The Digital Assistant: User Experience Strategies in the Automotive Industry
As described in one of the first articles of this course (“Managing our hub economy”, Iansiti and Lakhani, 2017) the automotive industry is about to be fundamentally changed by the emergence of connectivity and autonomous driving technologies. As the authors describe “(…) a new source of value is emerging: the connection to consumers in transit.” (Iansiti and Lakhani, p.88, 2017) the main focus is shifting away from the actual driving experience. A more recent example which I came across during my internship at the corporate strategy department of a large German car manufacturer is the emergence of digital assistants and their integration into cars. Along this example, I want to evaluate multiple different strategic choices automotive OEMs have when being addressed with this rising importance of digital in-car user experience and the pressure of external hub companies like Amazon or Google.
Based on my experience, there are three different strategic options available to OEMs.
First of all, OEMs can decide to fully integrate established digital assistant systems like Amazon’s Alexa as the only in-car assistant system. Generally, this strategy is mainly pursued by lower-budget brands, e.g. Fiat (Meier, 2018). Advantages of this strategy are, that it is a cheap solution offering many different functionalities to its users. This creates high user satisfaction. The dangers and disadvantages of the strategy, however, are great. Firstly, OEMs risk to lose the valuable customer connection that is described by Iansiti and Lakhani (2017). They may lose access to the majority of data produced while the driver is in the car. This loss may hinder OEMs to succeed in future digital business models. Furthermore, this strategy makes car manufacturers very dependent on hub companies supplying digital assistants. Once Amazon “got into” a car, switching costs for the OEM will be high and switching is very unlikely.
A second strategy available is the other extreme: solely providing “home-made” digital assistants. Currently, there is no OEM that is fully pursuing this strategy, if you forced me to name one it would probably be Mercedes Benz with its MBUX and the integrated LINGUATRONIC that comes closest to this strategy (Estrada, 2018). Before we look at the disadvantages to find out why no one is really adopting this strategy, let’s look at the advantages. Compared to strategy 1, this solution provides the highest possible customer connection: the digital assistant may not only impersonate your brand and thereby create unique brand loyalty but also the OEM gains full access to customer data. No matter whether ordering a Starbucks, searching the closest gas station or scheduling appointments at a doctor: the OEM knows everything. This opens the door for new digital business models like in-car advertisements and more. However, as mentioned before, this strategy is not really adopted due to its great disadvantages. The “in-house” development is extremely expensive and resource-intensive as OEMs must go outside their usual capabilities and knowledge. Therefore, it is likely that their assistant will offer less functionalities than the ones provided by industry leaders like Amazon or Google. Large investments may not pay off if users are unsatisfied. As customers are probably used to handling “regular” digital assistants in their homes (e.g. Amazon’s Alexa) they might be annoyed by always switching assistants without any possibility of transferring data from one assistant to the other.
Well, finally, there is a middle way strategy (of course there is). This strategy is widely used by higher-priced luxury brands like BMW or Audi. Here, the OEM integrates two assistants into the car: a “home-made” and an external one. This enables car manufacturers to capture “the best of both worlds” by retaining some access while opening the system to satisfy consumers. Advantages are the higher customer satisfaction and the minimization of the OEM’s dependence on tech companies. However, there are also major costs incurred with this strategic option: the OEM has to develop their own assistant while also optimizing the integration of the external assistant. With this integration, multiple difficulties arise: to what degree is the external assistant allowed to overtake the OEM’s assistant’s responsibilities? Who comes first? And how “deep” can the external assistant’s insights be? How is the interaction between both? Can they hand over tasks to the other? In many cases, these “middle-way” challenges are still unsolved.
Generally, a clear trade-off for OEMs arises: maximizing user satisfaction vs. capturing the value of customer connection and their corresponding data. As tech-companies like Amazon and Google commence with offering their products as in-car services, this trade-off will become increasingly severe. Customers may get high-quality in-car entertainment and services in low-budget cars by using Amazon’s Alexa or even a step before that by using Apple’s CarPlay. This also threatens luxury brand’s main business model: selling interior add-ons like navigation and infotainment systems at a high price. How will luxury brands be able to keep up with Google’s and Amazon’s systems? How will they differentiate once the actual driving becomes decreasingly important? I think there is a lot to come.
References
Meier, F. (2019). Hey, Alexa! What Cars Can I Talk to With My Amazon Echo? | News from Cars.com. [online] Cars.com. Available at: https://www.cars.com/articles/hey-alexa-what-cars-can-i-talk-to-with-my-amazon-echo-1420700147192/ [Accessed 18 Sep. 2019].
Estrada, Z. (2019). Mercedes uses its new car to launch yet another voice assistant. [online] The Verge. Available at: https://www.theverge.com/2018/1/10/16872494/mercedes-voice-assistant-infotainment-ux-ces-2018 [Accessed 18 Sep. 2019].
Iansiti, M. and Lakhani, K. (2017). MANAGING OUR HUB ECONOMYSTRATEGY. Harvard Business Review.
Hi Sophie,
thanks for sharing your perspective on digital assistant systems in the automotive industry. I agree, that there are two sides of the medal for OEMs here: Should they invest in their own digital assistant systems or should they give it in the hands of Google or Amazon, which are anyway preferred by the consumer? Giving these responsibilities to hubs like Amazon and Google is in my opinion the first step in loosing control over these customers as user experience and entertainment is becoming more important having in mind the future of autonomous driving. I do question though, if automotive manufacturers at this stage are still able to keep up with the pace of technology that hubs are leading. In the end, OEMs strength are cars, not entertainment and not digital assistants. Personally, taking the consumers perspective here, I would like to have the best and convenient system there is, and that comes from Amazon or Google.
Hi Sophie, I think this is a very interesting topic, thanks for sharing! I want to stress one concern you mentioned: how OEMs are going to treat customers’ data. Privacy concerns in terms of which data is collected by voice recognition systems exist across various industries. As artificial intelligence is advancing and can begin to interpret speech more effectively (i.e. can realize if someone is happy / sad / angry based on their tone of voice), cars and essentially OEMs will gain a deeper insight into drivers’ behavior. This could lead to personalized offerings that correspond to one’s mood. However, many could see this as a form of exploitation, as firms may use consumers’ time-dependent emotions to their advantage.