Get In: The Connected Vehicle Podcast From BlackBerry (Episode 9)
Update 03.08.23: New Episodes from Season 2 of "Get In: The Software Defined Vehicle Podcast," Are Now Available.
Heading for the hills this weekend and wishing you’d paid extra at the car lot for that fancy four-wheel drive? Or pulling up to the gas pump during your daily urban commute, and wishing you hadn’t? These could soon be problems of the past, thanks to our software-defined connected cars entering the “subscription economy.”
Welcome to the ninth episode of “Get In: The Connected Vehicle Podcast from BlackBerry.” This series explores the possibilities created by -- and technologies behind -- the revolution in global transportation we are witnessing today. In this episode, we meet Axel Heyenga, Global Director, Industry Strategy Manufacturing, Automotive & Retail, Zuora, whose company is at the forefront of digital subscription services, including for the automotive industry.
Click below to listen/watch the full Episode 9 podcast. Additional episodes can be found here.
Today’s automotive business primarily operates on a single sale basis: Consumers make a large, one-time purchase. Once they sign the contract, they are locked into a certain set of features that come with the car, and which will remain constant for the life of that vehicle.
Subscription-based sales will change that, Heyenga says. Instead of the “product-centric” approach of selling a car once for a set price, vendors can move to a “customer-centric” scenario where they “sell a product and offer additional services along the way to enhance the experience."
For example, “Somebody in Los Angeles or somebody in Madrid – they don't need a 4x4 car. They don't need it because there's hardly any snow. But there are tons of 4x4s driving around,” Heyenga says. Why? “You maybe go up into the mountains for skiing out of Los Angeles. Or in Spain, you go up into the Sierra Nevada.” But city-dwelling drivers have paid in full for their 4X4 capability, regardless of how often they use it. "I'm buying a car equipped with everything I need whether or not I need it right now; I pay for it.
In the future, however, carmakers will increasingly provide options that let you “use this feature or that function only when you need it – and you pay by-use.” So, when you buy a vehicle “The 4x4 is built-in, but you only subscribe to it when you need it.”
To Drive, Or Not to Drive?
Heyenga’s initial introduction to driving couldn’t have been further from the current connected trend. “My first car was a 1956 Chevy pickup,” he says. However, a recent experience driving to Ukraine for humanitarian purposes epitomizes the direction that vehicle technology is headed. “It took 27 hours from leaving and coming back. I had about a half an hour of sleep in-between. On that campaign, we were able to get 32 people out and away from the war and bring them to Munich. The cool thing is some of these cars were Level 3 autonomous. We drove in a convoy, and we were just guiding the steering wheel. The cars did all the driving by themselves.”
Zoura will play a key role in delivering this potential vehicular future, Heyenga says, because a feature like autonomous driving mode may not be something you would need every day. It might be another service you subscribe to just when required. “Zuora is at the heart of powering the subscription economy,” says Heyenga. “We founded that industry, and we help power subscriptions in every industry. We are driving the everything-as-a-service economy. This includes automotive, as well as manufacturing and retail.”
A New Model
The value of the subscription model came to the forefront during the pandemic. “Most of the subscriber-based businesses didn't see a downturn of revenue, because they had recurrent revenue coming in,” says Heyenga. “They did not have to sell over and over again.” Just as the subscription model has come to the fore in the computer software industry, it looks set to be the future for automotive as well.
Central to making the switch is the relationship with the customer and maintaining it over a lifecycle of usage that involves a variety of scenarios. “The question is, how do I expand my product lifeline across my customer?” asks Heyenga. “How do I keep and build a meaningful relationship with my customer on that journey? Selling a car is nice. It's a good effort. But selling a car twice to the same person is something that shows that you have done something right on that journey.”
Zuora’s role is to facilitate this model of fluid subscription services for automakers. “That's where we really help to enhance connectivity and build a platform underneath to help OEMs,” says Heyenga.
Central to this is how the financial aspects of the subscription model works. “The payment piece is the crucial point, because that's where revenue and new business models will monetize,” says Heyenga. This is where Zuora’s work with BlackBerry IVY™ can help develop a faster route to market. “It's all about the OS in the car. It's all about the usability.”
