Monday, April 11, 2016

Blue Ocean Strategy: Autonomous Vehicle

As of September 2015, the following companies had invested millions into self-driving automobile R&D development: Apple, Audi, Baidu and BMW, Bosch, Daimler, Delphi, Ford, General Motors and SAIC Motors, Google, Honda, Hyundai, Jaguar Land Rover, Mercedes-Benz, Mobileye, Nissan/Renault, Scania, Tata Elixsi, Tesla, Toyota, Uber, Volkswagen, Volvo, Yutong.[1] With this many supporters and developers of self-driving technology, this blue ocean technology is growing and increasingly changing the automobile sector.

McKinsey has identified four strategies that automakers and interested technology companies will explore in the coming years, as development of driverless technology increases and the timeline to adoption shrinks.[2] These strategies include premium incumbents, attackers, fast followers, and late entrants/nonadopters. The companies already listed in this post fall mostly within the first two strategies, premium incumbents and attackers, while some, like the less technologically advanced car companies, fall within the fast followers category.

Differentiation and Cost Competitiveness
Car and technology companies entering into the autonomous vehicle market are betting on the long-term viability of technology advancement in the area of interconnected vehicles as well as customer desire for autonomous vehicles. As the market grows and companies begin to see these technologies adopted in their portfolios, it may be the companies in the “fast followers” strategy category that see particular growth. As non-frontrunners in the race towards autonomous vehicles, these companies benefit from entering the market potentially a little later, seeing what consumers value from the technology, and potentially lowering prices in order to sell at a better value. However, early adopters and those first in the market will see significant initial gains, as the first options for these types of vehicles may be expensive, but could have a significant differentiation component that makes consumers quick to purchase.

System-wide Approach 
With this many entrants into the market, the blue ocean of autonomous vehicles is nearly a given to be successful. The fact that the technology already is proven and is now being tested on our roadways proves that it is not necessarily a race to the finish line to see who completes first. Rather, there is a system wide focus on this new technology and promises dividends for all manufacturers and technology companies competing to design these automobiles. This strategy may prolong adoption, since companies will want to make sure their products will be able to compete in a new but soon to be burgeoning business, but promises strong payback as the autonomous vehicle changes the face of how people commute and use their cars.

It is clear that the blue ocean of autonomous vehicles is driving innovation and development in the automobile and associated technology sectors. Though breakthroughs are coming, its interesting that, similar to the Coca Cola and Pepsi case, these companies seem to be progressing at similar speeds; maintaining forward momentum, while continually defining their place in the market. Will this industry destroy what we think of as historical automobile companies? Only the next five to ten years can tell. Autonomous vehicle technology has the possibility to disrupt the industry far more than nearly any other innovation in recent automobile-history.


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