I just returned from the Consumer Electronics Show in Las Vegas and it was striking how much the automobile has become a center of attention at this gathering. It was timely because I just published a new report on the future of mobility – Navigating a Shifting Landscape – and I had an opportunity to present my perspectives at CES.
My key message was that we need to avoid getting distracted. It’s easy and understandable to get consumed by the amazing technology that is reshaping the automobile industry and the mobility ecosystem more broadly. But, at the end of the day, from a business perspective, the key question remains: where’s the money?
That question focuses us on value creation and value capture and how it is likely to evolve in the mobility ecosystem. There will be profound shifts in both value creation and value capture in the years ahead.
In thinking about value creation, I suggested that we need to pay much more attention to understanding “return on mobility” – how much value do individuals receive as they move around in their daily lives?
The automotive industry has traditionally focused more on the denominator of that equation – ensuring that we get from Point A to Point B as efficiently, safely and comfortably as possible. I suggest that the winners in terms of value creation in the future will be those who focus on the numerator of the equation – what value are we experiencing once we get to Point B? And is Point B the highest value destination for us, given our unique context and aspirations? The value for us is much more in the destination than in the movement itself – for most of us, most of the time, mobility is simply a means to an end, it isn’t the end itself.
Here’s the thing. More and more of us live in dense urban areas, where more and more options are competing for our time and attention – and those options are evolving more and more rapidly, so even if we could spend the time required to know all the options available today, they will be different tomorrow. And, at the same time, we’re all under increasing pressure in terms of the time we have available.
So, in terms of thinking about the potential for value creation, think about the businesses that can be most helpful in increasing our return on mobility. Those are the businesses that will create the most value as the mobility ecosystem evolves.
But creating value is only the beginning. In an increasingly competitive business landscape, we increasingly find that businesses creating value are often not able to capture the value. Instead, it gets competed away and captured either by customers or by other participants in the marketplace who occupy more advantaged positions.
In this context, we need to focus on fragmentation and concentration trends. Those in the best position to capture the most value will be those who can leverage economies of scale and scope to build very large businesses with significant bargaining power relative to other participants in the ecosystem.
I ended up identifying four especially interesting opportunities for value capture in the mobility ecosystem. Not surprisingly they all involve building platforms that can benefit from significant network effects.
Trusted mobility advisor – this is a business that gets to know you as an individual customer better than anyone else and who can be trusted to proactively suggest where I should go to increase my return on mobility, as well as advising me on the best way to get to these destinations given my other commitments and needs. These businesses will have significant economies of scope – the more they know about you as an individual, the more helpful they can be. And the more other people they know, the more helpful they can be to you because they can start to see patterns of movement among people like you.
Mobility data aggregators – today we live in a technology world bridging three domains – automotive, smartphone devices and a growing Internet of Things infrastructure. Within each of these domains, relevant data is siloed and we lose much of the value because of the inability to aggregate the data and mobilize a growing range of analytic tools to generate insight from the data.
Mobility fleet operators – as we move from automotive ownership models to access models where we want a car on demand, when we need it and where we need it, we’re likely to see the growth of highly concentrated mobility fleet operators that will leverage network effects to provide us with more tailored access to meet our individual needs.
Horizontal operating systems – this is perhaps the most speculative of the four value creation opportunities but one with enormous potential if some business can pull it off. The issue here is that the three domains discussed earlier – automotive, smartphone and Internet of Things – are largely dominated by vendors jealously protecting proprietary technology stacks. The technology silos that result are a significant inhibitor to broader innovation in the devices and software, as well as making it much more challenging to aggregate data generated from these devices and software. We are already starting to see the emergence of a horizontal operating system layer in the smartphone business with the deployment of Android. Here’s an even more ambitious opportunity – what about developing a de facto operating system standard that spans across all three domains and facilitates interaction across the three domains as well as within each domain?
The need for speed
I go into a lot more detail on each of these four opportunities in the report that I mentioned earlier. As diverse as they are, they all share one common element. They are platforms driven by powerful network effects. Once a critical mass of participants have been assembled on a platform, these businesses are very hard to challenge.
So, there’s an urgency here. Those who make it to critical mass first will be the likely winners in value capture. These are not arenas where you can be a fast follower or stay on the sidelines and wait until someone proves out the concept.
The existing players in the mobility ecosystem have enormous assets that could be deployed to target these value capture opportunities. But they are also vulnerable because there is a strong tendency in times of mounting performance pressure to shorten time horizons and just focus on the challenges that exist today.
Speed requires alignment around a shared view of the future mobility business landscape and agreement on where the most promising value capture opportunities are. This requires “zooming out” to explore a much longer term time horizon. It then requires “zooming in” to identify a very limited number of business initiatives that can be aggressively pursued in the short-term to accelerated movement towards that longer term opportunity. Those who adopt this "zoom out, zoom in" approach are the most likely to occupy these white spaces before others can get their act together.
The mobility ecosystem is rapidly evolving, driven by new generations of digital technology. There are some significant white spaces for value capture that are emerging within this ecosystem, but they will not be white spaces for long. The winners will be those who can anticipate opportunities for value capture and move quickly enough to preempt others.
There’s a lot more to be said about this and, for those who are interested, the next level of detail can be found in the “Navigating a Shifting Landscape” report.