06th February 2015

In the digital economy, your competitors aren't your only competition

Think of a make of car. With the possible exception of Tesla, most of the names that flashed across your mind began life in the 19th century. Mercedes-Benz celebrated its centenary nearly 30 years ago; in 1998 Renault hit one hundred, followed by Opel, and Fiat in 1999.

That these companies have survived for over a century says something about the car’s prominent position in society. But some in the industry fear that their established place is being threatened by the digital economy.

Ford, which turns 112 this year, is worried that start-ups and tech giants are undercutting its business model. Speaking at a conference in Germany, Ford’s CEO, Mark Fields, said that to survive in the 21st century the car industry needs to compete with the likes of Google and Uber,

“There are [companies] who we never thought, five years ago, would be competitors for us”.

Ford and other car manufacturers are being squeezed on several fronts – ridesharing services like Uber, Hailo, and Lyft are changing how we think about and use transport; in-car operating systems, which both Google and Apple are developing, will wrestle more control away from manufacturers; and finally, automated vehicles, which Google and Uber are developing, will further reduce people’s need to own a vehicle.

In the digital economy it makes more sense to rent a car as you need, rather than to buy. And as more of us begin to see the car as something we use (and can summon with an app), rather than something we own, this will inevitably impact car sales.

We’ve seen this before, just on a smaller scale. Over the past 10 years, movies, TV, and music have ceased to be items we buy, but services we rent. The companies that benefited most from, as well as initiated, this change – Spotify, and Netflix – came from the tech sector. They undercut the established and dominant industry players to become the new industry establishment.

“[Tech companies] are looking at our industry”, says Fields, “[and aren’t] taking anything for granted, they are questioning tradition, and they are knocking down walls”.

Even inside the car, manufacturers are being squeezed by the digital economy. Both Google and Apple are building in-car operating systems. With these they offer manufacturers a dilemma – not installing them will be a competitive disadvantage, but in offering them they will be required to meet Google and Apple’s hardware standards – (basically, this will do to the car what Google and Apple did to mobile phone manufacturers nearly a decade ago).

And Ford may be right to be worried – in the recent past we’ve seen major players, like Nokia and Motorola, bought out and disbanded by Microsoft and Google’s phone divisions.

If Ford and others want to avoid a similar fate, they need to see the likes of Uber and Hailo, Google and Apple, as competitors – and challenge them with equally innovative services. To see how this can be done, take a look at Tesla

Links for this week cover the Tinder's money-making plans, McDonald's continued metamorphosis into a digital company, and Bloomberg's radical redesign.

  • #Mobile
  • Tinder's $19.99 undo button
  • Tinder's revenue plan turns its star feature into bug – which you can pay to fix
  • Read More »
  • #eCommerce
  • “I can see us allowing technology to do the heavy-lifting.”
  • Meet the man who’s challenged with saving McDonald’s from ruin. His first step, increase McDonald's digital team from 20 to 250 employees
  • Read More »
  • #Data
  • Opinions are free, Data is sacred
  • Since 2011 The Guardian has been building its own analytics tool - and it's using this to drive traffic
  • Read More »
  • #User Journeys
  • Google's 6 step programme
  • Google Ventures' 6 step product development plan looks rather familiar
  • Read More »
  • #Experience Design
  • For whom the bell trolls
  • Being trolled is a terrible experience –so why do people become trolls, and what do they gain from it?
  • Listen »
  • #Beautiful Web
  • "Instagram filters on acid"
  • Arguing that the homepage is dead, Bloomberg offers this radical, experimental, redesign of their site
  • Read More »
  • #Internet of Things
  • The Internet of People, and Things
  • People can't be left out of the IoT
  • Read More »
  • #Digital Transformation
  • Ford: "There are others who we never thought five years ago would be competitors for us"
  • Hailo, Google, and Uber are commoditising the car, and this has Ford worried
  • Read More »

Illustration: Patrick Cusack