Telematics: Exploring Technology, Architecture & Organizational Strategy Issues
Facing Ford Motor Company For An Emerging Technology In A Mature Product
Development Enterprise.
by
Kurt L. Ewing
M.S.E Mechanical Engineering, University of Michigan (1992)
B.S.E. Mechanical Engineering, University of Michigan (1990)
Erika K. Low
M.S.E. Aerospace Engineering, University of Michigan (1993)
B.S.E. Aerospace Engineering, University of Michigan (1988)
BARKER
Submitted to the Systems Design and Management Program in partial
fulfillment of the requirements for the degree of
SASSACHU
SSACI
SZ INSTITUTE
OFF TECH
N SYGY
Masters of Science in Engineering and Management
at the
T'TuT'
A UG
U G 0 12002
100
-----------LIE
MASSACHUSETS INSTITUTE OF TECHNOLOGY
LIBRAARRII;=S
June 2002
@ 2002 Kurt L. Ewing, Erika K. Low. All rights reserved.
The authors hereby grant MIT permission to reproduce and to distribute publicly
paper and electronic copies of this thesis document in whole or in part.
/I
Signature of AuthorsSystems Design & Management Program
Janua;l 8, 2002
Certified by:.
Thesis Supervisor, Professor of Aeronautics and A(1ooAutics, S
K..John 1-ansman
.hoolfangip
ering
Certified b y:
V
Paul R.Carlile
Thesis Supervisor, Assistant Professor of Organizational Studies, Sloan School of Management
Accepted by:
Steven D. Eppinger
LFMISDM Co-Director & GM LFt4.Pkfessor of Management Science and Engineering Systems
Accepted by:
Paul A. Lagace
LFM/SDM Co-Director & Professor of Aeronautics & Astronautics and Engineering Systems
1
ACKNOWLEDGEMENTS
We would like to thank all the Ford Motor Company employees who volunteered to participate
in this study. Their enthusiasm and cooperation was greatly appreciated and very inspiring. At
the time of this research, the automotive business climate for Ford Motor Company is very
challenging. Their willingness to offer their valuable time and insights during this pressured
time is testimony to their dedication and passion for their work.
In January 2000, we entered the Systems Design and Management Program at MIT. The two
years that followed have been nothing less than a life experience. The faculty, staff and fellow
students represent a learning community that will inspire us for many years to come. We have
learned so much from the breadth of experiences and perspectives brought together in this
program. Many thank go to our advisors, Professor R. John Hansman and Professor Paul R.
Carlile for their guidance. Their knowledge and ability to focus our efforts yet encourage new
perspectives and learning, personifies the world-class intellectual epicenter that is MIT. To the
MIT and SDM community, it is an honor and a privilege to have been amongst you all.
We also thank our management and colleagues from our places of work for their patience and
support. The demands of student, work and personal life, have made for an exciting yet difficult
balancing act. Your unwavering support has been crucial in facilitating this balance.
Finally, we are forever indebted to our families from whom patience, love and support was
unconditional. In many respects, your lives have been on hold so that we could pursue this
opportunity and we thank you.
-2-
BIOGRAPHY
Kurt L. Ewing has over nine years of work experience at Ford Motor Company and over ten
years in the automotive industry. He currently is an Engineering Supervisor for advanced
automotive safety technology development. He was the Crash Safety Development Team
Leader for Ford Motor Company's first introduction of the Personal Safety System@ on the
Taurus/Sable vehicle models. Previous assignments include product engineering, computer
aided engineering, project management, product liability and manufacturing. He received his
bachelor's degree in mechanical engineering, with honors, and his master's degree in mechanical
engineering from the University of Michigan in 1990 and 1992 respectively.
Erika K. Low has over ten years of work experience at Ford Motor Company. She currently is a
Crash Safety Development Supervisor for Windstar and Taurus/Sable vehicle lines. She has
extensive experience in nonlinear finite element analysis and was the Safety CAE Team Leader
for Taurus/Sable programs where she held lead responsibility for vehicle crash impact CAE
simulations. She received bachelor's and master's degrees in aerospace engineering from the
University of Michigan in 1988 and 1993 respectively.
-3-
Telematics: Exploring Technology, Architecture & Organizational Strategy
Issues Facing Ford Motor Company For An Emerging Technology In A
Mature Product Development Enterprise.
by
Kurt L. Ewing
and
Erika K. Low
Submitted to the Systems Design and Management Program in partial
fulfillment of the requirements for the degree of
Masters of Science in Engineering and Management
at the
MASSACHUSETS INSTITUTE OF TECHNOLOGY
ABSTRACT
Telematics is the blending of wireless information technology and the automobile. It is the key
enabler for the automotive sector to participate in a new mobile-commerce economy. However,
telematics is a new and emerging technology and imposes non-trivial integration challenges to
the automotive manufacturer because it has high rates of technological change and is a blending
of "old technology" with "new technology." Thus, telematics provides a pertinent opportunity to
investigate and better understand how to work through issues related to new technology
insertion.
Focused interviews were conducted with a cross section of eighteen Ford Motor Company
engineering and management employees who were responsible for delivering, telematics
technology into new model vehicles. Subjects responded to a list of standard questions that
solicited opinions on what technical and managerial directions Ford Motor Company should
pursue for telematics. Noteworthy themes and ideas from the data are presented and discussed
including tensions between the firm focusing on core revenue streams versus using telematics to
generate new market opportunities, culture-clash between wireless and automotive industries,
"clockspeed" differences between telematics and automotive product cycles, and strategies and
enablers for facilitating insertion of telematics into new vehicles. Architectural innovation and
knowledge transformation frameworks are used to highlight the particular challenges telematics
imposes on an established automotive product development environment. Recommendations are
made regarding areas where an automotive firm may focus attention to further enhance their
ability to integrate emerging technologies.
-4-
TABLE OF CONTENTS
ACKNOW LEDGEMENTS.......................................................................
2
BIOGRAPHY ........................................................................................
3
ABSTRACT..........................................................................................
4
LIST OF FIGURES.................................................................................
8
LIST OF TABLES.................................................................................8
CHAPTER 1: INTRODUCTION.................................................................
9
1.1 M otivation ........................................................................................
1.2 Structure of the Research.......................................................................
9
10
CHAPTER 2: LITERATURE REVIEW .....................................................
11
11
2.1 Introduction ......................................................................................
11
2.2 Architectural Innovation.......................................................................
12
2.3 Knowledge Transformation Cycle.............................................................
12
2.3.1 Definitions.....................................................................................
14
Cycle..
2.3.2 Knowledge Interface Attribute Effects on Knowledge Transformation
15
2.3.2.1 Impacts on Storage......................................................................
2.3.2.2 Impacts on Retrieval......................................................................15
15
2.3.2.3 Impacts on Transformation..............................................................
16
2.4 R elevance..........................................................................................
CHAPTER 3: BACKGROUND...................................................................18
3.1 Ford Motor Company Business Overview.....................................................
3.1.1 Business Description........................................................................18
3.1.2 FordMotor Company and the E-Economy...........................................
3.1.3 R ecent Events....................................................................................
3.2 Telematics Overview...........................................................................
3.2.1 Overview Scope................................................................................
3.2.2 Why Telematics?..............................................................................
3.2.3 What is Telematics?..........................................................................
3.2.4 A Brief Chronology..........................................................................
3.2.5 Current Functionality......................................................................
3.2.6 Future Capability............................................................................
3.2.7 A Tenuous Business Model................................................................
3.2.8 Telematics Partnershipsand Collaboration.........................................
5
18
18
19
19
19
19
20
21
21
22
22
23
CHAPTER 4: METHODS.......................................................................24
4.1 Focused Interview s...............................................................................
4.2 Standard Questions...............................................................................
4.3 D ata A nalysis....................................................................................
24
24
26
CHAPTER 5: RESULTS.........................................................................
27
5.1 Introduction......................................................................................
5.2 Focused Interview Questions..................................................................
27
27
5.2.1
5.2.2
5.2.3
5.2.4
5.2.5
5.2.6
Question 2, Creating New Revenue Streams with Telematics.............. 27
28
Question 3, Communications Telematics Technology................................
28
Question 4, Information Telematics Technology...................................
28
Question 5, Entertainment Telematics Technology.................................
29
Technology.....................................
Telematics
Question 6, Embedded
Question 7 & 8, Human-Machine Interface and Driver Distraction............ 29
5.3 Interesting Asides and Individual Perspectives.............................................
5.3.1 "Trickle-Down" Telematics Deployment...............................................
5.3.2 Offer Telematics as Stand Alone Options.............................................
5.3.3 "Market-Pull"Telematics Development...............................................
5.3.4 Be a "Fast-Follower"forTelematics...................................................
5.3.5 Relationships with Employees, Suppliers, Dealers...................................
5.3.6 Learnfrom the Wireless World............................................................
5.3.7 Auto Dealers Cut Out of the Value Chain.............................................
5.3.8 CustomerRelationship Management (CRM).........................................
5.3.9 Blending the Skills from Auto and Wireless Industries............................
5.3.10 "Clockspeed" Rears Its Head..............................................................
5.3.11 An Individual Perspective................................................................34
30
30
30
30
30
30
31
32
32
33
34
CHAPTER 6: INTERESTING TENSIONS & CONFLICTS...............................36
6.1
6.2
6.3
6.4
6.5
36
Introduction......................................................................................
Cutting Out the Auto Dealer versus Customer Relationship Management (CRM).......36
Culture-Clash Between Automotive and Wireless Industries............................. 38
Capturing Value from Telematics: Survival Mode versus Cultural Lock-In............. 40
42
Sum m ary...........................................................................................
CHAPTER 7: SOME EXPLICIT NOTIONS ON WHAT FORD SHOULD DO.......43
7.1
7.2
7.3
7.4
Introduction ......................................................................................
B e a "Fast-Follow er"..........................................................................
"Market-Pull" Technology Development.....................................................
"Plug and Play" Technology Integration....................................................
7.4.1 "Plugand Play" Strategy..................................................................
43
43
45
47
47
7.4.2 Is the Wireless Phone Handset the DominantDesign for M-Commerce?...... 48
7.5 "Innovation Tax" Mechanism to Subsidize New Technology..............................49
-6-
7.6 New Technology Deployment Strategies.....................................................
49
7.6.1 "Trickle Down" Strategy..................................................................
7.6.2 Direct "Mass-Market"Strategy ........................................................
7.6.3 "Optional-Equipment"Strategy........................................................
7.7 Recommendations...............................................................................52
7.8 Summ ary ...........................................................................................
49
51
52
54
CHAPTER 8: DEVELOPING ADAPTIVE CONFLICT
RESOLUTION CAPBABILITY................................................55
8.1 Introduction......................................................................................
8.2 Growth of Organizational Complexity and Knowledge Interfaces.......................
8.2.1 Exponential Interface Issues..............................................................
8.2.2 Ideal Skills Very Hard to Find Due to Emerging Nature of Telematics........
8.2.3 Differing "Clockspeeds" of Auto and Telematics.......................................57
8.2.4 Electronics and Telematics: Internal Boundary.....................................
8.2.5 Culture Clash between Auto and Wireless...........................................
8.2.6 Styling versus Telematics: "The Antenna is Ugly"..................................
8.2.7 Manufacturing versus Telematics: The "Happy Seat"..............................
8.3 Impacts on Knowledge Transformation Cycle.............................................
55
55
56
57
57
57
58
58
59
59
8.3.1 Telematics Application and Assessment...............................................
8.3.2 Recommendations/Areas of Focus to Improve Knowledge Integration......... 65
8.4 General Recommendations to Enhance Organizational Capability........................
8.5 Sum mary ..........................................................................................
67
67
CHAPTER 9: CONCLUSIONS..................................................................
69
9.1 C onclusions......................................................................................
9.2 Areas For Future Study.........................................................................
69
71
9.2.1 Driver Distractionand the Human-MachineInterface............................
9.2.2 Incentive Structures.....................................................................71
REFERENCES......................................................................................
-7-
71
72
LIST OF FIGURES
Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 -
Knowledge Transformation Cycle....................................................
12
Knowledge Transformation Relationship Matrix.................................17,60
Generalized Telematics System......................................................
20
Automakers and Telematics Partners...................................................23
Focused Interview Standard Questions.............................................
25
Technology S-Curve......................................................................44
Generic (Market-Pull) Product Development Process............................
45
New Product Development Interfaces...............................................
56
Telematics Impact on Knowledge Transformation Relationships............... 63
LIST OF TABLES
Table 1 - Automotive and Wireless Knowledge Boundaries.................................59
- 8-
CHAPTER 1: INTRODUCTION
1.1 Motivation
"Innovation is at once the creatorand destroyer of industries and corporations."
James M. Utterback
A firm's ability to successfully negotiate the dynamics that innovation imposes on it is crucial to
its success and survival in the market. With global economic barriers vanishing and opening the
tenacity of world competition, this ability is nothing less than paramount. This is problematic
because successfully managing innovation dynamics is anything but trivial, even under the best
business conditions, particularly for mature established firms. History is filled with examples of
successful, powerful firms faltering in the face of innovation. For example, Xerox, once having
such presence in the document copying industry that the term "photo-copy" was generically
referred to a "Xerox-copy," has fallen on hard times in the era of small, high quality desktop
copiers and digital media. The transition from centralized, mainframe computers to desktop
personal computers dealt difficulties for IBM once the giant of giants in corporate America.
