Navigant Research Blog

Automotive Subscription Services May Aid in EV Adoption and Software Updates

— October 19, 2017

When Karl Benz went for his first test drive in 1886, the automobile changed the way that we live in ways that were unimaginable. Over the course of the 20th century, motor vehicles expanded our horizons, making travel easier and more affordable than it had ever been. The need for vehicles to keep pace with always advancing technologies like automation and connectivity will probably end personal vehicle ownership for most of us in the coming decades, but only after manufacturers create business models that replace individual sales. One increasingly popular approach is vehicle subscriptions.

Pro and Cons of Auto Subscriptions

The idea of getting customers to subscribe rather than purchase products outright has been an appealing one for companies in many markets. From the provider’s perspective, creating a recurring revenue stream is good for business and helps to add some predictability for planning purposes. For certain businesses such as software, recurring subscription revenue can be hugely important to help fund ongoing development and product improvement.

For automakers that have endured some spectacular market cycles over the years, the prospect of stable monthly revenue is particularly enticing. As automobiles become more software-defined, the prospect of continuous recalls to update bugs and security vulnerabilities is something of a nightmare scenario if automakers can’t charge customers for those fixes.

For customers, on the other hand, the thought of a perpetual monthly car payment is significantly less appealing. Thus, automakers have to strike the right balance between what customers have to pay and what they get in return.

Early Movers

Enter the car subscription model. In the United States, Porsche is the latest company to announce a subscription service, joining Cadillac, Volvo, and Atlanta-based startup Clutch. Porsche Passport and Cadillac Book are the most similar. For a flat monthly rate that includes insurance, registration, taxes, and maintenance, subscribers can choose to drive any of the vehicles available from those brands. Porsche offers two price tiers. The entry-level $2,000 per month plan gives access to the Boxster, Cayman, Macan, and Cayenne, while the $3,000 tier lets subscribers pick any current Porsche.

Clutch is similar, but rather than being restricted to a single brand, the company works with dealer groups to build local fleets of a broader range of vehicle types from multiple brands. Clutch currently offers three price tiers, each with more expensive vehicles. Care by Volvo is structured more like Apple’s iPhone upgrade program. Rather than allowing drivers to swap cars at any time, the Volvo plan is similar to a lease that includes maintenance, insurance, and registration but allows customers to switch vehicles annually.

Promise for the Future

These early subscription models are aimed at more affluent premium customers who are more likely to stomach a relatively high monthly fee. However, if these models prove popular, mainstream brands are likely to follow suit with similar programs. Regardless of the price point and brand, the recurring revenue provides an opportunity to fund continuing software updates. The inclusion of maintenance and regular vehicle swaps will provide an opportunity to keep vehicles fresh. Once over-the-air software updates become common, shop visits for those updates will become unnecessary.

Window to Increasing PEV Use

In addition to regular updates, the subscription model also provides automakers with another opportunity to increase plug-in EV (PEV) use. Customers that might not otherwise make a multiyear commitment to a PEV may be more willing to try one as part of a subscription, especially if they can skip a traditional dealer in the process. The transportation business is changing, and we’ll see plenty more experiments before everything settles out.

 

What It Will Take to Make Healthy Buildings a Business Priority

— October 19, 2017

Healthy buildings are an emerging hot topic at industry events and in facility trade publications. In September 2017, I participated in the half-day Healthy, Adaptive Buildings Summit at this year’s GreenBiz Verge Conference. The conversations were invigorating, shifting from environmental justice to workplace transformation and back again. I was left with a lingering question: Are healthy buildings the next overhyped trend? Does the movement aim to encompass technology and business but will fail because of a misguided, yet well-intended focus? Not if industry leaders refine their message.

The panelist noted the similar lack of a common lexicon, or a range of definitions that reflect the wide stakeholder groups showing interest in the idea of healthy buildings. The opening panel discussion during the summit reminded me of ongoing conversations I have in the broader building technologies arena on terminology: Is the building smart, intelligent, a structure of connected technologies made up of systems? What threshold defines that next generation space? Panelists shared their differing, yet parallel points of view and these definitions resonate with me:

  • Health is basic, the absence of things wrong.
  • Well-being is how you feel about your health, and how you respond emotionally.
  • Wellness describes the proactive steps you can take to maximize both.

