It’s important for one to know one’s place in the world. This is especially difficult given the fact that one’s place may change. When this happens there may be telltale signs, like emails or polite taps on the shoulder or a whisper in the ear. TomTom should consider this commentary a “heads up” – the kind of alert a friend gives another friend when a sharp or heavy object is flying toward someone’s head.

The heads up is that it is time for TomTom to take a one-two punch to its current strategy.

Punch One: Launch a white label fleet telematics program to enable faster growth of the business services group and capitalize on the fleet industry’s current movement toward consolidation.  Servicing the fleet industry is a critical global market differentiator for TomTom and it is not too late to take advantage.

Punch Two: Shift to Android as a more potent platform for enabling in-vehicle app distribution.  (More on Punch Two at a later date.)

One has to love this company which has parlayed some of the cleverest marketing and product innovation into traffic and portable navigation market leadership.  The problem for TomTom, sadly, is that the market has moved on.  This has never been clearer than in the latest earnings report.

It’s true the company was able to report growth in its automotive segment (43% to €59 million), content and services (19% to €107 million), licensing (27% to €36 million) and business solutions (33% to €17 million), but the largest business, consumer, plunged (23% to €225 million).  The decline in the consumer business of €68 million, more than offset the aggregate gains in the other segments of €30 million. 

What was unclear from the company’s financial release was whether – after “impairments” and restructuring charges the company was actually profitable.  Earnings per share for the most recent quarter were positive though the year-to-date-earnings remain negative.

Core business is down

TomTom acknowledges that much has changed in its core business of selling mobile navigation devices.  While the company still claims portable navigation market leadership in Europe and some market share gains in the U.S., this leadership is over a dwindling market.

TomTom reported a decline in the total European portable navigation market during the quarter to 3M units from 3.4M in the year-ago quarter, with the U.S. falling even more severely to 2.1M units from 2.9M.  The company further noted that the speed of the market decline may be contributing to an inventory hangover, something that has plagued the segment for more than a year. 

If you have any doubts regarding the state of the portable navigation industry, a visit to your local electronics retailer will reveal a category suffering arteriosclerosis.  Without sufficient demand, existing products are not selling through quickly enough to maintain innovation momentum.  The new stuff is backed up because the old stuff is not selling through.  And, as a result, the portable navigation department is usually a mess.

The speed of the decline is spurring a restructuring at TomTom intended to reduce expenses by €50 million and likely to include significant personnel reductions.  Similar reductions have been experienced elsewhere in the industry including Navteq’s layoffs in its Traffic.com group.

To its credit, TomTom has moved to pursue business services and fleet opportunities under the WebFleet and WorkSmart brands. Yet despite claiming to be the fastest growing fleet telematics service provider in Europe and posting €17 million in revenue in the current quarter, TomTom is not keeping pace with more focused competitors in the fleet space.

The messaging on TomTom’s Work Website is out of step with more focused fleet operators, all of whom are enhancing their existing solutions with traffic and routing capabilities competitive with TomTom’s.  As the new kid on the block, TomTom may be able to successfully fight the good fight and convince operators it has a more robust solution for tracking drivers and delivering competitive traffic and routing information.  Or maybe it makes more sense to be a white label provider to all players in the fleet market.

White label enables scalability

The importance of the fleet business to TomTom’s prospects cannot be overstated.  With sales of portable navigation devices evaporating and inventory backing up, it is critical for TomTom to find new sources of revenue.  While the portable business is not entirely disappearing, the company has long depended on robust sales of these devices to support the content and services business which includes traffic data.

TomTom pioneered the use of probes in mobile devices to create traffic data which helps the company to deliver not only state-of-the-art traffic solutions but also for refining its industry leading routing engine.  So the success of content and services, best known for its traffic and routing offering, depends on the consumer mobile navigation business.

TomTom simply cannot afford to stand idly by while its portable navigation business shrinks taking its content and services business with it.  The fleet side of TomTom, however, holds the key to survival.  Fleets fitted with TomTom hardware or software are capable of taking up the slack from lost navigation device sales.

But TomTom needs to replace lost portable navigation nodes at a faster pace.  While the company noted an increased take rate for Live Services (which includes traffic data) for its mobile devices, the volume decline negated the increase in the take rate. 

By shifting to a white label service position in the fleet market TomTom can emphasize the fact that it has been a cloud service delivery player in the market since before the cloud was called the cloud.  TomTom was the first supplier to create an in dash app delivery platform for companies such as Toyota and Renault.  And the company’s routing, traffic and navigation tools are rock solid and ideally suited to the needs of the fleet industry.

Still, for some reason, TomTom clings to its brand position.  And while it clings, incumbent players in the fleet industry are adopting or partnering or creating their own traffic and routing solutions.  TomTom need look no further than ALK Technologies to find a company with a laser like focus on the needs of the trucking industry and a flexible business model to enable it to support customers branded or otherwise.  ALK’s flexibility has been rewarded with deals with Qualcomm and Xata among many others.

The point of a white lable initiative is to accelerate growth and rapidly scale.  Thirty-three percent growth, though impressive, won’t rescue our friends in Amsterdam.

Implications

The fleet market holds the key to TomTom’s revival and a white label strategy is the engine.  But let’s not stop there.  To keep driving its automotive business, where competition is keen and margins thin, TomTom ought to heave its brand ambitions overboard and slip into something unbranded to lubricate its Tier One relationships.

Automotive Tier Ones are looking for navigation partners with content and app delivery platforms.  TomTom still, to this day, offers the only effective in-dash app deliver platform, most recently adding TripAdvisor, Twitter and Expedia to the range of apps enabled for its mobile devices.

While auto makers and their suppliers are struggling with Bluetooth and USB connections, iPod Outs and MirrorLinks, TomTom has the slickest solution in the industry for delivering applications and content safely and securely into the dashboard.  C’mon TomTom, you don’t have to turn on the red light.  It’s time for the white label. 

Cross Country Automotive Services (CCAS) and AAA have almost simultaneously launched mobile EV charging programs in the U.S. CCAS described its program as “the nation’s first mobile charging warranty roadside assistance program." AAA announced in July its first roadside assistance truck with the capability to charge electric vehicles.  These programs are the precursors of ubiquitous mobile EV charging services, removing range anxiety from the psychological barriers to EV acceptance, but leaving sticker shock yet to be overcome.

Both programs are offered in a limited number of cities and are clearly targeting the earliest of adopters – ie. purchasers of Nissan’s Leaf EV – while anticipating the arrival of more Leaf-like vehicles.  The AAA program appears more forward looking than the CCAS program in that it offers two charging level options along with all of the usual roadside assistance services (tire replacement, battery charging, etc.) and, if all else fails, it can tow the customer’s vehicle.

CCAS says its mobile chargers may be mounted on small trailers and consist of 10 kWh propane-powered generators that charge the disabled electric vehicles. One of the AAA vehicles shown earlier this year features a removable lithium-ion battery pack for mobile charging.

