In this CXO Talk interview, Don Butler, executive director for connected vehicles and services at Ford Motor Company, discusses digital transformation in the automotive industry. This episode defines what Ford means in terms of automobiles being connected and what three aspects of connectivity connected cars need to incorporate, beamed in, brought in and built in because consumers are increasingly connected and living digital lifestyles and Ford is working to be part of that.
Watch the video and read the complete transcript of the broadcast.
Michael: (00:06) Hello, greetings everybody. Digital transformation, whatever that buzzword means, is affecting every industry including one of the largest, longest and most well-established industries on the planet -- the automotive industry. And that’s our topic today on episode number 109, with my co-host Vala Afshar.
Vala: (00:43) Hello Michael.
Michael: (00:45) Hello Vala, we have as our guest Don Butler, who is responsible for connected cars and services for the Ford Motor Company.
Vala: (00:57) Welcome Don.
Don: (00:58) Thanks Vala and hello Michael.
Michael: (01:00) Don, how are you. Thank you for joining us today.
Don: (01:03) Thank you, it’s good to be here.
Vala: (01:05) Don could you start the show with a little bit of background about yourself and what you do at Ford.
Don: (01:14) Sure, sure, so I have an electrical engineering degree from General Motors Institute, now known as Kettering University and I have an MBA from Harvard and have spent a vast majority of my career in the automotive industry. First in a series of engineering positions and then in planning, marketing, general management roles, business development roles.
(01:45) Spent actually a brief period of time at a startup called Inrix, which they do traffic data services. They’re based in Kirkland, Washington and I’m now with Ford. And at Ford as you said I lead connected vehicles and services for our organization and I work across what we call our functional skill team, so product development, information technology and marketing, and I lead our thrust in terms of connected vehicle services and experiences, and how we are thinking differently about you know the products and services that we deliver to the customers, as well as increasing the experiences that we deliver to customers as well all in the context of connectivity.
Michael: (02:38) So when I think about cars driving down the road, I’m not thinking about wires hanging off the car, I’m just thinking about just going down the road. So what does connected vehicles and services mean?
Don: (02:50) Sure, so probably the best thing is to start with our kind of simple definition of connectivity and what we mean when we say connectivity and we divided into three facets. We talk about beamed in, brought in and built in.
(03:10) And if you think about connectivity as the ability of the vehicle to have access to information that’s outside the vehicle in either transmitting information or receiving information, actually since the days of the AM radio right we’ve had connected vehicles right. So that’s the first most basic form of connectivity.
(03:31) Constant information that is beamed into the vehicle, so today that is much much more sophisticated obviously with things like satellite radio and not only you know media and content that you get through satellite radio for instance, but data as well, traffic data, services, you know weather forecast data that kind of thing.
(03:52) And from a Ford standpoint, you know we’ve had the lead in the element of connectivity that we call ‘brought in connectivity.’ So that is leveraging the content, the capability, the communications capability, the media, contacts on a smart device – smart phone that you bring into the vehicle and so with sync going all the way back to 2007, you know we’ve had the sort of foresight to understand in that consumers want to stay connected even when they’re in a vehicle environment, and we do that in a way that is safe, seamless, leveraging voice for instance for control to allow consumers to keep their hands on the wheel and eyes on the road – for now, right. And we can get into what the future might hold.
(04:42) Then the other aspect of connectivity is what we call built in. So the vehicle has its own independent node on the network, joining the Internet of things. Having its own independent capability of transmitting and receiving information and so in that case we are talking about a data modem that is part of that vehicles architecture that allows it to transmit, receive information to allow customers for instance to remotely interact with that vehicle to do things like lock, unlock, remotely start the engine. In the case of an electric vehicle for instance, check the status of the battery charge and then leveraging also that built in, connectivity to be able to do things like software updates and make sure that that vehicle actually gets better over time. And the challenge within that is that it’s fundamentally different than what we’ve historically done both for a vehicle development standpoint as well as the way that we approach our customers.
(05:47) You know, to this point in time, you know really if I could simplify it, it’s been we’ve provide customers with a vehicle and they give us money in exchange and its essentially a onetime transaction. There is no real ongoing relationship through that ownership period or user period, and so what we’re doing now is understanding that like many other brands, services, and experiences we need to stay connected, we need to develop that longer term relationship, both with the vehicle and the customer.
Vala: (06:22) I saw a video, I think it was at Mobile World Congress, where you demonstrate what I believe was a Ford Focus electric car and it was pretty amazing that from a mobile app you can charge the device and all of the other ways you can control and have all this intelligence to and from the vehicle. It felt like you know you’re connecting and building real customer intimacy by providing a tremendous amount of capability on what is ultimately becoming the remote control for life.
Don: (07:02) A smartphone
Vala: (07:03) Yeah, a smartphone, so it feels like the largest mobile device in our lifetime will be a car – mobile connected device. Why is all of this important? You talked about the different kind of connectivity, but is it really enhancing the customer experience and building that more than one-time interaction, is that ultimately what’s driving the innovation?