These descriptions clarify health at a personal level, but how can these ideas be extended to buildings? Healthy buildings can describe the effects from equipment operations on energy consumption, sustainability, environmental justice, and even employee productivity. If stakeholders can align their messaging, there is a great opportunity in the movement to make healthy buildings the next umbrella concept for the facilities industry. The answer is adaptability—flexibility in how to deploy and use technology in addressing multidimensional business objectives. The second theme of the summit, which is a valuable dimension that can showcase technology as a means to the wide-reaching goals of the healthy building movement.

3-30-300

JLL’s 3-30-300 Calculator has become the go-to metric for explaining why the intelligent buildings market has pivoted and the focus has moved from energy up the chain to that big 300 number—the cost of people and the aim to improve productivity. This metric is powerful because it speaks to the heart of the business perspective. While sustainability, social responsibility, and other potentially amorphous corporate goals are important from a branding and positioning standpoint, the bottom line still drives investment. If the healthy buildings movement can use technology and the data and analytics from the intelligent buildings market to quantify productivity, the investment is worthwhile. This is no simple task; data is key. There are so many variables that affect the measure of productivity and the industry has failed to create a single equation to measure the 300 just yet.

New Calculation of Adaptability

Thinking of adaptability as a lens on how to select and deploy technology for use in multiple ways may just be the framework the industry needs to make healthy buildings a substantial initiative, meet multiple stakeholder needs, and move away from surface-level buzz. Real-time data on occupancy and movement, indoor air quality, feedback on comfort, and data on business output could be valuable measures for a new calculation of adaptability. The measure of adaptability is also attractive as a way of reframing the conversation in line with the focus on the occupant we hear in the market more and more. Can adaptability describe the healthy building movement and provide the data that key decision makers need to characterize how their facilities are best in class? I would argue this approach can create a common conversation around dynamic systems with automated, ongoing performance improvement and a way to root the soft concept of health in the stiff framework of technology enablement.

 

Google Aims to Create a Blueprint for Smart City Development in Toronto

— October 19, 2017

The proliferation of fast growing, high density cities has created major challenges around energy and water infrastructure, traffic congestion, air quality, and the efficient management of resources for large numbers of people. Google’s Sidewalk Labs, a subsidiary of parent company Alphabet Inc., is attempting to solve these complex urban problems through a public-private partnership with Waterfront Toronto. Sidewalk Labs will invest an initial $50 million to deploy automated vehicles (AVs), smart buildings, intelligent traffic signals, and a myriad of other digital technology solutions for Quayside, a neighborhood on Toronto’s waterfront. This is the first project of its kind for Alphabet, and it aims to create a smart city blueprint for 21st century urban neighborhoods. While the first phase of the project will be deployed in Quayside, Sidewalk Labs intends to expand the pilot across Toronto’s entire Eastern Waterfront district—transforming the city into a global hub for urban innovation.

Connectivity and Mobility Key Focus Areas

Sidewalk Labs has released a 200-page document on its vision for smart city development in Toronto. Although the plans are yet to be finalized, the company is aiming to build the neighborhood “from the internet up”—making ubiquitous connectivity a significant hallmark of the project. As seen in other smart cities under development, such as in San Diego, a number of communication networks will be needed to execute on ambitious smart city visions. In Toronto, Sidewalk Labs will be deploying high speed wired communications over fiber and copper, high bandwidth wireless over Wi-Fi and cellular, and long-range low bandwidth connectivity using low power wide-area networks (LPWANs). The wide range of communication networks will enable an array of applications to be deployed, ranging from low power technologies such as air quality sensors all the way to high capacity networks for AVs.

