Welcome to the Fourth Industrial Revolution where Toyota, BMW, GM, Google, Tesla, and Apple may compete against each other – or not.
Apple CEO Tim Cook has confirmed company plans to enter the self-driving car industry with its own technology.
To some, the news comes as no surprise. Rumors lurked behind Apple’s 1000-employee project Titan, launched in 2014 to develop electric cars. Steve Kenner, the company’s director of product integrity, informed the authorities of Apple’s intention to start testing self-driving cars “in order to protect the public and to maintain the innovation cycle... Our goal is to promote innovation and ensure that this technology serves to save lives… Apple uses machine learning to make its products and services more intelligent, more intuitive and more personal.”
Later, photos were taken on public roads in the San Francisco Bay area of six Lexus cars equipped with Apple systems.
Cook did not reveal whether or not they were making their own cars. Apple does not manufacture its own products and outsources production to long-term partners such as Foxconn. Maybe Apple is learning from the experience of Tesla, which could soon be the world’s No. 2 car manufacturer in terms of market cap, but only 10th in the number of units sold. Tesla continues to suffer in its attempt to establish a supply chain and operations management capable of satisfying demand and reaching reasonable levels of productivity. As if Tesla didn’t already have enough headaches, it then lost the support of Toyota, who this very month sold the shares it had held in Tesla since 2010.
Cook stated: “We are focusing on autonomous systems. It’s a key technology we consider to be extremely important, like the mother of all artificial intelligence projects. And it’s also one of the most complex we’ve ever faced.” The mother of all these enabling technologies is AI and machine learning.
Upending traditional competitors and alliances
In the Fourth Industrial Revolution, the barriers between traditional industries like IT, electronics, automobile, and heavy industry are coming down.
“There is a major disruption looming there,” Cook said on Bloomberg Television, citing self-driving technology, electric vehicles and ride-hailing. “You’ve got kind of three vectors of change happening generally in the same time frame.” And in terms of this latter vector, Apple invested $1 billion last year in Didi Chuxing, the biggest Chinese ride-hailing service.
Apple doesn’t usually take a wrong step. It is hardly ever among the first in innovation--preferring to learn from companies who enter first – while Apple builds its own business ecosystem and value chains.
Now that Apple has set “machine learning” in motion, it is developing Artificial Intelligence for its autonomous car systems which will effectively be the Operating System of cars in the future. Machine learning is based on the accumulation of vast quantities of Big Data to generate patterns and algorithms that are developed using a learning-by-doing approach. Apple’s next step, which will be to publish part of their plans, arises from the need to have cars on the streets to feed machine learning, allowing them to create their own system unique from that of Google or the Chinese company Baidu. This may take several years, which is why Cook is so prudent, always anticipating his plans.
Apple has been forced to recognise what was already an open secret, and has started to hire the necessary talent and to build alliances.
Apple has already made moves to attract talent, indeed aggressively so, vis-à-vis electric cars. Tesla founder Elon Musk tweeted: “Apple is where workers go who are no longer of use to us.” It’s now a matter of attracting talent in the Artificial Intelligence associated with self-driving cars: Google and Baidu may suffer as a result.
Regarding future alliances, once we start joining the dots, maybe we’ll catch a glimpse of what lies ahead:
1. Toyota abandoned Tesla.
2. Apple uses Toyota cars for its machine learning.
3. Apple claims it’s not sure if it will make cars—they aren’t manufacturers—and that it is focusing on AI systems to develop the Operating System for self-driving cars.
4. Toyota has extensive experience in joint ventures to develop markets, such as the NUMMI factory Toyota had in partnership with GM in Fremont from 1985 to 2010. Tesla bought these same facilities in 2010 to establish its factory.
5. Both Toyota and Apple have been characterised for knowing how to situate themselves in the business ecosystems and perform top world ranked Supply Chain Management (Gartner 2017), favoring strategic alliances that allow the product life cycle to speed up in order to consolidate their positions in the industry.
In short, here are two good examples for how two big companies have geared their businesses to the Fourth Industrial Revolution. We can also see how Tesla, a company born in the Fourth Industrial Revolution, is suffering the pains of adolescence, perhaps for ignoring the competitive importance of aligning its operations and supply chain management with its strategy of exponential growth.
Musk is still confident that his COO will put his operations in order. And let’s not forget that Cook, previously served as the company's Chief Operating Officer under Steve Jobs. Or that in the industrial world, the benchmark is Toyota and its renowned production system.
Indeed, on several occasions Steve Jobs showed great admiration for the automobile industry, in particular for Toyota’s design quality and operational excellence when he visited Toyota HQ in Japan. In Walter Isaacson’s biography of Steve Jobs, there is a single important and relevant reference to cars:
“…I recounted what (Bill) Gates had said after he described his last visit with Jobs, which was that Apple had shown that the integrated approach could work, but only ‘when Steve is at the helm.’ Jobs thought that was silly. ‘Anyone could make better products that way, not just me,’ he said. So, I asked him to name another company that made great products by insisting on end-to-end integration. He thought for a while, trying to come up with an example. ‘The car companies,’ he finally said, but then he added, ‘Or at least they used to.’”
Roger Lanctot wrote in his post on Strategy Analytics: “Apple won’t make a car (Toyota already does): Car companies want to work with Google and Apple. Google and Apple want to work with car companies. Until there is a level of mutual respect established between these organizations, any outcome is destined to fail.”
One More Thing
This situation leaves us with one last question: How long will it be until the disruptive Apple and the incremental Toyota announce their long-term plans?
Photo credits: Shuterstock/Zentilia/JCG