Don: (07:27) That’s absolutely a key, and I love the phrase that you mentioned ‘customer intimacy’ and it’s really about us as an industry, adapting more and more to what customers are already doing and how are customers are living their lives today.
(07:50) We kind of joked about it, but it’s true. The smartphone has become in a sense that hub of our digital life, and you know, even the phrase ‘digital life’ at some point digitals going to be like we joke about it here. You don’t say the electrified home right, it’s just – of course, homes are electrified and you’ve got electricity.
(08:13) So consumers are increasingly connected and living digital lifestyles so in order for us to remain relevant you know we need to be part of that and take advantage of devices that their using like the smartphone for instance, and enabling experiences that wouldn’t otherwise be possible because we’ve got that connection. The Ford Focus energy is a great example of that, one of the areas around electric vehicles is obviously that charging is a much different context than just being able to stop by the gasoline station.
(08:51) So there’s increased sensitivity for obvious reasons around what the state of charge, you know how long is it going to take me to get to a particular destination, is my battery charge capacity enough for me to get to that destination.
(09:08) And so with our mobile app for instance we empower customers to understand, what is the state of charge of the battery and then translate that into a meaningful way for them to understand it.
(09:20) So if they’ve got a particular route or destination, they can use the smartphone app to understand here’s where I’d like to go, and then we give them a very simple indicator in terms of a red, yellow, or green of the likelihood of the battery charge being able to take you to that destination. And also, let them know what are the charging points either along the route or conveniently located that you can take advantage of.
(09:47) And so again, it’s about integrating ourselves into how our consumers are already experiencing life and living life, and moving sort of that automotive context more into a consumer experience, digital experience and connected lifestyle context.
Michael: (10:10) So Don, when the vehicle becomes a software platform it enables you at Ford to have an ongoing relationship that extends far beyond just that functional drive time.
Don: (10:31) Absolutely, and I believe it was a Morgan Stanley study that shows a high level of what they use today sort of loosely, but today – or I should say in the recent passed roughly 90 percent of a vehicles value has been in hardware components right. The power trains, the suspension, the body, the interior and roughly 10 percent of it was in software and control modules.
(11:06) And as we go forward we see that ratio shifting quite dramatically such that roughly 50 percent of the vehicles value will be in that hardware and the other 50 percent is divided between software and experiences and sort of out of vehicle sort of content.
(11:31) And a couple of things that really enable us to do first, we are as you allude to able to maintain sort of an ongoing connection we have the benefit of what software enables which is capability that gets better over time.
(11:52) And so, unlike a suspension system that you take your best inputs, take customer inputs, you understand what’s going on competitively, you understand what are the requirements of this vehicle. You’ve designed and built the best suspension system that you can but once you commit to it you’re done, right. You don’t have upgradable control arms, but we will have upgradable software and that in a sense empowers the consumer to have a vehicle that potentially two to three years from now is as good as the vehicle that someone buys new in that time frame.
(12:34) It also enable us to benefit from you know the data that is a result of those interactions and leveraging that data, and first of all it’s the customer’s data and we are stewards of it on their behalf. That’s our position for it here at Ford.
(12:54) But leveraging that data to enhance that experience and that relationship with the consumer to provide more and provide better and more contextual experiences.
(13:03) Again so that we become more and more part of how customers are living their lives and the vehicle becomes part of a solution to a multi-variant equation of customers are using and again in terms of how they’re perusing life and living life.
Vala: (13:20) So as you’re building this innovation to bolster customer intimacy and use software technology to create stronger connections between the driver, passenger and Ford. There’s an awesome amount of responsibility in terms of security and as someone who is also a technologist it must be a tremendous effort on Fords part to encrypt technology, to monitor backend systems, to whatever you do to ensure the personal information of Michael, Vala and Don are safe and secure and you’re using it only to add value and to enhance the experience of the driver. Can you talk a little bit about that?
Don: (14:07) Sure you’re absolutely right Vala and the way we look at it is as this notion of a connected platform delivering compelling experiences that result during the relationships with customers, none of that is possible unless it’s built on a foundation of trust. We’ve literally got a graphic here that illustrate all of this literally on a foundation of trust, and there’s two components to that trust and again you’ve alluded to them.
(14:40) First is privacy and second is security. So as a customer or a user, what do I want ford or other parties to know about me and to know about the vehicle. That’s the privacy element and the security element, what is Ford doing to protect me and my data from hacking and from threats.
(15:06) So on the privacy side I’ve talked about our philosophy of being stewards of the customers data. It’s the customers data and we’re stewards on their behalf, and we believe that giving customers control over how that data is used is absolutely the right thing to do and we believe that to the extent that we are providing value commits with that permission that we’ve got a balance there, and we need to always think about what is going to be valuable for the customer, not what can we do with this data.
(15:42) On the security side, it’s understanding that you know practically as we become more connected in terms of the vehicle and in terms of the cellular networks and in-vehicle networks and mobile apps that the threat surface grows exponentially.