The creation of a high tech and flexible mobility system is expected to be another major area of focus for the project. Sidewalk Labs plans on restricting all non-emergency conventional vehicles from a large portion of the neighborhood while providing robust walking and bicycling infrastructure, an expansion of streetcar lines, and self-driving transit shuttles. Additionally, smart parking systems, an adaptive traffic light pilot (which prioritizes pedestrians and cyclists), and a mobility as a service platform (which will help residents assess all mobility options) are expected to be deployed. Commercial freight will also be transformed into a tech-driven urban system by using robots to make deliveries. Together, these initiatives should make Quayside one of the most technologically advanced mobility (and least car-dependent) neighborhoods in North America.

Local Project, Global Implications?

The vision for the ambitious smart city project in Toronto goes far beyond the city itself. Sidewalk Labs is hoping the results and lessons learned in Toronto will be replicable for the thousands of other global cities struggling with similar urbanization and sustainability challenges. Finding the right business models, stimulating interdepartmental coordination within government, and quelling citizen concerns about privacy and security are all barriers that Sidewalk Labs must overcome if this project is to be successfully scaled and exported to other cities. Both leading and aspiring smart cities should keep a close eye on the developments on Toronto’s waterfront. It is one of the most ambitious projects to date in terms of testing integrated systems and innovations and could serve as a blueprint for optimal efficiency, sustainability, and improved quality of life for 21st century cities.

 

Working Together toward a Circular Economy in Europe

— October 19, 2017

The European Commission is taking the lead on circular economy strategies through the circular economy package. Thus, an increasing number of industry associations and companies in Europe are working toward a circular economy. They are devising ways to implement related measures to reap the benefits while also preparing for upcoming regulations and directives.

Earlier this year, Ecofys, a Navigant company, and Fipra organised a roundtable discussion with industry coalitions, private sector, and the European Commission on the circular economy package, with a focus on the upcoming Strategy on Plastics. The aim was to gain more clarity regarding the current direction and expected content of the strategy that the European Commission will publish by the end of 2017. Ecofys and Fipra are working together with complementary specialisations and a common goal of furthering the narrative about the circular economy. Ecofys specialises in strategic insights, research, and analysis while Fipra specialises in public affairs strategies. This combination of skills is critical to proactively developing substantiated, viable alternatives to the challenges presented by the circular economy.

Cooperation between Stakeholders

The key message of the roundtable discussion based on feedback from participants was the importance of cooperation between all stakeholders in the value chain to find creative solutions to making the plastics materials stream circular. According to the roadmap on the plastics strategy released by the European Commission in January 2017, the three challenges the Commission plans to tackle are the following:

  1. High dependence on virgin fossil feedstock
  2. Low rate of recycling and reuse of plastics
  3. Significant leakage of plastics into the environment

The European Commission plans to conduct a variety of actions, including studies and analyses on alternative feedstocks, reuse, recycling, marine litter, and micro-plastics. It also plans to develop standards for secondary raw materials and the biodegradability of plastics, as well as consider policy tools such as extended producer responsibility (EPR) aimed at increasing the recyclability of products.

Not a One-Size-Fits-All Approach

For a business, this transformation to a circular economy is about efficiency gains, both in terms of input and output, and ensuring each part of its value chain is being targeted. Factors such as shifting focus from product design to usage of recycled content, investing in recycling processes and technology, and creating a market for secondary raw materials based on competitive prices, quality, and quantity are all essential drivers in this transition.

Companies should emphasize all levels of the value chain, including all economic operators and the final customer. A more holistic lifecycle approach should be taken to evaluate where along the chain the most efficiency gains can be made. This transition to the circular economy will be a long one, and it can only be sustained if it is profitable for businesses. It’s also important to note that recycling cannot be a goal in and of itself. Rather, it should be seen as a means to an end.

The application of the waste hierarchy in the member states will also be heavily considered in all actions within the strategy by the European Commission. The main concern for the private sector is that the competitiveness of European businesses is ensured to encourage a successful transition to the circular economy.

The key positive takeaway from the discussion on the circular economy with multiple stakeholders is that there is great interest and belief in this important issue, as well as the desire to implement related measures. However, the motivation to act needs to be accompanied by specific implementation steps to accomplish the transition in companies and sectors.

 

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