Driving connectivity : the future of the U.S. telematics industry and its impact to Toyota Motors

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 liveoperator 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.