Q&A: OEMs, innovation and fact-based decisions

Mark Concannon, the president of Concannon Business Consulting (CBC), has almost 20 years of business consulting experience for many global Fortune 500 companies. Seven-year-old CBC is a boutique consultancy that recently launched a telematics practice, offering everything from strategy articulation through program management to business analysis.

Concannon thinks OEMS need to adopt new organizational and business models in order to innovate – and to keep up with consumer demand for the latest technology. He spoke to TU’s Susan Kuchinskas about the importance of finding the right people to lead innovation and about how to use innovation to keep abreast of the rapidly changing market.

In September 2012 you launched a telematics business practice. What is your approach to working with clients in this sector?

When we help OEMs and also service providers to OEMs, we focus on the business objectives of the particular client. We take the technology as more of a benefit to the outcome, and not so much as the focus of what we do. We'll start with a strategy – what is the outcome they are trying to accomplish and how that maps into what they actually can do on different time frames.

One challenge that OEMS struggle with is that vehicles are on a five- or seven-year lifecycle for deployment of capabilities or technology that many of these technology components are dependent on. For example, if you can't get data off the CAN bus, you can't do analysis of that data. Many of these components are dependent on future generations of the product, so we have to make sure the product roadmap reflects that reality.

What are some signs that an organization has a culture of innovation? Or, conversely, some warning signs that the culture actually stifles innovation?

Stifling innovation is easy to spot. If they're afraid of failure, or if they reward meeting a minimum level of performance, that's a sign of an organization that is not encouraging and often stifling innovation. If you reward a minimum level, people will meet that minimum. If you don't reward for going above that minimum, they won't go above that minimum.

Companies that foster innovation encourage risk-taking within reason. You still have to have business models, you still have to back up the reason you are pursuing this direction. But, in the end, risk and failure don't necessarily result in catastrophic outcomes in people's careers or the organization.

It becomes a controlled, accepted risk that, when it meets expectations, is rewarded accordingly. You have to prepare for failures when you take one of your best teams and give them a chance to do something, it might not work. That reality is hard for organizations to understand.

On the other side, we're seeing OEMs that create a very collaborative environment, which is a positive. But sometimes it's too many cooks in the kitchen. They will pull together five or six different pieces of global organizations, all trying to create innovation. But you have 30 people in the room trying to get something done that really four or five people should be doing. Ultimately, you have to have one point of accountability, one point of driving change, one point of who is leading that team to make sure innovation gets seen through to completion.

Which department is best adapted to handle telematics innovation within OEMs? Should the company set up a new, telematics-specific department? Or is it a groovy R&D lab in Silicon Valley?

I definitely think the model of sending folks from the parent organization down to Silicon Valley, closer to innovation, is good. But whom you send is critical. If you send folks that still have a five- or seven-year-cycle mindset for products, you'll be behind the curve. If you send folks who understand risk taking and the world of software, then you will be able to craft innovation. You then need to marry that up. They may come up with 50 ideas, only two of which can actually be done.

Creating a culture of innovation is also making sure you are making fact-based decisions. You can't take risks for the sake of risk. A piece of the calculation is your business intelligence – truly detailed information that gives you forecasting ability and the capability to analyze, for example, if I did that move, what would the outcome most likely be, based on history and on data I can gather in the marketplace.

Make sure you understand the question, and then work on what data do I need to answer that question appropriately. You may need to pull in all your data, partner data, parent organization data that's not centralized, customer information, trending and usage of vehicle products. There are also panel studies and other unique or discreet pieces of research you could do to prove out your theory.

Ultimately, all of those components come together into the business to make sure you're driving fact-based decision making to support your innovation.

Even if they do all these things right, can OEMs innovate fast enough?

A big piece of what I'll be talking about in at the telematics show in June is disruptive change. To date, OEMs haven't been far enough behind the changes in the market that it's forced their hand. We believe a disruptive change is coming that will be beyond their control. The consumer market will end up driving some change that. If OEMs are not on it right now, they can't keep waiting five or seven years, they can't even wait two to three years. They need to be able to release these new capabilities that the market demands within six months – or they will see the consumer go to a third party to solve this problem, much like we saw in the early days of the navigation industry.

Are you talking about aftermarket devices? The folks at SEMA say OEMs should leave this to them.

We're seeing organizations in the market publish products like remote control of the vehicle, unlock and start, basically CAN bus interaction. We're seeing that level of capability begin to come to market. The disadvantage is it's not OEM-approved. Obviously, anything a Toyota or Ford or Chevy would produce would give you a more consistent result and be supported by the OEM.

But we went down this path with navigation, where people wanted it in the vehicle, they wanted it less expensive, and they wanted it today. It took us a long time to get to the point where navigation was a standard feature.

In the end, there is always an argument that the companies that specialize in these pieces should be the one to do it. The fast is we have very valuable consumer experience real estate in the head unit, and it's something the OEMs would be remiss to give up on. If they gave up on controlling the in-vehicle experience, they would be giving up one of their most valuable assets.

Susan Kuchinskas is a regular contributor to TU.

(To listen to this conversation as a podcast, visit Podcast: OEMs, innovation and fact-based decisions.)

For all the latest telematics trends, check out Insurance Telematics USA 2013 on Sept. 4-5 in Chicago, Telematics Brazil & LATAM 2013 on Sept. 11-12 in Sao Paulo, Brazil, Telematics Japan/China 2013 on Oct. 8-10 in Tokyo, Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, and Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.

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