What does digital transformation mean for the car business?

BMW is one of the best car makers on the planet. It is also thinking seriously about what digital transformation means for the car business. Its cars now have Connected Drive, a platform that allows drivers to purchase apps for traffic, messaging, and for starting the the engine from a distance.

The new BMW is also packed with electronics that allow the user to experience different driving modes, from sporty to gas-saving, substantially changing the feeling of driving the car.

And yet BMW is still not making full use of digital business strategy – nor are any other car makers.

Consider: BMW charges €360 to unlock the ability to access the apps on the Connected Drive. Some apps (e.g. Remote Services) cost €80 and others (e.g. Real Time Traffic Information) can be rented for €45 over 6 months. If one spends a hefty amount of money on a new car, paying €80 or €45 for an app doesn’t seem too expensive, but needing to pay €360 to just activate the ability to download the apps seems totally wrong.

Contrast this with the approach taken by Apple. Making money on complementary products is one of the features of Apple’s business model. How does the model work? You sell the hardware and then you sell low priced apps (some of them are even free) to increase the value of the hardware. The apps represent a complement to a car and the Connected Drive is a store to sell complements, but why does the user need to pay to enter the store?

Imagine buying an iPad (especially in the early days of this product) and then having to pay €100 (or even €50) to access the App Store. This would have been a serious barrier. Following Apple’s logic would encourage BMW to make Connected Drive free, something that would make sense given the low marginal cost to BMW of doing so.

 

source:hbr.org

read more…

Leave a Reply

Your email address will not be published.