Telematics: Where the Radio Meets the Road

By Ealey, Lance; Mercer, Glenn | The McKinsey Quarterly, Spring 1999 | Go to article overview

Telematics: Where the Radio Meets the Road


Ealey, Lance, Mercer, Glenn, The McKinsey Quarterly


Communications technology will almost certainly transform the auto industry - but how?

Look to past technological revolutions for clues about the future

Incorporating new technologies in mass-produced automobiles has always been a risky business: the unfortunate fellow who suggested that redesigned engine valves might improve the performance of Henry Ford's Model T was pitched from a moving car into the company parking lot by Ford's security chief. Although the chances of suffering this particularly humiliating fate may have declined, in many ways the difficulties of introducing new technologies into automobiles have not.

One challenge is the way unpredictable events outside the auto industry can profoundly affect the development of new vehicle-related technologies inside it. In the late 1970s, for example, many US original-equipment manufacturers (OEMs) and their suppliers, betting heavily that fuel prices would reach astronomical levels by the 1980s, planned to increase their production of four-cylinder engines significantly. When oil prices came down to earth and remained there, such companies - locked into a five- to seven-year product development cycle for these engines - had little time to react to a new market that demanded power rather than fuel efficiency.

Even when the industry's external environment doesn't change, predicting where, how, and when a technology will catch on is difficult. For starters, new technologies can have very long gestation periods. Automotive antilock brake systems, for instance, were first researched in the United States in the late 1950s, introduced there in luxury cars in the late 1960s, withdrawn from the market in the late 1970s, and reintroduced in Europe in the 1980s. Such currently ubiquitous technologies as cruise control, which inventor Ralph Teetor first shopped around in post-World War II Detroit, were not broadly accepted for two decades. Electric power steering, which has yet to be introduced broadly, was touted as "the next big thing" in Popular Mechanics magazine during the 1950s.

Another problem for those attempting to divine the course of automotive technological change is the fact that different countries accept new technology at different rates. In Europe, for example, resistance to automatic transmissions is only now weakening - decades after the United States embraced them as standard equipment. Yet once a technology is accepted, it often sweeps the market much more rapidly than many experts expected: radial tires zoomed from a 2 to an 82 percent market share in the United States in only three years during the 1970s.

Government regulation further complicates the picture. Technologies promoted by legislation often penetrate markets in much less time than those driven by market pull or by the cost reduction and efficiency push of automotive manufacturers.

Even at an application-specific level, successful approaches vary significantly over time. A variety of configurations of feedback carburetors and fuel injection systems, for instance, took turns dominating the marketplace in the 1970s and 1980s as OEMs struggled to meet tightening emission regulations.

Airbag crash-sensor systems were at first mechanical but are now, after only a few years, electronic; early models with multiple crash sensors were quickly succeeded by models with only one, and they were followed in turn by models that again relied on multiple sensors, to differentiate among types of crashes. And airbag inflators seem to be on the verge of migrating from pyrotechnics to inert-gas technologies because of health and safety concerns.

The vast uncertainties surrounding the prospects of all new automotive technologies and the large investments and financial risks they demand - an airbag inflator plant can easily cost $1 billion - mean that senior managers both at auto companies and at suppliers must understand the mechanics of technology dissemination. …

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