This leads us to the automotive industry where an emerging blend of automotive and wireless
communication technologies called "Telematics," is imposing challenges for established, mature
auto manufacturers. In particular, Ford Motor Company has struggled to deliver telematics to
the automotive market. 2 Telematics cannot displace personal land transportation so it seems
difficult to suggest it would be as disruptive an innovation to the auto industry as desktop copiers
were to Xerox, or personal computers were to IBM, but this only serves to make the question of
why this new technology imposes such difficulty even more curious.
The research explores this question for insights as to why a new technology poses such
difficulties for a mature automotive product development enterprise. The goal is to better
understand these impacts in the hopes to enhance a mature firm's capability to manage new
technology and realize innovation as a creator of corporations versus a destroyer of them.
-9-
1.2 Structure of the Research
In Chapter 2, we conduct a brief review of some technology and organizational strategy literature
pertinent to this research. Chapter 3 provides background information on Ford Motor Company
(the mature product development enterprise considered in this study) and also provides a brief
overview of telematics technology. Chapter 4 presents the research methods utilized in this
study and the results are summarized in Chapter 5. In Chapters 6-8, we discuss the significance
and implications of the results. Where possible, brief recommendations on potential courses of
action are offered along with suggestions on areas of potential interest to an auto manufacturer
dealing with the challenges of new technology. Chapter 9 draws some general conclusions from
the research and suggests some areas for future study.
-
- 10
CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
In this chapter we briefly summarize some technology and organizational management
frameworks found in literature that are pertinent to this research. They are presented here in
order to facilitate discussion in later chapters. Section 2.2 reviews the notion of "Architectural
Innovation" and its effects on mature firms (Henderson and Clark 1990) . Section 2.3
summarizes the "Knowledge Transformation Cycle" and its importance to resolving conflicts
between knowledge boundaries and interfaces (Carlile 2002).4
2.2 Architectural Innovation
The Architectural Innovation Framework stems from a perceived gap in the spectrum of
innovation types. Incremental innovations are those that offer minor changes to an existing
product system and tend to reinforce the existing capabilities of established firms. Radical
Innovation opens up entirely new potential markets and applications. These innovations disrupt
an established firm's capabilities and create significant difficulties for their attempts to capitalize
on them. Henderson and Clark proposed an innovation type which they referred to as,
"architectural innovation," that is not quite disruptive because it may leave a product system's
components relatively intact, but the interfaces between them are altered in a significant way.
They refer to a firm's specialized knowledge about these interfaces (i.e. knowledge about the
ways in which the components are integrated into a product system or whole) as "architectural
knowledge." This architectural knowledge is acquired over time by a firm and it becomes
embedded in the firm's organizational structure and processes and people. It has tacit
characteristics.
Their work suggests that architectural innovations pose serious threats to
established firms because they necessitate modifications to this embedded architectural
knowledge. They state that architectural innovation can, "...destroy the usefulness of
architectural knowledge of established firms, and that this destruction is difficult for firms to
recognize and hard to correct". The implication is that architectural innovations may first appear
as incremental innovations to an established firm because they initially fit into the firm's existing
frameworks. Only after unexpected conflicts and issues arise will the firm appreciate the need
for new architectural knowledge. However, once the firm recognizes this need, it takes
-
-11
in an
significant time and resources to build it and apply it. Moreover, the firm has to do this
environment where some of its existing architectural knowledge still applies while some will not.
This complicates the learning and knowledge creation process.
2.3 Knowledge Transformation Cycle
2.3.1 Definitions:
In Carlile's framework illustrating knowledge integration, he emphasizes that the knowledge an
organization possesses is very much path dependent, meaning that it is a product of the
organization's prior experience, history and people. This is akin to the architectural knowledge
proposed by Henderson and Clark. Carlile's research provides a deeper look the difficulty
architectural innovations may impose by looking at the way knowledge is used within product
development organizations to solve knowledge interface problems. He breaks problem solving
in product development into three steps. Organizational knowledge is stored in some manner,
retrieved when needed and built upon or "transformed" into new knowledge to solve knowledge
conflicts between two or more functional teams (Figure 1).
Transformation
Storage
Retrieval
Figure 1. Knowledge Transformation Cycle
12
-
-
*
Storage: This is the means by which organizations store knowledge to maintain
organizational memory and capture knowledge and information obtained through past
experience. Knowledge can be broken into tacit and explicit components. Explicit
knowledge is something that can easily be conveyed to others if they have similar
backgrounds. Tacit knowledge is very difficult to convey except through teaching, or
observing. The outcomes of key tests or simulations can be stored (explicit knowledge),
but usually not the history behind the thought processes that created the explicit
knowledge. The thinking patterns, the key decisions and the reasons behind them are the
difficult portions of tacit knowledge to capture. They reside with people and are situation
dependent. Stored tacit knowledge is in people's minds and it is crucial to effective
problem solving. The way in which knowledge is stored is critical. It must be done in a
manner in which those retrieving it can understand. Knowledge and information can
easily be overlooked if not stored in a thoughtful manner. It is far from easy to store
knowledge in ways easy to understand for a broad cross section of people because much
of the most useful portions of knowledge, the tacit portion, are difficult to convey in
writing or artifacts.
*
Retrieval: This is the means by which one searches for knowledge and assesses its
relevancy to the knowledge interface at hand. Networking with other workers to tap into
their knowledge is an example of a retrieval mechanism.
Transformation: When knowledge conflicts between functional teams are identified, the
teams must work together to accommodate each other's needs. Each team must create
new knowledge to define the different solution options. It requires they understand each
other's positions and find mutually acceptable solutions. Then they must assess tradeoffs.
This can be an iterative process of problem solving. Artifacts or practices (e.g. drawings,
CAD models etc.) that help the different functional teams visualize or understand the
knowledge conflicts are used to transform knowledge across the interface. Carlile refers
to these items as "boundary objects." For product development settings where
- 13
-
*
technological change is faster paced, he points to the desirability of developing means to
enable knowledge creation and transformation to solve system interface conflicts.
Carlile also identifies three attributes of the knowledge interface that impact the Knowledge
Transformation Cycle. These attributes are novelty, dependence and specialization. These are
described below.
" Novelty: This is a measure of the "newness" of the knowledge interface. It represents
the level of difference the new problem is from a team's past experience.
" Dependence: This is a measure of the impact felt by one team whose performance is
affected by the needs of another team. High dependence is common in product
development settings, particularly for complex products such as an automobile because of
the high number of interfaces between all the vehicle subsystems. Design actions in one
area often create design work in another area. Carlile notes that dependence, "...forces
participants to understand, acknowledge, accommodate the needs of others, none can
maximize their own benefits at the expense of the others..."
" Specialization: This is a measure of pertinent knowledge that a team possesses. The
specialized functions must be able to convey their design needs so that the rest of the
team can understand if these requirements will cause conflicts with their own. The better
the specialization (the more expert the team is), the earlier functional teams may be able
to assess the conflicting issues impacting other functional teams. Carlile points out that
when facing novelty, expertise (specialization) is needed to determine what parts of the
existing organizational knowledge is applicable to solving the novel interface issues.
2.3.2 Knowledge Interface Attribute Effects on Knowledge Transformation Cycle:
The degree of novelty, dependence and specialization at a knowledge boundary impact the
effectiveness of the Knowledge Transformation Cycle, and thus the ability to resolve knowledge
conflicts. Figure 2 summarizes how these attributes enhance knowledge storage, retrieval and
transformation processes in the cycle.
-
- 14
2.3.2.1 Impacts on Storage:
Novelty and dependence have relatively weak impacts on the knowledge storage. However,
storage of knowledge will degrade when workers do not possess high enough levels of
specialized knowledge. This can happen by workers either rotating too often or are simply
inexperienced within a functional team. They have not had the opportunity to develop high
degrees of specialization. If specialization is relatively low, the quality of what can be stored is
correspondingly low. Higher specialization enhances knowledge storage because there is more
accumulated knowledge to store.
2.3.2.2 Impacts on Retrieval:
Novelty and specialization can impact knowledge retrieval. A high degree of novelty makes
retrieval more challenging because some of the stored knowledge requires a decision of
relevancy. Lower novelty enhances retrieval because the prior knowledge is highly applicable to
the new problem.
Higher specialization enhances knowledge retrieval because determining the relevancy of prior
knowledge is easier. However, in some cases it can be a detriment if the specialization causes
the person to be too narrowly focused. The balance sought is to learn from previous experience,
build on the past, but not be constrained by it.
2.3.2.3 Impacts on Transformation:
Knowledge transformation is impacted by all three attributes of the knowledge boundary. The
higher degree of novelty facing a team, the harder knowledge transformation may be. Novelty by
definition is new and will lead to unforeseeable developments during product development. By
introducing novelty, one is more likely to experience late discovery of design conflicts and more
time to develop design options to solve conflicts.
Higher degrees of dependence make the knowledge transformation process harder because of the
high impact of one team's requirements on another. For example, functional team "A" needs
functional team "B" to modify its subsystem so team "A" can meet its targets. High dependence
means that team "B" must stretch itself greatly in order to accommodate. More knowledge must
-
15
be developed because the solutions are not simple. Further, mutual dependence can appear if, say
the best solution team "B" could achieve would then have an impact upon another one of team
"A's" targets. Then the knowledge transformation process would begin to solve the new design
conflict. Higher dependence makes transformation harder because the impact of the dependence
is high, therefore the necessary accommodation is a large stretch and more knowledge must be
developed to create the solutions that will accommodate.
With high degrees of specialization, knowledge transformation is generally improved. When
specialization is high, knowledge storage is improved, because there is a wealth of past
experience from which to draw and the improved ability to judge which parts of stored
knowledge are most applicable to the existing design conflict. The only down side of high
specialization can be the large inertial pull that can keep the experts from comfortably dealing
with high degrees of novelty. With a large investment in an existing expertise, if novelty is
present, it may be that during knowledge transformation, the best design alternatives are outside
their comfort zones and therefore may not be discovered.
2.4 Relevance
These frameworks are relevant to this study because as we discuss later, telematics possesses
traits on an architectural innovation, which then has corresponding impacts on architectural
knowledge by creating knowledge boundaries (i.e. interfaces) that must be managed. We will
also discuss how Telematics has negative impacts on the Knowledge Transformation Cycle,
which hinders a firm's ability to resolve conflicts across these knowledge interfaces and creates
difficulty in integrating new technology.
-
- 16
Ability to
Store
Knowledge
Degree of
Novelty
Ability to
Retrieve
Knowledge
Ability to
Transform
Knowledge
Lower novelty
enhances retrieval
because the prior
knowledge is
applicable to the
new problem.
Lower novelty
enhances
transformation
because
accommodating
solutions are
based on highly
applicable prior
knowledge.
Lower
dependence
enhances
transformation
because the
accommodating
solution has less
negative impact
on the different
Degree of
Dependence
teams'
requirements.
Degree of
Specialization
Higher
specialization
enhances
knowledge storage
because there is
more accumulated
knowledge to
store.
Higher
specialization
enhances
knowledge retrieval
because
determining the
relevancy of prior
knowledge is easier.
High specialization
generally makes
transformation easier
because expertise
exists which can be
drawn upon to more
readily create
accommodating
solutions.
Figure 2. Knowledge Transformation Relationship Matrix
-
- 17
CHAPTER 3: BACKGROUND
3.1 Ford Motor Company Business Overview
3.1.] Business Description:6
Incorporated in 1919, the Ford Motor Company design, manufacture, assemble and sell cars,
trucks and related parts and services. Their business is divided into two sectors, Automotive and
Financial Services. They employ approximately 346,000 people worldwide 7 and rank fourth
overall in the Fortune 500 and Global 500 rankings which is second relative to all other
automakers.8
Its Automotive sector operates in various markets worldwide with vehicle brands including Ford,
Mercury, Lincoln, Land Rover, Volvo, Jaguar, Aston Martin and a line of electric powered
vehicles called TH!NK. They also hold 33.4% ownership of Mazda Motor Corporation and
operate vehicle service brands Quality Care and Kwik-Fit.
The Financial Services sector includes its subsidiaries Ford Motor Credit Company and Hertz
Corporation. Ford Motor Credit Company provides financing and loans to auto dealerships and
associated vehicle leasing companies worldwide. They also conduct insurance operations
through the American Road insurance Company in the United States and Canada. Hertz
Corporation operates car, industrial and construction equipment rental businesses in over 7000
locations in the United States and over 140 foreign countries.
3.1.2 FordMotor Company and the E-Economy:
During the late nineties and entering the twenty first century, Ford Motor Company was enjoying
industry leadership, record profits, and was undergoing a transformation from a world-leading
car and truck company to a world leading Consumer Company. A significant part of its strategy
to achieve this was capturing e-business opportunities. It created an internal business unit, called
ConsumerConnect, whose purpose was to revolutionize core business processes within the
company through e-business activities. The ConsumerConnect group launched various ventures
in 2000, including FordDirect, a venture with Ford Division dealers enabling consumers to shop
- 18-
for new cars over the internet; Covisint, an internet based automotive supplier exchange and
most notably, Wingcast@, a venture with Qualcomm to develop telematics technology and
services in October, 2000.
3.1.3 Recent Events:
The year 2001 proved to be difficult with the $3 billion Firestone tire recall, 9 damaged
relationships with suppliers, dealers and employees, product quality rankings behind rivals
General Motors and DaimlerChrysler,10 along with domestic economy pressures leading to
approximately $6 billion in net losses for 2001, and plans to reduce the workforce thirty-five
thousand people worldwide, discontinue four vehicle lines and close five plants." Furthermore,
the Wingcast@ venture has experienced delays in delivering telematics systems. An executive
team that touted a renewed focus on the core business of making cars and trucks replaced
members of top-level management, including CEO Jacques Nasser. Ford Motor Company was
no longer to be a consumer company but was again presented as a, "Car and truck company,"
and was going, "back to basics," by new Chief Operating Officer, Nick Scheele.1 2
3.2 Telematics Overview
3.2.1 Overview Scope:
Other studies have provided comprehensive summaries on telematics technology and service
descriptions.
