The In-Car App Experience: Convergence and Integration

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1 The In-Car App Experience: Convergence and Integration Author: Peter Crocker Founder and Principal Analyst Smith s Point Analytics, LLC Underwritten by: UIEvolution

2 In-Car App Experience: Convergence and Integration The proliferation of connected devices is giving rise to the Internet of Things (IoT) and emerging technologies will enable users to remain connected through a variety of devices in any environment. The Automobile is low hanging fruit in the IoT market as these machines are already laden with sensors and human to machine interfaces (HMI). As the car becomes more connected, users are demanding the same easy access to data and services that they have on their phone, in their car. This provides new opportunities for content providers, Silicon Valley mobile platform providers, and auto OEMs. With this new opportunity, strategic decisions made today will have a significant impact on which companies will lead and wield the greatest influence and control of the in-car application experience of tomorrow. To date, the smartphone and the in-car app experience have evolved into two parallel paths. The auto OEMs control the IVI system and head unit while smartphone platforms have controlled the broader smartphone experience that has overlapped with the automobile. With consumers demanding an app experience similar to the smartphone and the absolute requisite for safety, these two paths are converging and competition is emerging. Today s connected car market resembles the mobile phone business prior to the iphone. Back then, mobile operators controlled the app experience but their miscalculations ensured that their services would be marginalized as the opportunity to provide real differentiated value moved to more accessible app ecosystems and development platforms. Auto OEMs are faced with similar game-changing strategic decisions. While the auto industry may be faced with challenges similar to the wireless operator business, there are some important differences between a car and a cell phone that will affect the dynamics of this emerging opportunity. The first obvious difference is the economics and useful life of each system. According to IHS, the average age of a car on the road in the US is 11 years; the useful life of a smartphone is 21 months, per Recon Analysis. The typical US consumer will own six smartphones per vehicle they own. The cost of an automobile is also obviously disproportionately higher than that of a smartphone. With the average cost of a new car $32,000 and the average cost of a smartphone $314, the app experience becomes a different economic equation for consumers and vendors. 2

3 Source: Smith s Point Analytics, LLC Safety and liability are also important factors when comparing the app experience of phones and automobiles. Cars can kill people, phones cannot. Cell phone manufacturers only have to warn consumers of the dangers of using their phone when driving and they are off the hook. As the car becomes more connected the auto industry has a greater obligation to ensure that their product is safe. Lawsuits will eventually appear where claimants assert that an accident was caused by their car s digital experience creating a distraction, especially if these interfaces are used as directed. Distracted driving is a serious problem and the National Highway Traffic Safety Administration has provided guidelines for auto manufacturers as they design their in-car experiences. Recommendations include restricting web browsing to when a car is parked or limiting the amount of time a driver needs to take their eyes off the road to complete a task to 2 seconds per glance and less than a total of 12 seconds per task. The use cases of the connected car and the smartphone are also different. Phones are more personal and virtually everyone has one accessible all the time. Drivers typically use their cars to get from point A to point B and this environment is often shared with passengers. Cars are also used by multiple drivers with their own personal preference and possessing a variety of mobile devices. More importantly, in many cases apps designed for smartphones are built to be as engaging as possible, particularly apps built by brands or leveraging adbased business models. The more a user spends engaging with a smartphone app the more

4 valuable it becomes. In the car, app engagement is dangerous and apps need to be as efficient and focused on providing the driver the right information as quickly as possible. Requirements of in-car experience Based on the constraints and characteristics of the in-car app environment and use case, requirements of the in-car experience are unique. With a useful life of an automobile significantly longer than a phone and the speed in which mobile technology changes, the in-car digital experience must keep pace to remain competitive. This means that software should be easily updated including the lower levels of the software stack. New phones will ship with faster processors and slicker user interfaces that will leave two-year-old technology looking archaic. Car manufacturers need platforms that can evolve just as quickly. With the danger of digital content distracting drivers, interfaces need to support greater attention and focus on the road. Good application and UX design is a fundamental requirement of a safe app experience. Apps and menus need to be well organized and accessing features should be very intuitive. Also, voice and audio needs to anchor the in-car app platform and drivers should be able to navigate menus or create messages using just their voice. Audio should also be the primary way to consume content. Opportunities to create more innovative interfaces also exist such as heads up displays, retina tracking and gesture controls. Figure 1 Heads up display Source: Coolest Gadgets With distracted drivers a danger to themselves, passengers, and other motorists, applications need to be smarter and more intuitive. Apps need to reduce the time drivers

