Disruptive Technologies - Friend or Foe of the CTO - Part 2

CTO'S FRAMEWORK FOR SCOUTING FOR DISRUPTIVE TECHNOLOGIES

SPECTRUM - CTO's Framework for Scouting for Disruptive Technologies

While the CTO for ordinary times keeps track of the technology trends, the CTO for extraordinary times tracks many other drivers of changes and synthesizes a holistic vision of the future. The key drivers for transformation include social, political, economic, competition, regulation, universal, market over and above technologies. The SPECTRUM radar helps the CTO look at the drivers of transformation in a holistic way and take a proactive approach in responding to megatrends. In the case of the CTO of an Indian Automotive OEM the key drivers of transformation are:

Social – sustainability, shared mobility, demographic divide etc – Hyper-connected millennials (Gen Y) have very different needs as compared to their their Gen X parents.  Automotive OEMs need to design their product in a way that appeals to younger people. Smaller, digitally enabled, connected cars for urban commute allow younger people to stay connected as they drive and meet their infotainment needs. Among the three main benefits of connected cars — improved safety, enhanced driving experience and infotainment — infotainment appeals most to the youth [6]. With this input, the CTO starts tracking developments in connected vehicle technologies.

Political - shift of focus from oil to critical metals – for example, lithium and cobalt are key components of the battery of an EV – literally all the Cobalt comes from Congo – the stability of the government in Congo and the political relationship of a country with Congo becomes very important for ensuring a steady supply of Cobalt for the growing EV industry [7]. With this input, the CTO starts tracking the dynamics influencing the price of lithium and cobalt, R&D in alternative battery materials etc.

Economic – the economical drivers include the initial cost and total cost of EV as compared to ICE vehicles, the volatility in the price of fossil fuel etc – for example, according to a recent study published in the Journal of Applied Energy, for a period of over four years, the TCO of an electric car is lower than that of gas-powered vehicles in Texas, California and the UK [8]. With this input, the CTO starts tracking the usage pattern across different customer segments, the GDP growth, the various factors that influence TCO etc.

Competition – if we consider the autonomous vehicles (AV) space, while new players Tesla, Google and Uber score high on technology, the traditional automotive OEMs like GM and Ford are leveraging their go-to-market strategy, production prowess, staying power, and sales, marketing, and distribution to stay in competition. Ford has made big investments into an artificial intelligence outfit. It acquired ride-sharing service Chariot and invested in Velodyne, a company producing lidar, the laser scanning technology for self-driving cars. GM picked up self-driving expertise via a startup called Cruise, and partnered with Lyft [9]. With this input, the CTO of an automotive OEM starts tracking players outside the automotive domain, cab aggregators, LIDAR companies etc, He also starts closely monitoring the mergers and alliances between auto OEMs and new technology providers.

Technology – Electric, Autonomous, Connected – the convergence of these three technologies is expected to change the landscape of the automotive industry – this combination of technologies has great potential for enabling sustainable mobility for the future [10]. These three technologies are exponentially growing in their performance and the cost is steadily decreasing – their evolution is further accelerated by parallel developments in digital manufacturing – additive manufacturing, robotic manufacturing, modular approach to design etc. When such technologies converge, they have the power to disrupt the entire industry. When Local Motors introduced Olli (the mini bus), to the automotive market, it was an industry first in many sense – most of Olli was 3D-printed, it is an EV and AV, the vehicle could drive itself through dense urban traffic, Olli carried a few sensors and the sensors output were analyzed by IBM Watson (on the cloud) and instruction were given to Olli to successfully navigate through the roads. Here is a convergence of electric, autonomous, additive manufacturing, cloud technology, AI and cognitive technologies [https://localmotors.com/meet-olli/]. Based on this input, the CTO stops looking at disruptive technologies in isolation but starts visualizing future scenarios arising from the convergence of multiple disruptive technologies.

Regulatory – When the Indian Government decided to implement BS VI by 2020 [11 a], the entire automotive industry focuses their effort on leapfrogging technologies and innovations that can accelerate the journey. When the automotive OEMs are focused on meeting the emission norms, they also have to drive innovations to improve fuel efficiency and keep their customers happy. The NITI Aayog.report [11 b] says that “India can save 64% of energy spent on transportation and 37% of carbon emissions in 2030 by pursuing a shared, electric, and connected mobility future”. With this input, the CTO starts aligning his company’s technology roadmap with his Government’s mobility roadmap, explores opportunity to work with government labs, form industry – government consortia to accelerate the development of the disruptive technologies.

