For so long, business has been about the product. Build it, and they will come. So long, however, is becoming so old fashioned, as consumers turn away from buying products in favour of buying into services and experiences.
It’s a trend underpinned by era-defining technology that has fundamentally changed the way people interact, consume media and even travel. 15 years ago, there was no Skype; 14 years ago, there was no Facebook; 11 years ago, no iPhone; nine years ago, you couldn’t take an Uber; and Alexa only started answering back in late 2014. These new household names are relatively light on product, and heavy on service – where there is a product, it’s generally there to facilitate a service.
The key theme here is that big business, over-confident of the longevity and relevance of its product, has been disrupted by innovative start-ups with a keen eye on technology and unburdened by corporate heritage.
But disruption is not the exclusive domain of the start-up. In their book, ‘The Inversion Factor’ (The MIT Press), Bernardi, Sarma and Traub emphasise the need for companies to shift their strategies from product-first to needs-first; that is, instead of selling customers a product, companies should work out what it is their customers need, and how they can fulfil that need.
It’s a trend that is being felt throughout the automotive industry. For such a traditionally product-centric sector, transformation from product-focused to needs-first involves a major change in mind-set. After all, automakers and suppliers are global businesses with fixed assets making tangible products; for the automotive industry, it’s always been about the product.
Disruption – it’s not just for start-ups
That a century-old mechanical engineering company should be promoting its expertise in artificial intelligence (AI) and autonomous driving highlights the impact of this needs-first way of doing business, and it’s what has been guiding senior leadership at ZF Friedrichshafen. The company celebrated its centenary in 2015 and now, under the leadership of Wolf-Henning Scheider, who became Chief Executive in 2017, a company with a deep heritage in intricate gearing technology is being repositioned as a leading player in the future of mobility.
“We want to supply full systems solutions for the future of mobility, and that’s why we’ve called our strategy Next Generation Mobility. It’s not just three words, it’s really our motto and our theme,” Scheider tells M:bility.
Indeed, at the 2018 IAA Commercial Vehicle Show, ZF announced a five-year, €12bn (US$13.8bn) investment in e-mobility and autonomous driving. The timing of the announcement was significant: the company believes the commercial vehicle sector will produce the first business cases for autonomous driving. “The logistics chain is very complex, with many people involved, and yet companies are struggling to find truck drivers,” notes the former Bosch and Mahle executive. “Here we see considerable demand for autonomous solutions. There is also a growing business case for people movers.”
We want to supply full systems solutions for the future of mobility, and that’s why we’ve called our strategy Next Generation Mobility. It’s not just three words, it’s really our motto and our theme
Introducing such a change in a company’s corporate direction and ensuring that this new way of thinking runs throughout the organisation is a major undertaking. “Obviously, this needs close co-operation and very thorough discussion with the leadership team and the associates,” says Scheider. “We also surveyed more than 1,000 people to get input and impressions, to understand exactly what our leaders’ perceptions were of the company.” Once the new direction for the company had been decided, the next stage involved outlining it to the company’s 146,000-strong workforce. “And that’s important,” he continues. “We really want everybody to be engaged in this. It’s a very motivating and challenging target, and it’s great that everybody understands it.” Furthermore, the company has the full support of its owners, he notes, referring to the Zeppelin Foundation, which in turn is managed by the City of Friedrichshafen, ZF’s home town in southern Germany.
From cogs and oil to bits and bytes
Drivetrain technology, gearing and transmissions – these all conjure up images of shiny metal dirtied by oil. For the best part of two decades, academia, media and industry have debated the question of whether data is the new oil, yet the automotive industry’s century-old dependence on oil is declining, if not drawing to a close. Meanwhile, its almost total dependence on data is now becoming clear. At the same time, the advent of electrification brings with it a reduction in moving parts, and a simplification of vehicle powertrain componentry. And the sharing economy brings in a whole new way of thinking about products. Such change requires an appropriate response from those who depend so heavily on the status quo. As the phrase goes, if you fail to prepare, then prepare to fail. Scheider’s ZF, however, is being prepared for industry change.
“We have a very strong tradition for innovation. It’s in our genes, and engineering remains important,” insists Scheider. “We’re also capable of complex manufacturing tasks. Throughout its history, and in the last 20 years in particular, ZF has shown a strong ability to change.” He cites the successful integration of a number of companies, notably TRW, Sachs and Lemfoerder. Other investments or acquisitions include Ibeo Automotive, doubleSlash and joint venture work with e.GO Mobile. “It helps that our team is used to change, and that they embrace it.”
The joy of being driven
As the industry evolves, so too does the nature of the solutions that a company like ZF is asked to quote for and supply. Longer term, there will be a considerable difference between engineering for traditional driving pleasure, and engineering for next-generation mobility; torque, power and handling will take a back seat in the world of autonomous ride-sourcing, where the vehicles will be expected to deliver journeys that are at least unremarkable. The average robo-taxi passenger will be uninterested in the vehicle’s acceleration, braking and cornering, wanting simply a ride that gets them to their destination feeling refreshed and relaxed.
The logistics chain is very complex, with many people involved, and yet companies are struggling to find truck drivers. Here we see considerable demand for autonomous solutions. There is also a growing business case for people movers
“The challenges have changed significantly in recent years, no question,” agrees Scheider. “Mobility must respect environmental needs and safety, and we need to help cities come up with solutions to issues such as congestion, in preparation for the future. At ZF, we also see ourselves as an enabler for these stakeholders.
