Article by Prof. Dr. Ulrich Lichtenthaler, ISM International School of Management
There are huge opportunities in monetizing car data. Before turning the attention to capturing value, however, executives need a thorough understanding of their firms’ value proposition, value creation and competitive positioning. Many solutions that are currently developed may have a limited competitive impact, which reduces their potential for monetization.
In light of the major opportunities and challenges of leveraging car data, the topic of monetization is essential because it puts the revenue model center stage. To tap into the enormous future revenue pools of utilizing car data, many established automotive players as well as new market entrants currently develop innovative services. Based on an intelligent utilization of car data, the monetization process will be key in determining the winners in this new competitive arena. However, immediately turning the attention to capturing value from car data is usually not sufficient.
While value capture is a core part of data-based business model innovations in the automotive industry, value proposition and value creation are equally important. Many executives direct their attention to the monetization of car data although the specific value that is generated for their customers is still somewhat unclear. Moreover, the challenges in implementing the value creation architecture, which often includes multiple external partners, are often insufficiently considered. To balance the strategic focus on all parts of data-based business models, i.e. value proposition, value creation and value capture, executives may address the following five key questions:
- Which specific advances in the context of connectivity, autonomous driving, electric mobility, shared mobility, artificial intelligence and related trends will affect your firm most significantly? Usually, there is a focus on a few core strategic issues for many automotive companies.
- How will these transformations affect the established value chain of your company? These changes typically lead to the extension of the value chain, e.g. concerning data analytics, but also to reconfigurations of the order of value chain activities, e.g. regarding mobility services.
- Which players will be particularly important in your future car data ecosystem? Beyond the usual suspects, i.e. established suppliers, customers and partners, new players become relevant due to technology push and market pull effects, e.g. technology service providers and content providers.
- Which value propositions are particularly attractive for your firm’s customers? By combining a thorough understanding of the digital value chain and relevant ecosystem players, executives may systematically explore their strategy matrix to identify the most promising data-based use cases.
- What is the most beneficial value creation architecture for the use cases that your firm has selected? Here, it is particularly important to identify a clear competitive advantage, i.e. which knowledge, intelligence and services can your firm provide beyond the data-related activities of other players.
Many companies in the automotive sector pursue large strategic initiatives for monetizing car data. While these initiatives are important, they will often not live up to the initial expectations because they are relatively isolated activities. To capture the full potential of the business models, executives need to develop a thorough understanding of their company’s specific value proposition and value creation. In particular, they need a detailed analysis of their firm’s competitive advantage. Focusing on those use cases with a strong competitive positioning will provide a sound basis for successfully monetizing car data.
About the Author
Ulrich Lichtenthaler is a Professor of Management and Entrepreneurship at ISM – International School of Management in Cologne, Germany. He holds a Ph.D. degree in technology management and further is an executive coach and consultant, who has successfully completed over 20 digital transformation projects over the past years. He has written multiple books and articles for journals and newspapers, such as MIT Sloan Management Review, and he has taught executive education courses at leading business schools.