We do not attempt to re-create such extensive reviews here but offer a brief
summary with additional new information where noteworthy.
3.2.2 Why Telematics?
It has been estimated that people spend 500 million passenger hours per week in their vehicles,' 4
ranking third behind time spent at home or at the workplace. Statistics such as these helped
pave the way for a new E-economy market called Mobile Commerce (m-commerce).
Automakers envisioned a new wireless, two-way communications technology, called telematics
that was embedded in their vehicles, as a means to rejuvenate their stodgy industry and
participate in the E-economy. With as much as 60% of the lifelong value of an average midsize
- 19-
passenger car going to after market suppliers, combined with an initial estimated market
a
potential of $40B to $100B by 2010, the automotive manufacturers had good reason to take
5
look at how they might develop and exploit this new technology.'
3.2.3 What is Telematics?
Telematics is a blending of automotive and wireless information technologies. Initially,
telematics systems generally consisted of a voice-operated, hands free, analog cell phone, a
global positioning system (GPS) with limited text displays and in some cases, a satellite receiver,
all of which were embedded into the vehicle. A call-center infrastructure enabled information
and service transactions via conversation with a wireless phone operator or an automated system
of a
depending on the transaction requested. The human-machine interface generally consisted
pushing a button to send vehicle location data and connect with the call-center. Figure 1
illustrates a generalized telematics system (adapted from Newell, S. 2000).
x
&
Service
Personalized Information
Maintenance
(e.g. Stocks, News)
Internet
E-mail
X-MAI
A
-
Naviuation
Assistance
F_
Global
Two-Way
Communication
Streamed
Video
M/P-Commerce
Voice
Figure 3. Generalized Telematics System
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Emergency/Rescue
3.2.4 A Brief Chronology:
The first systems generally recognized as telematics were first introduced on 1996 model year
Lincoln Continental vehicles by Ford Motor Company. This Remote Emergency Satellite
Cellular Unit (RESCU®) offered automatic emergency call upon air-bag deployment and other
basic operator assisted services. It experienced very limited market success and the fundamental
technology expertise was passed along to a startup company ATX, who now, ironically, supplies
telematics products and services to Ford Motor Company. General Motors began telematics
systems and service offerings with its subsidiary OnStar@ in the year 2000. It has since pursued
aggressive implementation, leading to most of its 2001 production fleet to include OnStar@ as
standard equipment. Ford Motor Company soon followed with Wingcast@, which, unlike the
analog technology used by OnStar@, was based on latest digital wireless protocol technology.
Ford is to introduce the "Vehicle Communications System," on its 2002 Lincoln models, which
features a mobile phone handset specially designed to dock into an integrated phone mount that
is hard wired in the vehicle. 16
3.2.5 CurrentFunctionality:
Current telematics services include roadside assistance, route guidance, traffic information,
emergency assistance (automatically initiated upon airbag deployment), vehicle locator, basic
personalized information such as news and weather, concierge services, such as dinner
reservations, and reception of global radio broadcasts via satellite. Furthermore, short distance
wireless communication protocols such as Bluetooth have progressed allowing Bluetoothenabled devices to communicate with each other. DaimlerChrysler is expected to introduce
Bluetooth enabled vehicles by 2003.17 This would allow consumers to bring in a Bluetoothenabled device of their own, such as a cell phone and have it communicate with their vehicle's
telematics interface without any physical interface. Telematics functionality is growing rapidly.
For example, the startup firm, Networkcar, has is already developing an aftermarket system,
called CAReaderTM that plugs into a cars existing computer and wirelessly transmits vehicle data
to a remote diagnostics center. Performance problems or service issues can be e-mailed directly
to the vehicle owner and car dealer.18
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3.2.6 Future Capability:
Future envisioned capabilities include internet access, inbound and outbound e-mail, streamed
video, and position-commerce (p-commerce) which would enable personalized information and
financial transactions to be conducted directly with the driver while they are in their vehicle. For
example, a person could enable automatic e-mail messages be sent to their cars when they are in
proximity to a store that has a product they want to buy. Recently, Customer Relationship
Management (CRM) has been discussed as a means for auto companies to continually interact
with owners of their vehicles to better understand their needs and build long term relationships
with their customers. 19 Insurance companies collecting vehicle data from telematics systems
could offer reduced pay-per-use rates. Faulty engine control module software could be remotely
updated to improve vehicle performance without the consumer ever having to take the vehicle in
for service. Vehicles could warn each other under potential collision conditions and alert the
drivers or, with tying into Interactive Vehicle Dynamics (IVD) systems, execute corrective
maneuvers automatically. The options are really quite staggering to ponder.
3.2.7 A Tenuous Business Model:
Currently, telematics service providers (TSPs) such as OnStar@ and Wingcast@ have built
business models based on an airtime reseller model. Revenue is created through consumer
subscription fees for the telematics services. The service providers buy wireless airtime in bulk
from air-carriers such as Sprint or Verizon etc. and re-sell the wireless airtime to the subscriber
at a higher rate with the added service functionality. The viability of this business model has
come under scrutiny, citing the lack of leverage in the value chain TSPs have with respect to aircarriers like Sprint who own the physical infrastructure required to enable wireless
communication. 20 It has been estimated that OnStar@ has lost approximately $1 billion since its
beginning and Wingcast@ has struggled with launching its telematics business.
Furthermore, the view of e-business in general has changed significantly since the onset of
telematics. Over the past year we have entered into what Baba Shetty, an analyst at Forrester
Research Inc. has called, "the era of rational e-business." For example, General Motors recently
announced it was scrapping plans for AutoCentric, a $50 million venture car-buying site with car
dealers, and pulled out of its pilot venture with online auto marketer Autobytel. Ford Motor
22
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Company announced it is selling off its stake in Internet Capital Group Inc. after its $50 million
holdings, purchased at $108 per share, has fallen to less than $1.20 per share as of December
2001. 21 This comedown in the e-commerce sector presents additional pressure to associated
technologies such as telematics.
3.2.8 Telematics Partnershipsand Collaboration:
While General Motors and Ford Motor Company represent the leading automakers for telematics
investment, and are aggressively developing their own TSP enterprises, other automakers are
establishing relationships with telematics suppliers to introduce telematics technology into their
vehicles (Figure 4). Furthermore, various automakers are participating in the Automotive
Multimedia Interface Collaboration (AMI-C) that is developing standard telematics electronic
interfaces to the vehicle. Overall, telematics has generated an immense amount of activity
inside, and outside, the automotive industry and provides an interesting case of new technology
I
Automakers and Telematics Partners
Acura....................................OnStar®
OnStar®
Audi.....................................
Cross Country
BMW....................................ATX,
DaimlerChrysler....................... AT&T Wireless
Mercedes-Benz........................ ATX (badged as "TeleAid")
Ford......................................Wingcast@
General Motors........................OnStar@
(badged as "Lexus-Link")
Lexus....................................OnStar@
Motorola, Sprint PCS
Lincoln..................................ATX,
Subaru...................................OnStar@
Information Source: Automotive News, January 8, 2002,
Figure 4. Automakers and Telematics Partners
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dynamics.
CHAPTER 4: METHODS
4.1 Focused Interviews
Focused interviews were conducted with a cross section of eighteen Ford Motor Company
engineering and management employees who were responsible for delivering, telematics
technology into new model vehicles. The interview schedule was designed to capture a
"horizontal view" of the firm by virtue of interviewing a broad range of corporate activities that
touched telematics, including, but not limited to, business strategy, public affairs, marketing,
finance, advanced product engineering and scientific research activities. Additionally, the
interview schedule was designed to capture a "vertical view" of the firm by virtue of speaking
with a broad range of positions ranging from senior management to front line engineers.
4.2 Standard Questions
Subjects were sent a list of eight standard questions that solicited opinions on what technical and
managerial directions Ford Motor Company should pursue for telenatics (Figure 5).
Subsequently, each subject was interviewed, individually, to discuss their thoughts and answers
to the standard questions. While each question addressed a specific area of interest, they were
intentionally open ended to foster rich discussion and provoke the exploration into issues and
opportunities from the subjects' perspectives.
The first question was designed to simply establish and confirm the specific area of the subject's
responsibility within the firm. Question two focused on identifying opportunities for the firm to
exploit telematics technology as a means to create new revenue streams for the firm (i.e. other
than the "traditional" revenue streams means of selling finished/partial vehicles, financing
consumer purchases of vehicles or sales of aftermarket vehicle components etc.). Questions
three through six categorized the telematics technology by major functional groupings. These
groupings, communications, information, entertainment and embedded systems, were chosen to
ensure coverage of the full spectrum of telematics applications being discussed within the firm.
The groupings also provided a means to facilitate the interview and allow the subjects to present
more, or less, discussion on a particular area, as they desired. Question seven solicited
discussion regarding the design of the interface between the in-vehicle telematics system and the
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vehicle occupant. Question eight focused on issues revolving around distraction of a driver
using the human-vehicle telematics interface. Subjects were encouraged to answer the questions
in any order, omit questions as they chose and to focus on questions they felt particularly close
to. They were also clearly reminded that their participation would remain anonymous and they
were requested to identify any information they deemed confidential or otherwise sensitive in
nature so that it could be treated appropriately. Follow up interviews were conducted with
specific individuals, as needed, to clarify answers and address new and/or unresolved gaps in the
data.
TELEMATICS SURVEY QUESTIONS
Question 1: How have you been involved in telematics? What are your
responsibilities? What must you deliver?
Question 2: What should Ford do, in terms of product and/or strategy, to
create new revenue streams via exploiting telematics? Why?
Question 3: What should Ford do, in terms of product and/or strategy,
regarding communication based telematics systems? Why?
Question 4: What should Ford do, in terms of product and/or strategy,
regarding information based telematics systems? Why?
Question 5: What should Ford do, in terms of product and/or strategy,
regarding entertainment based telematics systems? Why?
Question 6: What should Ford do, in terms of product and/or strategy,
regarding"Embedded" data collection based telematics systems? Why?
Question 7: What should Ford do, in terms of product design and/or strategy,
regarding the human-to-telematics interface? Why?
Question 8: What should Ford do, in terms of product and/or strategy,
regarding driver distraction from telematics systems? Why?
Figure 5. Focused Interview Standard Questions
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4.3 Data Analysis
For each interview, the raw data was reviewed and distilled to its main theme(s) and key words.
This consolidated data was entered into a matrix with columns representing each standard
question and each row representing an individual interview. Anecdotal responses from each
interview were entered into the matrix under additional columns. Responses to the first question
were reviewed and verified the desired mix of work responsibilities was achieved. In order to
ensure anonymity of the subjects, data related to the first question is only presented indirectly
where it offers pertinent insight to the study. For each column in the data matrix, responses were
reviewed to detect emerging themes, interesting tensions or provocative perspectives.
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CHAPTER 5: RESULTS
5.1 Introduction
Given the verbose nature of the data in this study, even consolidated results are too cumbersome
to present here in their entirety. Additionally, due to the open-ended nature of the interviews,
most subjects provided significant discussion to issues not directly related to the standard
questions and/or provided comments that were more generic and could not be neatly categorized
under a specific question. While these indirect discussions evoked a wealth of information and
insights, much of it could not be contained within this study. Thus, direct responses to the
standard questions are briefly summarized in Section 5.2 and the most noteworthy asides and
individual perspectives are presented in Section 5.3
5.2 Focused Interview Questions
5.2.1 Question 2, Creating new revenue streams with telematics:
All eighteen respondents seemed to recognize telematics service subscription fees as a potential
means of new revenue for the Company but most comments on this question revolved around
whether or not the subscription fee offered a viable means of new revenue for the Company.
Opinions on this varied but even those with relatively optimistic viewpoints about Ford's ability
to create new revenue qualified their response(s) by saying that any revenue would very modest.
Nine of eighteen (50%) subjects explicitly suggested outsourcing the telematics service
capability. Of these subjects, 44% explicitly suggested that Ford should license OnStar@
services, with one person suggesting that Ford could re-badge the service so as not to use the
OnStar@ name directly. Only one out of eighteen subjects suggested that telematics still offered
a significant opportunity for service based subscription revenue. This subject proposed revenue
in the form of kickbacks from the air carriers due to Ford enabling their cars to seamlessly accept
an air carrier's phone handsets. To enable this, it was suggested that Ford build and leverage
relationships with the wireless air carriers. Furthermore, only one out of eighteen respondents
proposed creating new revenue by selling vehicle location data, from telematics equipped
vehicles, to traffic reporting services. However, even this subject perceived such revenue
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streams as, "by-products," of the technology and reinforced their opinion that real revenue would
be from improved customer satisfaction with their new vehicles.
Interestingly, no one suggested that the company should not pursue integrating the technology
and hardware into vehicles, but the predominant context was that the company should be using
telematics as a means to improve conventional revenue streams of selling cars and trucks. This
would be accomplished via use of telematics as a customer-valued feature, leading to higher
customer satisfaction, loyalty and subsequently, improved vehicle sales.
5.2.2 Question 3, CommunicationsTelematics Technology:
Nearly all of the respondents cited "Plug and play" as the appropriate strategy, combined with a
short distance wireless communication protocol (e.g. Bluetooth), to enable a wireless, seamless
interface between the handset and the vehicle. Thirteen out of eighteen (72%) subjects explicitly
stated that the vehicle should recognize any handset the customer brings into the vehicle.
