Why Detroit Needs the Valley—and Vice Versa
Anyone can see the looming changes facing global automakers who are grappling with new technologies, stricter emissions standards, and apps that are turning car buyers into renters (or simply riders). Automobiles are increasingly becoming connected, electrified, and autonomous supercomputers on wheels.
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Anyone can see the looming changes facing global automakers who are grappling with new technologies, stricter emissions standards, and apps that are turning car buyers into renters (or simply riders). Automobiles are increasingly becoming connected, electrified, and autonomous supercomputers on wheels. Consequently, the industry is increasingly focusing on the passenger experience and mobility services and less on mechanical systems.
This shift represents an incredible opportunity for new, disruptive business models, but generally, it has been framed as a point of conflict between the giants of Silicon Valley and Detroit. However, true innovation and success will only come if automotive OEMs and tech giants come together to collaborate, each adding their respective strengths to dominate the future of the industry.
The Valley, for example, entertains a much higher tolerance for risk and failure than the traditional OEMs, as its workforce and technology generally skew much younger. Detroit automakers, on the other hand, have the benefit of 100 years of industry and manufacturing expertise under their belts, including an exceptionally disciplined approach to safety, reliability, and risk mitigation.
While each center has its own strengths, each has its own weaknesses, as well.
Traditional automakers and suppliers, for example, cannot match the software prowess and entrepreneurial spirit embodied by Silicon Valley. The combination of state-of-the-art technologies—sensors, big data, machine learning algorithms, and more—required for the future automotive business models is beyond the in-house capacities of most legacy auto manufacturers.
Meanwhile, Silicon Valley companies have neither the discipline nor the expertise to establish the safe, sustainable manufacturing processes needed to make things like self-driving cars a reality. Silicon Valley’s “move fast and break things” culture is perhaps ill-suited to the laborious process of designing, manufacturing, and selling vehicles—Tesla notwithstanding.
While the media suggests that the two cultures are preparing for a battle for automotive market share, such a battle would ultimately do more damage than good for either side.
In trying to beat the tech giants at their own game, automakers would not only need to completely shift the trajectories of their businesses, but also to amass an incalculable amount of new talent, skills, and resources that, quite frankly, are not readily available. There are simply not nearly enough software engineers in the world, for example, to make even the biggest OEMs in the industry into worthy competitors in spaces dominated by the likes of Google and Amazon.
The rationale for collaboration between carmakers and technology companies is straightforward and strong. Carmakers can contribute automotive design, testing, manufacturing, assembly, sales, and service expertise, as well as infrastructure including dealership networks , all of which are out of reach for a technology company to develop, absent a major acquisition.
Technology companies, on their part, are positioned to develop and contribute self-driving software, GPS mapping systems, telematics, data science, network security, and related functions. As they are fairly insulated from the automotive industry’s product development cycle, customer influence, and labor politics, tech companies have the space necessary to experiment with and gradually develop self-driving software over a long-term time horizon.
Some players in the automotive industry have already entered into this kind of collaboration to develop and commercialize the technology, share risk, and prepare the market. Examples include:
BMW Consortium – for the development of a scalable platform for Level 3 and Level 4 autonomous vehicles with BMW, Fiat Chrysler Automotive, Intel, Mobileye, Aptiv, Continental, KPIT, and TTTech.
Waymo Partnerships – partnerships with Fiat Chrysler Automotive and Jaguar Land Rover for ride-hailing services, and with Magna to build a factory for self-driving cars in southeast Michigan.
GM and Cruise Automation – GM acquired Cruise in 2016 for testing and developing
autonomous car technology, and Softbank’s Vision Fund and Honda have more recently made strategic investments in Cruise.
Ford and Argo AI — Ford invested $1-billion in Argo AI, combining its autonomous vehicle development expertise with Argo AI's robotics experience and startup speed on artificial intelligence software.
Lyft Partnerships — Lyft, a ride-hailing service company based in San Francisco, has created partnerships with Waymo, GM, Ford and Magna.
These collaborations are only the beginning. The future of the automotive industry lies in automation, electrification, big data, and more, but we won’t ever get there unless more companies from Silicon Valley and Detroit join forces.
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