In- Vehicle Telematics

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In- Vehicle Telematics Driving Connectivity: The Future of the U.S. Telematics Industry and Its Impact to Toyota Motors MASSACHUSETTS INSTMTUTE By OF TECHNOLOGY John Webb JUN 16 2010 LIBRARIES SUBMITTED TO MIT SLOAN SCHOOL OF MANAGEMENT AND SCHOOL OF ENGINEERING IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR SYSTEM DESIGN AND MANAGEMENT PROGRAM FOR THE DEGREE OF MASTER OF SCIENCE IN MANAGEMENT AND ENGINEERING AT THE ARCHIES MASSACHUSETTS INSTITUTE OF TECHNOLOGY JANUARY 2010 C 2010 MASSACHUSETTS INSTITUTE OF TECHNOLOGY All rights reserved Signature of Author: JOHN WEBB SDM FELLOW MIT SLOAN SCI 5 (\F A EANA(iEMNT A)(FD SCHOOL OF ENGINEERING Certified by: MICHAEL A. M. DAV THESIS SUP yVI09 SENIOR LECTURE M1SLOAN IANAGEMENT Accepted by: PAT HALE DIRECTOR, SYSTEM DESIGN AND MANAGEMENT PROGRAM This page has been intentionally left blank Abstract As stated by Joe Guglielmi, President of Motorola's Integrated Electronics Systems Sector, in 1998 "... the most important technological advancement of the next decade is the one that will allow consumers to receive computer connectivity, in an easy to operate format, while in the automobile.' Guglielmi based his assertion on growing consumer connectivity expectations, resulting from consumer reliance on real-time information fueled by increased usage of the World Wide Web and increasing commuting times. In short Guglielmi asserted that due to growing consumer expectations concerning connectivity, Telematics represented not only a new line of business for automotive OEMs and wireless manufacturers, but a very profitable one as well. For this reason nearly all OEMs (Globally) of the 1990s entered, or conducted extensive studies on the Telematics space over the course of the next decade. Over these years, in the United States market, certain dominant features did emerge that helped to shape expectations over the course of the decade. These features were based around the themes of both safety (e.g. airbag deployment notification) and service (e.g. 24-hour live- operator support). By successfully integrating these features, while gaining GM corporate marketing and financial support, OnStar emerged as a dominant design in the US market throughout this period, updating their technologies to meet the gradual evolution of the wireless technologies and customer demand. While the innovations in the wireless space over the early portion of the decade had been slow enough for OEM's to maintain parity, recent (2005 and beyond) explosions in -3- wireless and handheld technologies, and in particular the emergence of smartphones, have led to disruption and fragmentation of the Telematics landscape. Much of this disruption has come from the fact that smartphones are delivering technologies that better serve consumers' core needs and are helping to develop new consumer expectations in terms of applications and connectivity. As noted by Bryan Inouye, National Strategic Planning Manager at Toyota Motors, in early 2009, "the rapid advancement in both wireless capabilities and handhelds has caused a disruption to the traditional OnStar model. We are now left contemplating how best to serve our customers by offering the best in safety features, connectivity, and infotainment." The purpose of this paper is to provide an assessment of the Telematics industry, specifically within the U.S. Market, which, according to experts and OEM leaders like Akio Toyoda, represents the most mature and advanced Telematics market when assessed holistically. Using this assessment, we will then provide a recommendation for the U.S. division of Toyota Motors, Toyota Motor Sales, on how best to proceed into the future. While Toyota Motors is used as an example company, this recommendation could easily be applicable to any Japanese-based automotive manufacturer operating in the United States. Thesis Supervisor: Michael A. M. Davies Senior Lecturer, MIT Sloan School of Management Acknowledgements I would like to thank my advisor and instructor, Michael Davies, for providing both academic and professional advice throughout my experience in the SDM program. I would also like to thank Pat Hale and the other members of the SDM program for giving me the support I needed to successfully graduate from the SDM program, and for creating a program of such relevance and benefit to my current and future career. Finally, I would like to thank my family, both past present and future for giving me the support that I needed, when I needed, and how I needed. This page has been intentionally left blank Contents A b stract .................................................................................................................................... 3 A cknow ledgem ents ............................................................................................................ 5 C on ten ts .................................................................................................................................... 7 L ist of F igures ........................................................................................................................ 11 Chapter 1 - Telematics Industry History and Overview....................................................... 13 1. W hat T elem atics is .................................................................................................. 13 2. Why Telematics is important ........................................ 14 3. History of Telematics Technology (In-vehicle, PND, Smartphone) ................................ 16 Chapter 2 - In-Vehicle Telematics ............................................................................. 22 1. Technology Description ................................................................................................ 22 2. Technology Parameters .................................................................................................. 23 3. B usiness EcoSystem ......................................................................................................... 24 4. Key EcoSystem Players ..................................................................................................... 25 4.1 OEMs (Original Equipment Manufacturers) ............................................................... 25 4.2 T elem atics V endors ..................................................................................................... 27 4.3 T ier 1 V endors ........................................................................................................... 28 Chapter 3 - Mobile Devices .............. .............................................................................. 30 1. Technology Mobile Device Architecture ...................................................................... 31 2. Technology Parameters ................................................................................................. 32 3.T radeoffs .................................................................................................................... 32 4. B usiness EcoSystem ..................................................................................................... 34 5.K ey EcoSystem Players........................................................................................................34 5.1 Portable Navigation Device (PND) Vendors ................................................. 34 5.2 Sm artphone V endors ................................................................................ 35 5.3 W ireless Providers .................................................................................36 5.3.1 V erizon W ireless ................................................................................. 36 5.3.2 AT&T Mobility ................................................................................ 37 5.3.3 O ther Players .................................................................................. 37 Chapter 4 - Relevant Technologies .................................................................. 38 1. C onnectivity .......................................................................................... 38 1.1 Wireless Wide Area Networks (WWAN) .................................................... 39 1.2 Wireless Local Area Network (WLAN) ...................................................... 39 1.3 Wireless Personal Area Network (WPAN) .................................................. 40 2. A pplication D elivery ................................................................................. 41 3. Standards and Platforms ......................................................................... 41 Chapter 5 - Toyota Motors Corporation Description ........................................................ 43 This page has been intentionally left blank -8- Chapter 6 - Current Telematics Landscape ...................................................... 48 Chapter 7- Analysis and Future Trends ........................................................... 49 1. Technology Trajectory............................................................................49 1.1. C ost ............................................................................................. 51 1.2 Portability ......................................................................................... 53 1.3 Usability and Vehicle Integration ................................................................ 54 1.4 Application Flexibility .......................................................................... 55 2. Product innovation and growth .................................................................
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