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Home , Automotive industry, Local Motors

Looking ahead Driving co-creation in the auto

May 2013

At a glance OEMs are moving to engage stakeholders like never before using the collaborative power of co-creation. Introduction While auto develop products and to meet consumer demands in a 24/7 world, co-creation methods can provide outlets to engage customers, dealers, employees and suppliers. Companies that successfully tap the feedback be able to enhance products, create in-depth customer experiences and gain a competitive advantage. How can companies better integrate solutions to drive co-creation that results in collaboration among various stakeholders through social media and other interactive outlets? Overview

In recent years, existing methods of There’s potential to engage other costs for enterprises, as well as collaboration with customers have stakeholders too, but these aren’t increased satisfaction and loyalty for begun to evolve into “co-creation.” as common. For example, while stakeholders. It’s an approach that can Stakeholders are now interacting a number of OEMs are actively be especially valuable for automotive directly with companies in a two-way collaborating with suppliers, relatively companies, who have looked to dialogue. The most common examples few are connecting in true enterprise connect with customers, suppliers, are around discussion forums and co-creation with their supplier and dealer networks for decades. . But now, services ecosystem. Companies may be able and many other processes to reduce costs and improve quality PwC believes that co-creation is are also taking part in the discussion. by transforming these relationships ultimately about increasing value There are already many examples and interactions. The same is true for through innovative dialogue and where automotive Original Equipment dealerships. By involving the dealer . Co-creation can make Manufacturers (OEMs) are taking networks in enterprise co-creation, a significant impact on relationships this approach. OEMs are likely to gain a significant across the entire automotive value competitive advantage. chain. From product design and Social media is raising the bar on development to new co-creation by giving companies Enterprise co-creation: and , co-creation fosters the means to interact with virtually taking collaboration to the true multi-directional collaboration every one of their stakeholders. next level among customers, suppliers, Some companies are already taking dealers, service and support advantage of channels like YouTube, Enterprise co-creation is a and internally among Pinterest, Twitter and Facebook, or fundamentally different way of employees. Even brand image can developing their own interactive looking at value generation between be improved when organizations online sites for customer . the and its customers, use co-creation to increase Companies that successfully tap into suppliers, dealers, partners, effectiveness of their corporate social customer feedback and encourage employees, and public sector agencies. responsibility programs. interactive involvement will be able It is opening up processes to enhance products, create in-depth and reengineering them, so that they customer experiences and improve both ways. Tangible benefits their competitive position. include growth, improved retention, and lower operating

2 Looking ahead Co-creation can take place using a Figure 1: Example of a potential co-creation landscape for an OEM with variety of engagement platforms, such relatively mature activities as online communities, social network sites, crowd-sourcing techniques and Project design and development contests. But co-creation is more than 5 just getting thousands of “followers” Corporate 4 or “fans.” A company’s goal should Social Responsibility be to create an engaged, extended 3 C that is committed to the brand involvement O 2 Branding and product and company shown by their A B involvement in collaborative activities. 1 M N It’s ultimately a between D E the company and an individual, 0 fueled by innovative experiences that Internal processes can lead to positive outcomes for (Scheduling, HR, etc.) everyone involved. K F Not all platforms are equally suited to Dealer sales L H G getting there. Engagement platforms I J can range from simple channels for conveying information or answering questions to environments Supplierand collaborativedevelopment Service and suppoprt to truly collaborative systems (see

Figure 1). Even companies that Letters represent particular activities or projects. These are mapped to various levels are already well on their way to of maturity: implementing co-creation are still 1. One directional, Informational platform, unsolicited information likely to have gaps in some areas, as 2. Transactional platform where information is provided (i.e. a request, and a response) the graph shows. 3. Platform supports co-operation where stakeholders work together toward their own separate goals with increasing interactions 4. Platform supports coordination where stakeholders begin to change their beliefs, thoughts, and most importantly actions, based on information from other stakeholders 5. Platform supports full collaboration where stakeholders work toward a common goal and openly share information. Source: PwC analysis