“It goes beyond the framework of maybe ten, 20 years ago. Some of the changes in technology requests are evolutionary, like our chassis safety components. These are very important, but the most significant changes are in electronics, automated driving for new mobility solutions, and in powertrain.”
For autonomous journeys to be unremarkable, a key area of development is the elimination of motion sickness. Even leading proponents of autonomous vehicles – including former BMW executive Dr Ian Robertson, speaking to this publication – have cited motion sickness as a major area of concern. No-one will get into a vehicle they know makes them feel nauseous during or after the journey.
“This is a core domain for ZF,” says Scheider. “It’s essential for autonomous driving that the vehicle motion control is even smoother than in a manually driven vehicle. We have a systems group for vehicle motion, and we have long experience and technological expertise in this area. We’ve even invented a next-generation control unit called cubiX, which acts as the domain controller for the overall chassis. The domain interfaces with the automatic driving system to make the ride smooth and comfortable, and prevent you suffering motion sickness.” Part of ZF’s strategy is to transition from the joy of driving to the joy of being driven, a shift which leaves no room for motion sickness. “Many consumers suffer from some degree of motion sickness. It’s one of the core elements that must be solved. And we are right on it.”
Level 3 in doubt
In terms of autonomous driving, ZF develops not only the technology for motion control, but also the ‘eyes’ of the vehicle; the company claims to be the world’s leading supplier of automotive cameras, and a technology leader in LiDAR through its company Ibeo. Both technologies will be essential for SAE Level 4 and 5 autonomous driving.
The fatal crash in Tempe, Arizona in March 2018, when a pedestrian was struck and killed by an Uber test vehicle in autonomous mode, raised serious questions about technology that relies on being able to bring the driver back into the loop at short notice. As such, the viability of Level 3 is very much in doubt. During the discussion, Scheider never mentions Level 3, only Levels 4 and 5. When asked about this, he explains the company’s two-sided approach to the development of autonomous drive technology. “We’re continuing to develop Level 1 and 2 ADAS functions, and these might evolve to Level 3. But at the same time, we’re developing the complex top end solutions for Levels 4 and 5.
“They’re very different systems,” he continues. “For Levels 4 and 5, you need huge computing power, which we have with ZF ProAI. But you don’t need ZF ProAI for ADAS functions.”
Part of the MaaS revolution
At its Technology Day in 2018, ZF announced investment in a manufacturing joint venture with Aachen, Germany-headquartered electric vehicle start-up e.Go Mobile. The e.Go Moove JV will build the E.Go Mover, an electric 15-passenger micro shuttle which will eventually also be able to drive at Level 4 autonomy. The JV is ZF’s clearest demonstration yet of its intention to be a part of the Mobility as a Service (MaaS) revolution, and underlines the company’s commitment to next-generation mobility.
“There are some very nice mobility services in the field right now, but MaaS comes with some obvious challenges,” says Scheider. “Take for example car-sharing: the car is not always where you need it, and then when you reach your destination, you often can’t get rid of that car. This creates a business case for autonomous driving, and in light vehicles that’s where I see it coming in first. But it will be a step by step process – it’s unrealistic to think that we can jump straight into fully autonomous driving in urban areas, but I could envisage autonomous valet parking, with the car driving itself slowly to a nearby parking area.”
The challenges have changed significantly over the last years, no question. Mobility must respect environmental needs and safety, and we need to help cities come up with solutions to issues such as congestion, in preparation for the future
In January 2018, ZF announced an autonomous valet parking programme in China in collaboration with Baidu, Nvidia and local car-sharing company Pand Auto. ZF’s contribution to the initiative is the vehicle sensor suite and its ProAI technology.
More Silicon Valley than Bodensee?
ZF ProAI is a high-power computing and AI solution, developed with input from Nvidia. ZF has also been highlighting its expertise in areas such as blockchain. Two very different technologies, of course, but these and others have much more of a Silicon Valley tech feel than a Southern German engineering vibe, yet Scheider believes they are an essential part of the company’s future.
“We’ve realised that we cannot survive without them! They’re the enabling technologies that we need. It might seem strange for the transmission department to be asked to develop a new blockchain business case, but we have a dual operating system and we formed new teams within teams, with external input where necessary. They have a clear target, and one was to build a blockchain technology business case for the vehicle to be able to pay for services such as parking, refuelling or recharging, without any human interaction.” The result was Car eWallet, a business which ZF has recently spun off as a new Berlin-based start-up with a high degree of freedom to develop blockchain business cases for mobility services.
“And it was a similar case with AI,” continues Scheider. “A separate team within our dual operating system was using AI technology to build up software algorithms for automated driving in complex situations. And it was very clear that traditional algorithms are no longer sufficient for managing this complexity. We just needed to go for AI, and the team did it.”
It’s not about the product
It looks increasingly as if next-generation mobility will be less about physical product and more about well-crafted solutions that meet customers’ needs. Clearly, ZF is thinking about its corporate customers, but it’s also considering the end-customer. If, once it’s on the road, the users of an e.Go Mover autonomous micro-shuttle find the experience relaxing and otherwise unremarkable, ZF will have done its job well. Likewise, the recipients of packages delivered by the pilot of an autonomously-parked parcel van, or the occupant of a car equipped with Car eWallet technology, who simply expect a good service that works well.
Product will still be a part of the future of mobility, but consider the product to be redefined as mobility itself. Success or failure will depend on whether companies continue to focus on product, or reposition themselves to be able to identify their customers’ needs, and deliver the services they want and desire.