Taking a Different Road
It’s also about differentiation, says Heyenga. This is another area where Zuora and BlackBerry IVY, a foundational software environment for developing high-performance features in next-generation software-defined vehicles, provide carmakers with a way of staying “in the driver’s seat” when it comes to owning the relationship with the customer.
“It's all about making life easier for drivers and creating value through it. The route of payment hasn't been decided yet and each OEM is doing it slightly differently,” and to Heyenga, that’s a good thing. “It’s why I believe Google or Apple is chasing the ‘inside of the car.’ They really want to own that experience inside the car. Control it and give the (same) experience that the people know from outside the world of auto.”
But Heyenga cautions, “OEMs need to control that inner circle of their car. They need to control the experience they want to give to their customers – build a walled garden around their customer base. They need to protect them. They need to decide which of the features and functions and services make sense in their cars. Not only for security reasons, but also to participate and create a value-based offering within their car.”
Platforms like Zuora and BlackBerry IVY are designed to allow each automaker to do just that. “An offering at BMW might look totally different than GM or Ford,” says Heyenga. However, “If you're on one of these larger platforms at Google or Apple, they are all going to look like the same kind of thing, in my perspective.”
Forging Ahead
Heyenga sees two key enabling factors for a subscription-based vehicular future. “The most important factor for everything we talk about here is 5G,” he says. But while that is gaining widespread coverage in the U.S., it’s less established in geographies such as Europe. “The second one is autonomous driving, which brings with it services and media entertainment in the car. The U.S. will be much faster in establishing Level 4 and Level 5 autonomous driving than Europe, because the traffic is not as condensed. Street corners and road dimensions are much wider, which gives more room. In Europe, if you go downtown, you have streets where two small cars can barely pass each other.”
Over the next few years, our relationships with our cars will increasingly resemble that of our smartphones, which reflect that each of us has “different demands, and you see different value in different activities or services,” says Heyenga. “Cars will become exactly that. You build your car and the digital experience around your needs and values.” To achieve that, he has this advice for automakers: “Be curious,” he says, “and constantly question what the customer wants.”
Secondly, “Nurture and protect your customers – because that's your value. And if you don't do that, you will most likely run the risk of just becoming a hardware provider to the digital world.”
Listen to Episode 9 of “Get In: The Connected Vehicle Podcast From BlackBerry.”
You can subscribe to "Get In: The Connected Vehicle Podcast from BlackBerry" at the following media services:
Video Transcript Steve Kovsky: Today, I'm joined by a guest who knows a great deal about how we're going to pay for it. I would like him to introduce himself, if you would. Axel Heyenga: Steve Kovsky: I don't know if you grew up in Munich, which is where I think you're joining us from today. What was your first experience as an operator of an automobile? Axel Heyenga: Mine was a '56 Chevy pickup. It was my first car to drive, and I went to the DMV with that one. That was quite an experience. It would not have been my car of choice if getting my license in Germany, because of gasoline consumption as well as space on the street. Steve Kovsky: Before we get into the meat of everything, we just started talking, but you've already inspired me today. Because I was looking at your profile on LinkedIn and saw what you're doing as a volunteer to help support the humanitarian effort to aid the people of Ukraine. I wanted to give you a shout out for that. Could you tell us a little bit about that project and how it came to be? Axel Heyenga: They just needed drivers to drive goods and needed supplies to Ukraine, to the border of Poland and Ukraine, and on the way back, taking refugees with them. Mainly, women, children and elderly. On the way back, there is a whole team behind it calling private families and finding space for them, so they don't have to go to refugee camps. It’s not very far from us here. It's 1,000 kilometers. A direct line to the Ukrainian border. And I felt, "I need to do something." One thing that I can do really well is drive, for a long time in a car. Legally, I'm not going to tell you how long it was. It was a very long drive. It was thought-provoking. It was positive, negative, and one of the most experiential weeks I’ve had – 27 hours from leaving and coming back. I had about a half an hour of sleep in-between. On that campaign, we were able to get 32 people out happily away from the war, from the craziness, and bring them to Munich. Bringing them to some families. Bringing them to some relatives around Munich. It was a stunning experience. Steve Kovsky: Axel Heyenga: Steve Kovsky: But it really is a great example of how connected we are becoming and how our cars are part of that. I would like you to talk a little bit about Zuora and what it is trying to accomplish. How is it affecting the automobile economy? Axel Heyenga: We are driving the everything-as-a-service economy. With that, obviously, automotive, manufacturing, and retail. All these things look