AAA describes its program as a pilot via which the organization will evaluate the appropriateness of different technologies for use in different geographies around the U.S.  Other vehicles will be equipped with generators powered by alternative fuels and other power sources.

Both the CCAS and AAA programs offer emergency charging assistance – five or more miles of range for as little as 15 minutes of charge - to drivers whose EV batteries have been depleted.  Available to both service providers and dealerships, the CCAS chargers offer the capability to quickly and safely charge multiple vehicles concurrently through a Level 2 charging protocol, delivering consistent utility grade power. In addition, the charger is capable of back-to-back services without the need to recharge any onboard batteries.

AAA says its mobile EV charging roadside assistance vehicles can provide Level 3 (DC fast charging) and Level 2 (AC quick charging) to electric vehicles.

The seven initial markets for the CCAS program are: Los Angeles; Phoenix; Nashville (Tenn.); Portland; San Diego; San Francisco and Seattle. The company says the first mobile charge within the program was successfully completed on August 26 in Phoenix, taking only 15 minutes to provide driver with an additional 5 miles. Cross Country will be adding additional mobile charging units to other areas throughout its national service provider network across the country.

AAA announced it initially will deploy its trucks with mobile electric vehicle charging capability in six metropolitan areas across the U.S. as a pilot program, including Portland, Seattle, the San Francisco Bay area, Los Angeles, Knoxville (Tenn.) and the Tampa Bay area. The phased rollout will begin later this summer and continue into the fall. Let the charging begin.

Additional insight:

http://bit.ly/qlP7i1 - When is 54.5 mpg not 54.5 mpg? US CAFE Targets May Disillusion US Car Buyers - Insight - Ian Riches - Automotive Electronics Service 

It’s summertime in the U.S. and once again people are traveling on vacations and dying in violent crashes throughout the country.  Under these circumstances, the automotive industry’s focus on enabling Twitter, Facebook and Pandora in the car seems particularly out of step with the needs of motorists and first responders.

The more basic need of providing first responders with emergency contact information and the relevant personal health information of vehicle occupants continues to go unmet.  Crash rates and fatalities may have declined in the U.S., but millions of people are still injured in crashes every year and hundreds of thousands suffer life threatening injuries.  Getting proper care to crash victims in the crucial “golden hour” should be the primary objective of any telematics system – or any car maker for that matter.

Existing telematics services provide for the connection to emergency contacts, but only at the request and approval of the customer.  Neither law enforcement officers nor emergency medical technicians have timely access to either the emergency contact or personal health information of crash victims.  And with more seniors behind the wheel each year as the population ages, the need to get personal health information to first responders is increasingly important.

An ongoing unmet need

 In spite of the wider deployment of safety systems and the adoption of vehicle connectivity solutions, the post-crash proposition has remained largely underserved.  OnStar and BMW tout the ability of their on-board systems to notify responders of the severity of a crash, but they have done nothing to close the gap in helping to identify victims and share their urgent care information.

What is different about vacation season this year, in the U.S., is the raised profile of the Yellow Dot program, a nine-year-old initiative to speed accident victim medical information to emergency responders by arranging for passenger information to be stored in the vehicle glove box with a yellow dot to alert responders to its presence.

The rear window-mounted yellow dot (pictured).

The interest in Yellow Dot reflects the program’s simplicity.  But the program’s simplicity masks its shortcomings.  And more sophisticated solutions already exist.

Participants in the yellow dot program, which has no formal nationwide coordinating authority, obtain a yellow dot decal from local law enforcement representatives and affix the decal to the inside of the rear window of their car.  The decal alerts emergency responders to look in the vehicle’s glove box to locate a personal identification card or folder with emergency contact and medical information about potential crash victims in the car.  That card or folder can include a picture or pictures to speed identification of crash victims.

Widespread, but piecemeal adoption and shortcomings galore

It sounds and is simple, which is why thousands of drivers in dozens of counties across eight states have adopted the program.  The problem lies in the analog roots of the program. 

With no coordinating national authority there are no set standards for the information included in the glove box.  Further, there are no standards for EMS access and use of the personal information, nor is there a central authority to assess the effectiveness of the program or to ensure the digital distribution of the vital victim information.

Even worse than these shortcomings is the patchwork implementation which has been proceeding on a county-by-county basis in those states that have embraced the program.  For a program such as Yellow Dot to have a significant impact on saving lives, speeding appropriate care to crash survivors and enabling the timely notification of emergency contacts will require nationwide adoption.  The fact that the program has been in place for nine years with such an anemic response speaks volumes.

There are other shortcomings to Yellow Dot.  Three violent and fatal crashes that occurred in the Washington, DC metropolitan area (where I reside) in the past week resulted in demolished or burning vehicles which would not allow a responder to access the materials in the glove box.  There are also privacy concerns associated with a program that alerts anyone to the presence of personal health and contact information in the car.

A problem seeking a cloud-based solution

But there is a more fundamental flaw in leaving the process of identifying crash victims and their medical needs via a document stored in the glove box, rather than in a secure off-board location.  This problem is clearly crying out for a cloud-based solution.

The need for the program is great, with millions of people injured in car crashes every year in the U.S. alone.  In fact, the Yellow Dot program has been targeted specifically toward seniors who are more likely to have medical issues relevant in an emergency response situation.

Not surprisingly, there are alternatives to Yellow Dot that do provide access to off-board databases.  Two QR code-based solutions are tied to private personal health record databases.  Lifespire’s Code Amber Alertag uses a QR code which, when scanned, grants access to the user’s personal health rercords and emergency contacts.  The service was designed for developmentally disabled individuals.  Mycrisisrecords.com offers a similar service allowing a couple of different ways for EMTs to access personal health information online.

The problem with both of these solutions is they are built around private databases not subject to industry standards or oversight.  (And at least one of these private solutions requires a subscription.)  This challenge is crying out for a solution such as that provided by MedicAlert.  MedicAlert is a prime candidate to solve this problem not only because it has the server-based system in place but because of the organization’s 50+ year history of working with the first responder community and the fact that it already has millions of members.  (MedicAlert also has the advantage of being supported by Microsoft’s secure HealthVault service.)

Still need to ID the driver and victims first

But MedicAlert will have to greatly expand the scope of its service to support such a program and it does not solve the emergency contact problem.  MedicAlert still requires responders to make contact with its database via telephone and password.  It still is left to responding law enforcement officers to first identify the crash victims.

As described earlier, existing telematics systems and roadside assistance services provide for connecting with emergency contacts, but only with the customer’s consent.  In the event of an unconscious or badly injured driver or passenger, valuable time can be lost attempting to get consent to reach out to these emergency contacts.

A low-tech solution from Roadside Telematics that leverages the National Law Enforcement Telecommunication System (NLETS) has been available for as long as Yellow Dot.  But Roadside Telematics requires adoption by a third party such as an insurance company or car maker to reach the market.

