The Case

Car on the Cloud

How Should Google Drive it?

In January 2012, Google’s CEO Larry Page reflected on the opportunities and challenges facing Google. Since taking over as CEO on April 4, 2011, he had made important changes.  He shut down initiatives that had failed to gain sufficient traction such as Google Wave, Google Health and Google Buzz. He masterminded the acquisition of Motorola Mobility to supercharge the Android ecosystem. Moreover, he committed resources to new initiatives like Google Plus to challenge Facebook, Google TV to compete against Apple TV, and Google Wallet to take on PayPal.  On October 13, 2011, Google reported the Q3 results: Quarterly revenue was $9.72 billion, which represented 33% increase over 3Q of 2010 with a net income of $2.73 billion. Page’s first nine months had been a success.Looking farther ahead, Page reviewed Google’s initiatives in the automotive sector. With cars—especially plug-in-hybrid and electric vehicles—becoming computers-on-wheels (premium cars today have dozens of microprocessors running 100 million lines of software code), Larry Page saw new market opportunities beyond Google Search and Maps that had already become standard on newer models from Daimler, Audi, GM, BMW and Ford. Moreover, drivers and passengers use Android-powered mobile phones with Bluetooth integration and regularly use apps such as Pandora, Facebook, Twitter and others inside automobiles.Automotive Telematics—which involve the transmission of useful data to and from the vehicle through advanced communication technologies—had evolved significantly over the last two decades. These technologies now pose new opportunities and challenges for not only leading automakers but also to providers of computers and communication technologies. The telematics landscape had come a long way from GM OnStar’s original concept in 1995—which involved bulky Motorola handset, GPS-enabled antenna and analog cellular network.

In the near future, 4G Long Term Evolution (LTE) networks could bring the power of cloud computing to automobiles on the move—to cars, drivers and passengers. Google—already a strong player in the mobile technology with Motorola Mobility and Android OS—could play a more central role in the automotive market in the future. Larry was keen to analyze how Google could play a more central role in this sector.  What could Google do to drive and accelerate the transformation underway in the automotive sector? How could Google create and capture value in this sector?

2012 Consumer Electronics Show

Many visitors to the 2012 Consumer Electronics Show (CES) in Las Vegas wondered if the letter C in CES stood for Cars. Several presentations focused on developments at the intersection of automotive technologies and consumer electronics—especially smartphones and apps.  On the Second day, Dr. Dieter Zetsche, Chairman of Daimler delivered the keynote address—the first time that a Daimler Chairman had done so at CES.  Zetsche, the head of the company that manufactures the marquis Mercedes-Benz brand of automobiles remarked: “Here at the Consumer Electronics Show in Las Vegas there are some people who view the automobile as an accessory to consumer electronics. Conversely, at the auto show in Detroit there are many people who view consumer electronics as mere trimmings for the car. Both points of view miss the point: as much as a smartphone can be far more than just a tool for communication, a smart car can be more than just a means of transportation.

 

Precisely at the interfaces between communication and mobility, vast potential for innovation lies dormant, and we intend to tap it.”

During his speech, Zetsche outlined how Mercedes second generation Mbrace technology connected the car to the cloud and how his company enabled backend servers with secure VPN connections toautomatically feed applications and updates from the cloud to the car.  These developments were part of the company’s updated telematics strategy, @yourCOMAND, built on latest developments in user interfaces including voice commands, touch-pad, and hand gestures. Technology-enhanced car becomes a mobile communications center that enables driver and passengers to access latest media and navigation services at any time. [A video of Zetsche’s keynote is available at the CES website].

Daimler’s Partnership with Google

Daimler has been working with Google since 2007 with the launch of Google ‘Send-to-Car’ functionality—Mercedes drivers were one of the first to be able to send destinations from websites to their in-vehicle navigation systems. At CES in 2012, Daimler and Google announced that they have deepened their partnership. Google would provide Daimler with preferential access to application programming interfaces (APIs). Daimler vehicles will have cloud-based map-related applications using Google Maps API and Google Places API. Theses API-linked services will enable Daimler to use Google Maps for their in-car map displays (including Google Street View). Mercedes drivers and passengers could potentially personalize the various services just as they do with Google on the web or on their mobile devices.

