In the last 100 years, the auto industry has been at the forefront of innovation, building a powerful base of knowledge along the way. From the Model T to mass production to automatic transmissions and beyond, the car has evolved into an amazing blend of road machine and sophisticated computer.

And yet, despite all this astonishing innovation, we believe the next decade will produce as much change as the previous century. In less than five years, cognitive computing has advanced from a novelty to a commercialized means for solving problems. In 2014, bioengineers developed a circuit modeled on the human brain: 16 “neurocore” chips that simulate a million neurons and billions of synapses, able to process information 9,000 times faster than a PC and with 40,000 times the energy efficiency. Combined with near-record levels of capital investment in start-ups, the picture becomes clear: we are entering a time of accelerated innovation, at a pace unprecedented in modern history.

For companies to thrive in this new environment, they must solve what we call “the clockspeed dilemma.” What is the clockspeed dilemma? Albert Einstein’s theory of relativity makes the point simply enough. Einstein taught us that time is relative.

It sure is in the auto industry. Car companies obey a pace—a clockspeed—required of capital-intensive powertrain plants, stamping plants, and assembly lines, to ensure cars work at Six Sigma quality every time and all the time, from -40 to 130 degrees Fahrenheit. Now they must also embrace a far faster clockspeed—actually, multiple faster clockspeeds. The faster clockspeeds are the result of new players entering the ecosystem, from technology giants to start-ups. Some of the new competitors operate at a much larger economy of scale. All of them fuel customer demands for cars to be repeatedly new, exciting, and sexy while still holding to the standards of Six Sigma quality. Thus the clockspeed dilemma: the need to serve two different paces at once.

The auto industry must reconcile these two different rates of change. It must act as if it were simultaneously in two worlds, moving at two different speeds. To do so is what successful innovation now means.


Customer expectations and the rise of multiple clockspeeds
The first step in solving the clockspeed dilemma is to understand the different clockspeeds that innovation and customer demand create. Of course innovations drive changes in consumer expectations, but we believe the newest consumer expectations will soon require innovation at multiple speeds. In fact they already do.

Consumers expect as a given that a car provides increasingly better fuel economy, increasingly safer experience on the road, and increasingly better-looking cars.

At the same time, consumers are being led toward new expectations—new kinds of unmet needs—by the most disruptive innovators, many from outside the traditional auto ecosystem. When Uber shows them they can have a car available to them on demand, when and where they want it; when the iPhone teaches them they can have a beautiful, stylish piece of equipment that satisfies their desires for music, the Internet and phone service in one device, they learn of something they “always wanted.” Now, courtesy of disruptive innovations, they demand it.

The Robust Industrial Machine and the Sexy Dynamic Experience

Because consumers expect both a safe, reliable, fault-tolerant car and a new sense of good, they bring on the extraordinarily different clockspeeds car companies must now satisfy.

The more familiar expectations require innovations intended for scaled metal bending and assembly, geared toward what we call the “Robust Industrial Machine.” The Robust Industrial Machine requires a 5–7 year clockspeed for powertrains, vehicle platforms, and other essential mechanical elements to provide a reasonable return on investment.

The power of the Sexy Dynamic Experience should not be underestimated; sexy can kill robust
The other expectations respond to a new competitive landscape, where technology innovation and payback periods are more like those found with consumer electronics, software, and communications. Those expectations drive not one but multiple clockspeeds for innovation that are faster than the traditional one—and we predict they will get far, far faster because of the accelerating pace of technology innovation. The speedier paces of innovation come out of consumer demand for what we call the “sexy, dynamic experience”. The characteristics of the Sexy Dynamic Experience are already familiar ones in the market:

  • Products repeatedly evolve and improve after purchase.
  • Products are flexible, able to create environments or experience that is configurable with a consumer’s tastes or usage situation. This desire for flexibility goes way beyond station pre-sets. Imagine a sedate, well-damped, autonomous rolling office by day that transforms into a responsive, raging drift machine by night.
  • New enhancements are reverse compatible. They not only improve performance but work with earlier platforms.

The power of the Sexy Dynamic Experience to drive innovation and to change markets should not be underestimated: sexy can kill robust. In 2006, both Nokia and Blackberry competed as Robust Industrial Machines. They offered as their chief selling points superior battery life, slim size, excellent call quality and strong security. Along came the iPhone. Viewed according to the dimensions by which Nokia and Blackberry competed, the iPhone was nowhere near as strong. It didn’t matter. The iPhone offered apps and content—music and video. It was cool, configurable, and regularly updated. It blew away the competition. The Robust Industrial Machine lost out to the Sexy Dynamic Experience of a phone that was no longer a phone, radically re‑drawing the nature of competition.