Working with NLETS and third parties, the Roadside Telematics solution ties the emergency contact information to the vehicle identification number (VIN).  By working with law enforcement, Roadside Telematics ensures personal information does not fall into the wrong hands or is misused.  In addition, the cooperation of law enforcement and the connection with first responders helps ensure the information is accessed in a timely manner and is shared with first responders and enables appropriate communication with emergency contact

Illustration of the sequence of NLETS VIN# ID/ECON (Identification/Emergency Contact) system transactions (SOURCE: IHE ITI ID/ECON White Paper, 2008)

It seems odd that the challenge of identifying crash victims and notifying emergency contacts remains a problem. With weekly reports of personal information being accessed illegally and with wireless broadband connectivity nearly ubiquitous the fact that auto makers have not closed this gap with the emergency response community seems absurd.

In his recently published book “Detour: My Unexpected, Amazing, Life Changing Journey with OnStar,” former OnStar president Chet Huber tells the story of an OnStar operator contacting the wife of a doctor who had accidentally shot himself in the chest so that she could comfort her husband while emergency responders were en route. The chief executive of 95190, which provides call center services to Lexus in China, has shared similar tales of call center operators directly contacting family members of an injured party at the request of the victim.

These stories are exceptional, and they mask the reality of first responders being unable to identify crash victims, their emergency contacts or their existing medical conditions. 

Formal notification of emergency contacts or next of kin, though, is best left to appropriate authorities. The police are trained in handling these matters in an appropriate and timely manner. Police officers are also mindful of the danger of frightened family members potentially racing to a crash scene and causing additional injuries on the way.

Implications:

The Yellow Dot program has the charm of an out-of-date analog solution to a very digital problem. The delivery of personal health record information and the sharing of emergency contact information should be left to appropriately trained professionals and secure off-board systems.

The use of QR codes, though clever, convenient and compelling, is an invitation to identity theft. And at a time when people’s personal information is frequently being used against them, the Yellow Dot actually has all the charm of a scarlet letter, notifying the world of the driver’s potential health issues or handicaps.

With the increased use of vehicle connectivity solutions and the ability to sign up customers at the time of the vehicle sale or afterward on a purpose-built Website, the Roadside Telematics proposition provides a safe, secure solution for identifying victims and their emergency contacts and can close the emergency response gap in combination with a service such as the existing MedicAlert/Microsoft HealthVault partnership. 

There is also a powerful economic incentive for auto makers to solve this problem in Western countries where the wired and wireless infrastructure and public service access point networks are sufficiently evolved to support these solutions. If the problem can be solved in the developed world, there is money to be made deploying these solutions in the developing world where accidents, injuries and fatalities from road accidents are much higher.

The next move is up to the car companies. Once the urgent needs of potential crash victims have been seen to, there will be plenty of time for Twitter, Facebook and Pandora.

Additional insights:

http://bit.ly/nwESkw - Chleon Answers Call for Secure Service Delivery Platform  - Lanctot - Automotive Multimedia and Communications Service

http://bit.ly/ojAJ1y - ChinaL The OEM Telematics System Landscape - Xu - Automotive Multimedia and Communications Service

http://bit.ly/qSA29m - OnStar: Time to Hit the Reset Button? - Lanctot - Automotive Multimedia and Communications Service

Nearly a year ago at the Telematics Update Content & Apps event in San Diego I was asked why the industry hasn’t simply standardized car stereo interfaces to ensure a safe, predictable experience in all cars. This simple question – which some might even regard as absurd – struck at the heart of the challenge of automotive HMI development. It also implied two other questions: Are we making any progress in HMI? Is there an ideal automotive HMI proposition?

The answer to the former question is “yes,” and the answer to the second question is “no.”  Automotive HMI is the great dashboard differentiator.  Like so much in the car, it is an art leavened with science and a science often overwhelmed by art.  And now you can stir marketing into the mix.  OEMs regard HMI as an essential element of vehicle branding.

After more than 100 years of designing cars, each dashboard remains a blank slate upon which a car maker and its suppliers carve their vision of in-vehicle interaction.  And even industry alliances have made little headway including, most recently, the GENIVI Alliance and the Car Connectivity Consortium (CCC).

GENIVI has left itself out of the HMI conversation seeing HMI as an inherently differentiating technology that is contradictory to the non-differentiating code sharing objectives of its charter.  The CCC’s Terminal Mode connectivity specification, on the other hand, focuses on both connectivity technology and HMI and has stepped directly into the HMI crossfire.

 Car Connectivity Consortium ventures where GENIVI fears not tread

Far from getting easier with each passing decade, the automotive HMI experience becomes more complex as choices multiply with the emergence of new technologies.  The CCC has sought to toss a lifeline to automotive designers with its safe mobile-phone interfacing credentials but, so far, only 18 companies have seen fit to join the consortium.

The industry is caught in the vortex of an HMI remix as the imperative to integrate wireless devices takes hold.  Dials buttons and switches are suddenly passé.  (In fact drives for removable media are on the way out as well.) 

The CCC spec attempts to define the parameters of a cross-platform mobile device interface that will enable screen replication of the mobile device modulated by policy management elements.  But the Terminal Mode proposition is being undermined by the more powerful urge in the industry to differentiate.

The challenge for OEMs is great.  Wireless devices arrive in the market having passed through several different hands including the hardware manufacturer, the software and operating system provider and the wireless carrier.  All of this means that car makers face a perplexing decision making process with no easy right or wrong choices.

The issues at the heart of this decision making process are the choice of connectivity technology and the HMI strategy for enabling safe and convenient and, hopefully, intuitive driver access to on-board and off-board services and content.  The connectivity technology candidates include: Terminal Mode, Bluetooth SPP, USB, Wi-Fi, Aux In, iPod Out and VNC.

Each of these connectivity solutions has the tacit or stated approval of different OEMs, Tier Ones, handset makers and carriers.  Each of these solutions also has significant HMI implications regarding device control of the dashboard or vehicle HMI control of the device.  One of these technologies, Terminal Mode, is supported by an industry consortium: the CCC.

While the involvement of an industry consortium implies broad industry support for a solution that can build market momentum, it also implies stagnation and compromise.  The automotive industry has lost patience with stagnation and compromise and is rushing new systems to market at an unprecedented pace.

Terminal Mode being left behind by OEM rush to connect

Terminal Mode was intended to speed mobile device integration efforts by defining a protocol for safely reproducing the mobile phone interface in the dashboard.  The thought process was that consumers would prefer to access their mobile device functionality on a larger screen with much of the familiar device-side HMI preserved.

Unfortunately for Terminal Mode supporters, the market has galloped forward without waiting for the organization’s standards setters.  Ford and its SYNC platform are partly to blame for this industry disconnect.  With Ford surging toward 3M SYNC systems installed, competitors have felt pressured to move ahead without the CCC.

For its part, the CCC has struggled to establish its global credibility having been born from a group of German car makers in concert with Finnish handset maker Nokia.  The leadership of CCC was then put in the hands of Nokia, according to its current president, who is a Nokia director.  Of course, after its recent significant global market share loss Nokia now faces much higher priorities than focusing on a global standards-based mobile device integration campaign.

