To give Joe a rest, and just because it's Christmas, Charmer really gets talking cars.
Photo: Camberwell College of Art, London, summer 2007.
18 December 2007. Amidst the lobbying at the Bali climate change summit, a spokesperson at the European Automobile Manufacturers' Association (the ACEA) explained last week to the FT that “widespread further innovations will be required across all sectors to challenge climate change and we are fully focused to contribute”. The organisation says it pours $30bn into research and development every year but claims that many innovations do not take off because politicians do not support them.
First let's shed a few tears, though not quite the ones the ACEA had in mind. $30bn is a shocking amount of money to spend without having a functioning process of political engagement in place to ensure you're developing products that stay in tune with the times. The second observation is to suspect that "widespread further innovations" is probably fairly narrowly defined, given the car industry's track record.
Over the last decade the auto sector has lifted the car bonnet and stared for a while at the engine. It's not all wasted. Improved diesels have populated Europe. Biofuels and hybrids are here or on the way, if that's your thing. Oh, and there's a GM Volt in Detroit. But ironically, unlike the CO2 backlash against air travel, a problem entirely related to propulsion technology, the environmental impact of cars is far more complex because congestion in cities and materials recycling are huge issues too. In fact, as a cradle to cradle product, the car right now is a mess.
Let's start where every industry should start. By examining its business model. MIT professor and future of work guru Tom Malone led a report in 2004 that sets out, rather usefully, what a business model is, or should be. It starts with Rappa's 2003 definition that a business model is:
"the method of doing business by which a company can sustain itself” and notes that the business model is clear about how a company generates revenues and where it is positioned in the value chain"
Most business models evolve over time while ignoring key realities which eventually come to threaten them. "Car makers" have, on the face of it, a very clear business model. They are Creators, which buy raw materials or components from suppliers and then transform or assemble them to create a product sold to buyers. They are different to Distributors (the next model), because they design the products they sell. Some car companies own that bit too and others don't. Malone and his team classify a company as a Creator even if it outsources all the physical manufacturing of its product, as long as it does substantial design of the product.
Yet whether the car company does or doesn't own the distributor model, the auto industry business model doesn't work very well. Even with the annual application of $19.8 billion in advertising in the US alone (yes really), demand for cars is much lower than supply in what is, in the developed world, a saturated market. Cars are increasingly expensive to design, with great pressure to continuously launch new product in order to maintain buyer interest and guarantee the high sales volumes required for economies of scale. At a distribution level, cars are still sold by gruesome little people who work all day in big showrooms that have very little foot-fall. People are largely motivated to purchase via the annual spending of that $19.8 billion (yes, really), applied largely to buy and fill printed space in newspapers or magazines, or via images physically displayed on outdoor space in cities or online, or through air time on radio or television.
Because of the need to maintain very high sales volumes, longevity is a confusing muddle - cars are bought based on quality, although depreciation is very fierce, particularly given the actual utility of a car is rarely impaired by product failure if maintained reasonably for the first six to ten years - certainly not like it was in, say, the 1970s. It's oversupply and intensive sales tactics that cause the depreciation. Rather like the vast property overdevelopments on the coast of Spain, where every northern European has bought their own apartment or villa, which they can't now sell because developers keep snagging buyers at the airport, the place is full of underused assets that are hard to sell on.
Job swap time?
There is another glaring failure of the industry, which gets very little attention. I have never encountered a car designer who was given the opportunity to design the space in which the car operates. Nor have I met a road planner who has had the chance to design a car. Yet cities around the world face enormous difficulties. I've recently sat in several nasty consultation meetings in London where planners are trapped between angry car drivers demanding the right to drive in cities and angry residents wanting to stop cars dominating their locality. The answers are usually in the form of an obstacle course - reducing road capacity to discourage car use, blocked streets, width restrictions and nasty big speed bumps which ironically boost sales of larger 'SUV' products which can lope more easily.