Driving co-creation in the auto industry 3 While many companies are already Moving beyond focus dialogue. It’s not optional. New exploring co-creation, few of them are groups buyers are already using online truly making use of all the possibilities information channels extensively In the past, OEMs often relied on co-creation offers. For example, to research different . The customer data obtained by surveys, automakers are making great strides growing access to almost unlimited focus groups, ethnography studies and in co-creation with customers through information and online communication secondary market research to develop product development and channels has absolutely empowered new products and redevelop existing with interested fans. However, the consumer. That is creating a big offerings. But those approaches still progress in other important areas opportunity for automakers. sometimes fell short. Although focus has been much slower. And though groups were used, some new vehicles supplier collaboration is common, Consumers are hungry for real- were designed that didn’t appeal to true co-creation with suppliers is time, ongoing information sharing consumers. And even when vehicles much less prevalent. There is also and active collaboration. Customer were very popular initially, some significant opportunity to leverage and enthusiast communities are failed to keep pace with changing the power of co-creation in areas like already emerging and beginning consumer preferences and were dealer relations, after-sales service to have an impact on automotive eventually discontinued. and support, internal processes, and . These new and more enhancing the company’s reputation engaged participants in the That’s why companies are now looking for corporate social responsibility. product development process are to go beyond background research providing input into everything and focus groups in initial design from design concepts and technical stages. Instead, the goal is to engage expertise to design drawings and customers in an interactive, ongoing technical specifications.

Figure 2: The Automobile—A Multitude of Engagement Channels

Store Clerks Friends Family Vacationers

Co-Workers Working Shopping Sports Romance Traveling Golf

Drivers Doing Business Communicating Inn Keeper Handling Singing, Talking Breakdowns Bad Drivers Navigating, Waiter Insuring and Trip Planning Reporting Claims Injured Drivers Avoiding Problems Bikers Storing and Securing Eating, Sharing Police Pedestrians Theft Reporting Fueling

Getting Repairs Servicing Agent Attendant

Media App Web Search Test Drive Purchase Trade-in Repair Tech Viewing Upgrade DMV Agent

Service Mgr App Store Tech Call Center Dealer App Support

4 Looking ahead “OEMs who leave their customers out of the development process risk falling behind the competition.” —Chad Mollin, PwC Management Consulting

Co-creating new design And while co-created design concepts The official received over concepts aren’t yet being mass-produced, the 35.6 million views, nearly 13 million first concept have already created visitors, more than 200,000 design There are a number of examples where a lot of interest. Launched in Brazil submissions, and the followers of its OEMs are getting customers involved in 2010, ’s concept car, Fiat Mio, official micro blog topped 495,767. in the design process. Customers and was based on more than 11,000 ideas This open-innovation platform has fans can participate in a virtual world submitted by 17,000 subscribers in activated a nationwide dialogue about to share ideas, participate in design more than 120 countries.1 Social media future mobility. With the People’s contests, suggest topics of interest sites Facebook and Twitter generated Car Project, the brand and more. This is an opportunity for some of the ideas, and videos about became the “most digitalized auto OEMs to gain knowledge and generate the “making of” the car are hosted brand in China.”2 Volkswagen turned innovative approaches to product on YouTube. three of the ideas into concept cars design and integrated solutions. and launched them at the Beijing Auto These virtual gathering places allow Germany’s Volkswagen, in English Show in May 2012. customers to rally around a new the ‘people’s car,’ decided to look product launch or simply participate to the world’s largest car market We think that OEMs who leave their in the discussion. OEMs who leverage for ideas. The company’s ‘People’s customers out of the development technology capabilities of the virtual Car Project’ started up in China in process risk falling behind the can further drive traffic to 2011. Volkswagen asked users of an competition. As these examples show, the retailer when the product comes interactive website to submit their some companies are already well to market. ideas and they did. on their way. Automakers need to consider how to reach out and connect with customers.

1. “Is this the future of ?” http:// 2. “Volkswagen crowdsources its way to a hover car,” www.plminnovation.com/fiat_mio.php; http://www. http://www.gizmag.com/vw-crowdsources-its-way- ideaconnection.com/open-innovation-success/ to-a-hover-car/22439/ Fiat-Mio-the-World’s-First-Crowdsourced- Car-00273.html

