BARRIERS AND MOATS
No, it's not the "Bat-Bike" for the next Batman movie. It's a concept prototype bike by 
Yamaha, for an upcoming industry show. This post in Engadget describes all the nifty engine and power features of the bike.
That's all very interesting, but what really caught my eye were all the electronic gadgets and features associated with the bike...specifically, as Engadget notes:
"it has a vehicle-to-vehicle distance warning system, a “cornering light system” for a little night time knee-scraping action, and a noise cancellation system which is said to allow for an intercom, voice navigation, hands-free cellphone calls, and music player — damn impressive if it really works!"
We're rapidly approaching a point where not only new bikes, but new cars are increasingly going to be more interesting to new buyers because of their electronic add-ons than just the mechanical features.
Steve Jobs highlighting recently that 30% of new cars in 2006 in the US will be "iPod-enabled" in some way is but the tip of the ice-berg. Just like in PCs, consumers will increasingly be interested in the conveniences that web-enabled electronics can provide to the average driver, obviously provided in as distraction-free manner as possible.
Examples?
- Navigation systems are rapidly incorporating real-time traffic data streams provided third-party providers.
- GPS systems are being used for more than their "Lojack" security functionality, but to call up services in the area you're driving by that you may be interested in...the current Cadillac SRX's Nav system has a voice-activated system that lets you say "Japanese" and it highlights the closest Sushi places in the area you're driving through.
- Third-party automotive add-on specialists are starting to install Wi-Fi-enabled hard-drive systems in cars for music to be shared between the home network and the car.
- Companies like BMW are starting to incorporate "Heads-up" Display technologies modified from the fighter jet manufacturing businesses for civilian use, in an effort to minimize driver distraction.
These are but a handful of examples, and they're cool in and by themselves. But they're not as mainstream as the underlying technologies are in the consumer space OUTSIDE the car. And they should be.
There are two main reasons for this state of affairs, both being primarily institutional in nature.
1. The auto companies are still taking a vertical, "we can provide it all" approach to this business, much like the cell phone Carrier's walled garden approach to wireless services I've talked about before.
As a result, services that could added rapidly, less expensively and faster by being horizontally integrated into wide array of wired and wireless web services currently being provided via the web by a Google or a Yahoo! are instead still being built vertically, more expensively and slowly by auto makers and their suppliers into Nav systems that still cost thousands when they should cost hundreds.
New cars are still locked into specific hand-sets and wireless carriers because the automakers build in vertical integration into the car's audio system. This often results in idiotic and expensive Catch-22s for the customer.
For example, I was recently forced to order a four-year old Motorola hand-set as a replacement for one that was stolen, as a special order item that cost $550 only to find out that the carrier in question, Sprint, no longer even supports that hand-set on their network. Yet it's the ONLY hand-set that is designed to be incorporated into my car's audio system by the manufacturer! Thus, no integrated cell phone in this car until I get a new car.
Some times engineering myopia gets in the way. I was astonished to find that the high-end 2006 BMWs (the 5, 6 and 7 series for those who track these things), will support the addition of EITHER a satellite radio hook-up controllable from the steering wheel, OR an iPod, but NOT BOTH. Why? I don't know. Yet most consumers who have iPods, will likely also want the inceased flexibility of satellite radio programming.
I'll note that there is some progress here, but it's slow. GM's OnStar network, which started as a differentiated service for it's high-end cars, is now slowly morphing into a more horizontal service available to non-GM automakers that may be interested in incorporating it in their new offerings.
As one would expect, the most open, horizontal options are being championed by lower-tier automakers from Asia, who have less to lose and more to gain by adding their features as low-cost options. As an example, a sub-$25,000 Toyota Prius, aside from its widely praisedl, environmentally friendly hybrid engine technology, offers the same, and some more cool, electronic options than a high-end Mercedes, BMW or Cadillac.
The Japanese version of the Prius offers an automatic parallel parking feature, which presumably is not made available in the US because of legal liability concerns (possibly the subject for another post).
There are also other institutional issues like re-training dealer salesforces on selling cars on their digital, electronic features in addition to their mechanical features. Often times, as a geek, I find I'm explaining the features of a Navigation system to the salesman rather than the other way around.
Automobile power systems will also need to be beefed up going forward to support the extra burdeon of all these add-ons. In addition, automakers will need to make available more A/C jacks and plugs in the average car and not just up front near the driver.
And finally, the service infrastructure for these cars, both dealer and independent, will need to be re-tooled to accommodate all these new technologies. Here too, the verticalization in the industry is causing some independent dealers to no longer support some makes of cars, because the auto manufacturers in question require proprietary diagnostic tools that are designed for specific car models and are more expensive than third-party tools that support multiple models. Regulators in some states are already looking at this new state of affairs.
2. The second institutional barrier is the way auto dealerships, auto web sites, and automotive media covering the industry are still focused on the "horsepower and handling" aspects of reviewing cars rather than providing intelligent, useful comparative data on how electronic systems compare ACROSS cars.
For instance, if I wanted a feature by feature comparison on navigation systems across a line of sedans or SUVs by model year, I'm out of luck, both in the traditional automotive press and the web.
Yet I can easily do that when I'm trying to select a feature for a PC or a laptop, which costs a tenth of the price.
The revolution in consumer electronics entering the automotive space comes at an awkward time for the auto industry. With both the manufacturers and their suppliers trying to get out from under the pension liabilities and union-driven benefit costs incurred from a half a century legacy of the auto era of the past.
The industry is grasping for every opportunity to add incremental revenue, even at the expense of fewer, more expensive options for its customers. The auto suppliers especially are experiencing their own series of bankruptcies, recapitalization and changes in ownership.
As all this works through the magic of business re-invention, the first barrier will likely be addressed, but it'll take a few years. And the second barrier will likely follow, as consumers become more savvy and start carrying their expectations of how things gadgets work outside the car, into the car (Why shouldn't I be able to easily play my home music collection in the car?)
In a world when more auto buyers are trying just to get from point A to point B in their daily, dreary commutes every day on increasingly clogged urban highways, there's an increasing disconnect with automakers who insist on showing their cars going "Zoom, zoom" on open, windy mountain roads with not a cloud in the sky.
In fact, the only place consumers can really go zoom, zoom is via digital conveniences, that are increasingly affordable for mainstream markets.
The auto industry will likely experience a transition somewhat similar to the one that the computing industry went through, from the verticalized, monolithic world of the IBMs and DECs (remember them?) to the world of horizontally built and direct-marketed PCs. But it'll likely be painful and take at least the better part of a decade.
In the meantime, we're at the stage where consumers should start to recognize them as as such and start to communicate their wishes to the parties concerned.
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