Reinventing the Car as a Service - Business Case

Reinventing the Car as a Service

© Mauro Forcolin 2009

Mauro Forcolin Leerdamhof 450 1108 CM Amsterdam The Netherlands +31 6 17 65 4887 [email protected]

Reinventing the Car as a Service © Mauro Forcolin 2009 [email protected]

2

No! Then why tolerate it in a car?

Or go to an ATM machine if you had to buy it before you could use it?

How about investing in a company that continually loses value but requires regular maintenance fees as long as you own the shares?

Would you buy a house knowing it would lose 15% of its value as soon as you walked through the door?


3

Opportunity The low ROI on car ownership - in terms of time, money, effort and headaches - are forcing consumers to look elsewhere to meet their personal transport needs:

Leasing programs

Innovative rental schemes

Car-sharing initiatives such as GreenWheels or Car2Go.

People want the benefits of having a car, without the overhead of ownership:

People want a car service, not a car.

And although these solutions try to reduce the burden of ownership, they are all inhibited by a single thing: The car itself. Cars are made to be used and replaced with new ones. Even with the solutions above, the devaluation and replacement costs must be passed on to the consumer.

There is great value potential in focusing away from the individual car.

Concept

The design, manufacture and maintenance cycle for automobiles must be re-invented to provide a personal transport service, not an individual item. The fleet becomes the main channel to distribute the service to consumers. The individual car is simply an assembly of components necessary to provide the service to the consumer. Individual components themselves are tracked and continually recombined in different cars to maximize overall fleet efficiency.


4

Concept Elements

The key aspects of the concept is to re-invent the design, manufacture and maintenance cycle of the car so that it can be positioned to consumers as a service. This is achieved through individual sub-concepts in:

Core Ideas

Business Model

Service Model

Branding

Design & Technology Together, these collectively create a strong value proposition. The concept focuses on the automotive industry as an ideal platform building on:

Key aspects of the automobile itself

Gaps in the car market

Capabilities in the auto industry

Thus the concept addresses many areas that must be researched, developed and refined. These are all kept in focus through a single Vision

Vision

The car industry is not about manufacturing cars; it is about renewal. Renewal of an interconnected, interchangeable fleet. A fleet designed, envisioned and maintained so that quality of life does not oppose quality of ideals.


5

Core Ideas

There is ongoing progress in making the manufacturing process and the cars themselves more efficient, but not in translating that efficiency across the entire fleet of cars and the car lifecycle. Components are supplied to the automotive plants which manufacture the cars. Even though the plants produce the same cars, there is no interaction between them.

By changing focus to maximize fleet efficiency, cars no longer have to be built and maintained as single items:

1. Rather than being repaired, customers have the cars replaced 2. Cars are disassembled and the components are reused where most needed in the

fleet 3. As components are reused to maximize efficiency, there is less and less reliance on

new parts from suppliers 4. An efficient strategy can be developed and implemented across the entire fleet rather

than single car. Components can be harvested from cars when optimal to do so for the fleet; not necessarily when a repair is needed

In this model, “new” versus “used” loses its meaning. Cars are assembled from components taken from other cars in the fleet. As consumers will only be interested in the car as a service, it only matters that it functions as expected.

Auto-makers will become “assemblers” with assembly and disassembly lines running side-by-side. Jobs remain in both assembling and disassembling and logical support. This process is outlined in detail on the following page.

More of the same is better

The concept is based on providing a service by increasing efficiency across the fleet. This efficiency is increased in 2 ways:

Larger fleet

Standardized fleet (more components that can be shared and reused)


6

Assembly Process Outline

1.

Cars are manufactured in factories with components from suppliers.

All key components have RFID tags so they can be uniquely identified

2.

Based on information of the state of the fleet gathered from factories, individual cars and other trend information certain cars are exchanged.

The cars are returned and disassembled. Their components are made available to the fleet.

The cars do not necessarily have to be returned to their point of assembly.