Driving co-creation in the auto industry 5 A co-created vehicle from the industry standard of 3 to 5 years. be anonymous or to be included in the enthusiasts, manufactured The company wants to streamline even . This co-creative model goes by hand further, with a goal of a 12 month well beyond traditional marketing and timeline. Customers actually help build buzz creation, by opening the door takes co-creation several their car; creating a unique experience. to a two-way conversation with key steps farther. It’s CEO, Jay Rogers, stakeholders where their ideas are says the company is changing the way That was not the first time an turned into reality. cars are designed, built and brought to automaker has put some aspect of market.3 The company crowd-sources, directly in the hands In today’s consumer-driven or co-creates car and then of the car buyer. has marketplace, providing opportunities manufactures the new models on a offered buyers of its Corvette for the public to share their ideas, small scale in micro-factories. The the chance to build the engines enthusiasm, and complaints is the company uses a co-creation approach themselves for an extra price and key to strong relationships. throughout the —design under supervision—a uniquely literal That may mean using existing social ideas are crowd-sourced, and suppliers take on co-creation.6 media networks like Facebook, Twitter exchange information on parts via an and YouTube, participating in new open-source network.4 Using co-creation to market communities set up by enthusiastic products and enhance fans, or interacting on cross-industry Local Motors’ co-creative challenge- the brand social websites. This is a way OEMs can based platform, The Forge, was act as peers in these new communities, Getting the car buyer involved in such a successful example other sharing ideas or just listening to what design and production will surely build companies started using it too. ’s customers are saying about their significant brand loyalty. In fact, OEMs Division is collaborating vehicles. Engagement platforms like who collaborate with stakeholders find with Local Motors to conduct an these are now shaping perceptions many ways to enhance both marketing online competition, RIG2— of car brands, so OEMs need to take 5 and brand management. Icon Generation 2. The global them seriously. competition sought innovative designs In Canada, Volkswagen used a co- for a classic heavy duty truck exterior Automotive companies do not need creation strategy to engage the that used more aerodynamic and to be constrained to existing social company’s fans in creating the third modern elements. media platforms either. Some OEMs in a series of ads themed ‘Drive Until’ now have their own interactive online for the company’s Golf . Local Motors’ own first vehicle, the communities. For example, Ford’s Facebook users helped develop the Rally Fighter, took just 18 months to interactive site, Ford Social helps script for the ad, choose the actors, and go from a 2-D to a vehicle to build customer-loyalty, promote select the music. Fans could choose to ready for pick-up. That compares to two-way interaction and help spread key messages.

3. “Wie Co-Creation in der Automobil-Industrie 6. http://blogs.forrester.com/doug_williams/10-07-13- funktioniert: Interview mit Jay Rogers von Local gm_takes_co_creation_literally Motors”, http://www.doubleyuu.com/wie-co- creation-in-der-automobil-industrie-funktioniert- interview-mit-jay-rogers-von-local-motors/ 4. “Das Case Local Motors: Co-creation and collaboration in the Automotive-industrie,” Universität St. Gallen, Double Yuu, T Systems, http://www.automotiveit.eu/wp-content/ uploads/2011/12/Local-Motors-Case-Study- FINAL1.pdf 5. “Local Motors wants your help designing the next Peterbilt rig” https://forge.localmotors.com/pages/ competition.php?co=68&tab=design-brief

6 Looking ahead Beyond the customer

Customers are just the beginning. Co- close, virtual platforms have become In September 2005, Ford introduced creation has the potential to reshape dominant. Internal Team web portals its ‘Aligned Business Framework’ interaction with virtually all internal and supplier portals, where people (ABF) to strengthen collaboration and external stakeholders including share everything from CAD drawings and develop a sustainable business suppliers, dealers, service and support to test results within an environment model to drive mutual profitability and internal audiences. that can be adapted by all participants, and technology development.9 As part are the most common today. of the framework, Ford is involving Working together with suppliers earlier in the product suppliers Using co-creation strategies is development process. one important way that OEMs are Co-creation platforms have been used including their suppliers much earlier And while co-creation may often for years to enhance relationships in their innovation processes, which start with the design phase, it doesn’t between OEMs and their suppliers; can increase supplier commitment, end there. Shared manufacturing these run the gamut from online transparency and trust,7 which strategies, like just-in-sequence information sharing websites, to co- leads to lower pricing, increased delivery and joint testing, can also location facilities in business parks and technology sharing and higher supplier provide great opportunities for OEMs business model transformations. relationship rankings. to co-create with their suppliers. So During the design stage, co-creation can more transparency. Ford’s ABF also Over the past decade, Ford has made platforms have become particularly includes sharing more information on big improvements in its working important. While in-person design forecast volumes and product plans relations with suppliers,8 citing workshops are still common for with suppliers. increased collaboration with key partners who are located relatively suppliers as one important reason.