for digital transformation. The next level of business transformation and how they evolve in business models, especially with the pandemic. Most subscriber-based businesses didn't see a downturn in revenue because they had recurrent revenue coming in. Not to do it as a sell, over and over again. That's where we are in the heart of it. It's really helping these brands to launch their subscription ideas. To optimize them, to scale, and in the end really drive a new business line beyond their normal business. Steve Kovsky: We're used to doing that. Either annually or monthly, having it automatically paid. How is this different from that experience? Axel Heyenga: More of, “I'm selling a car to I’m selling a product. Do I sell a product and offer additional services along the way to enhance the experience that enhance the product itself with available features and functions?” As an example, somebody in Los Angeles or somebody in Madrid, Spain. They don't need a 4x4 car. They don't need it because there's hardly any snow. But there are tons of 4x4s driving around. Potentially, what you can do, and it will be done in the future, and some automotive brands already do is the 4x4 is built in – but you only subscribe to it when you need it. You might go up into the mountains to ski out of Los Angeles. Or you go to Spain up in the Sierra Nevada. Use this feature or function when you need it. You pay by-use. This whole thinking of, "I'm buying a car. Everything is equipped that I need. Regardless of if I need it right now, I pay for it." The question is, how do I expand my product lifeline across my customer base? How do I keep and build a meaningful relationship with my customer on that journey? Selling a car is nice. It's a good effort. But selling a car twice to the same person is something that shows that you have done something right on that journey. That's where we really help to enhance these connectivities and build that platform underneath to help the OEMs, especially. But across all industries, to monetize experiences that they have invested in the last three, four, five years. They're heavily invested in increasing the customer experience – wrapping themselves around the customer. Now we're here about four, five, seven years where we help them to monetize that. Steve Kovsky: Now, I don't know if they would want to charge me to enable that. But if they have full control of the vehicle and they can turn on, turn off features. Also, perhaps monitor that I'm using that feature, so it's very seamless. That opens a new avenue for having this relationship with the automobile consumer. Axel Heyenga: Inside the car, how it will pay for your parking is not defined yet. Or how it will pay for the road tolls. It's all about making life easier for drivers and creating value through this. This route of payment hasn't been decided yet. Each OEM is doing it slightly differently. That's why I believe Google or Apple is chasing the ‘inside of the car’ – they really want to own that experience. Controlling and giving experiences people know from outside the world of auto. I think that's where the critical path comes in, because OEMs need to control that inner circle of their car. They need to control the experience they want to give to their customers. OEMs need to build a walled garden around their customer base. They need to protect them. They need to decide which of the features, functions and services make sense in their cars. Not only for security reasons, but also to participate and create a value-based offering within their car. An offering at BMW might look totally different than GM or Ford. If you're on one of these larger platforms at Google or Apple, they are going to look like the same kind of thing in my perspective. Honestly, having that customer ecosystem built around the products, around these whole life cycles, and helping the customer to get the best and the most out of the product on their life cycle in three, four, five years. Depending on where you live and how you use your car. That's a key point. Coming back to that payment piece. It’s the crucial point of it because that's where rubber hits the street. That's where you need to see where revenue and new business models will monetize. Steve Kovsky: But I had to get a device from them. Now, I can do it electronically, but I still have to manage it. My car does not manage it. If you are on a road trip and you think ahead and say, "Okay, I'm going to order some food." And then, you try to navigate through whatever the experience is to order online. You'll often arrive before you've placed your order. You can't do it if you're driving. Maybe if you have a completely autonomous vehicle. Otherwise, the passenger's going to do it. It's a miserable experience right now. How does Zuora help us change that so it's a seamless, pleasant, delightful experience? Axel Heyenga: And so, we need to be careful here. Zuora is helping optimize the experience in terms of, "How do I have an offer?" Do I have that offer from that restaurant? Do I have an offer that I take on? How do I process in the back? How do I get an invoice? How do I pay for it all the way for the restaurant? Or depending on who's handling the payments, doing a revenue recognition toward that. If you want to picturize it, it's between the ERP and the CRM system. To manage all these processes in very granular versions of all the activities that a subscriber normally has. Maybe it's using it three times a day. Then, he's off for a week. Maybe then he used it 15 times. There's a very flexible system that really helps the manufacturer