Value-To-Market – The (automotive) shift from creating products to growing services




Interview with Raid Naim

The shift from a products- to a service-business in the automotive industry is currently discussed a lot. But, hasn’t this change been happening since a while now?

Yes, this trend has been going on for a while. However, the accelerating change in the automotive market from being a seller market to being a buyer market, the increasing value of digital components and the change in regulations are making this shift essential for the survival of many players in the market. This shift has a big impact on the profits in the automotive sector and is forcing a change in value proposition. The pure driving performance will become less important than a thought-through mobility approach.

So, why is it still difficult for the automotive industry to cope with the current transformation?

There are multiple reasons:

  • Cars are complex products with a long conception, creation and delivery process that is tied to various security, safety and other regulations.
  • The industry had a very stable value proposition and business model for a long time. The focus was set on topics like performance, scale production, just-in-time delivery for a very long time. The question of delivered value has never been a central one.
  • Unlike luxury or entertainment brands, car makers have been entertaining an engineering culture, focused on product cycles and solutions for predefined problems rather than exploring problems or customer needs.

Are there also companies who succeeded in the shift from product to services coming from a similar industry?

Apple is one of these companies. If we think back about the time, in which various phone manufacturers competed on hardware features and prices, Apple was the player that disrupted with a new approach: creating a product that is a platform for services. With the introduction of the iPhone, Apple disrupted an industry that was similar to the car industry today.

Did they manage the shift by adapting a Value-to-market-strategy?

Yes, Apple (when it comes to the iPhone) is rarely about being the first to adapt this or that protocol or the first to bring this or that feature to the market, but rather focusing on a specific  customer need and trying to grow a product-service-mix that keeps feeding into that need. Measured by the established technical criteria, the first generation of iPhones was not faster or cheaper. Nor was it of higher performance. It was different. It had a new value proposition and a  business model that came with it. It promised to be a touchpoint in a larger journey of connectivity, rather than a simple means of communication. Now compare that with the shift from driving performance to mobility. Apple brought new values to the market and not the same values in a more efficient manner.

If the auto industry wants to focus on a value-to-market approach. How does it work exactly?

The value-to-market approach is based on the thought that the average lifetime of business models – even in the automotive industry – is getting shorter due to technological, social and regulative changes. Thus, the value creation process should be able to adapt value proposition and business model changes by introducing new or different values, instead of optimizing the creation of a predefined one. Additionally, the new value creation process should decrease the cost of experimenting and validation, as they become a main part of the process.

The value-to-market approach focuses on effectiveness rather than efficiency. It supports organisations doing the right thing instead of doing things right. When growing new innovative services, validating the value proposition is always the main activity. All KPIs, assessments, trackings need to focus on it. This way the value creation process will be owned by the value creators not by the operational management.

What is the role of data in this approach?

Data becomes even more important in value-to-market concepts, due to various reasons:

  • As the value creation process becomes a continuous cycle, there is a need for a much faster and more frequent conversion of data into insights that benefit the improvement of the process.
  • Exploration in forms of value proposition design and business model validation becomes an inherent part of the value creation process, which increases the need for data-based insights.
  • Data gathered by services grown in a value-to-market manner are used to enrich other services in the ecosystem of a certain customer’s journey and thus are an important asset for service owners.

About Raid Naim

Raid Naim is Head of Digital Transformation at Futurice, a new breed of innovation consultancy that has digital values at its core. Raid is a technologist by education and passion who is professionally living in the limbo between technology and business. In the last 15 years, he worked at large industrial corporations, digital giants and startups and is fascinated with the way people get organised around value creation.

Raid Naim from Futurice speaking about a value-to-market approach in the mobility sector:

Future of Mobility l Value-to-market approach in the mobility sector from Futurice on Vimeo.

 

Futurice’s Automotive Offering

https://futurice.com/automotive

About Futurice:

Futurice is a software engineering and innovation consultancy with digital values at its core. We inject life into digital solutions by designing innovative mobile apps and online software – all with a focus on user experience and interaction. We believe that the winning recipe for digital projects is happy people, happy customers, and happy users. Our customers span financial services, media, automotive and energy, amongst others.

Founded in 2000, we are 500 strong and growing. A Finnish company, our HQ is in Helsinki and we have offices in Tampere, Stockholm, Oslo, London, Berlin and Munich. For more information, visit www.futurice.com.