7. 2011 PPI NA Automotive OEM—Supplier Working 9. “FORD, KEY SUPPLIERS ROLL OUT INNOVATIVE Relations Study BUSINESS MODEL” http://media.ford.com/ article_display.cfm?article_id=21677 8. Ibid.

Driving co-creation in the auto industry 7 Interacting with dealers search engines such as Auto Trader. In 2007, Ford and others developed com, Edmunds.com and KBB.com. a connectivity platform, called SYNC A strong relationship with the dealer That means more pressure on prices, that allows users to make hands-free network has long been seen as critical since new car buyers can comparison telephone calls, control music and to OEMs’ success. By collaborating shop in a way they never could have in perform other functions with the use with dealers, companies can market the past. of voice commands in the vehicle. vehicles more effectively. Excellent Now, the automaker is working on at the dealer In the past, the dealership was the incorporating a series of in-car health level is also critical to developing a primary site of interaction with a car and wellness apps and services aimed strong brand. brand, but that’s expanding now. at monitoring people with chronic Third-party sites and the OEMs’ own It’s not always smooth sailing though. illnesses, into vehicles. digital platforms—particularly mobile In the US, for example, recent hard and social—provide the potential for In the area of diabetes, Ford times in the a whole host of other interactions. researchers have developed a drove thousands of dealerships out Making sure that dealers are linked prototype system that allows Ford of business. Many OEMs found that into such efforts is critical. When SYNC to connect via Bluetooth to relationships with the surviving dealers work together with OEMs and a continuous glucose monitoring dealerships were tense as a result. develop robust co-creation platforms, device and share glucose levels and By implementing co-creation they can enhance traffic into dealer trends through audio alerts and visual platforms together with dealers, storefronts, improve how the customer displays for drivers or passengers. The OEMs can actively foster collaboration interacts with both the dealer and systems envisioned would be able to downstream. That can help them reach the OEM, increase sales and build the interact with drivers’ other devices, out to the customer together with relationship between the dealer and like phones and then relay this dealers, and enhance relationships the OEM too. information to health care providers by with dealer networks too. storing the data in the cloud. Connected cars That’s especially important, since all Using a co-creation approach to get around the world dealers are facing Just how interactive will cars be? input not only from customers, but new challenges that go well beyond Automakers are starting to explore also from a whole range of other the economic environment. Consumer the possibilities. stakeholders, will be vital in moving shopping behavior is changing other like these forward. ’s “Fun Vii” concept car—Vii significantly. Online information stands for vehicle interactive — resources mean that new and used made waves at the Tokyo Auto Show car buyers now have instant access in 2011. Its touch screen exterior can to vehicle inventory availability and change to suit the drivers’ mood. The price transparency through online concept car can also connect to the dealer’s website for a check-up.

8 Looking ahead OEMs and suppliers are already working together to make vehicles more connected—cars are starting to become a “social” product.

Big opportunities in service When the tire pressure is low or the and support oil needs a change, for example, the car could not only alert the driver— In the US, a recent survey reported it could potentially show possible that only around 33% of customers locations to have the service done. If trust dealer repair and service facilities dealers see that a car will be in need of to conduct their repairs.10 Further, service, they can reach out to the driver over 80% of respondents indicated and let them know. That might include they wouldn’t use dealers for out of offering a discount at the right time or warranty repair work. That’s a lot of including functionality that lets drivers lost potential opportunity for dealers. make service appointments directly from the vehicle’s interface. Customers OEMs and suppliers are already benefit too, by obtaining a clear view working together to make vehicles of what their service requirements are, more connected—cars are starting and can quickly identify a dealer that to become a “social” product. can perform necessary or There’s a big opportunity to build in repairs at an acceptable cost. connectivity with dealers and other after-sales support providers too. New infotainment and other electronic systems should also work together with dealers and customers to identify the best way to provide transparency to the vehicle operation and service requirements. They’ll need to take into account the driver’s desire for privacy and leave freedom for selecting a preferred service location, but still connect interactively with dealer networks (and potentially other service providers as well). Some automakers are already working on such concepts (see Connected cars).

