Where’s the Money? The Future of the Mobility Ecosystem

Posted by John Hagel III

I just returned from the Consumer Electronics Show (CES) in Las Vegas and it was striking how much the automobile has become a center of attention at this gathering. It was timely because I just published a new report on the future of mobilityNavigating a shifting landscape—and I had an opportunity to present my perspectives at CES.

My key message was that we need to avoid getting distracted. It’s easy to get consumed by the amazing technology reshaping the mobility ecosystem. But from a business perspective, the key question remains: Where’s the money?

That question focuses us on value creation and value capture, and there will likely be profound shifts in both in the years ahead.

Value creation

Thinking about value creation, I suggested that we need to pay more attention to understanding “return on mobility”—how much value do individuals receive as they move around in their daily lives?

The automotive industry has traditionally focused more on the denominator of that equation, ensuring that we get from point A to point B as efficiently, safely, and comfortably as possible. I suggest that the winners in terms of value creation in the future will likely be those who focus on the numerator of the equation: What value are we experiencing once we get to Point B? And is Point B the highest value destination for us, given our unique context and aspirations? After all, the value for most of us is in the destination rather than the movement itself; mobility is simply a means to an end, it isn’t the end itself.

Here’s the thing. More and more of us live in dense urban areas, where more and more options are competing for our time and attention, and those options are evolving more and more rapidly. And our time is increasingly at a premium.

So, think about businesses that can be most helpful in increasing our return on mobility. Those are the businesses that can create the most value as the mobility ecosystem evolves.

Value capture

But creating value is only the beginning. In an increasingly competitive business landscape, we find that businesses creating value are often not able to capture it. Instead, it gets competed away and captured either by customers or by other participants in the marketplace who occupy more advantaged positions.

In this context, we need to focus on fragmentation and concentration trends. Those who can leverage economies of scale and scope to build very large businesses with significant bargaining power will likely be best positioned to capture the most value.

I identified four especially interesting opportunities for value capture in the mobility ecosystem. Not surprisingly they all involve building platforms that can benefit from significant network effects.

Trusted mobility advisor. This is a business that gets to know me as an individual customer better than anyone else and can be trusted to proactively suggest where I should go to increase my return on mobility, as well as advising me on the best way to get there given my other commitments and needs. These businesses can have significant economies of scope—the more they know about you and the more other people they know, the more helpful they can be.

Mobility data aggregators. Today’s technology world bridges three domains: automobiles, smartphone devices, and a growing Internet of Things (IoT) infrastructure. Data are siloed within each of these domains and we lose much of the value because of the inability to aggregate and mobilize it to generate insights.

Mobility fleet operators. As we move from personally-owned to shared access, on-demand vehicles, we’re likely to see the growth of highly concentrated mobility fleet operators that will leverage network effects to provide us with more tailored access to meet our individual needs.

Horizontal operating systems. This is perhaps the most speculative of the four value creation opportunities, but one with enormous potential if a business can pull it off. The issue here is that the three domains discussed earlier—automobiles, smartphones, and the IoT—are largely dominated by vendors protecting proprietary technology stacks. The technology silos that result inhibit broader innovation in devices and software, as well as make it more challenging to aggregate data. We are already starting to see the emergence of a horizontal operating system layer in the smartphone business, but there’s an even more ambitious opportunity: Developing a de facto operating system standard that spans all three domains and facilitates interactions across and within each.

The need for speed

I go into a lot more detail on each of these four opportunities in the report that I mentioned earlier. As diverse as they are, they all share one common element: They are driven by powerful network effects. Once a critical mass of participants has been assembled, these businesses can be very hard to challenge.

So, there’s an urgency here. Those who make it to critical mass first will be the likely winners in value capture. These are not arenas where you can be a fast follower or stay on the sidelines until someone proves out the concept.

Speed requires alignment around a shared view of the future mobility business landscape and agreement on where the most promising value capture opportunities are. This, in turn, requires “zooming out” to explore a much longer time horizon. It then requires “zooming in” to identify a very limited number of business initiatives that can be aggressively pursued in the short-term to accelerate movement towards that longer term opportunity. Those who adopt this “zoom out, zoom in” approach are the most likely to occupy these white spaces before others can get their act together.

Bottom line

The mobility ecosystem is rapidly evolving. There are significant white spaces for value capture that are emerging, but they will not be white spaces for long. The winners will likely be those who can anticipate opportunities for value capture and move quickly enough to preempt others.

There’s a lot more to be said about this and, for those who are interested, the next level of detail can be found in the Navigating a shifting landscape report.

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