A newly assembled car is given to the driver according to their preferences.


7

3.

The components are tracked via the RFID tags and sent to the appropriate factory to be reassembled into a car.

The process is managed according to rules designed to optimize the efficiency of the fleet as a whole.

Cars being produced by factories now contain components from previously assembled cars.

4.

The assembly/disassembly process is fully in place. Cars produced may now contain components from previous cars assembled in different factories.

The fleet has been optimized and the number of new components from suppliers has been minimized.


8

Service Model

Customers do not have to buy and “own” cars, to make use of the car “service” and other related services. Unlike car-sharing schemes, the customer will be in constant possession of a car, but not necessarily the identical one over time. As the system is geared to optimize across the entire fleet, he customer may be required to “exchange” their car even if functioning properly.

People don’t personalize their cars; they personalize their surroundings

Although the cars are continually disassembled and reintroduced to the fleet in a more efficient configurations, customers will still want their experience to be familiar. Thus customers can choose to have specific elements linked to themselves rather than the car that contains them, with higher premiums offering greater customization:

Interiors: this is where users interact with the car & leave their personal marks; seat settings, radio stations, glove-box contents

Exterior: paint/colour schemes – especially for government organizations & companies

And since customers will not be attached to an “individual” car, so as long as key features seem new, the rest (engine, drivetrain, chassis) won’t matter. This way the “Feels like new” sensation will be maintained across the fleet. This strategy will also allow the cars to be as similar as possible - so more components can be shared – while allowing customization where it counts for the consumer. This process is outlined in detail on the following page.

Time in the car should be indistinguishable from the rest of the day

The focus of a personal transportation service should not be on the commute, but on minimizing the extent it distracts from the customers regular day. Therefore, the service model must be extendable to include additional innovative services that optimize time:

Spent in the car driving or waiting

Spent as a passenger

When the car is not in use


9

Service Model Outline

1.

The standard automobile control system communicates vital information (mileage, performance statistics, etc.) to the car maker through any number of channels.

The logistical computer uses this information to calculate the next steps for optimizing fleet efficiency.

If it is determine that the car should be disassembled, the driver is notified.

2.

The driver is notified in advance to give them the opportunity to consider possible options for the car, an ideal time to return it as well as the location.

The less the driver’s options deviate from the service agreement, the lower the charges incurred, if any.

As the aim is to optimize fleet efficiency, the driver may actually be incentivized to choose options that lead to this rather than ones that the driver would prefer.


10

3.

The driver can choose their options and set a return date and location entirely online.

This information is processed by the logistical computer and ensures the correct components are made available just in time to assemble the driver’s car.

These components can be made available from car disassembled at that location, or from other factories and suppliers.

Additional services offered by 3rd

parties in partnership with the car manufacturer can also be purchased via the online portal.

4.

If there are no components from the current car that the driver wants to keep, the newly assembled car is given to the driver immediately when returning the previous one.

If there are components that the driver wants to carry over (i.e. the interior) then the driver must wait while: o The current car is disassembled o The components added to the new

configuration o Assembly is completed

The greater the extent of such “carried-over” components, the greater the cost to the driver as this limits fleet efficiency and has a greater assembly cost.


11

Design & Technology

The following aspects are necessary for this concept:

Modular Car Design

Cars have to be designed so that:

They can be disassembled as easily as they can be assembled

This can be done repeatedly

This can accommodate design changes Having the ability to “inter-change” components allows not only that they can be reused across the fleet, but that design changes can be added into the fleet without having to introduce entirely new car models all at once.

RFID-(Radio Frequency ID)

Being able to predict the lifetime of components is necessary for the fleet so that:

Cars can be serviced before a failure occurs o Lowers risk of performing repairs when 1 thing fail while the rest works fine

Particular cars/parts can be phased out from the fleet prior to their failing

This will reduce costs since components won’t be required to have the same lifespan. But this can be very dangerous if an accurate identification of the component cannot be made.