Consumers want one trillion miles of more mobility.

In conducting focus groups across age groups for our research, we were floored by how much the pace of change has accelerated in just one year. When we look at focus groups and our modeling, we understand why.

Two roads to the same place: An increasing desire for mobility options
Two generations will largely drive consumer demand in the future, the millennials and the “baby boomers plus”— those ranging in age from 45 to 75 years. Both groups are changing their behaviors but in wildly different ways. The boomers are moving into cities and holding onto their cars, at least for now. Millennials’ income and debt levels restrict their buying power and reduce their brand loyalty. The boomers and millennials share one interest, however: They already like mobility-on-demand services. We think their like is going to turn into love.


The 45-to-75-year-olds
Among the boomers plus, people are living longer, delaying retirement, and moving to cities. Sixty‑five is the new 45. In this demographic, many are still working in their sixties because they are healthier than past generations.

Older boomers, however, have concerns about the safety of their driving as they age. So do their children. They are not going to stop being active, however. Some of them will continue to work well beyond the typical retirement age, all the while traveling on the weekends. Some will slow down but still join their friends and families for weekly activities, whether card games, concerts, sports events, or the activities of their children and grandchildren. Others may do far less, but over the next decade, the 45–75 year olds will still be healthier than in the past and more tech savvy. They won’t be intimidated by mobility options.

Their almost-instant attraction to mobility services comes from a common concern they voiced in our focus groups from Atlanta to Chicago to Denver—sometimes in virtually the same language: With mobility services, “I don’t have to worry about taking the keys away from my dad, and I don’t have to worry about his driving.”

The 10-to-15-year-olds
Children and the parents of children share the boomers’ interest in mobility-on-demand services but for different reasons. For the children, it’s all about freedom, the ability to meet up with friends, or go to movies, soccer games, softball, music lessons, or countless other activities without having to get their parents or someone else to drive. Relying on Uber? Via? Lyft? An autonomous vehicle in the future? No problem. They’ve grown up not only tech savvy but instinctively trusting in technology. Once they know of mobility options, they’ll leap to use them.

In fact, the only limitation on their use of mobility-on-demand services will be their parents, who are not about to put a six-year-old in a Lyft or Uber vehicle.

Then again, once their children are a little older, parents are likely to show strong attraction to mobility options. We observed pronounced interest in our focus groups. It sounded something like, “I’m no longer the taxi driver. I get to recapture my life. I have more free time.”

Here, too, our predictions could be understating parents’ attraction to mobility-on-demand for their children. Mobility-on-demand will be especially attractive for parents in the future. When they have children, they will hesitate less than their parents to use mobility‑on‑demand services.

A trillionmile surge
These changes in consumer behavior seem modest, but small changes in personal travel choices can have a big impact in the future… and personal miles traveled (PMT) will soar! As we reported, our focus groups indicate that the oldest and youngest age groups have an increased interest in mobility-on-demand services. Based on current consumer perceptions, we would have expected only small effects from their increasing use of mobility options.

Our modeling tells us something far more exciting. It turns out that these small changes among the oldest and youngest demographic groups will likely produce large increases in personal miles traveled (PMT) by 2050: approximately 500 billion more PMT annually. Once we factor in population growth, that increase in personal miles soars to nearly one trillion additional miles per year.

When we first calculated these figures, we were astonished. Then we looked at our assumptions and realized that the number is likely to be far larger. Our figures reflect only the United States, but the increasing demand for mobility options will be global. Japan’s more aged population will produce even greater need for mobility services for its seniors. China’s population, aging as a result of the one-child policy, represents a mind-boggling demand for mobility services only 20 years later than the United States.

The increase in personal miles traveled may seem startling, but think of it this way: 10 years ago, how many of us would have predicted that most 10-year-olds would be walking around with smartphones? We grossly underestimated that trend. If we don’t watch out, we’ll grossly underestimate the power of these changes in consumer behavior around mobility options.

Setting the Pace
We’re riding a wave of fantastic innovation that’s going to be still more fantastic and happen faster and faster. It may seem daunting, but the traditional auto companies can institutionalize a faster-paced innovation capacity to go with their current one.  If they do and if they integrate their innovations with their larger organizations, they will be able to meet the variety of clockspeeds that this new normal asks of them. They’ll embrace the relativity of time. It is an exciting, powerful era. The right approach will lead a company toward a powerful future, a winner.

To read the full report, click here.