5.2.3 Question 4, Information Telematics Technology:
All eighteen subjects focused on navigation systems in response to this as the primary theme in
telematics information systems. Only one subject cited navigation as a high want and should be
pursued immediately across all carlines regardless of whether it was telematics based or by some
other means (e.g. CD ROM). All others were lukewarm citing the need for knowledge of
customer wants, price points and lack of infrastructure to enable reliable function. Several
subjects suggested that navigation technologies might be considered for overseas markets,
particularly Japan/Europe, given the higher consumer need, but not for USA markets given the
advanced and relatively user -friendly road infrastructure.
5.2.4 Question 5, EntertainmentTelematics Technology:
All eighteen subjects were lukewarm to this technology citing existing, cheaper systems (invehicle VCR/DVD) adequately meeting consumer needs and wireless data transmission rates
being much too slow (i.e. infrastructure lacking). Several subjects mentioned using satellite
radio as a gauge to measure consumer acceptance of telematics based entertainment technology.
A consistent theme was to determine customer needs and develop the feature from there.
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5.2.5 Question 6, Embedded Telematics Technology:
Remote vehicle diagnostics and maintenance was the focus of nearly all the subjects' responses
as a potential rationale to pursue this technology. One of the eighteen (5%) subjects cited
embedded telematics systems as a real opportunity for building and managing relationships with
customers while nine (50%) subjects explicitly voiced concern over consumer privacy issues and
suggested that the consumer would need to control what type of data is collected from vehicles
and/or only done so when they initiate the transaction. Network infrastructure, vehicle hardware
(e.g. sensors) and lack of clear value to the customer were also cited as key concerns. Several
subjects cited fleet vehicles as a potential area where the customer may perceive high value due
to the high costs of vehicle down times for these segments.
5.2.6 Questions 7 & 8, Human Machine Interface and Driver Distraction:
Most of the subjects viewed the questions on human-machine interface and driver distraction as
intertwined and answered these two questions together so results for both questions are
summarized here. One of the eighteen subjects viewed the human-to-machine interface as the
key opportunity for future competitive advantage within the automotive industry and suggested
that Ford invest heavily to ensure leadership in this area. Others emphasized intuitive, easy to
use interfaces with minimal physical interaction. Superior voice recognition was cited as a
crucial technology by nearly all of the respondents. However, four of the eighteen (22%)
subjects explicitly cited good voice recognition systems as necessary but not sufficient for a good
human-machine interface.
All subjects recognized driver distraction as an issue to consider. While the opinions ranged on
how significant an issue driver distraction would be, no respondents suggested that driver
distraction concerns would prevent the introduction of telematics technology. Opinions ranged
from holding the driver as ultimately responsible for their actions, to Ford being obligated to
introduce distraction countermeasures for its vehicles equipped with telematics. Opinions were
mixed regarding the usefulness of corporate design guidelines in addressing driver distraction.
Criticism that internal guidelines may place too much restriction on the vehicle design was the
common concern.
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5.3 Interesting Asides and Individual Perspectives
Many respondents began speaking about what they were familiar with and did not directly
answer the focused interview questions. In Sections 5.3.1 through 5.3.4 specific, but broadly
reaching suggestions on what Ford Motor Company should do with telematics. Sections 5.3.5
through 5.3.13 highlight some of the difficulties weighing on subjects' minds, which indirectly
lead us to potential actions that Ford Motor Company might pursue.
5.3.1 "Trickle-Down" Telematics Deployment:
Several subjects mentioned using premium brands as initial carriers of the technology and letting
it trickle down to mass-market brands in order to better absorb the high cost of the telematics
hardware.
5.3.2 Offer Telematics as Stand Alone Options:
Several subjects suggested that telematics offerings should be tiered as stand alone options that
the consumer could specifically order on their vehicle at extra cost.
5.3.3 "Market-Pull"Telematics Development:
A strong theme emerged suggesting that customer wants and price points needed to be
understood more thoroughly. This would drive investment and product strategy.
5.3.4 Be a "Fast-Follower"for Telematics:
An interesting comment made by one subject was that Ford Motor Company should learn to be a
"Fast-follower" company because there was no advantage or pay-off to be a leader in telematics.
5.3.5 Relationships with Employees, Suppliers, Dealers:
Several subjects stressed that relationships between intra-company activities, suppliers and
dealers need to be improved. Indeed, others seem to share similar opinions since Ford Motor
Company was recently ranked the least desirable automaker to work with by suppliers 22 and one
of the key elements of Ford Motor Company's turnaround plan is to repair relationships with its
employees, suppliers and dealers.2 3
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One subject said he has witnessed difficult working relationships and this has hindered abilities
to achieve his core objectives. A logical extension is that better cooperation is needed to attempt
such a challenging task as integrating telematics. Several subjects felt that long-term
partnerships may be helpful so that the benefits of established relationships can be realized
between Ford Motor Company and its suppliers. Another respondent mentioned that there were
organizational issues when the Ford engineers reverted to the established supplier relationship
pattern versus treating Wingcast more as joint venture partners.
Comments from a former supplier have indicated that Ford Motor Company is dictatorial and has
tipped the balance too far toward "needing to be tough" to ensure deliverables are met at the
expense of creating trust and building teams. They mentioned, "Ford should enable suppliers to
make money, work as a true team, share success and develop non-threatening communication.
We need to help them be successful so they have incentive for them to bring their best stuff to
us." They also proposed the automaker needs to get away from basing everything on the lowest
cost in terms of which supplier to choose and to think holistically about the whole package that
each supplier brings to the business equation. These prevalent, although not universal, tactics
can create a reaction within a supplier to hold back their best people and sometimes their best
efforts so as not to subject their best people to unpleasant situations. This is problematic given
the tenuous position of the automaker in the telematics value chain and the potential increased
reliance put on suppliers to successfully integrate new technology.
Forming strategic adjacencies was also mentioned as a key to sharing customers and sharing the
revenue stream. One subject summed it up by stating, "We must have friends in the right places,
what is good for our customers is good for all of us. We must establish relationships with all the
companies that come together to serve our mutual customers." This too, will require a culture
change for us as a company. We will need to look on these as partnerships of equals or even in
some cases, with ourselves in a subordinate role. These may be loose alliances formed over time.
5.3.6 Learn from the Wireless World:
Several respondents mentioned the need to learn from and implement as appropriate, practices
from the wireless world that can improve the automotive world that we operate in. There is also
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need to learn from them because we need to in order to work effectively in integrating their
technology into our vehicles. It is extremely difficult boundary; the knowledge each industry
possesses is very different, the cultures are very different, the speed of technological change as
well as the speed at which product cycles occur are markedly different. The auto industry is very
mature, cumbersome and technologically set in its ways, while the wireless industry is changing
very rapidly and is very used to living with great uncertainty. There was recognition by several
subjects that Ford Motor Company could learn a lot from the air carriers and phone makers with
some noting that wireless product development processes are "more sophisticated than ours", due
to the rapid changes they must accommodate in their products. There was a perception that we
should adapt appropriate aspects of their PD processes to improve ours.
5.3.7 Auto Dealers Cut Out of the Value Chain:
One subject noted that the Wingcast business model cut auto dealers out of the value chain. He
said that Wingcast was not planning to use dealers, since they assumed they would use their callcenters to attract customers. He was incredulous that this could have been the intended plan and
expressed his view that the team putting together the telematics business model did not have
sufficient retail experience and was unfamiliar with the critical role auto-dealers play in
introducing new vehicle features. He pointed out that without dealer buy in, new options like
telematics, will not get sold. He stated, "Dealers can and will kill anything that they are not
benefiting from. The Wingcast business model did not allow enough profit for the dealers to
make money." He noted that telematics requires such significant demonstration and promotion
to the customer that the dealer would not recoup their costs and it would take valuable sales time
away from presenting more profitable extras such as extended warranty packages. He viewed
this as a fundamental flaw that would greatly hinder, if not destroy telematics adoption and
stated, "We are not going to alienate dealers for telematics. They are already alienated enough
from some of Ford's efforts at direct retailing and inter-net sales..."
5.3.8 Customer RelationshipManagement (CRM):
Recall that a potential benefit from telematics that automakers envision is to enhance
relationships with customers by streamlining maintenance or monitoring vehicle performance,
driving patterns etc. One subject viewed this as a great opportunity for the automakers to exploit
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telematics, while other subjects said it sounded "desperate," with one person adding, "...it is
creepy, I don't want a relationship with an auto company and I don't think others will either."
Most subjects gave tepid responses to this question saying, "It may be worth pursuing." This
concept is a long way down from the original hopes of realizing new revenue streams as a
telematics service provider. Using CRM to reduce warranty costs opportunity is an obvious
want and using it to speed up the service experience sounds good, but as an auto dealer we spoke
to pointed out, there are many infrastructure enablers that must be in place to make better service
a reality. For example, this dealer noted that having the part waiting for you when you arrive
sounds nice, but often the inventory systems in use may take days to get the needed part. There
is also a tremendous amount of computer infrastructure necessary to monitor the vehicles and
interpret the data. Dealers and Ford would have to develop new skills to handle this and develop
better working relationships to share the information and any profit. All with a very intangible
bottom line associated with it.
5.3.9 Blending the Skills From Auto and Wireless Industries:
It was clear during our interviews was that our subjects felt that Ford Motor Company embarked
upon an extremely aggressive plan to implement telematics. However, their comments lead us to
believe that the right people were difficult to find. One subject thought that, "We (Ford) should
have tried harder to get the right skill set." The general consensus is that at the working level,
good people were hired, but many did not possess specialized knowledge about telematics and
were unfamiliar with the Ford product development system and processes. Another subject
noted that, through no fault of their own, these new engineers don't yet possess the specialized
skills to understand the systems issues. Their lack of experience and established networks with
other workers hindered their ability to navigate Ford's more bureaucratic product development
system. It was also pointed out that the lack of specialized knowledge created friction with other
functional teams that were caused extra work to accommodate mistakes made by the newcomers.
Several interviewees indicated they felt that the company had underestimated the difficulty of
blending the automotive and wireless skill sets. The organization was learning but started from
an unintended disadvantage that had made a very challenging goal that much harder to attain
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5.3.10 "Clockspeed" Rears Its Head:
One challenge cited by many is that of the different rates of technology development cycles
between wireless and automotive industries. This rate or "clockspeed"2 4 difference of telematics
has been cited as a key issue in other automotive product development research." In the wireless
world, where technological change is quite rapid, the product cycles are such that significant
technological improvements happen far more rapidly than the time it takes to develop a new
vehicle. Problems arise in product development when trying to accommodate this difference.
One subject from the telematics engineering activity mentioned, "We are constantly battling with
program teams justifying why we are late and why we don't have suppliers sourcing decisions
made." Another subject stated, "We are used to working with established companies that
understand their technology. We are not used to working with industries (wireless) in which
there is such high growth rates and such a turnover of companies." This highlights the depth of
the challenge in that the telematics churn rate even prevents the telematics suppliers from
developing high levels of specialization that the automotive industry might be accustomed to. In
the rapidly changing wireless industry, the best suppliers for given technology may change
relatively frequently compared to more traditional automotive component suppliers. It is not as
stable as the Ford-supplier relationships in other aspects of the business. Frustration appears to
stem from the lack of appreciation from other product development activities as to the unique
challenges the telematics team faces.
5.3.11 An Individual Perspective:
The following is a summary of a particularly interesting interview. We present it here in fair
detail because it provides insight to the complexity of the issues telematics creates. This subject
echoed other responses citing the high cost of the telematics hardware as a barrier to
implementation. They stated, "We (Ford) underestimated the cost of getting hardware in the
vehicles. It was much harder, the whole experience, than any of us thought it would be," and
added, "We did not and could not foresee all the hardware and architectural interaction problems.
The interface issues were exponential. Telematics will be done in some way, but our method of
delivering it is to be determined." This subject noted how telematics has imposed very unique
and novel challenges to the established automotive mindset. They said, "We don't offer
customer infinite selection of seat cloth material, but we are willing to offerto make our cars
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accommodate all types of cell phones, it is a different mental model... the cultural standpoint is
staggering." They went on to say," We have defaulted to our comfort zone. We have put it in a
space that is outsourced. This is the automotive mindset. Telematics is very non-automovish."
There was great promise and potential of what the business could have been, if we were willing
to invest what it would take to succeed. Too many of us were uncomfortable with that risk level.
We are inflexible. We want to know where we are going, what it takes to get there and then go
do it. We are uncomfortable with fogginess. We want to go 5mph in fog, rather than 40 mph."
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CHAPTER 6: INTERESTING TENSIONS & CONFLICTS
6.1 Introduction
In analyzing and synthesizing the responses, many conflicting points of view and conflicting
entities were observed. We've expounded upon three in the sections below to give a flavor for
some of the issues surrounding telematics implementation at Ford. In section 6.2 we discuss the
tension between the desire to utilize telematics to for enhanced customer relationship
management (CRM) and the fact that the current business model does not have sufficient
incentives for auto dealers to profit from telematics. In section 6.3, we discuss the differing
cultures seen in the Auto industry and the Wireless industry and in Section 6.4, the dynamics
surrounding the "back to basics" mantra seen in the company right now is discussed in light of
"cultural lock-in", whereby mature companies struggle in making organizational and mindset
changes to confront new challenges.