RFID technology will be required that is robust and small enough to be able to identify individual components.

RFID will also be used to communicate with additional services provided by third parties.

Information Technology

Information management plays a very important part in these areas:

Tracking components via RFID

Calculating which components should be interchanged, from where and when in order to maintain efficiency across the fleet

Logistics to ensure the components are available when required and managing assembly

Tracking services subscribed to by customers

In order to achieve this, advanced and robust IT systems will be necessary, as well as the infrastructure to allow them to communicate.


12

The Auto Industry

The car market is ideal for executing this concept for the following reasons:

The Car Itself The chart below compares various items the necessary attributes required to fully execute this concept. The car is the only item that meets all the necessary criteria.

Gaps in the car market The increase in the number of car use options for consumers illustrates that there is a change in attitude towards car ownership. The trend is generally follows that cheaper options are less personal and less convenient. But there is a gap filled by this concept between car sharing and leasing because it allows the feeling of a personalized experience without the overhead of having to have a single car.

Long-term use

Expensive

Widespread use

(economy of scale)

Regular maintenance

required

Movable

Multiple Separate

Components

HousingAppliancesComputersCars


13

* Efficiency denotes how much overhead there is in the cost of the item. Since the car is manufactured as a

single unit, devaluation costs must still be paid (by the rental, leasing or car share companies) and transferred

to the customer.

Capabilities in the auto industry All of the options currently available to potential car users are limited by car replacement costs. This concept allows for a level of personal association with the car rivaling ownership at costs similar to car sharing. These lower costs are derived from:

Efficiency across the entire fleet

Reuse of existing components (materials and supplies account for 93% of automotive manufacturing costs)

1

Economy of scale

1 http://www.ic.gc.ca/cis-sic/cis-sic.nsf/idE/cis33611cste.html

RentBuyLeaseConceptCar

Share

Public

Transit

Efficiency*

Cost

Convenience

Personal


14

Realization

In order to realize the concept, progress must be made in all the key areas outlined below.

DESIGN

LOGSTICS

ICT

MANUFACTURING

TECHNOLOGY

MARKETING/ BRANDING

The order in which resources are allocated to the different areas is based on:

Effort required

Lag time

Dependencies in other areas In addition to effort, financial resources are also required. These resource requirements roughly align with the effort shown in the table above.

RFID Technology

Databases & Infrastructure

Factory Conversion

Modular Car

Component Exchange Algorithm

Service Models

Manufacturing processes

Optimize Transport

Integrate w/ 3rd

parties

Pricing & Incentives

Strategic Partnerships

Targeted Comms


15

Concept Business Details

The following elements round off the concept and provide insights to allow it to go to market… as well as some promotional information about the author.


16

Business Model

Like other services, the business model will be based on customer subscriptions. Along with basic subscription to the car service, customers can pay for premium services in the following areas:

The car service itself

Customers can pay extra to change the amount of customization the car; from always keeping the exact same interior and paint colour, to requesting a specific chair that was used by a celebrity in their car. Even additional components can be requested, like ski-racks, specific wheels, “car bling”.

These components will be linked to the customers themselves; the greater the effort in keeping this link the higher the premium the customer pays.

Additional services

These are services that add value for the customer to the time spent in the car as well as time when the car is not being used. The range is nearly infinite from dedicated parking or toll lanes to fuel services that fill the car when not in use so the customer does not have to.

Many of these services can be bought in bulk and resold to the customers

Reselling customer information

As well as allowing an interface to third party services for the customer, the RFID Technology allows information about the customer to be collected and used by third parties for targeted marketing and other narrow-casting possibilities.

Benefits & subsidies

By reducing the CO2 fleet footprint & using “green” manufacturing methods, any benefits and subsidies can be used to offset the operating costs for the concept.