The obvious solution here is much greater collaboration between those who design towns and cities and those who design vehicles. 20mph zones, the desire of every London borough, could be implemented as special roads without speed bumps but with speed regulation technology in place in any car that wishes to use the street. Incentivised navigation can provide people with better knowledge of journey routes that combine a car hop with some other mode of transport. Indeed those firms supplying the cars could develop new services where they receive public subsidies for actually incentivising people not to drive at certain times or via certain routes, that are quicker and easier. And before anyone waves a Daily Mail reporter at me, this isn't a national disgrace overseen by snoops. It's a really neat idea that would make life easier for almost everyone.
Anyone who thinks that people are wedded to their cars and will react violently over any change just needs to remember that people can't choose what they've never been offered. It's really easy to buy a car but I can't easily let my friend borrow it. Nor can I rent a bicycle outside in my street and drop it off at the railway station (unless I live in Paris). Demands for high product quality and safety features, along with the need for those economies of scale, mean that vehicles are all designed within a consistent set of performance criteria. While that might on the surface sound good, it's actually bad. Almost any car you buy in San Francisco can easily be driven, immediately, on a road trip to Florida in outstanding comfort and safety. Yet such vehicles are usually used in urban areas to visit the supermarket, or to go and buy a coffee.
The reality is that auto firms lack the design processes and the channels to market to develop and integrate new kinds of vehicles into cities and towns. Toyota is an interesting example, given that it is normally perceived as doing everything right. As Joe recently pointed out, it keeps on showing developments of its i-series vehicle, a lightweight and very compact personal 2/3 wheeled device that would dramatically reduce vehicle space requirements and reduce energy use and emissions on journeys. But think about it for a minute and today there is (literally) no practical path by which residents of a town or city can adopt this vehicle. You'd be a freak, cast out into a crazy world where you'd put your life at risk and look a fool. Like a Segway today, the cost would be too high for the utility, which is actually very high, but different to a car.
"Selling a Yaris to a lady in her sixties, say, involves an advertising agency, a dealership and a cheese and wine launch party, complete with balloons."
While Toyota is clearly screaming that it can build these things, it has barely touched the surface in working with politicians to integrate them into the environment. It will need a whole new generation of vehicle integrators, working town by town, street by street, to help redesign the streetscape to accommodate more appropriate vehicles for each context. And they can't be sold via existing models. They need to be part of cool new mobility packages. In contrast, selling a Yaris to a lady in her sixties, say, currently involves an advertising agency, a dealership and a cheese and wine launch party, complete with balloons. Instead there can be city, town or village-level marketing of handy local services or new movement packages. It may be that IKEA incentivises visitors with a free car if you go at certain times of day to help reduce overall car ownership, while stopping its absurd policy that people must drive to the store to order home delivery items.
Same sales and marketing approach as the Yaris, but I bet the same lady was having a lot more fun IN the '60s.
In future the same lady may want a different kind of vehicle, or indeed will participate in a social network that includes rideshares from people she knows, offers the option to use a favourite car or might incentivise her to use local bus services or an electrically assisted bike. She might prefer the two/three wheeled i-Series because she can use green urban pathways that are speed regulated and much easier to navigate. She will find these allow her to park right outside her local shop, and the tiny vehicle will no longer be brow-beaten and intimidated by terse and inflexible parking meters and attendants, all determined to express their hatred for the car. She can lend it to her daughter, or her friend.
The problem is politicians don't know what to do. They don't know how to really consult at a local level - they just know how to contain the car. The best car companies have a chance to really think. But they need to think beyond the car. They need to make sense of how cities work, and don't work. As the Bali conference centre lies empty, now is the time to start building the next generation of design processes and channels to market. But telling politicians that customers don't want more environmentally-friendly vehicles is trite in an industry that spends $19.8 billion in the US (yes really) convincing people to buy what it produces today. The business model is broken.