5 spend not only completing a particular task but thinking about it. Cognitive distraction or taking your mind off of the task of driving increases the risk of accidents. More contextual and predictive apps will relieve the cognitive burden on the driver. A typical scenario might be: If a motorist scheduled a meeting with a business colleague, the in-car systems would know the location of the meeting, who it is with, and at what time. The in-car navigation system would guide the driver to a place to park near the rendezvous point without any direction from the user. By knowing the place and time and contact info of the colleague, the system could also alert them if the user is running late. This scenario requires apps that can share data and leverage predictive analytics to anticipate the needs of the driver and changing circumstances. Data from the in-car computer should also be able to identify the driver to track individual patterns and preferences to inform predictive models that can anticipate requests and customize interfaces and environments. Adjusting seats and music preferences are just two examples of using identity to improve the driving experience. The potential for a distracted driver to cause considerable damage also means that the in-car experience must work as advertised. Auto manufacturers cannot allow apps that have not been vetted and approved for safety on their platforms. Error prone or hard to use interfaces can be a distraction. This issue becomes even more serious when ODB systems that manage driving controls come into play. OEMs need to ensure that third party developers are not able to cause problems in these mission critical systems. How platform vendors & OEMs are addressing these requirements Today, there are two distinct approaches to the digital car experience, the over-the-top approach, and the integrated approach. Over the top The OTT approach is exemplified by third party software and smartphone vendors connecting with in-car head units and IVI systems, using these assets to control and display their apps. Apple Car Play is the most prominent example of this approach and MirrorLink is another. The purpose of these systems is to improve safety by limiting distractions. By plugging their phones into the USB port in the car, users are able to navigate apps on their mobile devices using the controls on the steering wheel or dashboard in addition to voice activation. The apps can also be displayed on the IVI head unit in the dash. This approach has some benefits and drawbacks.

6 Figure 2 - OTT Architecture s p l Displa Contr Contr Source: Smith s Point Analytics, LLC Benefits One of the OTT model s greatest benefits is tied to the independence of the phone from the car. The phone is separate from the car so as technology evolves, consumers can upgrade their phone ensuring they have a contemporary in-car digital experience. The mobility of the phone also ensures that data generated while in the car is available in other environments. Creating notes or reminders while in the car that are accessible anywhere anytime is one example. By leveraging the smartphone app experience in the car, users are also more familiar with the interface. For the handset and software providers, this approach has significant strategic advantages as it allows them to control and profit from the experience through data services and advertising. Drawbacks With handset manufacturers and mobile operating systems vendors controlling the software platform, this significantly limits auto OEMs control. Not only does this limit potential revenue generating opportunity but a chance to differentiate their product. While these OTT solutions were designed to make driving safer by providing motorists a better way to interact with their phone, this approach may be an interim step to an even safer experience. Without integration with the onboard computer, these solutions are unable to adopt some of the safe driving guidelines put forth by the NHTSA. Disabling features or interfaces while the vehicle is in gear is one example. Also, apps that are designed for a more engaging environment may be too distracting to be used in the car. With OEMs handing over control of the operating system, apps and user interface to Silicon Valley platform vendors, liability becomes an issue. If an app running on a mobile phone developed by a third-party developer but controlled by HMI features in the car distracts a driver causing an accident, who is liable, the car or handset manufacturer? Without control

7 of the entire experience, the auto manufacturer may be culpable for damages caused by factors out of their hands. ODB dongles could also be characterized as an OTT solution as it includes third party hardware using in-car sensors to gather data. These solutions are worthy of mention but have limited influence on the in-car app environment. OEM OTT While the OTT model is being pioneered by Silicon Valley software giants, the automotive OEMs are also supporting a similar approach through the GENIVI Alliance. The GENIVI Alliance is an association of auto manufacturers promoting an open application platform that standardizes the interaction between smartphone apps and on-board controls and displays. Developers that adhere to the standard will enable users to interact with their apps through the head unit and other controls that also support the standard. Integrated approach A more integrated approach puts the smartphone as a node in a more networked system. Instead of positioning the phone at the center of the system, middleware is leveraged to manage data and integration between the phone, ODB system, in-car IVI system, head unit, and instrument cluster. Well-managed and secure APIs can be exposed for developers to create innovative new experiences incorporating data from multiple sources. Figure 3 Integrated Approach ODB Middle ware Embedded Radio Source: Smith s Point Analytics, LLC With integrated approaches, connectivity to the internet can be achieved using the smartphone's data channel or through a SIM and cellular radio integrated into the onboard system.