17

Key Markets

Geography

Currently, the USA is a prime location to launch this concept for the following reasons:

The Obama administration's strong position on sustainability, and focus on "change" and innovation as a key tool in breaking out of the economic recession

Americans are buying fewer cars and looking elsewhere to fill their transport needs.

Manufacturers are struggling to find ways reduce their carbon footprint of their fleets and their manufacturing processes

Target Consumers

The concept is based on providing a service by increasing efficiency across the fleet. The larger the fleet and the more standard it is (more components to be shared) the greater the efficiency. Thus, the target markets according to importance are:

Local, State & Federal Governments o Have a requirement to reduce carbon footprint yet still need large number of

vehicles o No interest in maintaining fleets themselves o Most vehicles can be standardized across governments

Environmentally-conscious consumers & Corporations o Interested in the service quality & renewability rather than ownership

Rental, car-share schemes o Can focus providing service rather than fleet maintenance


18

Branding

Behind the notions of “efficiency” and the “car as a service” within the concept, there is single ideal: Freedom. Freedom from the oppressive weight of car ownership and all it’s baggage. Once free, people are no longer tied to the car; it loses the superficial importance it played in their lives.

Cars are not the status symbol; Lifestyle is the status symbol Today, cars instill a status level on owners because the buying model is such a bad investment that making it implies having money to spare. And since buying was the only alternative until recently, even those without money had to make the investment. Of course, owners then dote on these purchases to compensate for this, as the only alternative to drive a second-hand car. But as the tyranny of the buying model disappears, so will the status associated with the car; the car will become unimportant. Since the car itself will no longer be important, it can change, evolve. It becomes a car that is constantly invents itself.

Symbolic of cyclical renewal & sustainability Yet each incarnation can be special as it only existed as such at a particular point in time. Perhaps it was driven by a particular person or was part of a specific event?

These can be recaptured and kept indefinitely with you as the rest of the car changes

Finally, it’s more than just a car; it’s a rich suite of services that provide for all those hassles associated having a car

Focus is NOT on making having a car pleasurable, but on forgetting one has a car at all!

The better you live, the less you notice your car.


19

About The Author

Like Energy, Karma is finite. If added in one place, it must be removed from another.

Luckily for me I have had the karmic fortune of having an insatiable curiosity supported by healthy skepticism and an overly sarcastic outlook. Of course karmically, someone had to pay the price. And in this case it was my parents, teachers, friends and anyone unfortunate enough to lend me their ear. The positive side of this is that I have been allowed to foray into many different subjects and fields. Each one allows me to build on what I learned previously and make references back in order to add meaning, personal relevance and integrate into my world view

Basically, I’m very good at connecting dissimilar dots...

Being able to make relevant connections between dissimilar things has provided me a platform for creative work: From consulting in policy and governance for IT security issues in the government and financial sectors to publishing on future economic models (http://tinyurl.com/n69uav) From nation branding to increase foreign investment (http://tinyurl.com/5tgk7q), to disruptive commercials (http://tinyurl.com/mljsy2) Digital platforms to inspire youth (http://tinyurl.com/mmccz7) or to bring down The Man (http://tinyurl.com/kl7lss) And don’t forget travel blogs (http://tinyurl.com/kvhpez) and D&AD student award-winning viral chickens (http://tinyurl.com/m5txra)

and creating value through those connections…. And the mixture of pride in a job well-done and pure tenacity requires me to pursue such projects and ensure maximized value from them. Creation of a concept is just the beginning: it’s the continued elaboration, expansion and management with the same passion and talent in creating the idea that allows the value to explode.

and seeing it through to the end.

I’m also pretty funny, in a tangentially non sequitur kind of way and tend to add things on that aren’t really required.

http://tinyurl.com/n69uav

http://tinyurl.com/5tgk7q

http://tinyurl.com/mljsy2

http://tinyurl.com/mmccz7

http://tinyurl.com/kl7lss

http://tinyurl.com/kvhpez

http://tinyurl.com/m5txra