6.2 Cutting Out the Auto Dealer versus Customer Relationship Management (CRM)
Since the beginning of the automotive industry, retail dealers have held the primary contact with
the end consumer of new vehicles. For all intents and purposes, dealers are as mature and
established as the automakers themselves and are as entrenched in their ways of business as the
automakers are in theirs. Selling vehicles is not as easy as some in the auto industry might think.
A dealer we spoke to professed, "Vehicles need selling, if you treat them like TVs, you won't
make any money. Salespeople need to be incentivized to sell. The emotional attachment that
people have their vehicles can be used to push them." Selling vehicles is a highly developed
institutional skill that they've invested a lot of effort in perfecting, just as automakers have
invested much effort into developing skills to build vehicles. Perhaps partly because of this
highly evolved skill in selling vehicles, consumers have notorious negative perceptions of auto
dealers. One of the historical perceptions is that consumers feel like the dealer does not care
about them once the vehicle sale has been made. For many, going to the car dealer is a stressful
proposition. It is not surprising that automakers would find it troubling that the car
buying/servicing experience is less than enjoyable.
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Thus, it is also not surprising that there has been historic tensions and conflict between the
automakers and dealers. Different times throughout the past, Ford has tried to "get rid of" its
dealers. The most recent events include the "Mega-dealers" Ford created through buying out
certain numbers of its dealer network and consolidating them into large centralized outlets. Ecommerce has opened up possibilities for direct inter-net sales that serve to bypass the dealer.
However, auto dealers continue to hold a very powerful position in the automotive value chain.
Recall the comments form one of the interview subjects in reference to introducing new vehicle
features, " Dealers can and will kill anything that they are not benefiting from." Since the dealer
is the contact to the consumer, they control the sales transaction and have a lot at stake with how
that transaction transpires. Thus, it seems natural that auto dealers feel that they "own" the
customers and would be very protective of that relationship. CRM threatens to shift that
relationship to the automaker versus the dealer.
The automakers vision is to create "multiple touch points with customers" to enhance the vehicle
ownership experience and better understand customer needs over the life of the vehicle. Recall
from the interview data that telematics does not sell itself (as is probably true for many new
technologies for which the market is not yet established) and requires the dealer to take
significant time out of the selling transaction to explain and demonstrate it to the customer. This
is time that the dealer could spend selling more profitable items such as extended warranties,
rust-proofing and paint treatments. Recall also that the telematics business model does not
compensate dealers for the additional expense and risk they incurred for pushing this new
technology.
Thus, it seems problematic that the very means by which the automaker wants to establish and
build these extended customer relationships (CRM) cuts out the very entity that holds that
relationship. This would seem to exacerbate an already tenuous relationship between the
automaker and the retail dealers. This is dangerous because the power of the dealers in the
automotive value chain is very high and their relationship with the customer is their key
contribution to it. This combination of factors explains why one of the interview subjects was
incredulous that the basic telematics business model did not provide for any incentives to the
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dealers. It seems that telematics strategies would need to foster and build the automaker - dealer
relationship versus apply additional pressure to it.
Then there is the question of whether or not consumers care either way. The interview data
suggested that the desire for consumers to have a relationship with an automaker is just not there.
One subject described it as "creepy." Add to this, the tenuous state of any relationship between
the consumer and the auto dealer and one is left wondering, quite frankly, why pursue CRM?
From this perspective it is understandable why someone would label CRM as sounding
"desperate."
6.3 Culture-Clash Between Automotive and Wireless Industries
Several respondents alluded to the interesting clash of cultures between the automotive and
wireless worlds. One of our subjects mentioned the difficulty many companies have had in
working with the auto industry and that some have walked away from business with Ford due to
the complexity of requirements necessary to integrate their systems into Ford vehicles. For small
companies seeking to supply large volumes of parts to automakers, the down side is not only the
complexity and additional requirements they must accommodate but also the automaker's
attitude to dominate the relationship being that they (the automaker) are the customer to the
supplier. For many smaller companies not burdened with the bureaucracy of a large firm,
working with an automaker may be a difficult adjustment. Healthy supplier relationships exist
and can be seen scattered throughout Ford, however, there are people in the company who hold
different views on supplier relationships. We are all products of our experience and who
influenced us during our careers and those who hold a more rigid view of supplier relationships
will not be easily convinced that it is beneficial to change.
Since the auto industry is a relatively stable environment, processes and methods are entrenched.
The automotive product development process is very regimented and focused in eliminating
unknowns before proceeding to subsequent steps. Technology is well understood and not rapidly
changing. Getting change accomplished is hard. Trying something radically new is difficult
because of the inherent inertia of the auto industry. There is nothing in the market that is
pushing anyone to compete at levels where rapid change is rewarded. Automotive consumers
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are advanced and have high expectations of a product that constitutes such a large investment. It
is expected to function properly for five, ten, fifteen plus years.
Ford Motor Company has been such a fixture in America that there is a sense by some that it will
always survive. This mindset can facilitate complacency, security and entitlement. It seems
relatively rare to fire and employee in the auto industry, either for performance or due to
economic stress. Instead, workforce reductions are typically achieved through early retirement
offerings to accelerate the natural attrition process. In many respects the large, mature
automotive industry acts as a shelter from the harsh, unforgiving dynamics of the market.
Contrast this with a new industry, such as wireless where change is rapid and companies are
coming and going in the industry. There must be a different mentality in the workforce when
dealing with rapid change. Their problems are quite different. They are trying to keep pace in a
highly competitive and rapidly changing market. Discontinuity is a fundamental assumption.
There are not yet clear established "winners" because the industry has not yet approached
maturity. Their consumers are not as advanced as automotive consumers because they have not
been able to build generational knowledge and expectations about the products. The products
are, for all intents and purposes, disposable compared to an automobile because they have such a
shorter lifecycle and require a fraction of the investment made in a automobile. Their quality is
lower; their customers are less hard on them, because the products are novel. One respondent
told us that there is much more price elasticity with cell phones than with vehicles.
Mixing the above two industries has been an interesting experience and it is not trivial. During
the focused interviews one subject elaborated on how difficult a challenge the culture clash
imposes. They recalled a speech they heard by Jack Welch in which he apparently said he
decided not to attempt ventures with "Silicon Valley" companies, mainly due to concerns over
culture clash and that he didn't want to face explaining to his General Electric employees why
these "Silicon Valley" workers were driving around in luxury autos as part of their assumed
compensation perks. When people from two industries are thrown together, they don't suddenly
change their approaches. They often don't know anything else. The interview comments about
the auto dealers not being part of the basic telematics business model and the desire to put the
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"non-automovish" telematics into a familiar outsourced automotive space highlight the
fundamental differences in corporate cultures. In the end, as one respondent put nicely, the
automotive and wireless skills need to be "blended" together. This blending is the successful
bridging of the cultural boundary and a first step is communicating the challenges that each
industry faces. Often, a lack of understanding between different groups causes the friction and
once challenges have been explained in terms that can be understood, the friction can subside.
Indeed, bridging this cultural boundary is a crucial part of successfully integrating telmatics. It
could be a positive force for more than implementing new technology. It could help in the firm's
day-to-day business and improve high-level system performance that gives a more balanced
optimization of targets, rather than powerful groups forcing their requirements and being
inflexible because they possess organizational clout.
6.4 Capturing Value from Telematics: Survival Mode vs. Cultural Lock-In
It was clear from the interview data that most respondents are skeptical about Ford's ability to
create new revenue opportunities from telematics and are very focused on the "core" business. A
strong theme emerged to treat telematics as a car feature and outsource it, allowing the firm to
focus on vehicle quality, cost and customer satisfaction. This places telematics in a familiar
automotive context and the conventional revenue stream. However, the reasons behind this
mindset are not trivial because they can have significant implications for the company's strategic
decisions concerning new technology.
First we note that this theme in the responses could represent corporate mantra because it is
aligned with the well-publicized desire of the company's new senior management to re-focus on
the core automotive business. However, all participants in the study knowingly had full
confidentiality and were very passionate and candid in their interviews. Thus, their sentiments
should be genuine for all the themes and opinions received in this study and not simple
regurgitations of corporate-speak.
Next, it is clear that at the time of this study, Ford Motor Company is facing serious challenges
in the core automotive business sector and could be characterized as sliding into a survival mode.
The automotive industry is highly cyclical and is characterized by enormous profits in times of
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general economic prosperity. However, it is also characterized by enormous cash outlays and
profit-eating product incentives to finance operations and maintain market share through times of
general economic downturns. The domestic, and international, economy pressures experienced
since the new millennium have placed a heavy burden on automakers to shore up their core
business operations. Furthermore, competition in the automotive industry is highly productcentric and outsourcing has become an increasingly adopted practice. Thus, the negative
feedback the company has received for product quality and supplier relationships cannot be
treated lightly. All of this, combined with the costly Firestone tire campaign has placed Ford in a
difficult short-term business position. One can understand why respondents in this study were
very keen to view a new and uncertain technology such as telematics, in terms aligned with the
established industry norms of outsource, cost, quality, customer satisfaction etc.
However, tendencies for firms to revert back to familiar patterns when faced with new and
25
uncertain information, is a dynamic on which researchers have commented.
26 27
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2
Foster and
Kaplan discuss at some length that as firms age, creative divergent thinking naturally gives way
to rational, process intensive, convergent thinking. Thus, mature firms develop "cultural lock-in"
due to embedded mental models that are built over time. The mental models may become
manifested in corporate control and measurement systems. These systems can stifle innovation
precisely because they are based on rational, convergent thinking and seek a continuous,
predictable state. This convergent thinking is needed for operational excellence, where surprises
and unpredictability are troublesome, but when faced with something new and uncertain, a firm
may react defensively and revert back to what it knows because it cannot reconcile uncertainty
within its mental models and corporate control processes. This they argue is the key contributor
to a firm stagnating with respect to the market. They suggest that, "Corporate control systems
also undermine the ability of the organization to innovate at the pace and scale of the market.
Under the assumption of continuity, for example, the arguments for building a new business can
be turned back, since its probable success cannot be proven in advance. Under these
circumstances, it is likely that ideas based on the incremental growth of current capabilities and
mental models will be encouraged." To sustain above average market performance, they argue a
firm must continually create different growth opportunities, which requires a firm to create,
innovate, think divergently and embrace discontinuity."
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From this perspective, the theme for respondents in this study to place telematics into a known
context (e.g. a new vehicle feature to increase vehicle sales) and focus on the core operations
poses a sinister situation because it might indicate cultural lock-in and convergent thinking
which may lead a firm to discard new opportunities that are difficult to navigate, yet critical to
future, longer term success of the firm.
6.5 Summary
This chapter illustrates the inherent and subtle nature of conflicts generated by telematics. These
conflicts can be thought of as interfaces or boundaries where the tension across them must be
reconciled. This is not trivial to accomplish but it is necessary in order to successfully capitalize
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on the new technology.
CHAPTER 7: SOME EXPLICIT NOTIONS ON WHAT FORD SHOULD DO
7.1 Introduction
While the standard questions in our focused interviews were intended to foster open-ended
discussion on telematics issues and strategy, they were phrased to explicitly ask for subject's
opinions on potential actions and alternatives available to the company for telematics (i.e. "What
should Ford Motor Company do... ?"). Many of the subjects in our interviews obliged us in this
respect and in this chapter we discuss several themes that emerged.
Some of these suggestions
came as direct answers to specific questions and some were given in a broader context that could
not be neatly binned to a specific interview question. Numerous subjects cited some, while
others were mentioned only by a few or in some cases an individual. What they all have in
common is that they have strategic implications to an established firm trying to adopt, integrate
and deliver new technology in its products.
Sections 7.2 discusses the merits of being a 'fast-follower" as a strategy for managing new
technology. Section 7.3 talks about "market-pull" technology development, which was a strong
theme in the interview data. In section 7.4, we discuss a "plug and play" approach to technology
integration. In section 7.5, we discuss the "Technology Tax," which is a generalization of the
"OnStar@ Tax" used by General Motors to subsidize their telematics technology integration.
Sections 7.6 through 7.8 review ideas from our subjects on telematics deployment strategies. In
Section 7.9 we summarize the discussion and offer some recommendations as to areas the
company may wish to focus attention.
7.2 Be a "Fast-Follower"
One interviewee suggested that Ford should learn to be a "Fast-Follower," because it "will not
pay to be a leader in telematics." This is a provocative approach to new technology insertion in
general and has potential advantages. First, it can mitigate the risk for investing in a form of the
technology that is not "dominant." Emerging technologies are characterized by being in an era
of "ferment" until a dominant design develops that lures mass adoption of the technology and
marks the beginning if the "take-off' stage in the technology life cycle (Figure 2). Thus, waiting
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until a dominant design develops and then quickly latching on to it gives the advantage of
aligning one's efforts with the form of the technology that has highest probability of market
success while simultaneously minimizing investment expended testing out alternative forms of
the technology, some or all of which may not be viable. While it is arguable whether or not a
dominant design can be recognized as such except in hindsight, the
Performance
"Fast
Follower"
"Maturity"
entry
"First
Mover"
"Take-Off"
entry
Dominant Design
emerges
"Ferment"
Effort
Figure 6.Technology S-Curve
fast-follower approach does enable more information to develop regarding the potential future of
the technology, which can improve decision-making. Given that automobiles are the second
largest investment/purchase that a family will make, second only to a home, i.e. the consumers
have a lot at stake when they go to purchase an automobile. It may be better to be the later
entrant firm that implements the technology in the right way versus being the "first-mover" firm
that implements a technology that does not meet the expectations of the advanced auto
consumer.
