Monday, November 18, 2013

2014 Crystal Ball – What Do We See, Looking Back From 2019?

by David P. Carlisle

Let’s transport ourselves to the not so distant, and not so uncertain, future. It’s 2019 and we’re taking stock of things that we call innovations, but that 2019 takes for granted. Much of what we see springs from changes that dawned with the new millennium. So, before we take a stroll around 2019, let’s go back to Y2000.

In Y2000 we plotted the course of industrial evolution – how technology would provide the consumer with more convenience – and used the video industry as an example. Wayne Huizenga made billions by picking up the trash with Waste Management and serving up the trash with Blockbuster. At its peak, Blockbuster was the ultimate convenience in video rental, but it eventually lost out to the even greater convenience of satellite and pay-per-view.

Back in Y2000, GM’s annual report showed a schematic of the web-connected car that dovetailed quite nicely with Motorola’s “smart vehicles” discussion in their annual report. Well, both companies were certainly on-target. The vehicles and the infrastructure are in place today.

Back in Y2000 we clearly saw what was going to happen to service shop sales. The internet would enable more convenience and better information, collapsing dealer service sales and margins. We nailed that one.

But, we screwed up in our choice of enabling technology. We thought that the Y2000 crop of B2B internet ventures would work out and change our lives. Most of these failed because either the market was not ready or the industry itself was to blame.

Back in Y2000 we definitely had enough tea leaves spread out on the saucer to get a pretty clear glimpse of the future.

Let’s move on to 2019. Collision avoidance systems will become as common as airbags and will save lives that are now lost in big wrecks.

These same systems will save bruises (to car and driver) in the smaller fender benders. Hey, they will even save egos from parking lot scrapes and scratches. Insurance costs will go down. So will collision parts sales. Collision parts sales currently account for about 40% of all parts sales by dealers – much of these sales are wholesaled to independent collision shops. So, let’s say that collision avoidance technology takes a hefty bite out of this part of the business … say, 30%. That might be a very big change. Hmm. A lot of companies feed off the collision parts business. LKQ comes to mind. Remember what happened in the 1980’s when the OEMs extended exhaust lifetimes from three to ten years? That really screwed up companies like Monro, Midas, and Meineke. They had to evolve to survive, and this evolution took them into full service repair and maintenance.

Likewise, the collision parts feeder companies will have to change in order to survive, which means they must move into the non-collision business. LKQ already has.

Lives will be saved, and our businesses will change from both of these first order and second order effects. What else will be different?

Just about everything.

The “connected vehicle” that we saw in GM’s and Motorola’s annual reports from Y2000 will become a reality. The health and maintenance needs of vehicles will be monitored by the vehicle itself, with collaboration from a benevolent supercomputer. The driver will interact with their vehicle via the internet. The Service Advisor will become the human interface – a kind of greeter – and the dealer workflows will become more predictable. Finally, finally, the customer will be in control via the computer–no matter how much the customer doesn’t know, the computer will prevent upselling to the uninformed.

This will make things interesting.

I have used the term “boiling frogs” to describe slow dealer reaction to the threat of chain service providers. (That is, a frog won’t jump out of water that is very slowly heated to boiling – and eventually it boils to death. This is also applies to people who won’t or can’t respond to change that occurs gradually.)

We will have a different pot of boiling frogs in the future. This time, it’s the independent repair specialists who will be contentedly croaking in their steamy bath of hot water.

And we really don’t have to worry about those second order effects stemming from collision avoidance systems, because they will be crushed by second order impacts from the connected vehicles.

Bottom Line: In the next few weeks let’s look at the industrial vehicle sectors – construction, agriculture, and heavy truck. Life is going to change in the next few years. Carlisle & Company will be conducting a massive amount of research into what 2019 will bring us – numbers, interviews with change agents and focus groups. All of this will come together at the Crystal Ball during the 2014 NAPB.

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