From product to service offering: the OEM’s transition to mobility services

Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Paris (2019)

Keywords:

autonomous vehicles, Service innovation, servitization

Abstract:

Context

Autonomous cars, also called, self-driving cars, are currently expected by many to play an important role in the future of carmakers, helping them develop new products as well as new services. Despite the high development costs, the complexity of the technology and the uncertainties surrounding the evolutions of the regulatory framework, nearly all carmakers have expressed their interest in that technology, both via internal development projects and via partnerships and acquisitions.

Carmakers are not only interested by autonomous vehicles (AVs) as products, but are increasingly looking at AVs as bringing about new services, focused for example on the operation or the maintenance of the vehicle. In the case of Carmaker 1 and Carmaker 2, both organizations have started to develop many projects, ranging from highly conceptual projects to more short-term developments and experimentations.

Often however, the strategic intent of OEMs is not very clear, firstly because public announcements are often optimistic declarations by high-levels executives aiming to give a positive image of the company and motivate teams, secondly because teams working on autonomous car projects are more focused on the development and advancement of their project than on sharing information and thirdly because acquisitions and development of AV-related services takes several shapes and reaches different maturity stages. Faced with this new challenge, OEMs need to adapt and combine efficiently projects that address both products and, increasingly, services. This phenomenon is called servitization. It stems from both a strategic intent and an organizational arrangement.

Relevant literature

The evolution of carmakers through the development of services refers to the literature field of servitization. This field, which has been studied since the 1980s, has become even more popular with the rise of digital technologies. We can trace it back to the concept of servuction (Eiglier & Langeard, 1987). Autonomous vehicles are closely linked with the development of new services that will ensure their smooth operation, and bring more value to customers (Antonialli et al. 2018). Thus, OEMs need to develop new competencies that will enable them to operate these new services. The expected impact of servitization on a company’s KPI has also been an important element in this literature.

Literature gap

Although servitization has been studied extensively, the application of this concepts to the recent developments of the auto industry has not yet been the subject of detailed scrutiny. The authors believe this is an important task because economies in developed countries, including those that have a strong industrial core, such as the auto industry, are becoming less and less industrial, and focusing gradually more on services (Gadrey, 2003). The rise of the internet and digital technologies and tools has an important role to play in that respect. This article aims to show why, in the case of the development of AVs, it is crucial to link the concept of servitization to the organizational and strategic challenges faced by an OEM, both from a theoretical and practical perspective.

Research questions

This article focuses on the way a company developing new products also takes into consideration the development of new services. Our recent research has shown that the link between product and service is quite strong in the case of autonomous vehicles. In this article we will study the coordination between the exploration of products and the creation of new services. The development of AVs relies both on products being modified with certain components to allow them to be used in a service context, and services being launched with the capability to evolve and integrate upcoming technological components.

Methodology

In this paper we will study examples of ambidexterity that have allowed industrial companies to integrate the development of services. Examples of both successful and unsuccessful attempts to change the business model and the structure of a company will be analyzed. We will try to identify what assets and capabilities organizations have leveraged to develop services. We will then conceptualize a matrix that helps identify the different product and service-oriented projects to analyze the carmakers’ strategic intent. This matrix will be founded on the Technological Readiness Level scale and key criteria in the development of AV technology that have emerged through our own research.

Empirical material

The authors have had access to data both via semi-structured interviews, implication in several projects over the long term and, finally, via meetings and presentations about the development of AVs. Results Preliminary results will be presented to assess the usefulness of the matrix, its scientific reliability and its relevance to the development of AVs in various technological and national contexts.

Contribution to scholarship

This article linking the evolution of OEMs to servitization will give scholars a new tool to look at and study service-development projects.

Contribution to practice

This article will give automobile analysts a useful tool to analyze the various strategic paths chosen by large companies that are developing AVs. Moreover, it will help managers visualize and communicate the different objectives of their projects.

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