However, the fast-follower approach is problematic in the respect that it trivializes the task of
integrating a new technology into a complex product system such as an automobile. A fastfollower approach may be attractive assuming one is dealing with an innovation that is
incremental in nature because incremental innovations readily fits into the firm's existing
knowledge processes. However, our interview data shows that the task of integrating telematics
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into a vehicle is anything but trivial. Indeed, as we discuss further in the next chapter, telematics
significantly affects the interfaces in the vehicle product system, and necessarily, the product
development organization. Telematics may pose more as an "architectural innovation," (Chapter
2) which is extremely difficult for mature firms to manage because it affects deeply embedded
"architectural knowledge" that is hard and time consuming to align with the new technology. A
potential countermeasure to this might be an interface standard. This would stabilize the
interface, which might minimize the need for the firm to modify architectural knowledge.
7.3 "Market-Pull" Technology Development
Respondents consistently expressed the opinion that customer needs and pricing information
must be determined to successfully launch telematics systems. The want to establish customer
needs is a fundamental step in the concept development phase of the generic product
development process defined by Ulrich and Eppinger (Figure 3).28 They associate the generic
product development with a "market-pull" situation in which, the firm first identifies the market
opportunity and then uses, "...whatever available technologies are required to satisfy the market
need."
Concept
Development
Detail
Design
System
Level
Testing
Refinement
Production
Ramp-up
Design
Collect
Customer
Needs
Figure 7. Generic (Market Pull) Product Development Process
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Planning
The product development process at Ford is no exception. It too initiates with a phase of
assessing consumer needs, which are cascaded into engineering specifications and flows into the
final product design. It is natural characteristic of a mature firm to be very process intensive so it
is not surprising that many respondents in the study cited the need to establish consumer wants
with respect to telematics features prior to investing and incorporating them into the vehicle.
This situation is problematic for telematics (and emerging technologies in general) because as
the interview data suggests, it is a technology in search of a market and the automotive product
development process is based on market-pull.
Furthermore, some research suggests that over-reliance on customer pull may lead to an
established firm's inability to successfully capitalize on disruptive technologies (Christensen
2000).29 Consumers tend to be shortsighted and tend to want what works for them now but will
then switch to a new technology once it presents itself. As is often the case with emerging
technologies, the benefit or value is also in a stage of emergence. By not recognizing any
immediate benefit from a new technology, customers may influence the firm to focus on existing
technologies. The firm, in the interest of maintaining customer satisfaction, may ignore, or delay
investment in, such new technologies. Once the new technology has developed enough so that
these customers recognize value, they will switch to it leaving the firm ill-equipped to satisfy the
very same customers that were giving the firm high satisfaction feedback to begin with. The
firm is then in an uncompetitive position and may miss out on market opportunities (or worse, go
out of business).
Christensen notes, "This is one of the innovator's dilemmas: Blindly following
the maxim that good managersshould keep close to their customers can sometimes be a fatal
mistake."29 While telematics is likely not a disruptive technology to the automotive industry, the
potential downsides of over reliance on market-pull strategies are still relevant here because the
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automotive product development process relies heavily on market-pull.
7.4 "Plug & Play" Technology Integration
A theme detected in the interviews, was to adopt a "plug and play" strategy for implementing
telematics. This response was particularly evident when subjects discussed cell phone
technologies and the plug and play approach was motivated by the perceived need to allow
consumers to bring portable phone handsets of their own choosing and use them seamlessly in
the vehicle environment (e.g. hands free, voice activated, in-vehicle display screens to display
messages etc.). There are actually two areas of interest this data presents. First, there is the
general notion of "plug and play" as a technology integration strategy. Second there is the focus
on the wireless phone handset that warrants some discussion.
7.4.1 "Plug and Play" Strategy:
As a strategy for technology insertion, plug and play (i.e. modularity) has some advantages with
respect to industry "Clockspeeds." Recall that some of the subjects in our interviews cited the
faster pace and chum of telematics development as a source of tension in the automotive product
development process and this tension has been the topic of previous research." One way to
address this is to try to speed up the automotive pace to better match the wireless industry.
Alternatively, one could slow down the wireless pace to better align with the automotive
development cycle. Another means to address this issue is to design a vehicle architecture that is
impervious to the rapid chum of the wireless technology. This suggests that an open interface
architecture would be desirable. Indeed, various automakers are participating in the AMI-C to
jointly develop standardized interfaces between vehicle electrical and telematics systems across
the automotive industry. This not only has the advantage of creating a buffer mechanism
between the different "clockspeeds" of wireless and automotive industry, it plays a crucial role in
the dynamics of an outsourced, automotive product development environment. The AMI-C
standards may act as an open, and public standard for the interface between the vehicle and
telematics components (e.g. cell phone handset). This creates a power balancing mechanism
between the automaker and the telematics suppliers. Since the interface is open and freely
available to all, the Automakers could shop the supply base for the latest and best telematics
technology and readily implement it into their vehicles. It also enables them to create a
competitive environment amongst suppliers because they would all be designing to the same
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interface standard. This works as a cost control mechanism for the automaker. An interesting
development mentioned frequently in the interview data was the wireless communication
protocol, Bluetooth. This can be viewed as an emerging interface standard between the vehicle
and telematics systems. For example, a wireless phone maker (e.g. Qualcomm) can design their
phone handset to be Bluetooth enabled. Meanwhile, Ford can enable its vehicle electrical
systems for Bluetooth and when the phone is in proximity to the vehicle, they can communicate
with each other. However, if the market tips toward Bluetooth as the standard of choice, the
makers of Bluetooth may hold a powerful position in the telematics value chain because it is a
proprietary protocol and automakers and telematics system suppliers will be dependant on it. In
other words, Bluetooth may serve as an open, but private standard. It will be interesting to see
how this market develops.
7.4.2 Is the Wireless Phone Handset the Dominant Design for M-Commerce?
The implicit focus on the phone handset we noted in our interviews has strategic implications as
well. The wireless phone handset may represent the ultimate form of mobile communication
because you can take it with you anywhere. Thus, wireless phones that are embedded in a
vehicle (e.g. OnStar@), or are otherwise limited in function because they are tied to a vehicle are
not as attractive a means to deliver mobile communication. Furthermore, the functionality of the
handset is increasing rapidly. Regulations are in process to require all wireless phone handsets to
incorporate a locator device (e.g. GPS) to enable emergency workers to automatically locate
people making 911 calls from cell phones. They have inter-net access, e-mail capability, voice
recognition and can be used to make wireless purchases of goods and services. Some new
models have an integrated Personal Digital Assistant (e.g. Palm Pilot). Accessories such as
keyboards to type e-mail are available. This suggests that the wireless handset not only
transcends the automobile as the ideal mobile communication device but it may be on the cusp of
becoming the ultimate m-commerce device. This has strategic implications to an automaker
because the wireless phone handset may pose as the dominant design for mobile commerce.
Being aligned to the dominant design is one of the crucial underpinnings of a successful
technology strategy. While automakers may not profit directly from the telematics technology,
they would extract value through selling vehicles (i.e. network externalities) by providing
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enhanced and safe use of the handset while a person is in their vehicle.
7.5 "Innovation Tax" Mechanism to Subsidize New Technology
The cost share mechanisms mentioned by some of the respondents pose an interesting notion to
facilitate new technology insertion. The precedent has been set for telematics with General
Motor's "OnStar Tax." One could extrapolate this to a more generic, "innovation tax." Thus,
anytime a vehicle segment wanted to introduce a new technology that it thought would be
beneficial, all vehicle lines would pitch in to subsidize the cost. This diverts risk from a
particular vehicle program and spreads it across the firm. This would foster the ability of
vehicle programs to do a "test push" of technology, gauge consumer interest and react
accordingly. Obviously this idea would require further investigation. For example, worker
incentives would be a critical variable to consider. One would need to ensure that workers were
rewarded based on overall corporate metrics, versus specific vehicle line profitability, because
vehicle program managers would be adding cost to their vehicle development programs with the
potential of not realizing any direct benefit from it.
7.6 New Technology Deployment Strategies
7.6.1 "Trickle-Down" Strategy:
Several subjects suggested that telematics technology should be offered on premium, lower
volume brand vehicles first and then trickled down to mass market, higher volume brand
vehicles as the technology matured, gained reliability, and cost improvements. This is an
established strategy employed by automotive manufacturers to introduce new technology.
Premium vehicle customers are less price sensitive than mass-market vehicle consumers and
come to expect that it will have the latest technologies given the high price they are paying.
Even fundamental technologies such as air bags for crash safety were first introduced on
premium brand vehicles and Ford's first venture into telematics was on its premium Lincoln
brand with its RESCU@ system.
This strategy makes sense in several ways. First, it enables the automaker to insert the
technology into the market sooner than if it was trying to go directly for mass-market vehicles
because of the relative price insensitivity of the premium market consumer. New technology is
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typically not optimized in its initial stages and a form that reliably performs the intended
function may not represent the most cost-effective way to implement the technology. Thus,
premium vehicles can effectively absorb more technology cost because they can pass more cost
along to the consumer and can thereby consider implementing a technology in its earlier, nonoptimized stages. Secondly, a trickle down strategy also acts as a product quality risk
management mechanism by containing new unproven technology to the smaller volume,
premium market and thus minimizes consumer exposure to bugs and "Things Gone Wrong"
(TGW). This minimizes the firm's exposure to warranty repair costs and potential penalties to
customer satisfaction. Third, this strategy can function as a test market for consumer acceptance
and usage of new technologies. Various new features can be evaluated and only those that
consumers are using and willing to pay for are identified as candidates to trickle down to other
vehicles. This may be more effective than marketing methods that try to gauge consumer
interest in a new feature without actually having it to give to them. This enables the firm to
focus investment and resources on those technologies that will most likely positively influence
the consumers' buy decision. Gaining experience with the technology will enable more cost
effective and higher quality forms of the technology to be developed, which can then be
cascaded to higher volume vehicles whose consumers are more pragmatic.
However, if features are only trickled down to mass market segments if they were well received
in the premium vehicle segments, then opportunities to introduce technologies that appeal to the
mass market vehicle segments, but not the premium vehicle segments, may not be identified and
the associated large business opportunity may not be realized. Telematics contains a broad suite
of potential functionality. Certain functions are highly specialized and may appeal more to
mass-market vehicle buyers than to premium vehicle buyers. For example, automatic download
of a song off the radio to an MP3 file may be very popular in a music oriented, and very price
sensitive, youth market buying a Ford Escort, but not in a middle-aged Lincoln Town Car market
who only wants to find out the latest stock prices.
Using the trickle down strategy to identify and exclude technologies with low consumer appeal
can work if buyers of premium brand vehicles are true lead users of a given technology and it
can be expected that the technology is generic enough to attract majority users at some point in
time. Otherwise, the trickle down strategy should be focused on building up experience with a
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technology for the production environment while simultaneously acting as a cost/quality risk
management mechanism.
7.6.2 Direct "Mass-Market"Strategy:
Telematics has utilized a different approach in that it has gone directly to mass market vehicles
in order to immediately create economies of scale and get the hardware costs down to levels that
fit a new vehicle's affordable business structure. The difficulty lies in whether or not the
economies of scale offer a low enough price to satisfy the more price sensitive consumers in the
mass-market vehicle segments. If an appropriate price point is reached, there is still the potential
to have a greater market exposure to quality bugs and other start-up issues with the new
technology. This may pose increased risk for warranty costs and customer satisfaction penalties.
The contagion model is a powerful means to grow sales of well-received products but it is also a
powerful means to communicate even temporary product shortcomings to a great mass of
consumers who may never return from competitive substitute products. If the price point is still
too high, the consumers will not adopt and the technology may not get implemented at all
particularly if the business model was based on these initial economies of scale. This poses
particular risk for established firms because they are typically driven by economies of scale.
Furthermore, a direct mass-market strategy may not facilitate timely introduction of new
technology. Since the mass-market consumer segment is more pragmatic, vehicle development
programs in these segments are very focused on cost. New features that pressure these tight
business structures are subject to intense scrutiny to determine if they are "value add" to the
targeted consumer. Thus, the pressure to establish what these pragmatic consumers want and
how much they are willing to pay for it becomes paramount. However, this can be very difficult
to establish for new, unproven technologies and getting this information may take significant
time or may not be possible at all.
7.6.3 "Optional-Equipment"Strategy:
Another strategy that was mentioned by a few subjects was to introduce telematics as optional
equipment. As with the trickle-down strategy, the optional equipment strategy is also an
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established means for automakers to introduce new technology. Take rates for the optional
technology can be measured and higher take rate technologies can be focused on and cascaded
out to other vehicles. These technologies become candidates for standard equipment, which can
enable higher cost efficiencies such as complexity reduction, economies of scale and thus higher
base profit margins. This strategy also has the advantage in that you can immediately introduce
technology into vehicles regardless of consumer segment. That is to say, mass-market vehicles
do not need to wait for it to trickle down from premium brands. Thus, if you have highly
specialized technologies that are more likely to be attractive to consumers of lower segment
vehicles, you can immediately create a test market for them by offering the technology as
optional equipment. This carries the risk management advantages of the trickle-down strategy
because only those who bought the optional technology are exposed to potential start-up issues.
If these start up issues become significant, or consumers just don't care for the feature, the
technology can be easily removed without significantly affecting the mainstream product.
However, this strategy leads to price pressures associated with complexity costs because two
versions of the product are now required.
If the cost pressures are too high, the technology may
not be implemented at all, particularly in the price sensitive mass-market segments.
