
Motor Company, for example, about two and one-half years
to plan, deSign, and build a new car. Design and production,
including metal stamping equipment and assembly line setup,
must be finalized long before the car rolls off the line. But the
automakers can create a new software interface for a car within
months and update it again and again over the life of the car
without much lead time. This enables Ford and other auto
makers to significantly improve the passenger experience and
add new features to cars years after they are built.
Ford is perhaps the auto maker doing the most to innovate
with software and apps. Its MyFord Touch interface is an
in-dash touch screen available for select vehicles with controls
for navigation, music, phone integration, and temperature.
Ford has upgraded this interface and the Sync software behind
the interface, adding tablet and smartphone integration and
better voice response. In 2010, Ford added support for the
online music streaming service Pandora, which is very popular
among young potential buyers. This update enables drivers to
connect their tablets and smartphones to the Sync system to
access music and other apps using voice commands.
Ford Chairman Bill Ford Jr. has championed the use of soft
ware to alleviate urban congestion by investing in technology that responds to the problems created by traffic in the biggest
cities. Theoretically, technology might help cars to avoid traffic
jams, to reserve parking spaces in advance, and possibly to even
drive themselves.
To manage vehicles in this way, cars need to be connected
to some kind of central system, which would coordinate
with public transit and other transportation methods, and to
do this, cars need to be equipped with software that can
monitor and enhance vehicle function at the most basic levels.
The eventual system would require that cars feed increasing
amounts of information to systems whose purpose would be to
minimize highway congestion. The system would also require
an industry standard, which does not exist today. Ford has
doubled its investment in vehicle-to-vehicle communication
technologies, and BMW is also continuing to develop ways
for vehicles to communicate with one another on the road to
avoid collisions.
With the inclusion of software in their cars, automakers are
entering uncharted territory. They must now devote resources
to updating and testing their software, as well as to establishing
ways to provide the updated software to their customers. Car
companies need to coordinate their car development cycles
more closely with their software development cycles. Also,
many of the technologies included in automobile software
packages raise the same privacy concerns surrounding location
tracking that have often plagued smartphone manufacturers
and app developers.
Ford is grappling with the best way to roll out software
upgrades to its customers. The company has been mailing
USB sticks to 250 000 customers whose cars have an advanced
touch screen control panel running the MyFord Touch inter
face. The stick contains a software upgrade that will improve
navigation controls, the music and phone features, as well as Information Systems, Organizations, and Strategy
ability to control car temperature. The upgrade also con- code that will upgrade system speed and improve the based on common criticisms from Ford owners. Ford says it plans to continue issuing software this way, the company hopes that customers will the habit of checking the Ford Web site for software on their own. TIlOugh most car owners are used to hnology in their cars remaining constant throughout of the car, newer cars are poised to change all of that. has hired "human-machine interface engineers," job is to analyze how their customers interact with the in their cars. Often, these engineers use customer to make changes to the software. Customers com that too much information was available on each of the interface, so Ford moved the most commonly tures to more prominent positions on screen and their font size, relegating the rest to submenus. Feed
has been positive. Ford has also asked dealers to dedicate
time and personnel to hands-on technology training to
customers master its interface.
M, Daimler, and other companies are all developing new
for their cars that operate online in the cloud. Users
able to remotely track their cars (you will never forget
you parked again) and diagnose problems with the car,
low tire pressure or the need for an oil change. Corpora
will be able to track employee use of company cars by
‘prlwpt-j na car sensors and engine readouts. Manufacturers
be able to aggregate and analyze the data from custom
cars to identify quality problems and, if necessary, quickly
recalls. Just as with apps, the possibilities are limited only
the imagination of automakers.
GM ""ill allow its app developers to access its computer
to improve app function, which raises a familiar set of
concerns. Auto analysts believe that automakers will 85 make mistakes as they learn how to properly handle sensitive
customer data and provide robust privacy options. On the other
hand, automakers are hoping that younger customers who have
grown up using Facebook are less likely to care about privacy
and features that collect highly targeted information about a
car’s location and driving habits.
BMW is also investing more than $100 million in mobile
apps, hoping to market them to their customers as "premium
services." Some analysts are skeptical ofthe decision to invest that
much money, but BMW believes that mobile apps will become
an increasingly attractive selling point for customers ofits BMWi
electric and hybrid cars. Although the future of cars sharing infor
mation with other nearby cars is still years away, automakers are
excited by the possibilities afforded by smart software and apps.
Sources: Ian Sherr, "Cars Pump Up IQ To Get Edge;’ The Wall Street
Journal, January 13, 2012; Chris Murphy, "4 Ways Ford Is Exploring Next
Gen Car Tech;’ Information Week, July 27,2012; Mike Ramsey, "Avoiding
Gridlock with Smart Autos;’ The Wall Street Journal, February 27, 2012;
Joseph B. White, "New Driver’s Ed: Tutors to Decode
Dash·
boards;’ The Wall Street Journal, May 8,2012; Chris Murphy, "Ford is Now
a Software Company;’ Information Week, November 28, 20 II and "Why
BMW Suddenly Loves Mobile Apps;’ Information Week, March 2. 2011;
Chuck Squatriglia, "Ford Brings SmartPhone Apps to Your Dashboard:’
Wired, April 20, 2010. Case Study Questions
1. How is software adding value to auto makers’ products?
2. How are the automakers benefiting from software
enhanced cars? How are customers benefiting?
3. What value chain activities are involved in enhancing cars
with software?
4. How much of a competitive advantage is software provid
ing for automakers? Explain your answer.