To further complicate matters, Nokia’s weakest market is the most essential market for mobile device integration: The U.S.  (Nokia’s current smartphone share in the U.S. is estimated by Strategy Analytics at 2%.)  Smartphone connectivity in the car is currently being pursued in the industry mainly with the objective of enabling access to streaming music content.  The U.S. is the largest music market in the world.

Ford and Fiat show the way

There are actually three essential application areas for smartphone connectivity in the car: communication, navigation and entertainment.  Communication was the first to be resolved with Bluetooth hands-free phone interfaces enabled by voice technology.  Fiat and Ford were leaders in this integration effort.

Navigation was the next priority for smartphone connectivity.  Here, again, Fiat and Ford have led the way with mobile device integration solutions enabling navigation.

Ford has also been in the forefront of entertainment content integration from a mobile device.  In fact, Ford’s consistent and fast-paced success has put extraordinary pressure on the industry to respond.  Terminal Mode arose as a cross-platform mobile device integration alternative to Ford SYNC and Fiat Blue&Me but its arrival has highlighted the limitations of the automotive industry’s well-established consortium-based standards setting process.

As an unproven lab-produced standard Terminal Mode is subject to the ongoing tinkering of consortium members, including those that might block advances.  But even under the best of circumstances its success can be undermined by a lack of market adoption by makers of handsets or head units.  In fact, even wireless carriers have the power to interfere with Terminal Mode’s progress especially as they begin to play an increasingly assertive role in the telematics market.

Notable names among CCC members, non-members

CCC members include OEMs Toyota, GM, Volkswagen, Daimler, Honda, Hyundai and PSA.  Notably absent from the CCC’s member list are Ford, BMW, Nissan, Renault, Audi, Jaguar Land Rover, Chrysler, Kia, and Fiat. 

The list of head unit makers among the CCC membership is also short but includes Alpine, Delphi and Denso.  The list of center stack system suppliers not included among CCC members is long and includes Continental, Bosch, Harman and JCI, all of which have their own connectivity solutions.  Most notable by its absence is Clarion which has adopted RealVNC’s technology which is based on the same VNC technology of Terminal Mode.

Samsung, Sony, HTC, and LG Electronics are all named as examples of handset makers that have joined CCC and will support the Terminal Mode protocol.  Apple, RIM and Google are still missing from the CCC membership list which does not include a single wireless carrier.

In spite of being a CCC member, GM has already chosen its own proprietary path with the announcement of its MyLink Bluetooth SPP-based smartphone connectivity system.  MyLink might one day adopt Terminal Mode protocols, but today has nothing to do with the CCC.

Produced in cooperation with Panasonic Automotive and QNX, GM took over the MyLink brand from OnStar.  (OnStar’s MyLink smartphone app is now called RemoteLink and is on its own development trajectory.)  Similarly, Toyota, another CCC member, is pursuing its Entune Bluetooth SPP-based connection with Terminal Mode nowhere to be found.

Harman pushing Aha Radio

Harman is not currently a member of CCC and is aggressively pushing its Aha Radio connectivity application with what company executives call a “small licensing fee.”  In other words, Harman is seeking to push Aha Radio into any platform it is currently engaged in or bidding on.

A worthwhile side note on this interface struggle is the central role now being played by Pandora.  Pandora is a special case because it is a standalone application requiring its own unique software code and with a business model that does not allow subsidies or revenue sharing.  Ford was first to enable voice access to on-device and streaming content including, last year, voice access to most Pandora functions such as skip, thumbs up/down and channel selection.  Ford's interface remains unique in this respect.

BMW was next to enable Pandora smartphone integration, but has not enabled voice integration, preferring to use its physical i-Drive controllers.  Mercedes has also enabled Pandora access.  GM has now arrived with MyLink – shipping later this year – with voice integration and touch screen control, like Ford.

Pandora is not part of Harman's Aha Radio application portfolio, possibly because Aha Radio is ultimately intended to be an advertising platform with revenue sharing.  That prospect rules out inclusion of Pandora whose licensing forbids revenue sharing.

Each of these OEMs has taken a different approach to representing apps on an in-dash display.  Not one of these companies, though, has chosen to reproduce the handset HMI.  At the same time, though, each of these OEMs is known to be investing heavily to enable their individual app experiences a cost burden Terminal Mode is intended to alleviate while also requiring some loss of control.

Implications

Terminal Mode may yet have its day in the dash(board).  The CCC consortium supporting Terminal Mode has ventured upon sacred ground for the automotive industry: dashboard HMI.  Car makers jealously protect this differentiating real estate.

It is fitting that the battle is playing out in Detroit which is ground zero for audio decision making worldwide.  It is also worth noting that Apple has guarded its HMI experience not unlike a car maker with enviable success.

The growing importance of wireless carriers and their knowledge of user interfaces may yet play a decisive role which may alter the current development trajectory.  Handset makers are also stepping forward with their own ideas and priorities.

With that in mind, we think the CCC faces steep obstacles in convincing car makers to surrender some control over HMI in the interest of cross-platform scalability and cost reduction.  It is an admirable effort and one that may lead to technical breakthroughs relevant in other application verticals such as V2V connectivity.  But when it comes to entertainment, communications and navigation, car makers may have too much at stake to play along.

Further Insight:

http://bit.ly/oQaPOr - #RealVNC: A Dark Horse in the Connectivity Race - Insight - Lanctot - Strategy Analytics

http://bit.ly/nwESkw - #Chleon Answers Call for Secure Service Delivery Platform - Lanctot - Insight - Strategy Analytics

http://bit.ly/oS67Rg - #Pandora, #Spotify, #Sirius XM Vie for Automotive Subscribers - Lanctot - Insight - Strategy Analytics

Speaking at the Center for Automotive Research’s Management Briefing in Traverse City this week, OnStar’s president touted the organization’s plans to pursue initiatives in global markets from Latin America to the Middle East. We hope OnStar is not losing sight of some basic blocking and tackling opportunities closer to home.

OnStar has yet to realize the monetization opportunity of its extraordinarily powerful platform. That so-far missed opportunity was nowhere more in evidence this week than with the announcement from State Farm and Hughes Telematics (HTI) of an aftermarket telematics system offering everything from vehicle diagnostics to stolen vehicle tracking and usage-based insurance – all integrated and delivered via the Internet and a smartphone application.

The State Farm announcement pointed up OnStar’s failure to create its own unique insurance solution somewhere along its 15-year history. Imagine for a moment, a dealership insurance selection process to be handled by the F&I department that would allow customers to check a box authorizing OnStar to share their driving data with their insurance company in order to receive a discount.

It is especially noteworthy that GM for years had a captive insurance partner in GMAC which, to this day, only offers an odometer-based insurance product to OnStar customers. Of course, GMAC is no longer owned by GM and this insurer’s poor ranking (based on number of policies) in the industry is a further reflection of the greater failure of OnStar.