to come and build an experience that is in-line with their brand experience. In terms of how they're invoiced, how flexible and transparent these are. How are you going to, for instance, at the end of each day, get a clear overview of what you have been consuming during the day in the car. That seems simple, but for large auto manufacturers or other manufacturers, brands and industries, that's a tough cookie. Because each of these fine-tuned services that you charged for need to be recognized. In terms of financially, but also, "How do I drive the experience to the customer for transparency?" Because you want to make sure your car only charges you what you want. The complexity here is very high. Our platform helps to ease that very smoothly in each direction. Internally, into finance, into the marketing department for creating new packages, new pricing, new offerings. But also, to the finance department to do the invoicing and revenue recognition. Closing the books. All the way to the ERP system that the financial team uses in docking into the legacy system. It's very API-driven, and our system can practically pluck into any of those systems and multiple systems. Steve Kovsky: I find that Amazon, which is a partner of BlackBerry, is bringing together the BlackBerry IVY™ platform, which competes in some respects. But on the retail side, I will often make a purchase with Amazon, even if it costs a little bit more. Because they've got my information, they make it very easy to do. Ease of use is so important. But if you're facing this as an automotive OEM, you're looking at this new subscription economy. They have to choose a platform or build one themselves. What is this decision tree that they're looking at? How are they facing it? Axel Heyenga: I can say that most who have a thought process, already executing on customer experience optimization, and being data-driven, they quickly go to a single platform to manage the whole process. Especially, with EVs. That's where we can have that end-to-end experience really. From offer of that restaurant you said, all the way to revenue recognition. You can drive that experience end-to-end across all systems in the back end. The car in the end is only a mobile device, the interaction point. That's how we see each IoT device. It delivers an experience. It delivers back data on which you can execute. That's how we see this. There is complexity in the OEM space: cultural, technology, and business optimization. The combination of those makes it so complex. You tell the financial guy you're going to be shifting the earning, not just the money when you sell the car. You're going to be earning money across a life cycle. It's a totally different business model. There's a lot of change: business change and transformation behind it, as well as cultural change. You need to test it. It's like testing and trying a new feature in the car. Technicians and engineers test until the end, when they say, "Now, it's ready to ship." It's the same thing with subscriptions. You want to test and try. What is the best value, the best experience that customers get from your offerings? Which again, comes back to you need to be able to fail fast, learn from it, and try anew. Especially, in automotive and especially in Europe. That DNA of failure is not very nicely built. Or that muscle, so to speak. There are dimensions behind it. Building and learning from that muscle, how to do this. And that's why there is no plain answer of how OEMs and what they run into – it’s all one by one. Steve Kovsky: I don't even know what to compare it to, when you look at all of the things that are happening at the same time. Autonomy, electrification, software-defined vehicles. The importance of data. The ability to control, to reach the sensors in real-time, and apply artificial intelligence to optimize. All of these things are compressing into this industry. And then, you look at how they pay for it. What are some of your thoughts about how this is all going to turn out? Do you have some ideas? Axel Heyenga: That's a different notion of how car sales are done in Europe. In Europe, in major countries, the car is still the second largest investment besides real estate. There's a different thought process. How they buy the car, how they order the car. If you're in the U.S., you're selling by the lot. You pick and choose a color and you just take that car and drive home. That's why I'm saying CPG. It's like going into the supermarket and picking some apples. In Europe, if you go to, let's say, Germany, you go to the dealer here and say, "I want to have that car." They say, "Nice. I'm not going to give that to you. I can't. It's my model for showcasing. You need to order it." If you're lucky, you get it quite fast, because they have somewhere built a similar car. But most likely, they're going to build it for you as you want to have it. How it's going to turn out? Different dimension. Number one. Most important factor for everything we talk about here is 5G. 5G in North America is quite nicely established. Especially, around the urban areas. In Europe, I wouldn't trust the 5G at this time. Driving from here, where I live in Munich, up to Hamburg. That's 800 kilometers. Around 600 miles. 