Insight No.38 : Jun 2012 : Shifting to a Higher Gear: Business Insights from PcubedSpeeding Towards the Car of the FutureBy Colin Brown & Amanda Akass

Every year cars drive around three trillion miles on the roads of the USA. The country has more than 250 million vehicles. But for years there has been more computing power in the average mobile phone than in the average car. That is set to change, rapidly.

By 2014, automobiles will be in the top three fastest-growing areas for connected devices and Internet content, according to Gartner forecasts. Intel Capital has recently announced a $100 million "Connected Car" fund for research into automotive technology. From electric vehicles and infotainment systems to radar capabilities, wireless connectivity and even self-driving technology, the car of the future is on the road - bringing with it a wealth of opportunities for innovation and development.

For Colin Brown, Pcubed's West Coast VP, this was a natural topic for a half-day conference in Silicon Valley, organized last week by the British American Business Council of Northern California, of which he is president.

"If you look at how industries organize themselves, pretty much all of them operate in silos, and think in a very linear way," says Brown. "Real innovation happens when you're able to work across those silos.

With the technology in cars moving forward more quickly than ever before, it's a natural area to focus on. Pcubed specializes in joining the dots between industries, driving value by going across those silos and opening people's eyes to the bigger opportunities.

"Pcubed has a very strong track record, bringing together classic technology with new opportunities. A great example is the work we did with Ford on the Ford Escape Hybrid, which we helped bring to market a year ahead of schedule," Brown noted.

For the experts assembled at the event at Silicon Valley Bank in Santa Clara last week, development is focused on three main directions: computing power, connectivity, and electrification.

Screens, Speed, and CPUs

Keynote speaker Simon Segars, EVP and general manager of the Physical IP Division at semiconductor supplier ARM Technologies opened the session by describing our growing technological expectations in all areas of life.

"One of the challenges the industry has is that consumers today are used to a very different level of technology experience than in the past, and cars don't live up to that," he notes. "It's both a challenge and an opportunity for the industry. The next generation of consumers will have a very different level of expectation from the technology in their cars."

Segars believes it's time the car began to catch up. "User interfaces have rapidly progressed from being very clunky to very slick. There are screens everywhere. Computing has gone from something you do - you sit at a machine and do computing - to something that just is, all around us. And it's that experience that needs to come into the car. All of those benefits we've had from the explosion of mobile devices, driven by fundamental processor technology, screen displays, innovative user interfaces, and huge economies of scale - if we can bring that into the car, it's going to make the car much more interesting."

Taner Ozcelik, automotive general manager at processor powerhouse NVIDIA, agrees that the different average design lifecycles of the automotive industry - 15 years for a car compared with two years for a mobile phone - poses a fundamental challenge for manufacturers trying to bring the latest technology into their vehicles.

"We should be looking at this holistically," he explained. "Some parts of the system change rapidly. Others don't. Why not decouple them? If there is a modular computer system, you could replace the computer regularly, bringing technology to the car more quickly. For example, last year Audi announced they were including our 2011 Tegra infotainment system in their new cars. Just a year later, an upgrade was released. That would have been unheard of previously."

For Pcubed's Brown, the development of the "Connected Car" will always be limited until a fully standardized platform can be developed: "It's a bit like the computer - which became an open platform once it was opened up to software developers. Automotive manufacturers have traditionally worked in isolation. The speed of developing the connected vehicle depends on how quickly the platform will open up to collaboration and innovation. That's why what NVIDIA and ARM are doing is so interesting. If NVIDIA creates a standard model to engineer on all cars - that's like Microsoft developing [operating systems] for computers."

Mark Platshon, senior advisor to BMW i Ventures venture capital group, goes even further in his vision of the car of the future as a vehicle for the kind of innovation Silicon Valley specializes in.

"No offence to Detroit, but today a lot of the innovation in the car is focused on computing power, networking, and the Internet and a lot of that is centered here. If Google drives the car, Apple drives the infotainment system, and Bosch makes the batteries, what is the car itself? It becomes a platform for the added technologies."

Connecting the Car

As ARM's Segars explains, the concept of the Connected Car is a twofold relationship: cars to other cars and cars to the cloud.

"Having cars talking to the outside world and sharing information about their environments will make driving much safer, and easier," he says. "If you drive into a new city - through the cloud, your car should be able to direct you to an open space in a car park. It could channel information about traffic, weather, where you're going. If the cloud learns all cars are swerving around an obstacle, the authorities can be alerted to go and sort it out....

"With car to car communication - your car would know the locations of all the vehicles around you. If you were waiting to pull out at a blind junction and you couldn't see far up the road, your car could stop you from pulling out when there's a truck about to come round the corner."