Insurance companies would like nothing better than to pay GM for the customer data necessary to manage the usage-based insurance model. GM’s failure to foresee and enable this has left the door open to a budding telematics aftermarket and it is just the beginning of an emerging battle for control of the customer.

The importance of the State Farm launch goes well beyond the simple proposition – at least it seems simple – of an auto insurer plugging a module into a vehicle’s OBDII port. The State Farm initiative reflects the importance to State Farm of altering its relationship with its customers.

State Farm's emergency button will now be increasingly available to drivers in need of assistance at crash scenes. This is a fundamental rewriting of the rules of post-crash protocols as auto insurer State Farm will now have the opportunity to not only take direct responsibility for post-crash customer care, but will also have a hand in post-crash vehicle care. (It may seem crass, but it is vital to State Farm’s financial interest to handle this proposition directly.)

There are other new opportunities inherent in the State Farm offer. Automobile dealers around the country will be well advised to contact one of the 18,700 agents in their vicinity to bring them in for State Farm UBI days < - that’s my idea, State Farm, but it’s not trademarked.  (Worth noting that State Farm has described no such plan or initiative - but, hey, it's time to start thinking outside the box!)

Not only might drivers be eligible for discounts, the smartphone app provides a diagnostic x-ray application for the vehicle. Maybe that local dealer can get their service department’s phone number programmed into the device or have it set up to send an SMS message. (Again, just my crazy idea - not State Farm's.)

Implications

It’s not too late for OnStar to wake up and realize the platform’s real potential. It’s also not out of the question for OnStar to simultaneously pursue new product and service initiatives at home and abroad.

All OnStar needs to do to find success is realize that it is a 15-year-old start-up. It’s time to forget about that parent company GM, OnStar, and put the pedal to the metal. Any further delay for OnStar will only leave more opportunity for aftermarket players, like State Farm, to sweep in and steal the business.

Strategy Analytics' broader range of specific recommendations are detailed in: 

Additional insights: http://bit.ly/oapWOj - OnStar: Time to Hit the Reset Button? - Lanctot - Insight - Strategy Analytics

http://bit.ly/qbSM0B - #StateFarm, #Hughes Raise Usage-Based Insurance Bar - Lanctot - Insight - Strategy Analytics

http://bit.ly/pLNDLr - #OnStar #FamilyLink Could Break Location Taboo - Lanctot - Insight - Strategy Analytics

Good enough is the enemy of the best (with apologies to Voltaire). Nowhere is this more apparent today than in the traffic data industry. Almost anywhere in the world Google's free real-time traffic data, based on Android handset probes, is perceived by a preponderance of consumers as "good enough." In fact, more than a few people – at least the ones I run into – perceive Google real-time traffic as great.

But is good enough really good enough?  If good enough is actually good enough, how was INRIX able to lure top-notch venture capital firms like Kleiner Perkins and August Capital to invest $37M in Series D round funding?  Observers have ascribed a $500M valuation to INRIX based on that investment, putting INRIX on a path to CEO Bryan Mistele’s goal of a $2B valuation in connection with the company’s plan to launch an initial public offering in 2012.

If good enough traffic data is free, how can INRIX command such a premium valuation?  As my brother is fond of telling me: “Watch the hips.”  What my brother is talking about is anticipating the direction of a soccer or basketball player.  The best guidance is to not be taken in by the head-fake, watch which direction the player’s hips are pointing.

In traffic data, the bellwether is predictive traffic data.  Real-time traffic information is the crack of traffic information.  It is easy to get excited about real-time traffic information like live traffic reports and traffic-camera feeds.  But if you are a traffic manager or even if you are just a traffic data consumer trying to navigate from one point to another, what you need is predictive traffic information.

Predictive traffic information is where INRIX shines.  It is worth noting that Google pulled its predictive traffic information last week without explanation.  It is not clear what the information was based on, but something must have gone wrong.

Why is predictive traffic information so important?  That is simple.  If a service provider doesn’t have predictive traffic information it cannot estimate accurately when someone is going to arrive at a particular destination.  If the service provider or application cannot predict travel times with any accuracy, then it cannot provide useful routing information or ETAs and, therefore, cannot deliver a reliable navigation solution.

Time and time again, survey respondents tell Strategy Analytics that traffic and navigation are the two most important applications.  If a service provider has inferior traffic information, sooner or later the user will realize that the navigation information is NOT “good enough.”  A good indication of this is navigation arrival times that are constantly changing on a smartphone app, navigation device or embedded system.

Executives at Waze, the probe-based, crowd-sourced traffic information provider were probably delighted by the INRIX funding announcement.  The money-losing, venture-backed traffic information provider was trying to make some publicity hay of its own a week ago when Los Angeles authorities shut down the 405 Freeway for two days.

Waze scored a public relations bonanza with news reports across the country and around the world along with extensive network television coverage in partnership with the ABC network.  While Waze is a clever solution, it is entirely focused on real-time traffic information, not predictive.  Unfortunately, this is a fatal flaw. 

So, even though Waze picked up thousands of new users in the Los Angeles area to contribute their probe data to the traffic information service along with their Twitter and text messages regarding real-time traffic events, Waze is not able to provide predictive traffic information services.  Without predictive traffic data, Waze is a novelty traffic information service with a niche market.

Implications

The implications for Waze and, for that matter, Nokia Navteq, are important.  Probes alone do not a traffic information service make.  INRIX has demonstrated this truism definitively.  But it may take a while to sink in with consumers.  Fleet managers and traffic management executives get it and have voted with their dollars and Euros.  OEMs like Toyota, Ford and Audi get it too.

With the latest round of funding, INRIX is now positioned to expand its range of cloud-based, travel-oriented service offerings and explore acquisitions.  The company is also teaching the industry important lessons every day about the importance of predictive traffic.  And that's more than good enough.

To compete successfully in the traffic information business requires a robust predictive traffic engine.  Consumers and traffic managers and, for that matter, fleet managers all need predictive traffic information to plan their routes around delivery times and fuel consumption.  INRIX is delivering these solutions to a growing range of public and private organizations in a growing range of geographies.

Additional insights:

http://bit.ly/nNTWk2 - Automotive and Portable Navigation Outlook 2010 - 2018 - John Canali - Automotive Multimedia & Communications

INRIX looks to put more distance between itself and competitors in the traffic business, even as it leverages those traffic reporting connections to build its cloud-based traveler service platform. The company announced $37M in new funding from VC Kleiner Perkins today intended for global expansion, acquisition efforts and expansion of its mobile apps business.

