|The Consortium Conundrum and the Race for Autonomous Driving|
The ambitious and multifaceted endeavor that is fully autonomous driving seems simply too large a task for one company to undertake. In the race for autonomy, automakers, software experts, hardware manufacturers, and ridesharing companies are turning to each other in an effort to expedite their collective progress on the matter.
Foregoing traditional practice and the opportunity for market dominance, several companies are hoping their combined efforts will bring them further than they could get on their own. Bringing a self-driving car to market not only poses many technical challenges, but it will involve a cultural shift in the way humans are transported and how they interact with machines every day. Such an unprecedented project has spurred unprecedented relationships that involve everything from young and nimble tech startups to century-old auto manufacturers coming together. These strategic partnerships present a challenging conundrum.
Lay of the land. The web of players banding together to tackle autonomy is tangled. In the interest of brevity, here is a list of some of the more significant partnerships:
The Open AutoDrive Forum attempts to act as an open dialogue to standardize the area of autonomous driving with participation from over 60 companies across auto, software, mapping, ridesharing, hardware, and education. BMW, Intel (and Mobileye), Fiat Chrysler, and Delphi have partnered to establish an industry standard for self-driving fleets and hope to bring vehicles to market by 2021. Fiat Chrysler is also working with Waymo to develop autonomous vans based on their Pacifica model. Waymo partnered with Avis to augment their fleet service capabilities. Uber has announced partnerships with Daimler, Volvo, GM, Didi Chuxing, and Toyota. Waymo and Lyft have entered into an arrangement. Jaguar Land Rover is investing $25 million in Lyft to fund autonomous vehicle activities. Intel, Toyota, Ericsson, and Nippon Telegraph & Telephone have formed what is called the Automotive Edge Computing Consortium to develop the technology for an ecosystem of connected cars. HERE mapping, a 3D mapping initiative, is owned by a consortium of companies including German automotive companies BMW, Daimler, and Audi, along with now Intel and Tencent. There have also been several other groups arising that include Nvidia, LiDAR company Velodyne, and auto engineering firm Bosch. Where a consortium makes sense. In an area of commodity technology like wi-fi or Bluetooth, industry standards make certain that a rising tide lifts all boats and the collective group benefits from cooperation more than each could on its own. This concept manifests itself in bodies like the Wi-Fi Alliance and the Bluetooth Special Interest Group. This model can sometimes be an effective way to implement standards that encourage broadly adopted technology and safety, and bolster more substantial relationships with the government. For example, vehicle-to-vehicle (V2V) communication is one area in which a consortium could be effective. ‘Out-communicating’ your rivals does not afford you an edge, so competition for this technology does not make sense – the higher goal is safety. Cooperation on building and implementing the best system possible would benefit all companies and, most importantly, consumers.
But partnering up is usually inefficient. Innovation feeds off of competition. Great competitors play offense to attack their rivals. Partnerships that bring entities together inorganically, often out of obligation, typically play defense. While sharing technology, patents, or engineering talent may create synergies or expedite the time to market on paper, it often creates a clash of competing interests, muddled accountability, and a diminished sense of urgency. In an area of intense competition, like building an autonomous vehicle for public roadways, small differences in technology can create large gaps in capability and time to market. This is an area in which a consortium would be ineffective. Although a strategic partnership may bring together certain components of the system (e.g., an automaker, a chipmaker, a software company, or a ridesharing network), the group’s combined efforts cannot match those of a single, capable entity on a clear mission. We believe the most effective player is one who can quickly deploy resources at scale and one that is nimble enough to react quickly and decisively in the highly dynamic field of autonomy. For instance, General Motors may not have the balance sheet (mkt cap $51B) or the knowledge to spend $5 billion on a battery factory, but could most likely garner the necessary insights via a strategic partnership. Even so, due to their image as a traditional automaker and their adherence to the status quo, it is unlikely that they could raise or deploy the funds necessary to do so. On the other hand, Tesla has effectively been given an open checkbook from their investors to pursue new manufacturing paradigms, battery production, and autonomy.
A history lesson. It’s a challenge to find examples of strategic partnerships that have yielded revolutionary innovation. In fact, Peter Simoons suggests that 80% of ad hoc partnerships fail outright. If history repeats itself, the countless companies collaborating on autonomy may form solid organizations, but true innovation will evade them.
Shared Mission. A couple of years ago Tesla found that about 15% of Model S vehicles were making a strange noise when the car hit 17 mph. On a Saturday morning, Musk gathered the Tesla motor design team along with a group from SpaceX. He instructed the team to fix the issue by Monday, setting into motion what’s known inside of Tesla as “heroics.” By Monday the problem was solved. Having Tesla and SpaceX working together to solve a problem may sound like a strategic partnership, but it’s decisively different. Most SpaceX and Tesla employees believe they work for Musk, and walk through walls to inch towards his goals. It’s a lack of this type of shared mission that causes consortiums to stumble.