 

New apps for the social networking site Facebook, Google Maps Street View and Panoramio by Google will be available for Mercedes Benz later this year. Other apps such as Google Local search and Google Weather would also be launched. The required Internet access for such functions is provided via a mobile phone using a Bluetooth connection.  Google’s role has been critical for Mercedes to create feature-based service differentiation in its automobiles.

 

Evolution of Automotive Telematics to the Cloud

Dr. Zetsche’s keynote speech highlights the new frontier of innovation at the intersection of automotive and digital technologies. Cloud computing and related services offer promise for innovation at this intersection. And such innovations call for new patterns of collaboration and competition between companies in these two sectors. Paragraphs below highlight some new initiatives involving automakers and IT companies as illustrations of this increased interconnections between these two sectors.

Ford and Microsoft    Since 2007, Microsoft and Ford have been working together on Ford SYNC—voice-activated access to cloud-based network of information including traffic, news, sports, weather, stock quotes along with turn-by-turn navigation.  In 2010, Ford added SYNC AppLink—which allows customers with smartphones to access popular apps such as Pandora using voice commands.  Ford’s proposed SYNC architecture integrates three different types of apps (1) those built-in to the automobile by Ford; (2) those brought-in by drivers and passengers; and (3) those beamed-in from the cloud. Ford’s research indicates that with information collected from the car, Ford has been able to continually identify opportunities for service improvement, thereby creating the ‘upgradable car.’ As of early 2012, SYNC has been installed in over 4 million vehicles.

Google’s Joint Experiment with Ford    Google has been working with Ford to explore how its Prediction API can be applied for predictive analytics to maximize the efficiency of a vehicle—particularly a hybrid or electric vehicle. Google believes that this initiative has four-to-eight year horizon. Ryan McGee, an architecture and algorithm supervisor at Ford who works closely with the hybrid and electric vehicle programs remarked, “We’re really talking about making your car behave better with some knowledge of how it was used in the past.” Google Prediction API has the potential to empower the vehicles to anticipate the driver’s needs—which takes the current state of telematics to the next level of value potential.

In one scenario outlined by Ford engineers, the vehicle might ask the driver “Are you going to work?” and take his or her answer into account, in addition to monitoring the actual movements of the car and real-time information such as traffic conditions. Google’s data centers would provide the cloud computing power to do the analysis on that data, and then recommend an optimized route that includes factors such as taking advantage of electric vehicle-only lanes.

Beyond providing navigational guidance, these analytics would feed changes in the automotive drive train performance controlled by an on-board computer. A plug-in hybrid gas-electric car might use more gas and conserve electric power during one part of the trip so as to be able to operate in electric-only mode in EV-only lanes. Because Google cloud computing provides more computing power and data storage capacity than could reasonably be packed into a car, the Google Prediction API should be able to produce a much superior optimization model for vehicle performance, taking into account historical data for traffic patterns and engine performance.

Ford and Bug Labs. Ford is experimenting with Bug Labs to let people add new electronic components to their cars. At the ‘September 2011 TechCrunch Disrupt’ in San Francisco, the two companies demonstrated a socially networked in-car fuel economy monitor connected to the Internet, via Bug Labs’ cloud-based service. The focus of this joint initiative is to allow for drivers and passengers to easily add third-party modules as aftermarket options during the life of the car. The joint initiative—OpenXC platform—is designed for developers to create wide range of products and solutions adapted to the different local needs and accelerate the connectivity of cars to the cloud.

Toyota’s Dual Pathways to Cloud with Microsoft and SalesForce.com   Toyota is pursuing dual pathways to the cloud involving two different partners: Microsoft and Salesforce.com.  Early in 2011, Toyota and Microsoft committed to a $12 million venture to bring telematics to Toyota vehicles via the cloud, allowing users to stream music, connect to information services and manage the batteries in their electric vehicles.  This cloud connection will be based on Microsoft’s Azure cloud-computing platform, and the functionality will be available on Toyota’s electric and plug-in-hybrid cars in 2013.  The firms will work together through the automaker’s Toyota Media Service subsidiary to create a global, cloud-based telematics system by 2015. The system will provide telecommunications and data, GPS and multimedia in an integrated fashion as also provide charging and battery management capabilities.