7.7 Recommendations
Based on the above discussion we offer some brief suggestions on areas an automaker might
focus attention:
" Keep close tabs on wireless phone handset and accessory development. While we did not
provide a rigorous argument for the handset being the "dominant design" for mobile
commerce, the argument at least seems worthy of continued attention. Aligning the
firm's efforts with the dominant design does not ensure market success, but it is
impossible otherwise. Furthermore, the "clockspeed" of handset development is feverish
and we believe that this sets the pace for consumer expectation in m-commerce.
* It may be advantageous to aggressively pursue an open, and public, wireless interface
standard between telematics devices and the vehicle. If, as our interview data suggests,
Ford Motor Company's goal is to use telematics as a means to only support their core
revenue stream of selling vehicles, then this would serve to protect the automaker from
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power shifting to the suppliers of a proprietary standard interface. It would also align the
firm's efforts to the trend towards the more mobile, wireless interface that Bluetooth
technology introduces. Since the telematics suppliers would be designing to an open and
public interface standard, the benefits of supplier competition would be enabled, namely
protection from price gouging and being able to shop for the best technologies. A
standard interface offers a buffer from the mismatch in wireless and automotive product
development "clockspeeds" by stabilizing the interface. This mitigates upheaval to the
firm's architectural knowledge which opens up potential benefits of fast-follower and
plug-and-play strategies.
" A "Trickle-down" approach combined with an "Optional-equipment" strategy may be an
appropriate means to deploy telemtatics. From a risk management perspective, this poses
as the most conservative approach because it combines the reduction in consumer
exposure from both of these strategies. This lower risk may enable the firm to better
maintain product competitiveness by introducing the technology relatively earlier than if
mass-market acceptance was at stake and enables the firm to start gaining valuable
experience with a technology that is proving to require a significant learning curve for the
firm due to its impacts on architectural knowledge.
" Alternative means to subsidize new technology costs may warrant further investigation.
The high cost of telematics hardware was often cited as a barrier for implementation.
Mechanisms to distribute costs of new technology more broadly over the firm such as the
"Innovation Tax," or working with wireless air-carriers to subsidize hardware costs as
they do cell phone handsets may facilitate introduction of telematics (and new
technologies in general).
7.8 Summary
In this chapter we reviewed some of the specific ideas that came out of the data on how Ford
Motor Company might proceed with telematics. It is noteworthy that none of the data discussed
in this chapter addresses the question of how an automaker can identify the level of difficulty a
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technology may impose up-front so that it may choose the appropriate means to manage it.
Recall that we suggested telematics might pose as an architectural innovation and has
implications to the firm's embedded architectural knowledge. As noted by Henderson and Clark,
one of the reasons why such innovations are hard to deal with is because they appear to be
incremental in nature. Thus, a firm trying to implement them does not necessarily identify the
difficulties until considerable time and investment has been expended in trying to implement
them. This underscores the importance of developing organizational capability to quickly
resolve interface conflicts associated with new technology integration as they arise because it is
exceedingly difficult, if not impossible, to identify all these conflicts a priori. As we shall see in
the next chapter, developing this capability is far from easy, particularly for telematics.
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CHAPTER 8: DEVELOPING ADAPTIVE CONFLICT RESOLUTION CAPABILITY
8.1 Introduction
In the previous chapter we ended with the notion that telematics requires an automotive firm to
develop the capability to quickly resolve interface conflicts because its effects on the firm's
architectural knowledge cannot be completely known ahead of time. In this chapter, we discuss
how implementing telematics, a new technology makes developing this capability even more
difficult than it already is, which offers insight as to why this new technology poses such a
challenge.
In Section 8.2 we illustrate how the addition of telematics into the automotive product
development environment results in an explosion of new interfaces that must be successfully
managed. In sections 8.2.1 through 8.2.7, examples are discussed to highlight the knowledge
boundaries these interfaces generate. In Section 8.3 we discuss how telematics hinders the
"Knowledge Transformation Cycle" that is so crucial for knowledge interface conflict resolution.
Some areas of focus that may lead to the mitigation of these hindrances are also highlighted.
Section 8.4 reviews some general recommendations on how to enhance adaptive conflict
resolution. Section 8.5 summarizes the discussion.
8.2 Growth of Organizational Complexity and Knowledge Interfaces
Figure 6 illustrates the immense growth in organizational interfaces that must be managed with
the insertion of telematics into a vehicle product development team. The telematics activities
bring their own unique design requirements that create a ripple effect amongst many other
development activities. Each interface represents a knowledge boundary where conflicts will
arise. The efficiency with which these teams can identify and solve their knowledge interface
conflicts (i.e. the health of the Knowledge Transformation Cycle) is critical for successful
integration of new technology. Several examples pulled from the interview data are discussed
below.
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Automaker
I
Body Engineering
Supply Base
Styling
A
Telematics System
Telematics
Systems
Supplier
Engineering
Electrical Systems
Engineering
Manufacturing
Wireless
Component
Advanced Electrical
Engineering
Suppliers
Auto Electrical
Systems
Supplier
Human Factors
Figure 8. New Product Development Interfaces
8.2.1 "Exponential" interface issues:
In reference to implementing telematics and working with wireless technology suppliers, one
subject explicitly noted that the telematics integration experience was, "... much harder than any
of us thought it would be," and that, "the interface issues were exponential." They cited, "We
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are used to working with established companies that understand their technology and are not
growing so fast, whereas in wireless, everyone is new..."
8.2.2 Ideal Skills Very Hard to Find due to Emerging Nature of Telematics:
Three subjects lamented the fact that they were not able to hire the right combination of skill
sets. One subject stated, "We needed a crack team on this, and essentially we had too many
inexperienced engineers. They're going to be good eventually, but they don't know the Ford
system yet." This sub-optimal balance in worker skills generates knowledge boundaries that
must be reconciled in order to successfully resolve product development issues.
8.2.3 Differing "Clockspeeds" of Auto and Telematics:
Recall that several subjects cited the differing "clockspeeds" between the wireless and
automotive industries as a serious product development issue. Automotive product development
discipline dictates that technology decisions be frozen relatively early in the cycle. Late change
is difficult to accommodate. One subject stated, "We are constantly battling with program teams
justifying why we are late and why we don't have suppliers sourcing decisions made." This lack
of appreciation by the vehicle program teams for the product development challenges faced by
the telematics engineering activities highlights the knowledge boundaries and interfaces created
by the different chum rates between automotive and wireless industries.
8.2.4 Electronics and Telematics: Internal Boundary
It is interesting to note also that within the electronic team, there is a boundary between those
who have not yet grappled with the technology needed to implement telematics (both electronic
and wireless) and those who have. One of our respondents noted that he saw pushback from
some of electrical engineers who have a great deal of invested knowledge in what they've been
doing for years and appear to find it difficult to accommodate telematics technology.
8.2.5 Culture Clash Between Auto and Telematics:
In the automotive culture, surprises in product development are not welcome. Stability and
continuity are favored over change and discontinuity. Relatively speaking, wireless culture is
based on rapid change and discontinuity. A telematics supplier we spoke to expressed his shock
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at the lead times involved between design freezes and production launch of a new vehicle.
Another respondent mentioned that there were organizational issues when the Ford engineers
reverted to established supplier based relationship patterns versus treating Wingcast, as our joint
venture partner. The strong-arm tactics that are perceived to be part of the automaker culture do
exist and are arguably not the best approach for integration with an unfamiliar industry. This
difference in cultures makes successful management of the knowledge boundary even more
problematic.
During our research, we had the opportunity to observe functional team interactions on a vehicle
program that was integrating telematics. These were not part of the focused interviews but are
anecdotal data that enriches the context of the knowledge interfaces generated by telematics.
They are particularly interesting in that they represent a new technology clashing with two very
established and powerful activities within the automotive firm, vehicle styling and
manufacturing. This culture clash creates particularly challenging knowledge interfaces. The
styling and manufacturing cases are discussed in Sections 8.2.6 and 8.2.7 respectively.
8.2.6 Styling versus Telematics: "The Antenna is (glv"
The telematics team's need to place their antenna on the roof was a large impact to the vehicle
styling activity. Styling was reluctant to accommodate this requirement because they perceived
the antenna as "ugly" which encroached on their aesthetic requirements for the vehicle. The
telematics team had to work very hard to produce the technical evidence that the roof location
was necessary for them to achieve their requirements. The antenna's shape was changed and its
location was shifted from the roof edge to the vehicle centerline to accommodate the aesthetic
requirements. Styling then "approved" the telematics antenna.
8.2.7 Manufacturing versus Telematics: The "HappySeat"
To allow for the antenna to be roof mounted at the centerline of the vehicle, manufacturing was
forced to devise a means by which the line workers could physically mount the antenna in the
intended location. Manufacturing has many ergonomic requirements to protect the health of
production line workers and the roof centerline location encroached on worker reach
requirements. This required them to create the "happy seat", an innovation where the line worker
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sits on a hanging seat that enables access to the antenna installation location on the roof. In order
to get the cooperation of manufacturing to make such a change, a great deal of time and effort
was expended.
The above examples help illustrate the knowledge boundary issues that appear when trying to
integrate telematics into an automotive product development setting. The knowledge gaps are
wide (Table 1) which stresses the pressure on the Knowledge Transformation Cycle. Since it
requires working together to integrate the new technology into a vehicle system, these interfaces
can be thought of as gulfs that must be bridged in order to deliver the entire system. Enough
mutual understanding must be developed to create the bridge. In the case of telematics,
negotiation of these boundaries had to come from relatively inexperienced people. The
challenge was immense.
Table 1. Automotive and Wireless Knowledge Boundaries
Auto
Wireless
Understanding of Wireless
Low
Higher, but many
inexperienced people
Understanding of Auto
High
Low
Culture
Conservative, Traditional
New, changing
Pace of Change
Slow
Faster
Product Development Process
Inflexible
More flexible
8.3 Impacts on Knowledge Transformation Cycle
8.3.1 Telematics Application and Assessment:
Here we use the framework to assess how the Knowledge Transformation Cycle worked in
general at Ford with respect to telematics implementation. To assist in this assessment, we restate Figure 2 (Chapter 2) to show the environment in which the Knowledge Transformation
Cycle works most effectively. It is interesting to note that this environment coincides with the
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strengths inherent in Ford Motor Company's (i.e. mature product development firm's) product
development process.
Ability to
Store
Knowledge
Degree of
Novelty
Ability to
Retrieve
Knowledge
Ability to
Transform
Knowledge
Lower novelty
enhances retrieval
because the prior
knowledge is
applicable to the
new problem.
Lower novelty
enhances
transformation
because
accommodating
solutions are
based on highly
applicable prior
knowledge.
Lower
dependence
enhances
transformation
because the
accommodating
solution has less
negative impact
on the different
teams'
requirements.
Degree of
Dependence
Degree of
Specialization
Higher
specialization
enhances
knowledge storage
because there is
more accumulated
knowledge to
store.
Higher
specialization
enhances
knowledge retrieval
because
determining the
relevancy of prior
knowledge is easier.
High specialization
generally makes
transformation easier
because expertise
exists which can be
drawn upon to more
readily create
accommodating
solutions.
Figure 2. Knowledge Transformation Relationship Matrix
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Telematics Novelty: HIGH
Telematics possesses high novelty because it is an emerging technology. It is novel both to Ford
and even to those in the wireless world. It is novel to Ford because it has not previously been
integrated into our vehicles. It is novel to the telematics team for two reasons, first, the
technology is rapidly evolving, and second, the team is relatively inexperienced. The telematics
team has the added challenge of integrating this new technology into a system with which they
are unfamiliar. There is also novelty in that this is an emerging market and Ford is not in its
"comfort zone" dealing with the uncertainty that comes with that territory. We observed in our
interviews that many people sought to treat the emerging telematics market with the processes
we've used for our established markets, such as determining what customers want and then
developing it. In this case, since the market is not yet established, our old processes are not as
useful and may even lead to wrong assumptions.
Telematics Dependence: HIGH
Telematics possess high dependence because the task of integrating it into a vehicle is so
complex. Telematics creates numerous knowledge interfaces within the organization (Figure 8).
As we have shown, reconciling knowledge conflicts across these boundaries is not trivial
because the telematics requirements significantly impact the requirements of other automotive
product development activities (e.g. styling, manufacturing).
Telematics Specialization Available: LOW/MEDIUM
In our telematics example, there are varying degrees of expertise on the entire program team.
For those implementing telematics, the specialization was relatively low partly due to the
emerging nature of the industry and due to the difficulty in obtaining enough people who do
possess the ideal specialized knowledge.
This combination of knowledge interface attributes that telematics imposes is damaging to the
Knowledge Transformation Cycle and illustrates the immense challenge in successfully bridging
the knowledge interfaces that telematics generated throughout the automotive product
development environment. High novelty, high dependence with low specialization has negative
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impacts on knowledge storage, retrieval and particularly transformation (Figure 9). These
impacts are summarized below.
*
Knowledge Storage: Since telematics specialization is not high, knowledge storage
ability is not high either. The average level of stored specialized telematics knowledge is
low. Therefore, there is precious little knowledge to store.
" Knowledge Retrieval: With lower levels of telematics specialization, high degrees of
novelty make knowledge retrieval challenging, because the engineers are less able to
make the critical decisions regarding knowledge relevancy. A wrong choice on the use
of knowledge in addressing a novel problem can lead down a wrong path. For telematics
there are no formal enablers in place. Telematics knowledge retrieval efforts are based on
individual networks and initiative. Senior management reviews are used to highlight a
functional team's technical issues and to get them the help they need. Retrieval can be
facilitated by management recognizing similar issues or knowing of an expert who could
help with a particular problem-and knowledge can then be "retrieved" in that way.