10. Source: AutoMD.com

Driving co-creation in the auto industry 9 Internal collaboration and Working with stakeholders Some firms are even now beginning employee innovations in the community to utilize social media platforms such as facebook and twitter to report their Co-creation can also be a useful Consumers and society in general CSR performance11 with a goal to tool to build relationships within an have become increasingly focused engage actively with participants who organization. Establishing the right on a firm’s economic, social and become a following to a firm’s CSR interactive engagement platforms environmental impact, or the “triple . This not only helps build to reach out to employees can be bottom-line”. With information trust with stakeholders and interested especially powerful as part of internal that is easy to share, companies that parties but also allows firms to better change programs, or as a way to foster don’t uphold high standards in these gauge overall sentiment early on. an innovation throughout areas quickly suffer damage to their the organization. When companies reputation and subsequently their OEMs recognize that they are often really engage their employees and profitability. The continued growth under the spotlight when it comes not only ask for their ideas, but of Corporate Social Responsibility to the impacts that automobiles also implement them, employee programs (CSR) across many have on society at large. Cars are satisfaction and morale goes way up. industries has shown how firm intimately linked to environmental And since satisfied employees are more profitability improves with the concerns, public safety and economic productive and less likely to leave the “greening” of a firm’s business. sustainability. By leveraging many of company, there’s a direct impact on the However, while many companies the same platforms and techniques bottom line. have developed CSR programs, there used to reach out to consumers, is a growing sense of complacency suppliers and dealers, OEMs could New tools and resources can in communicating them and their build interactive dialogues with take internal collaboration to an impacts. Further, there is a risk of the other stakeholders that may not be entirely new level. But good online perception of “greenwashing”—where so interested in what the design of collaboration tools alone aren’t enough what is reported in terms of impact is a vehicle looks like, or how it’s put to really an internal culture of not the true performance. together, but are rather interested with co-creation or gain efficiency benefits. the impacts on the environment and Automotive companies also need With multiple reporting standards society that comes with building and to listen to the voices of employees that can be used, such as: Global adding another vehicle to the road. who will actually use these tools in Reporting Initiative (GRI), 26000 Through cocreation and the utilization their day-to-day interactions. Indeed, and 14000 and Social Accountability of social media platforms, OEMs can collaboration tools work best when International (SAI) just to name a few, gain the capability to quickly identify they are co-created with employees. there is a significant challenge for firms what needs to be communicated, Implementing new HR systems to in deciding what to report and how to gauge overall sentiment and react streamline time reports, for example, report it. Firms that have a co-creative earlier to concerns that may emerge. can potentially save companies a lot mind set, recognize that social media of administrative time. But they need can be a very effective platform for to make sure that systems work well moving beyond the often long and dull for employees. That’s easier if staff is annual CSR reports to more dynamic, included in the development process. transparent and targeted reporting.

There are many other ways to co-create with employees. With many companies now operating with a smaller staff, looking to every employee as a possible source of new ideas and information can make the difference between surviving and thriving. 11. http://www.forbes.com/sites/ forbesleadershipforum/2012/01/18/the-top-10- trends-in-csr-for-2012/

10 Looking ahead What’s next? How PwC can support your • Product and Service Co-Creation Co-creation is already starting to co-creation effort • Public-Sector and Multi-Stakeholder emerge as a mainstream method of We help our clients give stakeholders Policy Co-Creation collaboration and idea generation in more active and direct responsibility in • New Business, Ecosystem, and the automotive industry. We believe planning, innovation, operations, and Business Model Co-Creation the pace of implementation will delivery. PwC Management Consulting increase significantly over the next five can work with your organization to • Business Interaction Redesign years. Automakers should embrace this explore how co-creation can propel new level of openness and stakeholder your business to the next level in interaction and leverage the significant various ways: tools and resources available. We think those that do this most effectively • Enterprise Co-Creation Assessment will be well-positioned to create a • Customer Experience Co-Creation sustainable leadership position for the future. • Supply Chain Co-Creation

Driving co-creation in the auto industry 11 www.pwc.com

To hear how our services could benefit your organization, please contact:

Dietmar Ostermann Global Automotive Advisory Leader +1 313 394 3220 [email protected]

Doug Billings Principal, Co-Creation Specialist 617 530 6163 [email protected]

Chad Mollin Manager, NA Automotive Management Consulting Practice +1 224 622 2593 [email protected]

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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