INRIX already boasts a network of 10M GPS-enabled vehicles; and 100M+ users in 22 countries; and 150+ customers.  But what is more important is that INRIX is in the forefront of traffic product development, deployment and innovation.  The company’s pioneering advances in the past year include:

• The first pan-European launch of a TPEG over IP real-time traffic service - via Audi Connect
• In app community traffic reporting integrated with live traffic feeds on Navigon's Traffic4all, Harman's Aha Radio and other private label apps developed by INRIX and its partners
• Predictive travel times function - when does one have to leave to arrive by a particular time - on Ford's SYNC Traffic, Directions and Information feature

In all, INRIX has more than 18 traffic-related service offerings with more to come.  The latest innovation available via Ford’s SYNC Destinations mobile app is the ability to see instantly how the current traffic picture differs from the norm.  In other words, INRIX’s traffic service can alert a user instantly to important traffic anomalies.  This feature intuitively recognizes the frustration of a red-green-yellow-coded map that tends to look the same at particular times of the day. 

This kind of intuitive service innovation is the mark of an industry leader and the kind of continuous product enhancement that investors are interested in fostering.  And given the challenge of improving on existing traffic data solutions and raising and fulfilling customer expectations for traffic data services, INRIX's achievement is non-trivial as it has consistently delivered new solutions.

The two biggest areas of product development and industry leadership for INRIX are two-way traffic reporting – enabling traffic information users to report road conditions in real-time – and cloud delivery of traveler information.  While companies from ITIS Holdings (UK), ASF (France), viaSuisse (Switzerland), CarVP (China) and Waze (Israel) have all brought two-way traffic reporting functionality to mobile environments, INRIX has made the most progress in reaching the widest audience of actual reporters including such platforms as Pioneer’s AppRadio, Harman’s Aha Radio and Navigon.

INRIX’s hallmark is predictive traffic services.  Two-way traffic reporting is just beginning to emerge and find its way into telematics systems, such as Audi's Audi Connect.  The next phase of development for INRIX is broadening of its cloud portfolio into more content and services even as the company brings its solution to new geographies.

Implications:

The next stage of traffic industry development will be defined by clever passive floating vehicle probe data solutions derived from smartphone apps, portable navigation devices from TomTom and Garmin, and embedded consumer telematics systems.  Even more important will be the added traffic condition reporting influence of active traffic data users reporting on road conditions in real-time.

INRIX has already met that challenge on multiple mobile and embedded devices and systems.  Nokia Navteq's acquisition of Trapster was a clear indication that the company shares that objective.  Beyond enhanced traffic reporting will be traffic-enhanced routing.  (Good routing requies good traffic data.)  And INRIX's focus on traveler services will likely add advertising and sponsorships to the mix.

INRIX's ability to support real-time connected traffic services will give the company a privileged position in a traffic services future characterized by location awareness.  Further traffic enhancements will likely include integration of video, image recognition technology and multi-platform solutions.  It will be a great ride.  Are we there yet?

The conventional wisdom in the industry is that 50 percent (or more) of OEM profitability occurs after the sale of the vehicle. The dealer plays a critical role in this process as the primary customer interface. Unfortunately, dealers and OEMs have never been on the best of terms. And when it comes to leveraging service opportunities to crank up profits there remains much room for improvement.

The good news for dealers is that there are a proliferating range of suppliers and solutions to make the connections between car buyers and their dealers more “sticky” and more profitable. These solutions are focused on either vehicle diagnostics or service scheduling or both. This is not a new challenge for the industry, but new technology is altering industry relationships and changing the customer experience.

The increased interest is actually supported by recent findings published by JD Power and Associates in its 2011 U.S. Automotive Emerging Technologies study. According to the results of a survey of nearly 18,000 vehicle owners, remote diagnostics was the feature with the highest degree of interest after the market cost was revealed.

Interest after market price is revealed

                Remote vehicle diagnostics – 55%

                Non-branded premium sound system – 52%

                Wireless connectivity system – 50%

                Rear-vision camera system – 46%

                Blind spot detection – 45%

                                                                SOURCE: JD Power & Associates

A handful of companies are leading the way in closing the diagnostics/service gap.  Xtime, is the market leader in what it calls ServiceCRM.  GoPoint Technology has an iPhone app and OBDII connection to allow dealers or consumers to diagnose vehicle problems.  And Vinvox has an OBDII plug-in to allow dealers to manage and monitor customer vehicles needing repairs or maintenance.

GoPoint and Vinvox are new to the market, with Vinvox in the very earliest start-up stages.  Xtime, on the other hand, already boasts a robust following among OEMs.  In fact, Xtime is unique among these three companies in pursuing relationships with OEMs, while GoPoint and Vinvox are designed to be offered directly to dealers – and GoPoint as the only direct to consumer play.

Xtime says its ServiceCRM automates and integrates electronic service menus as well as online/dealership/call center/smartphone/telematics scheduling, online bill pay, electronic service notifications, comprehensive shop control, greeter boards, management reporting and certified DMS connectivity into a unified, web-based platform.

Xtime says it delivers its ServiceCRM product via the Internet to over 3,200 dealers today.  This “Software as a Service” or SaaS business model  empowers the dealer to schedule customer service visits and promotional campaigns.

The company is also piloting a Mobile Service Advisor (Q3) to enable a full check-in solution.  Xtime says its MSA includes electronic inspections, advisor appointment views, trim-level menus, vin scan, photo/video capture, automated customer signatures and electronic notifications, for fast customer check-in.  All functions are delivered on a tablet computer.

Xtime says it is the exclusive provider of these functions for car companies such as Infiniti, Nissan, Lexus, Toyota Canada, Southeast Toyota, Chrysler and Hyundai and is the preferred provider at BMW, Toyota USA and Audi.  Xtime is also the exclusive provider for many of the industry's leading dealership groups, including AutoNation, Group 1 Automotive, Sonic Automotive, West Herr, Luther, Ferman and Checkered Flag.  CustomerTraac, The Market Store, DME (owned by JM Solutions), Aspen Marketing and Dealer’s Greatest Assets (DGA) all use Xtime to power their centralized call centers for service scheduling.

Xtime is actually an important element of Hyundai's Blue Link telematics eco-system providing a critical link between Hyundai, the customer and the dealer.  The ability exists within the Xtime implementation with BlueLink for automatic notifications to go to dealers in the event of a vehicle DTC (diagnostic trouble code) occurrence.  If the consumer opts in - to share vehicle information - and if the feature is enabled dealers will be notified of the DTC and can then reach out to notify the customer.

This capability is an industry first when and if it is enabled at the launch of Hyundai's Blue Link solution.  The Hyundai implementation stops short, however, of providing dealers a proactive view of the status all customer cars.  Privacy concerns are likely impeding this next step.  But privacy is not interfering with advances in the aftermarket.

GoPoint’s iPhone-based solution is unique in putting diagnostic capabilities in the hands of the consumer or the service manager.  Unlike a competing solution from CarMD, which is a dedicated device, GoPoint combines a free downloadable app for the iPhone with a diagnostic cable for the OBDII connection to tap into the vehicle codes on the Can bus.