Knowledge Transformation: Ford Motor Company'sproduct development process helps
bring conflicting needs to the surface. However, telematics knowledge transformation
process is dependent upon individual's abilities to solve conflicts. Information
Technology ("IT") type "boundary objects" 3 0 exist and are helpful but incentives to share
knowledge are generally not in place. Our ability to implement telematics as originally
envisioned was hindered by our inability to get a more balanced mix of experienced
people and novices. Furthermore, our underestimation of the number of and depth of
problem solving/interface issues was a factor as well. One could also argue that a lack of
complete buy-in by middle management, whose strong cost target achievement incentives
conflicted with the cost of implementing telematics, may have been a factor as well in
that the questions that arise when a program team doesn't see the logic in attempting
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*
Ability to
Store
Knowledge
Degree of
Novelty
Ability to
Retrieve
Knowledge
High novelty makes
retrieval harder
because the
extrapolation of
prior knowledge to
the new problem
becomes less
obvious.
HIGH
HIGH
LOW
High novelty makes
transformation
harder because
developing solution
options will take
longer. Novelty
introduces the need
for learning about
unforeseen
consequences
Higher dependence makes
transformation harder
because the impact of the
dependence is high,
therefore the necessary
accommodation is a large
stretch and more
knowledge must be
developed to create the
solutions that will
accommodate.
Degree of
Dependence
Degree of
Specialization
Ability to
Transform
Knowledge
Lower specialization
forces teams to
search for knowledge
outside their teams.
They have not yet
developed their own
specialization and do
Low specialization
makes retrieval
harder because
knowledge to make
decisions on
relevancy is
lacking. This is
Lower specialization
degrades
transformation because
design conflicts may
take longer to
recognize and once
conflicts are identified,
not yet have a lot of
knowledge to store.
exacerbated by
presence of high
novelty.
developing
accommodating
solutions will be more
challenging.
Figure 9. Telematics Impact on Knowledge Transformation Relationships
something novel creates tensions that can undermine focus. With low specialization, the
knowledge transformation process (the resolution of design conflicts) will be slower and may
lead to less robust solutions. A team which wants in specialization will feel high levels of
frustration if they identify conflicts late, the tough challenge of resolving design conflicts with
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63
other teams will be done under time pressure. Mistakes are more prevalent when time is tight.
Low specialization triggers potential chain reactions that can lead to disappointing outcomes.
When facing high degrees of novelty and dependence, the lack of specialization is a significant
setback.
A key point made by Carlile is that "in rapidly changing environments that also have high
dependencies between different specialized functional knowledge domains, it is best to focus on
methods and tools that facilitate transformation of knowledge and learning between and within
functions, rather than relying on recycling and heavily depending on past experience."
The above point suggests that we may benefit from enabling knowledge transformation and
learning in portions of product development that deal directly with or interface with novel
problems (such as implementing telematics). One of the larger difficulties for our inexperienced
telematics team was that not only was it dealing with novel technology in a setting where the
established processes were unknown to them, but they were also operating in a setting that did
little to abide the time it would take to solve the unknowable conflicts that were bound to
emerge. Their environment must be more flexible, more of a learning environment because they
are spending time learning as they go along. Their incentives must be different from those of a
stable environment. Teaching, which is important in all product development, is perhaps more so
in this type of setting and should be strongly encouraged and incentivized. As in the slower
paced product development setting, expert people willing to teach is critical here as well. But the
experts in a faster paced setting are necessarily different than those in a mature, stable
environment. Here, expert knowledge may be shallower, due to the fact that technology is
changing fast. The desirable qualities of these people are more in their ability to adapt and absorb
new ideas, not to build exclusively on previous knowledge. These people cannot get stuck in
their knowledge niche because the technology will not allow them to. Not all people can thrive in
an atmosphere like this. Management must create a setting that allows greater creativity and
encourages cross-functional learning. Leadership is perhaps more important in this setting. The
atmosphere of the group, and therefore its ability to work together to share tacit knowledge is
dependent upon the leadership's ability to lead by example and encourage behaviors that are
conducive to this type of need.
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8.3.2 Recommendations/Areas of Focus to Improve Knowledge Integration:
Storing information more uniformly would make the retrieval of information, a useful foundation
for creating knowledge, much more efficient. As for the tacit part of knowledge, the storage and
retrieval of knowledge (not just information) is most efficiently done with human beings. Tacit
knowledge is stored within people. Either knowledge resides within the person, who needs to
retrieve it, or knowledge resides with someone else, in which case, retrieving this tacit
knowledge comes with the willingness by one person to teach another. The most efficient way
to retrieve knowledge is by working with a knowledge expert, who is willing to teach.
Incentivizing people to become experts who can teach others would improve the ability to
retrieve knowledge. Stability of the work force is desirable so some level of knowledge can be
attained. Knowledge gets diluted when people do not spend adequate time in a specific work
discipline. Workers should be valued for staying in positions long enough to attain adequate
levels of specialization.
Knowledge transformation builds upon the problem solvers' abilities to retrieve relevant
knowledge from storage and use it to solve new problems. The problem solvers must have the
expertise to distinguish between that which is useful and that which is not. Knowledge
transformation can be improved if storage and retrieval are improved and sufficient
specialization is available to decide upon knowledge relevancy to the novel problems. Further
improvement of the knowledge transformation process can happen with easier availability of
boundary objects. This enables faster understanding of conflicts, the necessary first step in
creating solutions to conflicting design requirements. On top of this, incentives to promote
teamwork and teaching, along with leadership can further enhance our abilities to transform
knowledge. Research by Von Krough, et. al. regarding "knowledge enabling" speaks to these
needs. 3 1 Their ideas on the "dimensions of care" can be used to develop the environment
necessary to enhance knowledge transformation, and develop specialization more quickly than is
currently prevalent within Ford.
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Storage/Retrieval Improvement:
*
Put in place performance review incentives to reward expertise and teaching. Make it an
obligation to teach for those who attain expert status. Tie their performance assessment to
the progress of those they teach. Create prestige and recognition around formal
mentoring roles.
"
Cultivate the right mix of breadth and expertise in organizations.
"
Develop discipline in methods of information storage.
"
Enhance management incentives to develop people versus just meeting business targets.
Knowledge Transformation Improvement:
*
Enable the ability to develop appropriate boundary objects to enhance the learning of
team members as needed so the best decisions are made for the overall program. This
may require "IT" solutions, or the rapid building of physical bucks to display visually the
designs. Boundary objects may be as simple as sitting down with an expert from another
area to help an individual explain a conflict so they can understand the technical issues. If
people are incentivzed to teach, then the need for fancy boundary objects may not be
necessary.
" Train management to instill a "caring" environment, one in which tacit knowledge
sharing can thrive. This requires the removal of barriers to tacit knowledge sharing,
which is an ongoing and significant challenge. They must be more heavily involved
personally with their teams to facilitate the actions.
*
Reward team player behaviors over great individual performance.
" Trust must be built. Subordinates must trust that the system is fair and that teamwork will
be rewarded and behaviors that do not promote teamwork will not be overlooked.
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8.4 General Recommendations to Enhance Organizational Capability
Other potential opportunities to enhance organizational capability for new technology integration
include:
Empower a "Technology Integrator" who bridges across the slow to fast paced
environment. Candidates for this position require a good mix of breadth and expertise
and should possess sufficient organizational authority to drive integration of the
technology. They might report to both the slower paced world and the faster paced
worlds. These people are rare in that they must develop the ability to readily identify
solutions that accommodate both side of the boundary.
* Create flexible and holistic work objectives. Need to reward engineers who take risks to
their own objectives in order to help another function meet theirs. This will promote a
true "systems" approach to problem solving.
* Establish metrics to measure the effectiveness of knowledge enhancement actions.
Perhaps tying this in to vehicle quality. This would require sorting out the largest
contributors to quality and estimating how much can be attributed to organizational
changes meant to improve knowledge issues. We note doing this is hard.
8.5 Summary
In this chapter we illustrated the new organizational interfaces created by inserting telematics
into the automotive product development environment. Each of these interfaces represents a
knowledge boundary that must be managed in order to successfully integrate the new
technology. The Knowledge Transformation Cycle is the fundamental process by which
knowledge conflicts at these interfaces are resolved. However, telematics possesses a high
degree of novelty and dependence but lacks high knowledge specialization. These traits
negatively impact the storage, retrieval and transformation processes in the Knowledge
Transformation Cycle, which imposes even more difficulty in developing the adaptive conflict
resolution capability within the organization. Potential actions that may mitigate these negative
impacts include, incentives to reward teaching and mentoring to improve knowledge storage and
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retrieval and strong integrator role to facilitate knowledge transformation across organizational
interfaces.
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CHAPTER 9: CONCLUSIONS
9.1 Conclusions
Issues facing an established automotive product development firm trying to create, capture and
organize to deliver value from an emerging technology called telematics were explored.
Telematics is not only a blending of wireless and automotive technology but it is also a blending
of their product development cultures and cycle times, all of which have strategic implications to
a firm's ability to successfully execute and capitalize on this new technology. The goal was to
better understand some of the issues telematics has imposed on a mature automotive product
development environment and highlight areas where an automaker (e.g. Ford Motor Company)
may decide to focus attention so as to enhance its ability to successfully manage emerging
technology.
The research generally suggests that subjects in this study were focused on telematics as a
vehicle feature and were most concerned with how to fit it into the existing business model and
product development process of the automotive manufacturer. The challenging business state of
Ford Motor Company at the time of this study, makes it difficult to distinguish whether these
views are reactions to immediate core operational issues, the come down in expectations from Ebusiness, or a manifestation of cultural lock-in, the latter of which would pose serious, long-term
strategic implications for the firm.
Many of the ideas and concerns voiced in the data revolved around how to best integrate the
technology into new vehicle programs, how to pay for it and how to deliver it to new vehicle
markets. To these ends, un-conventional funding models (e.g. "Technology-Tax") may be
beneficial for subsidizing new technologies such as telematics, whereas conventional means of
automotive technology deployment (e.g. Trickle new technology from premium-market vehicles
down to mass-market vehicles, possibly combined with optional-equipment offerings) may be
appropriate. Using these un-conventional and conventional methods together may provide an
effective means to simultaneously minimize financial and market exposure risk.
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Interview data in this study provided clinical confirmation that the challenges an emerging
technology (i.e. telematics) imposes on the mature automotive environment are not trivial. The
suggestion that telematics possesses traits of architectural innovation reinforces the importance
of product and organizational interfaces and implies that the inherent difficulty it entails has to
do with its impact on the subtle, embedded and enduring architectural knowledge of the
automotive firm.
From the product system architecture perspective, an open, public interface standard that enables
wireless communication between the vehicle and telematics devices may be appropriate. This
would stabilize a key product system interface, which potentially alleviates product development
pressures due to the different rates of wireless and automotive technology cycles (i.e.
""clockspeed" differences) and upheavals in architectural knowledge. It also protects the
automotive firm from power shifts in the automotive value chain.
From the organizational perspective, telematics creates numerous new interfaces between
product development activities. These interfaces are made more problematic by the different
"clockspeeds" seen in the wireless and auto industries and the cultural differences that the
industries possess. Each of these interfaces are knowledge-boundaries, which require each
element of the Knowledge Transformation Cycle (storage, retrieval, transformation) to be sound
in order to most effectively resolve knowledge conflicts across them. Telematics possesses high
novelty, high dependence and low-medium specialization. This creates perhaps the most
challenging combination of factors when attempting to use knowledge to solve new interface
conflicts. An important enabler to improving this cycle is to carefully develop an appropriate mix
of specialists and generalists so that specialized knowledge is not diluted within an organization.
When confronting novelty, Carlile has suggested that it is most important to enable knowledge
transformation, and that investment in knowledge storage and retrieval improvements are
important, but of secondary importance because rapid change renders some previous knowledge
obsolete and possibly misleading. Specific suggestions have been outlined in this research to
address the need to enhance knowledge transformation, or the ability to effectively solve
interface conflicts. Since the key to solving problems lies in the creative use of tacit knowledge,
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the creation of an atmosphere conducive to knowledge sharing and teaching is critical to
enhancing this ability because it is the most efficient way to develop knowledge. The creation of
this atmosphere is difficult and would need continuous attention, strong leadership and focused
incentives.
9.2 Areas for Future Study:
9.2.1 Driver Distractionand the Human-Machine Interface
Driver distraction is probably the most public concern over introduction of telematics technology
and was recognized by all of the subjects interviewed in this study. The activity in scientific
research and government legislation has been sizable with numerous states considering
regulations restricting cell phone usage while in a vehicle. This has obvious implications to the
interface between the driver and the telematics equipped vehicle. The role this will play in
competitive strategy, technology adoption and automotive product development processes may
warrant further study.
9.2.2 Incentive Structures:
This research highlights the importance of workforce incentives in facilitating introduction of
new technologies. For example, the "Technology Tax" idea for funding new technology may
require incentives for product development management to accept added costs to their vehicle
programs for technology they may not even be pursuing for the specific vehicles they are
responsible for delivering. Additionally, the research highlighted the importance of relationships
with suppliers and dealers. Incentive structures that strengthen these relationships are crucial. A
firm's dynamic capability to resolve knowledge interface conflicts requires efficient knowledge
creation and transformation. How does one motivate a workforce to create knowledge?
Alignment of incentives is certainly not a new issue, but its importance in the context of new
technology development within a mature product development environment seems particularly
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problematic due to the dichotomy of skills required.
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