8 Benefits With data available from disparate sources, applications can draw inferences to create a much more contextual and relevant experience for users. Sharing of data across applications supports a smarter platform that will lead to new killer apps. Location is an important data point to provide situational awareness, but additional data enables multiple layers of context. Identity is another key data point to improve the in-car experience. Integration between ODB systems that captures data on driving patterns could be used to identify the individual in the driver s seat. The car s ability to identify the driver enables a customized environment that can be adjusted to the driver s personal preferences. This data can also improve the experience of passengers. Incoming texts can be delivered to the driver via audio while passengers can receive traditional text on their phone. The integration between the smartphone and connected car also enables the system to anticipate needs of the driver. Integration with the navigation application and smartphone calendar enables the system to anticipate the destination of the driver without them having to input the data. With greater data integration and sharing, cars can also measure available fuel or electric power and determine if it is adequate to reach the intended destination. This capability will be much more relevant as automobiles are increasingly powered by electricity, requiring charge time and/or charging stations on route. Benefits of Integrated Connectivity As cars increasingly maintain their own independent wireless connectivity these types of smart experiences can extend beyond the confines of the car. If a smartphone app and in-car app communicate in the cloud, the vehicle could anticipate potential issues. Should a user be planning a road trip using a travel planning app, this data could be accessed by the car which could alert users of low oil levels or tire pressure. An integrated onboard computer, communications module, and smartphone can also support remote car ignition, maintenance alerts, and notifications if a door has mistakenly been left ajar. Greater integration between the mobile phone and automobile also supports better in-car display of data and content. In the future, heads-up displays or augmented reality may prove valuable in displaying data while driving. Soft instruments in the instrument cluster displaying data from smartphones may also be in demand in the future. Drawbacks While an integrated platform has significant advantages, the challenge lies in implementation. With this new approach, an ecosystem of developers and services focused on the in-car app is not well established. Also, without a consolidated market with a few leading platforms, developers have to deal with multiple operating systems to reach a broader audience.

9 Leveraging data to drive predictive algorithms is also a tricky endeavor and failures can be frustrating and distracting for drivers. Integration with the ODB system and driving controls also opens up the risk of hackers causing serious damage or the misuse of data. Build vs. Buy Auto manufacturers taking a more integrated approach to the in-car experience have two basic strategies they can pursue; they can build the platform themselves or work with a third-party software platform provider. Build Car manufacturers such as GM, Ford, and Tesla have chosen to create their own platform for developers to create apps. While they may not be creating the entire software stack from scratch, by using a third-party RTOS or open source, the higher level application environments, APIs and middleware are proprietary. This approach has some benefits and drawbacks. Benefits By keeping application platform development in-house, the auto OEMs are able to control a much greater portion of the experience. This not only helps car companies maintain secure access to system level onboard computers but also the quality of the apps. Greater control of the in-car experience also enables car companies to differentiate their product through the app experience and platform. This strategy worked very well for Apple and the launch of the iphone. Drawbacks The challenge with this approach is the effort and expenses required to create the platform, recruit developers and encourage an ecosystem of services around it. With limited expertise in developing application software, car companies will have to build these capabilities from the ground up. With operating system fragmentation a major headache for mobile app developers, introducing additional platforms for each auto OEM would exacerbate the problem. Attracting developers and creating an ecosystem is very difficult even for software companies that understand the culture and developer needs. Executives with manufacturing backgrounds will be hard pressed to understand this environment sufficiently to make the right choices in creating a robust app ecosystem. Buy Licensing an application platform from a third party software vendor is another option available to car companies. Vendors such as UIEvolution are licensing software platforms to auto OEMs to integrate with the onboard systems and manage the application environment.

10 Benefits This strategy leverages all the benefits of an integrated approach but shifts the responsibility of creating an ecosystem to the platform vendor. By hiring a software company, the expertise and dynamic culture already exists so the speed to which solutions can be brought to market is shortened. Developers will also be more inclined to develop for a platform that is not OEM specific will presumably be deployed across multiple manufacturers, reducing fragmentation issues. The ability to brand the interface of these platforms also enables OEMs to maintain their mark within the app experience. The investment required to implement a 3 rd party system is also much lower compared to the cost of building a separate proprietary ecosystem. While working with third parties relieves OEMs from creating a developer community, it does allow them to control the lower levels of the operating system to ensure that data and mission critical systems are protected. Typically 3 rd party solutions are characterized by app environments that are certified on the OEM controlled RTOS and middleware. Developers are then able to create apps to run inside the container more freely without additional certification from the OEM. By working closely with the 3 rd parties, OEMs can maintain control of the lower level operating system and front-end branding while leveraging the creativity of a wider ecosystem. Drawbacks While OEMs will be able to control large portions of the software stack, they do not have control of the entire operating system. They also are reliant on the stability and expertise of the third party ecosystem. Open vs. Closed systems The openness of these application ecosystems is an important factor in the industry s ability to control costs, ensure safety and flexibility, and build community. Developers ability to access source code and APIs enables greater flexibility and reduces costs while developers ability to leverage standard and open programming languages grows the community. How OEMs manage access to APIs and source code will also have an important effect on safety and reliability. Open Source Software In order to control costs through open source software, OEMs have supported the Automotive Grade Linux (AGL), a Linux Foundation working group focusing on software solutions for automotive applications. This organization brings together industry participants in a consortium to collaboratively create low-level software that does not contribute to any competitive differentiation of each auto vendor's system. By using open source software lower in the stack, OEMs can still differentiate in the application layer while spreading the costs across a larger base. With more developers

