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    cyber2003 - telematics - Telematics Puts Service Providers in the Driver's Seat

     
    2/3/2003
    Is your car the next great point-of-purchase opportunity for service providers? Could be—if providers can figure out what customers want. Telematics can make it possible.
    by Julia Hanna

    What will the car of the future look like? Forget space-age designs. From a technological perspective, the more pressing question is: What will the car of the future do for us?

    Telematics—a term that was rejected as "jargony," "misleading," and "non-customer focused" by a panel of experts in the field at Cyberposium 2003—can be loosely defined as the technology that enables data to be delivered to or received from a vehicle.

    Telematics, like many tech-based industries, has not yet fulfilled its late '90s hype, when analysts predicted the market would grow to $30 billion in three years. The opportunities for innovation are still wide open, said Chet Huber (HBS MBA '79), president of GM's telematics subsidiary OnStar, but any early stage venture is difficult—particularly in the automotive industry. "Yet the scale in an industry of this size is inherently attractive."

    We're in it because GPS and wireless technologies are already creating a significant value shift in the market.
    — Raj Desai,
    IBM

    At this stage in its evolution, panelists agreed, successful telematics services focus primarily on safety and security—aiding in the recovery of a stolen vehicle, for example, providing immediate medical response to "red button" calls if a driver is having a heart attack or other medical emergency, or assisting with navigation. Personal concierge and travel services are also available. Offering entertainment options will no doubt factor into the future of telematics as well.

    Figuring out what customers want is always the biggest challenge, said Jack Withrow (HBS MBA '83), director of telematics at DaimlerChrysler, but hands-free communication that allows for safer (and in some states, legal) vehicle operation has been a primary driver, so to speak, in their most recent projects.

    "Telematics is not about technology," said Raj Desai, vice president of business solutions, engineering, and technology services at IBM. "It's more about technology-triggered changes. We're not involved in it because we're focused on consumer gadgets. We're in it because GPS and wireless technologies are already creating a significant value shift in the market."

    From Microsoft's perspective, telematics is part of the company's overall vision of a connected world, with the Internet as a common backbone and the car as a "smart" device capable of creating a home/office mobile environment.

    Entrepreneurs are the heroes in this field.
    — Clay Pew,
    DraperFisherJurvetson

    "Our aim is to improve and simplify the driving experience," said Gonzalo Bustillos, director of business development and marketing at the company's emerging technologies group. The telematics puzzle pieces don't fit neatly just yet, he added, but primary concerns to address include the following: Does a new development add value? Is it safe, cost-effective, and well integrated into the automotive environment? On a "platform" that may be driven for ten years or longer, does it allow for the evolution of new customer demands?

    For the most part, panelists agreed, telematics is a difficult business for startups to break into, since the major automotive corporations are more comfortable working with stable, secure companies like IBM. Even so, there's no particular model for success at this stage, said Clay Pew, a partner at DraperFisherJurvetson. The VC firm's strategy in emerging technology fields such as telematics focuses on a number of relatively low-cost investments across a number of ventures.

    "It's an exciting time," he said. "Entrepreneurs are the heroes in this field."

    The telematics panel discussion was held during the Cyberposium 2003 conference on January 18.

    Julia Hanna is an associate editor at HBS Bulletin.

    Related stories in HBS Working Knowledge:
    Profitable Business Model? It's Easy

    Reinventing the Industrial Giant

    Related HBS departments:
    Entrepreneurial Management
    Marketing

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