560 miles. I wouldn't trust a 5G network all the way up there. I think that's a crucial point of basic availability. Second one is autonomous driving, for instance, which comes very fast. With services and media entertainment in the car. I think the U.S. will be much faster in establishing L4, L5, than Europe. Because the traffic is not as condensed. The streets are not that condensed and busy as they are in Europe. I'm not talking about the five-lane traffic jam in L.A., because that's traffic. But the lanes are much wider. The street corners and the whole dimension is much wider, which gives more room. In Europe, if you go downtown, you have streets where two small cars can barely pass each other. That's one thing. The second thing in autonomous is the legal state. Technically, it's all possible, but the legal state of, "How is the car going to decide if it needs to make a decision: left or right?" Those are insurance-based. But coming back to the level of customer experience within the car, I think there's a lot been done the last 24 months in the OEM space. Offering additional services, finally getting over-the-air updates into the car. They're still learning and they're failing. They're starting to fail, which is fantastic. Because that's the best way to learn. People are starting to understand that there are features in the car that they've already used on their mobile. Now, they're transferring. It wouldn't make sense to start everything immediately, because people would push things away. People need to get used to it and look at it. How do I drive this? And if you look at the dimension of how we as humans learned from a hardware mobile phone with buttons, today, we have a full iPhone® or an Amazon® phone in front of us. Full-blown technology. You can do everything with it. That's the same thing. How people using cars, the customers, will get used to these different features and functions. We'll sit here, Steve, in let's say five years or four years. We are going to be talking about, "How could we have ever had payments in the parking space?" Or "Why do we pay for a 4x4, when we don't need it? I just want to have it activated." That's a cultural change also in the usership of things. That's exactly what we are driving. We are helping organizations, customers, brands, whatever you want to call it, on that journey to usership. Yes. There will be still ownership. I have a 17-year-old boy and a 15-year-old girl. They don't want to own anything. My son bought himself a car, but only to go to the mountains for skiing or mountain biking. He would never even think about driving into the city. It's a totally different use case, where ownership is a different use case than usership. I think that's an interesting part where we will see we are the old guys here. The younger guys will decide where to go. I saw some research on Generation Z where they come back to ownership, but in a different meaning for them. Where they kind of, "Yes, I want to own something, but it enables me to do something that I wouldn't be able to do." In terms of freedom, of going somewhere, where you don't have the flexibility of just renting a car for a couple hours or a day. It would make sense to go to Italy, maybe for the weekend. Using this in a city like Munich, where they say, I'm mixing official trains with a scooter. And then, maybe go home by a taxi or by an Uber. It's a mixture that will be interesting. I'm traveling quite a bit where I'm using Uber. I was at a conference in Stockholm where the taxi driver didn't come, and I had a speaking engagement in front of customers. When I got too close to it, I just jumped on a scooter and drove to the venue, which took me 20 minutes or half an hour. Luckily, it wasn't raining. I got there just in time. Just by flexibility of, "What is the mobility available, and what makes the most sense at the time?" That's where I think it's going. The inside of the car will not be anything different from, me as a consumer, building what I need. Your needs, Steve, will be different in the car than mine. Adapting as your mobile phone. The entrance will look different: your screen than my screen. Because you build it the way you want to have it. You have different demands, and you see different value in different activities or services. That's the same thing I expect. Cars will become exactly that. You build your car and the digital experience around your needs and values. Steve Kovsky: If you had a final thought for automakers, for developers, for consumers that are interested in this connected car experience, what it's going to mean to them and what are the next steps. What would you tell them? Axel Heyenga: In the end that’s the audience you want to attract. If you have the same muscle that you have in production, in designing and building cars, as you do with customers, you're in a very good spot in the world. That's one thing. The second thing is, "Nurture your customer." Protect your customers. Because that's your value. That's your entrance point. And if you don't do that, you most likely run the risk in just becoming a hardware provider to the digital world who own the space – owning the money flow from inside the car. Those are my two points, if they're listening. Steve Kovsky: I'm so happy that there are services like Zuora out there, and that there are people evangelizing this and helping us flex. Because I think flexibility is going to be very important. We have our cultural approaches and what we're programmed to do and what we've done now for generations. The relationship we've had with automobiles and that our markets have had. But this is certainly changing. Axel, I want to thank you so much for opening our eyes to all of this and for being a guest on our program today. Axel Heyenga: Steve Kovsky: Get In: The Connected Vehicle Podcast from BlackBerry is available wherever you get your podcasts. Don't forget to subscribe to keep up to date with our latest episodes. |