But there is more to the GoPoint solution than meets the eye.  The solution is also being used in four U.S. states by SpeedEmissions as a certified emissions testing application called Carbonga.  And for car servicers or car dealers there is a cloud based solution, FuzzyLuke, which puts the application in the hands of customers to enable them to diagnose vehicle problem codes and upload them to a Web-based application for service scheduling. FuzzyLuke claims the iPhone application and OBDII connection cable help car dealers and service operations tap into the $60B market in unperformed maintenance.  

Vinvox also integrates with smartphones and offers Web-based means for both consumers and dealers to view vehicle history and warranty and repair status along with vehicle codes, but Vinvox dispenses with the cable in favor of an OBDII plug-in with a cellular connection.  VinVox’s Retriever provides real-time notifications of required service or maintenance to the dealer and driver giving the dealer a powerful customer relationship management tool.

Implications:

What is clear is that OEM telematics systems have failed to fulfill the promise of customer/vehicle relationship management.  Aftermarket providers are diving into this yawning gap with clever solutions intended to empower dealers to better manage their fixed servicing assets while also enabling consumers to better understand that functional status of their vehicles.

How the OEMs could have missed this opportunity is hard to comprehend.  There is no doubt they see the money being left on the table now, though.  Within a few years, car makers will have refined their dealer service integration solutions and, maybe, they will win dealers back.

The goal is a centralized CRM/VRM model that gives the OEM a view to global vehicle servicing activities while giving the dealer the tools he or she needs to manage and measure customer service opportunities and, at the same time, creates a Web-based window for the consumer to better understand the service and maintenance status of their own car.

The vision has been at least partially described in the past by telematics service suppliers such as Hughes Telematics.  And Yamei Electronics has a fully realized solution in use with 1,800 car dealers in China.  (http://bit.ly/mSEUsB - #Yamei Puts Dealers in the Telematics Driver’s Seat – Insight)  It’s time for OEMs to plug into the customer’s interest in their own vehicle and the value of the dealer interface.

The measure of a creative and powerful marketing organization is often best taken when the chips are down. For Hughes Telematics that measure might have been taken two years ago when Chrysler and Hughes agreed to part company with Chrysler in the throes of a Chapter 11 filing.

The loss of Chrysler meant that Mercedes-Benz (Mbrace) might be left as Hughes’s lone OEM customer in North America. The loss of Chrysler also looked like the final straw that might bring down Hughes’ once-grand vision of a cross-OEM hybrid telematics system integrating cellular and satellite connectivity. That vision included a hardware module, call centers, service partners and an integrated three-screen solution enabling Web and smartphone access to vehicle information along with remote control.

Today, all of those pieces – except the satellite connectivity – are still in play, but Hughes has repositioned itself to address a wider scope of potential verticals (including healthcare and insurance) while still addressing automotive OEM and aftermarket opportunities.  Hughes is approaching the market with a less grandiose and more flexible offering – in-Drive.  

in-Drive to the Rescue

In-Drive allows Hughes to pursue fleet, insurance or aftermarket vehicle tracking and recovery solutions as a white label provider of software systems capable of supporting wired or wireless modules or even smartphone-based solutions.  The introduction of in-Drive, heralded at the 2010 CES show and even more advanced at the 2011 show in January, showed Hughes bouncing back with a new vision.  

Paramount to that new vision is an emphasis on the insurance side of telematics.  Thanks to intellectual property acquired from NetworkCar, Hughes has the most flexible and extendable platform available in the insurance telematics market.  Also thanks, in part, to that technology positioning, the company is engaged with unidentified insurers to bring a next-gen telematics solution to the market.  (Hughes declines to identify any potential partners or the nature of any systems that may be in development.)

The importance of the insurance telematics angle ought not to be underestimated by car makers.  Progressive’s launch of its Snapshot usage-based insurance product (http://bit.ly/fu1JCa - Usage-Based Insurance Brings New Competitors to Telematics Market) has the potential to fundamentally change the relationship between insurance companies and their customers.

Progressive’s Snapshot product tracks vehicle miles driven, amount of time driven and time of day and calculates speed, though it does not correlate speed to posted speed limits.  The online reporting tool shows these figures along with a calculation of the number of “hard braking” incidents. 

The Snapshot reporting tool also displays a graph characterizing the driving behavior as to whether the driver is maximizing MPG correlated to the time of day of that driving activity.  In this way Progressive is opening the door to a new relationship with the customer.  To Hughes’ credit, the company described its own solutions around eco-routing and eco-driving three or more years ago.

Hughes Enabling Next-Gen UBI Solutions

Hughes’ insurance offering, like Snapshot, might be an OBDII plug in, or it can be implemented in a variety of ways including wireless connectivity.  Hughes is not wed to a particular platform and is capable of deploying its solution on any platform.  More important is the back-end analytical tools Hughes brings to the proposition allowing for everything from traditional safety and security to vehicle diagnostics, emissions, concierge services or family monitoring.

The system/service bundles offered by Hughes via in-Drive (http://bit.ly/hOgPcV) include:

Automotive Data Services

Telematics

Family Co-Pilot

Hughes’ newfound flexibility means the company is free to pursue opportunities in the fleet market as well as in the consumer market.  In fact, thanks to its wireless patents, Hughes could launch its own OnStar-like aftermarket telematics mirror with CAN connectivity for capturing vehicle data if it so chose.  In other words, Hughes could out-OnStar OnStar.

Working through insurance partners, Hughes is in position to help its partners redefine that customer relationship.  An insurance telematics device is perfectly capable of providing vehicle tracking and recovery – like LoJack – roadside assistance, navigation and POI assistance, or any of a variety of concierge and vehicle diagnostics capabilities.

The vehicle diagnostics capabilities offered by Hughes include vehicle emissions monitoring for inspection purposes as well as the checking of error codes.  In the event of a breakdown, a Hughes-based insurance telematics solution could provide names of nearby approved service or repair providers.

The same kind of functionality is true for emergency circumstances.  A Hughes module, provided by an insurance company and equipped with appropriate sensors and CAN connectivity, could alert emergency responders – again, in an OnStar-like fashion.

To paint an even rosier picture of Hughes’ renaissance, prospects are good for the signing of a second OEM telematics relationship later in 2011.  Between its improving OEM outlook and robust aftermarket prospects, Hughes is tracing an improving trajectory.

Implications:

Hughes Telematics’ emergence in the insurance market changes the prospects for this application segment.  Until now, insurance telematics solutions did not stray far from the basic collection and analysis of driving time and time of day – with some exceptions (http://bit.ly/9XRntG - #Allianz Changing the #PAYD #Insurance Game - blog).  The range of solutions available from Hughes for collecting and analyzing vehicle information opens the automotive market to new opportunities for insurers.

The fleet industry is already looking at behavior modification-type solutions tied to vehicle tracking.  (http://bit.ly/e94Opj - Behavior Modification Comes to Fleet Telematics from the Cloud)  Progressive has already taken the step of integrating ecological driving elements in its UBI solution.  A wide range of possibilities are available to auto insurers, but there are obstacles.