11 working on the platform, bugs can also be worked out quicker. Open source software advances on a more evolutionary path with constant updates and improvements. This open and collaborative approach also leads to standards that the entire industry can support. Open source projects can often reduce the cost of licensing software or developing it from scratch, but too often these systems are not complete. Resources need to be invested in integration, maintenance, and additional code to fill holes in the stack. These service costs can mount quickly. The liability issues associated with in-car apps also require that OEMs certify that open source software operates correctly in their environment. The track record of successful consortiums focused on open source software in competitive markets is also not an encouraging precedent for ongoing efforts in the automotive industry. Wireless carriers pursued a similar strategy which failed due to infighting among participants as each advocated specifications to benefit their own implementation and differentiated value proposition. While open source software has a lot of advantages, proprietary operating systems are backed by vendors who have incentives to ensure that the stack is maintained and tested. This can improve the performance of the product. Open Standards and APIs The GENIV Alliance is working on open APIs to provide developers a standard way to access on-board displays and controls. This standardization will reduce API fragmentation for developers helping to limit the cost to create apps for the car. With automakers building IVI systems that are GENIVI compliant, developers can build apps that adhere to the same API standards negating the need to write unique API calls for each platform. With industry players working together to ensure that the proper controls are in place to maintain the security of automotive systems, a more vetted system should emerge. Open Programming Languages The support of open and popular development languages and frameworks such as HTML5 and JavaScript are also key to supporting a healthy community of app developers that can leverage existing skills and knowledge to build apps. By supporting open languages, platforms are able to attract a much larger community of developers to create innovative new apps. Many more tools and frameworks are also available to developers working with open languages. While open and standard languages have a larger community, often closed systems are more efficient. With vendors existence often predicated on the maintenance of a programming language, support can be more reliable.

12 Strategic importance of the in-car app platform Providing consumers the features they desire in a particular product just makes good business sense. The in-car app experience is an important competitive differentiator and these capabilities will enable vendors to drive greater profits through premium pricing. The challenge is giving consumers what they want while keeping them safe. In-car technology is an important factor driving a purchasing decision of an automobile, more important than color or brand. Forrester Research surveyed North American consumers and found 50% of respondents said they would partly base their purchasing decision on onboard technology. Not only does the in-car app experience have a significant impact on margins, they also represent opportunities for new revenue streams and business models. Auto manufacturers can sell new services and create revenue streams similar to the $1.5 billion OnStar business GM has built. These metal benders can also provide services to users for free and generate revenues by providing data to vendors. Information such as location can be very valuable to retailers or maintenance data could be helpful to repair shops or dealerships. By providing ongoing services to users, car companies can also reinforce their brand and drive customer loyalty. Without control of the in-car data and user interface, car companies risk squandering this opportunity to drive revenues and margin while still retaining the cost of ensuring safe operation of their product. This strategic dilemma is similar to the one that wireless operators faced with competition from the then revolutionary iphone. The need to protect the brand, justify investment, and limited client software experience led to operators bringing to market clunky and expensive applications, platforms, and services. Apple and Google offered cross operator platforms that provided distribution for apps and monetization opportunities for developers and disrupted the industry. Car manufacturers need to embrace innovation, even if it is not developed in-house and understand the limitation of their organizations structure and expertise.

13 Conclusion The smartphone in the car is an inevitable reality, but we believe the unique environment of the automobile provides an opportunity for auto manufacturers to provide added value to drivers and differentiate their products. An independent wireless connection between the car and the internet is an important competitive asset. Car companies need to work with wireless operators to create attractive service plans for users. Potential models might include bundling connectivity services with maintenance or anti-theft services. Car manufacturers should own safety. Safety features are important factors influencing car purchases and a core competency of OEMs. They have been researching safe ways to operate their products, avoid collisions and improve survivability since the 1920s and 30s with safety glass, hydraulic brakes, seat belts, and padded dashboards. OEMs requirement to focus on safety puts them at an advantage over smartphone vendors who are much less reliant on safety features to drive sales and less liable for accidents caused by distraction. Auto manufacturers that can create a less dangerous and more enjoyable experience for drivers to manage their digital lives will be in a much better position to drive revenues and margin. By creating the safest, easiest to use and most convenient in-car interfaces that leverage all integrated data and HMI will lead to more control of the experience, a more differentiated offering, and more sales. This may be easier said than done. OEM and software vendor partnerships need to be tight and collaborative. Safe experiences will also be less visible so car companies must promote safety and brand audio voices and audio interfaces. In order to create the best digital environment while maintaining control, OEMs should closely partner with software vendors and collaborate. The right user experience can be achieved by software companies and auto manufacturers leveraging their core competencies collaboratively.