According to Akio Toyoda, President of Toyota Motor Company: “Together, utilizing Windows Azure and Microsoft’s vast information infrastructure, we will boost the value of automobiles by making them ‘information terminals,’ moving beyond today’s GPS navigation and wireless safety communications, while at the same time enhancing driver and traffic safety.” The idea is to connect vehicles to servers around the world, eliminating the need for excessive hardware and software within the vehicle. Steve Ballmer, Microsoft CEO remarked “it will be easier for consumers to access newer services and for developers to offer new applications and features.”

Separately, Toyota and Salesforce.com are working on developing Toyota Friend—a private social network to be offered from 2012, initially in Japan on Toyota’s electric and plug-in-hybrid vehicles. Toyota Friend provides a platform for the car to relay key information to the owner, this could be general maintenance tips or notifications that that the car is running low on power. In this instance, the driver would receive an alert on their mobile, similar to a Tweet.  Salesforce Chatter, which is an enterprise social network, will power Toyota Friend.


Toyota’s President Akio Toyoda said: “Social networking services are transforming human interaction and modes of communication. The
automobile needs to evolve in step with that transformation. I am always calling for Toyota to make ever-better cars. The alliance that we announce today is an important step forward in achieving that goal.”

Google X is unknown to most. It is a clandestine lab where Google tackles many shoot-for-the-stars ideas. Google has not officially revealed much, but it is clear that such a lab is in the core DNA of Google. New York Times published an article on November 13, 2011 that revealed, “In a top-secret lab in an undisclosed Bay Area location where robots run free, the future is being imagined… It’s a place where your refrigerator could be connected to the Internet, so it could order groceries when they ran low. Your dinner plate could post to a social network what you’re eating. Your robot could go to the office while you stay home in your pajamas.”  The article went on to speculate that: “Google may turn one of the ideas—the driverless cars—that it unleashed on California’s roads last year—into a new business. Unimpressed by the innovative spirit of Detroit automakers, Google now is considering manufacturing them in the USA.” On December 13, 2011, US Patent and Trademark Office awarded Google a patent for ‘transitioning from a mixed-mode vehicle to autonomous mode’ related to this experiment.

Larry Page is aware that Microsoft is serious about the automotive sector since it had co-developed Sync with Ford and has brought its azure cloud platform capability to help Toyota. Sanjay Ravi, head of automotive at Microsoft noted that, “after mobile phones and tablet personal computers, the vehicle is becoming the third fastest-growing connected device.” Furthermore, Microsoft is poised to introduce Windows 8 and Windows Phone in 2012 (with its set of apps) with significant integration with cloud services.

What should Google’s strategy be for the automotive sector in this decade? Larry Page and his team made Android Operating System a serious contender in mobile technology and are now working to integrate Motorola Mobility hardware into Google. In relatively short time period, Google successfully transitioned from its core focus on internet search to create the Android ecosystem involving device manufacturers (HTC, LG, Samsung and others) and telecom operators (Verizon, AT&T Wireless and others all over the world).  Can it successfully navigate the automotive ecosystem, as cars become computers on wheels with cloud connectivity? The automotive sector—especially with cloud connectivity and increased role for social networking—appears a logical opportunity for Google. The cars could be a natural extension for the Android OS since drivers and passengers use mobile phones and apps to access music, videos and games through apps. Furthermore, local advertising could be tailored to individual preferences—a core area for Google.

Google’s business model with Android has been to maximize the penetration of Android OS to enable monetization through advertising. Will that approach work in the automotive sector? Where in the global marketplace should Google focus on? What are the risks? What are the competitive challenges? Who would be its key partners and allies in the ecosystem? What acquisitions make business sense? What will Google’s roadmap look like over the next five years?

You are asked to develop a presentation to Larry Page and his team on Google’s strategy in the automotive sector as cars connect to the cloud against the backdrop of increased plug-in-hybrid and electric vehicles. This should be well researched with clear and compelling view of how Google could differentiate and win in this sector over the next five-to-ten years.