Such connectivity has obvious safety applications; but also has much broader implications about the whole driving experience. For BMW i Ventures's Platshon, the car of the future will be thoroughly integrated with all aspects of its driver's life. "The car will be able to ask, 'Do you need parking at this place? Do you need a restaurant at this one?'" he points out. "Do I need a reservation for parking, or charging for my electric vehicle? The car - or the car with an integrated smartphone - will be able to do that for you."

For Sven Beiker, executive director of the Stanford University's Center for Automotive Research, we are at the cusp of a huge change in the way cars interact with the society we live in. "Cars have always been selfish and introverted," he explains. "They don't share their data. But what if you could use that data to improve traffic safety, flow, and efficiency? What about the implications for car sharing?"

"The biggest challenge for car sharing at present is convenience. You need access to the vehicle straight away... If the cars could connect - if they know your schedule, and where you need to go - it would be great news for vehicle sharing. There are so many vehicles parked up around us all the time, you could use them much more efficiently. Teenagers just about to learn to drive now have a very different attitude towards cars; they don't have the same identification with the automobile. Owning a car is not such a big thing. It's about having access to one when you need it. It's not surprising - owning a car is costly. It could end up being much easier to share one."

His forecast for a revolution in the way drivers perceive their cars and integrate them into their lives could be compounded by rapid improvements in electric vehicle (EV) technology.

Electrification

One of the most frequently cited objections to EVs is their limited range: around 80-120 miles before they need to be plugged in and recharged. Stanford's Beiker points out, however, that 80 percent of all car journeys in the United States are under 10 miles. For Rich Meyer, of PWC's PRTM Management Consulting, a complete reset of how we prioritize our vehicles is needed. "The EV is perfect to use as a commuter vehicle, to drive to work," he says. "It's not designed for a family vacation. But at the moment a lot of families have two vehicles - one for driving to work, and one for more long range trips. Electric vehicles need to have better market penetration."

Jit Bhattacharya, CEO of Mission Motors, a San Francisco supplier of advanced powertrain technology, says the technology has come a long way since the previous attempt to encourage widespread EV adoption in the 1990s. "The Nissan Leaf Battery pack would have been twice as heavy and four times as expensive 10 years ago," he recalls. "And the arguments for electric vehicles picked up as soon as the price of gas went above four dollars a gallon in 2008. Every time the price of gas gets 10 cents higher - EVs become more attractive. It makes the payback premium so much better... As with many renewable energy sources, the upfront cost is high, but the cost per mile is far lower. Currently the payback time is around seven to 10 years. It's shorter once maintenance is taken into account... But that payback is continually getting more competitive."

Now, nearly all the big car brands are getting involved in the electric vehicle market; with such a sudden explosion of research and investment, its hoped economies of scale will help bring the costs down more rapidly.

For Brown, this sudden surge in electric and hybrid vehicle market penetration is very impressive. "Only a few years ago - and I'm talking 2009 here - the technology looked marginal, at best," he observes. "It shows that even an old industry which moves slowly in design and engineering terms can adopt new technology very quickly and effectively."

Jason Wolf, from Better Place, an American-Israeli company working to produce a market-based transportation infrastructure that supports electric vehicles, has no doubt that the car of the future will be electric. "Already it is better and cheaper to drive a mile on electricity than on any other fuel," he says. "In the same way that the CD was inevitable once it was first introduced, because it was so much better. It's just a question of time."

The explosion of interest in so many different aspects of automotive technology is causing an explosion of opportunities for innovation and investment in Silicon Valley and beyond. As Brown explains, "One of the key messages I took away from the event was the level to which technology providers who have not historically been part of the automotive manufacturing supply chain have really pushed on and innovated in the way technology operates in the car - creating a huge opportunity for the vehicle manufacturers."

This is a perfect example, he adds, "of why both the British-American Business Council and Pcubed are able to look at challenges differently. The BABC creates the ecosystem for new partnerships to be formed, driving innovation. And Pcubed has always worked at the heart of engineering, helping solve complex problems and moving new technology forward. It's just these kinds of exciting challenges which draw people to us."

For more information about this event and Pcubed's innovation practice, please contact Colin Brown at colin.brown@pcubed.com.

Colin Brown is the West Coast VP of Consulting at Pcubed, a global consulting firm focused on business transformation with deep expertise in program and portfolio management. Pcubed  clients include nearly half of the Fortune 500 including Ford, Chevron, Microsoft, Harmon, the UK and Australian Governments, and the Olympic Delivery Authority. Contact Colin at colin.brown@pcubed.com.