Devices, like Progressive’s, that connect with the vehicle CAN bus via the OBDII port are problematic.  Some cars are known to respond unpredictably to such plug ins and gleaning the necessary data can be a challenge.  The value proposition difference between such a device and one that is not connected to the vehicle is significant.  

It is still early days for UBI-based underwriting.  But Hughes participation in this market has the potential to change the market significantly.

Progressive Update:

This analyst is currently participating in a trial of Progressive’s Snapshot UBI service.  Progressive said it could not provide an OBDII Snapshot plug in for my 2009 BMW 5 Series, but it could provide one for my 2004 Toyota Sienna.  The initial reporting appears below:

Best Buy reported some disappointing financial figures last week blaming stalled consumer demand for TVs – including new IPTVs and 3DTVs. Going unmentioned in the company’s earnings call was its ongoing outreach to Detroit with a deal to sell and install EV charging stations for the Ford Focus EV and its plan to sell and install OnStar’s aftermarket mirrors. It’s time for Best Buy – and other large box retailers around the world – to seek closer ties to domestic car manufacturers to leverage the emerging connected and electric vehicle opportunities.

The Best Buy-partner announcements:

Best Buy-Ford Sync: http://bit.ly/eNGZ18

Best Buy-Ford Focus EV Charging Stations: http://bit.ly/e0CHWF

Best Buy-OnStar: http://bit.ly/eoJGeq

Best Buy understands the importance of connectivity as its Best Buy Mobile strategy has clearly become the engine of growth for the company. Best Buy Mobile is gaining more square footage in Best Buy’s large box stores – absorbing floorspace previously dedicated to selling shiny discs. And the company says it intends to open 150 Best Buy Mobile standalone stores in the U.S., bringing the total to 325.

The importance of Best Buy Mobile to the future of Best Buy is important to understand on two levels. The arrival of smaller Best Buy Mobile stores reflect Best Buy’s need to explore alternatives to its existing large box retail store model – built around destination shopping. And it also reflects the wider so-called “connections” business strategy of selling hardware that comes with a connection and, usually, a service subscription.

The category cited on the Best Buy earnings call as generating the single largest sales increase was mobile broadband and Wi-Fi connectivity devices, up 50%. The only category garnering more attention from Best Buy merchants than mobile broadband devices and, of course, smartphones themselves (where Best Buy claims a 6% U.S market share) is tablet computers. Best Buy has seen significant sales from tablets and expects even bigger numbers in the future, hopefully replacing sales lost from other computing platforms.

This is precisely where the automotive industry outreach comes into the picture. Traditionally at odds with the automotive industry, Best Buy has suddenly become the go-to retail partner for auto makers seeking stronger customer relationships. Car makers are themselves wrestling with the rise of the smartphone and table computing platforms and their influence on consumers.

Best Buy is experiencing this outreach from Ford and OnStar at precisely the moment it is experiencing the most competitive heat from online retailers and audio and video content streamers. Ford and OnStar need Best Buy’s trained sales people to explain new connectivity solutions to their customers – and to validate device compatibility, as in the case of Ford Sync. Best Buy needs Ford and OnStar to connect with new car buyers who may be considering aftermarket purchases.

 Best Buy fields an army of connectivity experts in its stores – which is precisely the marketing force needed by car makers bringing systems such as MyLink, Sync, Entune, mbrace and Uconnect to the market. But is Best Buy missing the boat even as it welcomes Ford and OnStar aboard? Yes!

The challenge facing Best Buy is preserving the relevance of its large box retail stores – where growth has eased or ceased altogether – in a market where consumers have almost perfect visibility to product assortments, information, and pricing online and gasoline is expensive. It is no coincidence that Best Buy launched two new online-to-store initiatives in 2010: Ship to Store and Friends and Family guest pick up.

Best Buy touted the improvements in its online-to-store initiatives in the past year. The company said in its earnings call that the number of in-store pick-ups for online sales grew to 40% from 35% in the year-earlier period. And 80% of big screen TV purchases made online were picked up at physical stores.

Best Buy’s large store future is inextricably linked with the pervasive car culture in America and elsewhere. It is a strange irony, then, that the mobile electronics department has become a virtual afterthought buried in the back of most Best Buy stores and frequently unstaffed.

One of the indications that Best Buy has not recognized, on its own, the opportunity presented by its new-found auto industry connection is the disconnect between the OnStar initiative and the Ford initiatives. The OnStar mirror is handled by the mobile electronics department, while the Ford Sync initiative is handled in the mobile phone department – and never the twain shall meet.

Normally such a disconnect would be rational and tolerable except for the fact that smartphones and tablet computers are playing an increasingly important role in the automotive market. What better marketing environment than a large box Best Buy store for companies such as Apple and RIM and Motorola (and?) to tell their tales of in-vehicle integration?

The opportunities to be derived from leveraging auto maker relationships include:

• Demonstrating smartphone and tablet computer integration alternatives in cars – along with distracted driving mitigation messages. (Tablet computers are ideally suited to aftermarket rearseat video solutions.)
• Demonstrating and selling aftermarket safety systems.
• Demonstrating and selling mobile broadband devices.
• Safe driving clinics for teens
• "Pimp My Ride" rallies in the parking lot?

Best Buy’s large box stores are veritable palaces to destination shopping actually dependent on the automobile. It makes sense for the company to take advantage of the in-store space and product assortment and trained sales force to promote enhanced driving experiences.

Implications:

The strangest thing about this emerging opportunity is Best Buy’s failure to recognize it. Auto makers have historically been hostile to automotive aftermarket retailers – and with good reason. A substantial proportion of a typical OEM’s profitability and of the profitability of its dealer base comes from aftermarket sales. (Maybe Best Buy could coordinate its efforts with local car dealers. Better yet, maybe Best Buy could negotiate pricing on new cars - it works for Costco.)

The mere fact that OnStar and Ford are reaching out to Best Buy and other retailers marks a tipping point in the industry. Auto makers are suddenly recognizing that they have entered into the consumer electronics market. On this new turf they clearly understand that they will need all the help they can get in explaining and demonstrating their own consumer electronics solutions. (Coincidentally, Ford and GM have drastically cut the size of their dealer organizations - adding a further rationale to the retail outreach.)

While Ford has reached out to its dealers to offer more training and more incentives to usher them into this new consumer electronics-laden era, retailers like Best Buy are being asked to fill a yawning gap between the available technology and the available means of explaining it. The marriage of Best Buy and the automotive industry is a marriage of convenience, but Best Buy should take advantage of this opportunity to build stronger customer relationships, higher connectivity market share and increased profit from the resulting service and installation business.

Additional insight:

http://bit.ly/ePD2Df - GM Shrinks Development Cycle in Game of Connectivity Catch-up - Roger C. Lanctot - Automotive Multimedia & Communications Service

http://bit.ly/dJXnU2 - Aftermarket Telematics: Let's Get It OnStar - Roger C Lanctot - Automotive Multimedia & Communications Service