Universal – The universal resources like minerals, water, fossil fuel etc have a strong influence – especially the availability of Lithium, Cobalt, Rare Earths, Water have a big role to play in the evolution of EV industry [12] – lithium and cobalt are key constituents of the battery of the EV – both these metals are concentrated in certain geographies (Cobalt in Congo and lithium in Argentina, Bolivia and Chile) – the rate of scale up of EV manufacturing will be limited availability of these materials. The motors of the EV need strong magnets made of rare earth element (Neodymium, Praesodymium) – China dominates the global supply of rare earths and the price has increased multifold with the rising demand for motors from EV and wind turbine industry. Based on this input, the CTO starts tracking the availability of scarce material resources that could become critical bottlenecks for the growth of his company, starts assessing materials recycling technologies, initiates R&D on alternative materials for batteries and motors etc.

Market – Global automotive executive survey by KPMG in 2017 [13 a] indicates battery powered electric vehicles as #1 trend, followed by connectivity and digitalization. In emerging economies like India fuel efficiency (FE), total cost of operation (TCO) and ease of use continue to top the market demand from new vehicles. EVs score very high, on the fuel efficiency dimension, as compared to ICE vehicles. Lower TCO encourages cab aggregators like Ola and Uber to induct EVs into their fleet. Ease of use of EVs will depend on the range, density of charging stations network, time for charging etc. Based on this input, the CTO starts looking at eMobility as a system level solution rather than EV as a product in isolation – he realizes that it is not enough if he delivers a world class EV product, he has also to ensure that the ecosystem is ready so that his customers can realize the value. He can assure ease of use of his product only by co-creating the charging infrastructure for EVs. He will also start tracking technology developments in fast charging, wireless charging etc. Rising EV penetration is expected to have an impact on low-voltage distribution grids in residential or commercial areas. Hence the CTO has to track technology developments in power generation, storage and distribution. The EV will be truly green only when the electricity used for charging is derived from renewable sources like solar. The CTO has look across the industry as the EV brings three industries together – automotive, renewable energy and power distribution [13 b].

The CTO has to study all the eight drivers and synthesize his insights from all these eight directions to create a holistic view of disruptive technologies. He will be very responsive to disruptive changes when he continuously keeps scanning across all these eight directions.

References

[6] Millennials are rewriting the rules on car usage, Business Line, https://www.thehindubusinessline.com/specials/auto-focus/millennials-are-rewriting-the-rules-on-car-usage/article9752385.ece

[7] Cobalt: The Achilles Heel for Electric Car Makers, Forbes,  https://www.forbes.com/sites/timtreadgold/2018/03/07/an-electric-car-boom-excite-australias-mining-tycoons-but-there-may-be-a-cobalt-problem/#8d884183b426

[8] Total cost of ownership and market share for hybrid and electric vehicles in the UK, US and Japan, Kate Palmer et al, Applied Energy, Volume 209, 1 January 2018, Pages 108-119

[9] Detroit stomping silicon valley self-driving car race, Wired, https://www.wired.com/2017/04/detroit-stomping-silicon-valley-self-driving-car-race/

[10] The future of mobility in India, McKinsey and Company, 2017 https://www.mckinsey.com/~/media/mckinsey/industries/automotive%20and%20assembly/our%20insights/the%20future%20of%20mobility%20in%20india/the-future-of-mobility-in-india.ashx

 http://innovationflow.blogspot.com/2017/12/creating-sustainable-mobility.html

[11] (a) India Bharat Stage VI Emission Norms

https://www.theicct.org/sites/default/files/publications/India%20BS%20VI%20Policy%20Update%20vF.pdf 

(b) India leaps ahead – transformative mobility solutions for all, NITI Aayog, May 2017, http://niti.gov.in/writereaddata/files/document_publication/RMI_India_Report_web.pdf

[12] https://www.cell.com/joule/pdf/S2542-4351(17)30044-2.pdf

[13] (a) Global Automotive Executive Survey, KPMG 2017,

https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2017/01/global-automotive-executive-survey-2017.pdf

(b) Global EV Outlook 2017

https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf