Autonomous Driving

Moonshot Project with Quantum Leap

from Hardware to Software & AI Focus
02
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

Summary 04
Autonomous Driving: Hype or Reality? 06
Deep dive: Artificial Intelligence 18
Impact on Today’s Automotive Industry 28
1. Product Structure 35
2. Work Structure follows Product Structure 38
3. New Steering Models 47
4. Mastering New Technologies 50
The Way Forward 52

03
Summary
Future autonomous (electric) vehicles are primarily
software-driven products compared to traditional cars.
The upcoming transformation in the automotive indus-
try from a “made of steel” business towards “software
is eating the world” will be no doubt a game changer –
for better or worse. Now that new players from the
tech sector have entered the stage in the automotive
industry, traditional manufacturers and suppliers try
hard to continuously shorten development cycles and to
catch up with the inevitable move into the new software
era. Collaborative agile working models predominantly
known from the software industry and more innovative
cooperation management approaches are paving the
way for tackling these challenges and turn them into
opportunities.

04
Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

05
Autonomous Driving:
Hype or Reality?
In recent years, autonomous driving and so-called robo-
taxis have become one of the hottest topics in the auto-
motive industry - and beyond! Traditional car manufactur-
ers and established suppliers are not the only ones who
are trying hard to find the sweet spots in this new emerg-
ing mobility value chain.

Tech giants like Nvidia and Intel, leading increase in e-mobility, which the world is still
software and internet players like Google waiting for, and lately blockchain and Bitcoin,
(Waymo) and new mobility startups such which receive significant media attention.
as Aurora, Cruise and Uber are also on But where among all these trends and hypes
the verge of reaping the rewards of an can we place autonomous driving? The
entirely new future mobility era. Unlike the following paragraphs show some forecasts
stakeholders of today's automotive industry, to frame the general market potential for
they do not have vested stakes to protect. autonomous driving solutions and provide
However, on the other hand we are all aware a framework to align on common terms and
of several technological hype cycles, ranging wording when it comes to automated and
from the internet bubble at the turn of 'real' autonomous driving.
the millennium, the proclaimed significant

06
07
Voices on Autonomous Driving enthusiasm. However, there has also been to massively change the way we live and the
Autonomous driving is receiving significant some bad press, mostly because of fatalities significance it has owing to the fact that we
media attention, not least because traditional due to technological errors (see Figure 1). as humans give away control and thus put
car manufacturers and tech giants are invest- Some argue that these are individual our lives in the hands of an algorithm. It will
ing heavily in new technologies and prom- cases and should not distort the fact that need time and positive reinforcement for
ising start-ups or forging new partnerships, statistically speaking, autonomous driving the general public to ultimately accept and
but also because of significant technological is already safer than normal driving. At the trust this new technology –
advances. Overall, public perception is same time, autonomous driving is under the and its inventors.
positive and surrounded by an optimistic scrutiny of the public eye due to its potential

Figure 1 – Voices on autonomous driving

Where are we today?

»Exclusive: BMW to introduce »Automated vehicles may bring a new »Volvo and Baidu join forces to
‘safe’ fully autonomous driving breed of distracted drivers« mass produce self-driving electric
by 2021 with iNext« ABC News, 24 Sep. 2018 cars in China«
Digital Trends, 28 Sep. 2018 CNBC, 1 Nov. 2018

»Have autonomous vehicles »Why People Keep Rear-Ending

»Tencent builds autonomous driving
hit a roadblock?« Self-Driving Cars«
team in Silicon Valley«
Wired, 18 Oct. 2018
Financial Times, 7 Nov. 2018 Forbes, 1 Nov. 2018

»Amazon Could Become the Next Big

»Self-Driving Cars Can Handle
Player in Autonomous Driving«
Neither Rain nor Sleet nor Snow«
The Street, 24 Sep. 2018
Bloomberg, 17 Sep. 2018

»Uber asks for permission to restart self-

driving car tests in Pittsburgh eight months »Waymo Shifts To 'Industrializing' Self-Driving
after its test vehicle killed an Arizona pedestrian« Tech as Robotaxi Launch Nears«
Daily Mail, 2 Nov. 2018 Forbes, 6 Sep. 2018

The automotive industry is rapidly moving forward and undergoing massive change – automotive companies,
tech giants, start-ups and others are working hard on solutions

  Positive developments   Controversial developments

08
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

The Road Towards 'Real' Future state 3 embraces the driverless

Autonomous Driving revolution. Autonomous driving technology
Based on Deloitte's Future of Mobility study, proves to be viable, safe, convenient and
we envision four different personal mobility economical, yet private ownership continues
futures emerging from the intersection of to prevail.
two critical trends: Vehicle control (driver vs.
autonomous) and vehicle ownership (private Lastly, future state 4 envisions a new age of
vs. shared), as depicted in Figure 2. accessible autonomy. A convergence of both
autonomous and vehicle-sharing trends will
Our analysis concludes that change will lead to new offerings of passenger expe-
happen unevenly around the world, with dif- riences at differentiated price points. The
ferent types of customers requiring different earliest adopters seem likely to be urban
modes of transportation. So all four future commuters, using fleets of autonomous
states of mobility may well exist simultane- shared vehicles combined with smart infra-
ously. Future state 1 describes the status structures to reduce travel time and costs.
quo in many markets, where traditional
personal car ownership and driver-driven
vehicles are the prevailing norm. While
incorporating driver-assist technologies,
this vision assumes that fully autonomous
driving will not become widely available
anytime soon.

Future state 2 anticipates continued

growth of car and ride sharing. In this state,
economic scale and increased competition
drive the expansion of shared vehicle servic-
es into new geographic territories and more
specialized customer segments. The costs
per mile decrease and certain customer
segments view car and ridesharing as more
economical and sustainable for getting
around, particularly for short point-to-point
movements.

09
 Figure 2 – Autonomous driving is the main driver of future mobility

Future states of mobility

Autonomous

3 4
Personally Shared
Owned Autonomous Autonomous
Vehicle control

~$0.46/mile ~$0.31/mile
Low Asset efficiency High

1 2
Personally Shared
Owned Driver-Driven Driver-Driven
~$0.97/mile ~$0.63/mile
Driver

Vehicle ownership

Personal Shared

~$X.XX cost estimate per mile based on US market example ADAS: Advanced Driver Assistance Systems
2

Source: Deloitte FoM study 2018; Statista; IHS Automotive

10
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

Currently, broad acceptance of autonomous

vehicles seems much further away than
a wide adoption of car and ridesharing.
ADAS2 system
Sources of potential delay include the need
Bn. $ to address existing technological limitations,
30 such as proper functioning of sensors in
26 all weather conditions and comprehensive
availability of high definition maps, as well
20 18 as concerns over cyber security and liability.
13 On the other hand, ridesharing services in
10 8 particular have a strong economic incentive
to accelerate the adoption of autonomous
vehicles, since it could significantly reduce
0
2016 2019 2022 2025 one of the biggest operational cost in their
system: the driver! This is one of the main
reasons why tech players like Google do not
Autonomous Vehicle Sales rely on step-by-step driver-assist progres-
sion as most industry forecasts predict
Annual # of Sales in Mn. 33
(Figure 2: e.g. tripling of advanced driver
30 assist system (ADAS) revenues between
2016 and 2025), but instead try to jump
20 immediately to fully autonomous driving.
Rather than following the historical pattern
of technological innovation, autonomous
10 driving could constitute a step-change in de-
1 velopment. However, the majority of indus-
0 try experts expect the inflection point for
2021 2025 2040 widespread adoption of 'real' autonomous
vehicles not before 2030. The following
paragraph explains what we mean by 'real'
autonomous driving.

11
Classification of Autonomous Figure 3 – Vehicle automation levels
Driving Levels
In terms of enabling technologies, automat-
Partial Conditional
ed driving is an evolution from the advanced No Automation Driver Assistance Automation Automation
driver assistance systems (ADAS) for active
safety, which have been developed over Level 0 Level 1 Level 2 Level 3
recent decades and are still being contin- No system “Feet-off” “Hands-off” “Eyes-off”
uously improved. A classification system
based on six different levels, ranging from
fully manual to fully automated systems, was
published in 2014 by SAE International, an
automotive standardization body (compare
Figure 3). Level zero to level two requires
a human driver to monitor the driving
environment at all times. Level zero means
no driver assistance at all, while level one
provides simple support like speed control.
Level two combines lateral and longitudinal Driver needs to be
control by the vehicle in specific situations. Driver is in moni- ready to take over as
However, the driver needs to monitor the Driver in charge of toring mode at all a backup system
car and traffic at all times and be ready to longitudinal or times
take over vehicle control immediately. Driver completely in lateral control Vehicle in charge of
charge lateral and
Vehicle in charge of longitudinal control
lateral and in many situations.
Vehicle takes over longitudinal control Warns driver in a
other tasks in specific situations timely manner.

<2000 2000+ 2010+ 2018+

Source: Deloitte research 2018, SAE International 2014

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 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

The focus of current developments by car Roadmap to

manufacturers is in the range from level 2 'real' Autonomous Driving
to level 4. The most important transition is Automotive manufacturers are forging the
High Automation Full Automation between partial automation (level 2) and path to high and full automation based on
conditional automation (level 3), since in the previous experience regarding driver assis-
Level 4 Level 5 latter case the driver is allowed to be out tance systems, where automation at level
“ rain-off” No driver of the loop. The main difference between 2 has been realized successfully. However,
level 4 (high automation) and level 5 (full the quantum leap in system reliability is
automation) is the system's capability to between level 3 and level 4. At both levels,
handle specific restricted driving modes vs. the system is already in charge of monitor-
Z
Z all driving modes (eventually, these types of ing the driving environment, but at level 3
Z
vehicles will not have a steering wheel at all). (conditional automation), a human driver
still needs to be prepared to take control of
the vehicle within a couple of seconds. At
level 4, the system must be able to manage
specified traffic conditions without any driv-
er intervention and to reach a safety fallback
Driverless during state in the case of unexpected events.
defined use cases Vehicle in charge of
lateral and
Figure 4 shows a roadmap towards 'real'
longitudinal control autonomous driving (level 5) for passenger
Vehicle in charge of
in all situations. cars, expected to hit the road with wide-
lateral and
According to use spread adoption not before 2030. On the
longitudinal control
case, no steering other hand, level 3 and level 4 market intro-
in many situations.
wheel and/or pedal duction are already underway, with level 3
Minimized risk for
required.
accidents. being primarily focused on an automated
highway pilot and level 4 on specified appli-
cations such as automated valet parking or
first robo taxi fleets in selected cities (e.g.
2019+ 2021+ Phoenix, operated by Waymo).

13
Figure 4 – Roadmap towards 'real' autonomous driving

... 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 ...

“Google sibling Waymo

Autonomous private
Level 5 launches fully autonomous
vehicles on public roads
ride-hailing service”

Urban and suburban pilot

Highway autopilot including

Level 4 highway convoy
Automated valet parking

Parking garage pilot

GM 2019/
Traffic jam
Level 3 Highway chauffeur Audi 2020/
chauffeur Bosch
Daimler 2020/
AVP 2018
e.Go (ZF) BMW 2021
Mover iNext 2021
2019+/
Traffic jam
Level 2 Conti CUbE
assist, …
Audi AI Traffic 2019+
Jam Pilot 2019

Tesla Autopilot
ACC, Stop
Level 1 v9 2018
& Go, …

Level 0

Source: ERTRAC 2017 “Automated Driving Roadmap”, VDA 2018 “Automatisiertes Fahren”,   Testing and ramp-up phase
The Guardian 2017 “Google sibling Waymo launches fully autonomous ride-hailing service”, Deloitte Research 2018   Series deployment

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 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

The market introduction and adoption rate Key Challenges

of level 3 systems and above will differ by The progression from level 3 to level 4 is
market and region, because not only do cer- not a steady one. Classic rule-based ADAS
tain technological issues need an ultimate functions reach their limits with level 3
solution (e.g. how to cope with extreme requirements. Linear "if then" conditions
weather conditions like snow, heavy rain need to consider every possible use case
or fog etc.), but regulatory and customer or combination of use cases in any given
acceptance issues must also be addressed traffic situation, which is virtually impossible
sufficiently upfront. in urban environments (level 4 and 5). Apart
from confined spaces such as highways, traf-
fic situations are highly dynamic and com-
plex. For this reason, self-learning systems
based on artificial intelligence (AI) that mimic
human decision-making processes are
critical for meeting the demand for complex
scene interpretation, behavior prediction
and trajectory planning. AI is becoming a
key technology in all areas along the auto-
motive value chain and is paramount for
the success of level 4+ AD systems. Figure 5
illustrates the leap forward in technological
progression from traditional software devel-
opment to artificial intelligence.

However, AI talent is scarce and the market

is highly competitive, resulting in skills
shortages. This puts additional pressure
on automotive companies still needing to
build up expertise in those areas. But what
exactly is AI in the first place? We are going
to shed some light on this question in the
next chapter.

15
 Figure 5 – Quantum leap from classic rule-based coding to artificial intelligence

Maneuver
1

Maneuver
2

Maneuver Autonomous
… Driving Level 3+
(Machine Learning)
Technology Performance Level

Maneuver
n

Substitution of rule-based
coding with training of
Artificial Intelligence algorithms

Classical ADAS
functions (rule-based coding)

2018 2025+
(Today)

Source: Deloitte Research 2018

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 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

AI is crucial for AD level 3+, because classic coding is

not sufficient to master and meet the necessary
requirements

• Traffic situations are highly dynamic and complex

• Sensors collect tremendous amounts of data points, which

need to be interpreted in real time (e.g. object detection,
»Artificial Intelligence is the
reduced visibility, natural behavior, map adjustments, …) new electricity.«
• The required processing speed for the amount of complex, Andrew Ng (AI Entrepreneur, Adjunct Professor Stanford University)
new data input can only realistically be mastered with
self-learning systems

• Deep learning systems can be trained to mimic human

decision-making processes, which could ease human-
machine interaction on the road

• Behavior prediction of other road users including vehicles,

pedestrians, cyclists

• AI is becoming a key technology in all areas along the

automotive value chain

17
Deep dive

Artificial Intelligence
Artificial intelligence is at the top of its hype curve. With potential-
ly revolutionizing applications in almost every industry and do-
main, the market is experiencing explosive interest from estab-
lished companies, research institutions and startups alike. The
global automotive artificial intelligence market forecast shown in
Figure 6 reflects this interest with a CAGR of 48% between 2017
and 2025, culminating in a total volume of around 27 billion U.S.
Dollar in 2025.

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 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

Figure 6 – Global automotive AI market forecast

30
27
Automotive AI Market Size [billion USD]

25

21 Service
20
+48%
16
CAGR
15
12 Software

10
8
5
5
3
2 Hardware
1
0
2017 2018 2019 2020 2021 2022 2023 2024 2025

  Historic data   Forecast

Source: Tractica 2018, Deloitte Research 2018

At the same time, there could not be a model based on machine learning, which artificial intelligence realm. As Elon Musk
greater gap in experts' opinions on the has been around for years and would usual- put it: "The pace of progress in artificial
technological short-term potential of artifi- ly classify as data mining, is now rebranded intelligence (I’m not referring to narrow AI)
cial intelligence, which ranges from simple as 'AI'. Companies follow such strategies is incredibly fast. Unless you have direct
performance improvements in today's to tap into the hyped sales potential. One exposure to groups like Deepmind, you have
methods to artificial intelligence-powered of the prevailing reasons is that the term no idea how fast - it is growing at a pace
robots conquering and enslaving the human artificial intelligence is ill-defined. There is no close to exponential. The risk of something
race one day. single, agreed-upon definition that removes seriously dangerous happening is in the five-
all doubt; rather all definitions leave room year timeframe. 10 years at most.”
While there are promising advances across for interpretation and therefore room
the entire spectrum, we see an inflation of for deceptive product specifications. This
technologies branded as artificial intelli- should by no means diminish the impressive
gence. For example, a demand prediction advances and speed of development in the

19
In order to separate hype from reality, we ligence. Common to most definitions is that
will classify artificial intelligence in the broad- "intelligence" refers to the ability to sense
er context of science, which includes but is and build a perception of knowledge, to
not limited to computer science, psychology, plan, reason and learn and to communicate
linguistics and philosophy. Figure 7 shows in natural language. In this context, it also
the key characteristics of an AI system. The comprises the ability to process massive
common understanding of artificial intelli- amounts of data, either as a means of train-
gence is that it is used to get computers to ing AI algorithms or to make sense of hidden
do tasks that normally require human intel- information.

Figure 7 – Key characteristics of an AI system

Big Data Reasoning

Capable of processing Ability to reason (deductive

massive amounts of or inductive) and to draw
structured and unstruc- inferences based on the
tered data, which may situation. Context-driven
change constantly. awareness of the system.

Learning Problem-solving

Ability to learn based on Capable of analyzing and

historical patterns, expert solving complex problems
input and feedback loops. in special purpose and
general purpose domains.

Source: Deloitte 2018 “Artificial Intelligence”

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 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

We differentiate between narrow and gen- Figure 8 – 'Machine learning', 'Methods' and 'Technologies & Infrastructure'
eral artificial intelligence. Today's artificial in the context of AI
intelligence solutions are almost exclusively
narrow. In this context, narrow means that
an AI algorithm only works in the specific Artificial Intelligence
context it was designed for, e.g. computer Ability to sense, reason,
vision-based object detection algorithms engage and learn
in autonomous driving systems. Such algo- Voice recognition Computer vision
rithms have the potential to exceed human
performance by orders of magnitude. Planning & Natural language
General AI, on the other hand, refers to the optimization processing
more human interpretation of intelligence in Machine Learning
the sense that such AI solutions are able to Ability to learn
understand, interpret, reason, act and learn Robotics & Knowledge
Unsupervised learning
from any given problem set. An AI system motion caputre
typically combines machine learning and
Reinforcement Supervised
other types of data analytics methods to
achieve AI capabilities (Figure 8). learing learning
Methods
Ability to reason
Regression, decision trees etc.

Technologies &
Infrastructure
Physical enablement

Platform, UX, APIs,

sensors etc.

Source: Deloitte Research 2018

21
 Figure 9 – Autonomous vehicle disengagement report statistics1

10.000
Period: December 1, 2016 to November 30, 2017
Autonomous km driven per disengagement
[logarithmic scale, values in km]

1.000

100

10

1
Google GM Nissan Zoox Drive.ai Baidu Telenav Aptiv nVidia Mercedes Valeo Bosch
Benz

Source: “Autonomous Vehicle Disengagement Reports 2017”, DMV, CA

1
Please note, that this figure is only indicative, given that it only shows the state of California. Some firms, including German OEMs, do not
22 test their vehicles in California and therefore do not appear in the data
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

• Based on the 2017 “Autonomous Vehicle Artificial intelligence is one of the crucial Technological Hurdles
Disengagement Reports” published by the elements for level 4 and 5 autonomy. Recent On-board & Off-board
DMV, California, Waymo leads the race for autonomous vehicle disengagement reports Technological hurdles for level 3 automation
autonomous driving leadership by far issued by the Department of Motor Vehicles, and above are still manifold. We differentiate
California, illustrate the autonomous miles between on-board and off-board challeng-
• GM’s investments in Cruise Automation driven before disengagement becomes nec- es, as shown in Figure 10. As far as on-board
helped them propel to second place in essary, in critical or non-critical situations issues are concerned, the key challenges
terms of autonomous kilometers driven (Figure 9). While many factors come into play revolve around sensors, computing hard-
per disengagement here, it is undeniable that the firms known ware, basic software and autonomous
to be strong in AI are leading the statistics. driving core software. In order to ensure the
• Nissan following in third place with a wider Please note that the DMV only registers safety requirements imposed by industry
gap firms that perform test drives in the state and government, sensor quality still needs
of California. The graph therefore does not to be improved to cater for e.g. accuracy for
• Noticeable advancements especially from represent the full picture, but rather serves speeds up to 130 km/h and in some cases,
startups and tech companies illustrative purposes. Based on our experi- especially with lidar, the price point is still
ence, the relation between top performers too high to be economically feasible. With
• Audi, BMW, Volkswagen, Tesla not consid- and mid to low performers is accurate new central processing units and operating
ered in this chart due to a lack of test data though. systems come new challenges regarding the
tracked by the DMV vehicle's overall safety concept. ECUs need
to process large amounts of input data, but
also compute complex algorithms based
on artificial intelligence techniques, such
as convolutional neural networks (CNN) for
object detection, in real time. Considering
the industry-wide trend towards electric
drivetrains, the ECU's requirement for
computing power is counteracted by the de-
mand for low energy consumption. In terms
of software development, the challenge lies
in creating, training and securing (validation
and verification) safe algorithms.

23
Figure 10 – On-board and off-board challenges in autonomous driving

Adaptive Cruise Control Emergency Braking

Pedestrian Detection
Collision Avoidance

Traffic Sign Recognition Lane Departue Warning

Cross Traffic Alert

Park Assist

Surround View Surround View

Blind Spot Detection

Park Assist
Rear Collision Warning

Park Assistance/Surround View

Source: Deloitte 2018

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 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

On-board hardware On-board software components

Camera Optics ystem on a Chip OC High Definition On- oard aps

Collect optical images to be inter- High performance energy- Precise localization information about
preted by advanced AI & analytics efficient computer hardware roads, infrastructure and environment

Radar V2V/V2I ocalization & apping

Determines speed and distance of Communication with vehicles Data fusion for vehicle localization and
objects using electromagnetic waves infrastructure over short range environment analysis

LiDAR Actuators Perception & Object Analysis

High resolution sensor using Translation of electronic signals Algorithms Detection and classi-
light beams to estimate distance into mechanical actions fication of objects and obstacles
from obstacles

ltrasonic sensors GPS Prediction Foresight of movements

Short distance object Localization of vehicle and actions by vehicles, pedestrians and
recognition (e.g. parking) using satellite triangulation other moving objects

Odometry ensors
Measure wheel speed to predict vehicle Decision- a ing
travel and complement localization Planning of vehicle route, maneuvers,
acceleration, steering and braking

Off-board hardware software

ehicle Operating ystems
Data Center AV Cloud Operation
Operating system running
Storage and processing of Learning, adopting and up-
algorithms in real time
hot and cold vehicle data dating HD maps & algorithms

upervision platform
Analytics to monitor the AV system
operation, detecting & correcting faults

25
While some companies see level 3 func- be a swift approach to achieve this amount
tionalities as an evolution of classic ADAS of mileage in real world testing. Simulations
functions, which can be mastered with effectively contribute to this requirement,
rule-based coding, level 4 and 5 autonomy covering more than 95% of the mileage
require artificial intelligence to cope with demand. However, it remains a challenge to
the complexity of traffic situations. The set up the proper test concept and collect or
latter typically demand large data sets (e.g. create sufficient data for validation.
raw sensor data) for training, testing and
validation of (deep learning) algorithms. In Overall, the challenges for companies work-
order to store and process these data, com- ing on autonomous driving technology are
panies make use of data centers or cloud significant and vastly affect the dynamics of
solutions. The data are labelled, clustered the automotive industry. The following par-
and ultimately used to optimize and update agraph discusses our view on some of the
algorithms. It remains an open challenge to- key implications confronting the automotive
day to efficiently validate artificial intelligence industry.
algorithms such as CNNs. AI algorithms
operate like a black box in the sense that it is
not trivial to determine what triggers certain
decisions. Validating correct functionality is
cumbersome and today only feasible statis-
tically via numerous test cases.

Besides, data centers constitute the

basis for simulation purposes. Theoretical
estimates show that in order for level 3+
autonomous vehicles to achieve approval
for commercial use, the system needs to
undergo billions of kilometers of testing. It
is neither economical nor does it prove to

26
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

»We're entering a new world in which data may be

more important than software.«
Tim O’Reilly (Founder O'Reilly Media)

27
Impact on Today’s
Automotive Industry
Cars are no longer merely the means of getting from point A to point
B, nor are they simply status symbols; instead, they have become
functional assets. Particularly in recent years, car manufacturers have
discovered growing customer demand for digital infotainment solu-
tions and other in-car services. In the telecommunications industry,
smartphones replaced the traditional mobile phone, with telephony
being just one of many features and oftentimes not even the most
important one.

Car manufacturers face a similar trend

nowadays, namely that the car is turning
into a platform to serve a variety of
functions. As Nitesh Bansal, Senior Vice
President and Head of Manufacturing
Practice Americas and Europe at Infosys,
put it: “The modern car is a supercomputer
on wheels, and its sensors and cameras
generate a wealth of data that someday
might be worth more than the automobile
itself” – in that, for car manufacturers, the
car is becoming a rich source of data they
can use to improve products and business
operations.

28
Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

29
The same goes for development: 50 years Figure 11 – From hardware to software focus
ago, the distribution of a car's added value
between hardware and electrics, electronics Average automotive product cycle time
(E/E) and software was approximately 95%
compared to 5% respectively. In an average
car today, the distribution is closer to 50%
hardware and 50% E/E and software. Along
with the technological progression of the
8 years
semiconductor industry, development of E/E
as well as software has increased exponen-
tially over the past two decades. At the same
Average automotive product cycle time 7 years
time, the average product cycle time has
halved over the same period (see Figure 11). 6 years

5 years

4 years

2000 2005 2010 2015 2020 2025

Year
Source: Diez (2015), Deloitte Research 2018

30
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

E/E & SW share of total value add in automotive

ABS Electronic fuel On-board Hybrid Connected Autonomous

injection Diagnostics cars cars cars

50%

30%

20%
15%
10%
5%

1970 1980 1990 2000 2010 2020

Year
Source: Statista 2018, GTAI 2016, Brandt 2016, freescale semiconductor 2010,
Wallentowitz et al. 2009, Deloitte Research 2018

That said, OEMs increasingly deviate from a around 60 control units to manage the signals and the bandwidth of bus connec-
"One Product, One Function" strategy and multitude of functionalities in the vehicle, tions. Car manufacturers have started to
instead approach a "One Product, Many the trend is going clearly towards a central accept the challenge and subject themselves
Functions" philosophy, similar to what we processing unit that controls all functions of to - in some cases drastic - transformation
have seen in the telecommunications indus- the vehicle in unison. One of the crucial chal- programs, which we will dive into in the
try with the introduction of smartphones. lenges associated with a central processing following paragraph.
While an average car today still features unit lies in managing the criticality of control

31
Paradigm Shift in OEM Product Figure 12 – Four major areas of organizational change
Development Organizations
Historically, car manufacturers have Product Structure: Work Structure follows
established a very strong top-down chain Hardware vs. Software Share Product Structure:
of command. This made sense when labor Agile Development Organization
division between "thinkers" and "doers" was Processes
strict. The engineer defines how the me- Analog Cockpit Silos & Waterfall
chanic needs to assemble the car, the senior
engineer instructs the junior engineer, etc.
In today's VUCA world (volatile, uncertain,
complex, ambiguous) these rules do not ap-
ply anymore. The environment has changed,
new competitors have entered the market
and are constantly challenging and changing
the rules and dynamics of the game. Core
competencies, skills and know-how that
have been perfected for decades to build
great quality cars fade into the background, Digital Cockpit Cross-Functional & Agile
while the focus is placed on innovation, agil-
ity and software, including but not limited to
autonomous driving, artificial intelligence,
agile working, electric vehicles and new
business models.

Based on our experience, Deloitte sees four

major areas of change that will ultimately
change the dynamics of the automotive
industry for good (Figure 12). • Value add of software in the vehicle con- • Better consideration of 'real' customer
tinues to increase needs & requirements by applying mini-
mal viable product (MVP) approach
• Trend is supported by surging importance
of artificial intelligence (AI) • Reduced development time, shorter time-
to-market and lower development cost
• Shift away from “one function, one device”
philosophy towards a “many functions, • Ability to cope with uncertainty and com-
one software platform” approach plexity

Source: Deloitte 2018

32
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

New Steering Models: Mastering New Technologies:

KPI vs. Progress Indicator Cooperation vs. Supplier
Relationship

KPI Supplier Steering

Progress Indicator Partnership

• The nature of agile working environments • Autonomous driving brings a new level
requires new steering models of development complexity that can no
longer be managed by individual players
• Progress indicators, such as OKRs (Ob- alone
jectives and Key Results), should be used
more as a compass to ensure movement • Both technology companies and car man-
in the right direction rather than a numeri- ufacturers benefit from complementing
cal control on detail level each others’ skill sets and sharing develop-
ment efforts

33
Area 1 refers to the product structure. The dictable in nature, such as the development clear interfaces. In the case of autonomous
share of value added to the vehicle between of autonomous vehicles, require different driving, there are many unknowns for what
hardware versus E/E and software is shifting approaches to success evaluation. Where constitutes the optimum technical solution.
in favor of the second. Consequently, car the technology is new, the outcome uncer- Additionally, no single player in the industry
manufacturers undergo major transforma- tain and the timeline unpredictable, classical possesses all the skills necessary to develop
tions to refocus their core competencies KPIs often do not provide sufficient benefit the perfect solution. Google and Apple
and build up expertise in those areas. in measuring and steering the progress of hold great expertise and talent in software
development. Instead, agile steering models development and artificial intelligence, but
Area 2 describes the change that is should focus on continuously measuring lack the automotive know-how to build cars
necessary on an organizational and work holistic progress and direction as compared themselves. Car manufacturers possess
structure level. Structures and processes to performance at specific milestone dates. the necessary automotive expertise and
that have proven successful for the devel- After all, agile development practices infrastructure, but lag behind with software
opment of products with low shares of E/E support the ambition to cope with uncer- capabilities. For this reason, companies are
and software are no longer ideal for the tainty by providing a new level of adaptivity. joining forces in development partnerships
development of autonomous vehicles. Com- Upfront top-down planning, including metic- and increasingly via mergers and acquisi-
panies are increasingly replacing classical ulous project timelines, run counter to the tions.
waterfall structures with agile approaches. philosophy of agile development. However,
The goal is to move away from long devel- a smart alignment between major top-down
opment cycles, inflexibility and hierarchical project milestones (e.g. on a quarterly basis)
command-and-control style management and bottom-up progress indicators, which
practices and replace them with shorter de- show operational work advancements (e.g.
velopment cycles, adaptivity, flat hierarchies on a bi-weekly basis), provide good orienta-
and team empowerment. tion regarding the overall project status and
direction.
New work structures and development
processes require new steering models, Finally, Area 4 addresses new forms of work-
which is the focus of Area 3. Key perfor- ing with suppliers and partners. Traditional-
mance indicators (KPIs) are an effective ly, car manufacturers have outsourced large
tool to evaluate an organization's success shares of development work to suppliers
at reaching targets. This applies mostly to in classic contract relationships. This is a
situations that are predictable and linear. viable option when confronted with known
Environments that are complex and unpre- technologies that can be partitioned with

34
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

architectural philosophy often still allocates software oriented "automotive technology

specific functions to dedicated controller companies" with shorter release cycles for
Product Structure: units). Simply put, this remains the industry software applications. The underlying change
From Hardware to Software Focus standard today: One device, one function. To in product structure goes away from the "one
For decades, traditional car manufacturers the same degree, it still holds true that tradi- function, one device" philosophy, towards
have perfected their craft to build great qual- tional car manufacturers are cost optimizers a "many functions, one software platform"
ity cars. Over the last 30 years, automotive more than innovative game changers. The approach, as shown in Figure 13. The
E/E as well as software applications have current business model is to make money computing power required to process the
gained great traction, along with the rise of by selling cars. New entrants follow a more huge amounts of sensor data, primarily from
enabling technologies including computer radical strategy. Technology companies have cameras, radars and lidars in autonomous
chips, the internet, etc. Initially, speed of inno- identified the value of data for their business vehicles, makes those cars supercomputers
vation was slow in this domain compared to and leverage business models that support on wheels, as stated earlier. Thus, it makes
modern standards. This is why it made sense this notion, such as Waymo's robo-taxi pilot sense to take advantage of this technology
that a single control unit had the sole pur- program in Phoenix, Arizona. potential and use it as a central source for
pose of powering a single function (of course, data processing.
this is a simplified explanation because Traditional car manufacturers have identified
several E/E functions are commonly execut- their need for change and are drastically
ed across several ECUs. However, the E/E investing in becoming more agile, more

Figure 13 – Shift from hardware to software focus

Traditional Hardware-driven Philosophy New Software-driven Philosophy

One Function Many Functions

» One Device » One SW-Platform

Source: Deloitte 2018 35

The aforementioned changes do not only approaches. The main difference lies in the continue to become more connected and
apply to hardware, but also to the way soft- software development sequence: While autonomous. The most prominent example
ware is applied (Figure 14). Up until recently, waterfall follows a sequential path from of a company that is already using RSUs
there was no demand for regular software conception to deployment, agile has an successfully is Tesla, which regularly releases
updates. Control units were flashed during iterative approach where potentially ship- updates to its fleet to improve the autopilot
production and in most cases never saw an pable software increments are developed function, battery range, or others. Other
update until the end of the car's product according to a minimum viable product prominent players, including traditional car
lifecycle. Software was designed under the approach. This is relatable to the way smart- manufacturers such as BMW and Daimler,
premise of avoiding errors at all costs, and phone apps are created today. The updates have gained substantial experience with
therefore required substantial lead and regularly released to app stores are product RSUs, not least because of their car-sharing
development times. increments resulting from a sprint (in Scrum, fleets.
a time-box of 4 weeks or less during which
In agile software development, software a potentially shippable product increment is
quality is of paramount importance as well, developed). Remote software updates (RSU)
oftentimes even more so than in waterfall in automotive gain in importance as vehicles

Figure 14 – Shift from hardware-driven to cloud-driven software updates

Hardware-driven Software Updates Cloud-driven Software Updates

App
Store

Remote
Software
Update

Upfront planning, updates after years Updates according to sprint cycle

Source: Deloitte 2018

36
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

»For whatever reason somebody can be convinced to

buy a PC, it opens up a whole new market for all of us
in the software business.«
Kevin O’Leary (Co-founder SoftKey)

37
 Figure 15 – Traditional waterfall vs. agile software development

Work Structure Traditional software development: Separated structure

follows Product Structure
As mentioned, traditional software devel-
opment follows individual development Software component
Software Software
stages sequentially. From an architectural team incl. component
Component Component
standpoint, building blocks are divided into lead with local respon-
1 4
software components, which are taken sibility
Overall System
care of by component teams (compare
Software Software
Figure 15). Since development times can be
Component Component
extensive for certain software components,
2 5
this approach requires meticulous upfront
planning: First, to enable teams to work
in parallel with clearly defined interfaces, Software Software
tasks and responsibilities; second, to reduce Component Component
dependencies to a minimum, as queues 3 6
have an exponential impact on cycle times.
In complex systems, dependencies cannot
Component
be avoided every time, which increases Plan-driven Teams
coordination efforts and complicates system Dependencies between
integration. Owing to this structure, water- components cause Function-
Command-
fall development is characterized by local queues, which have an specific
and-Control
optimization of single software components exponential impact on Leadership
due to silo development. Operational and cycle times
Local
organizational structures are detached and
Optimi-
require coordination teams. Management
zation
follows a command-and-control style Function-
specific
leadership, because technical decisions are
Development
Waterfall
made top-down.
Sequential

Individual
Responsibility Silos

Source: Deloitte 2018

38
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

Agile software development: Integrated structure

Feature Team 1 Cross-functional feature

team with end-to-end
responsibility
Community m
Community …
Community 1

Community 2

Feature Team 2

Feature Team ...

Feature Team n

Feature
Cross-feature Backlog-
Teams
driven
alignment via
self-organized End-to-End
Servant Development
communities
Leadership

Global
Optimization
Integrated
operational &
organizational Agile
Structure Iterative
(MVP1
Approach)
Team
Respon- Cross-
sibility functional

1
Minimum Viable Product Approach
39
 This is in stark contrast to the characteristics are fundamentally different from the ones
embodied by agile software development, in the automotive industry. The car industry
which in its core embraces self-organization is highly sophisticated and consists of an
on team level, pushes decision-making advanced network of manufacturer, supplier
down to the lowest possible hierarchy level and partner relationships. OEMs outsource
and fosters servant leadership. Teams large portions of development work to sup-
are cross-functional and assume end-to- pliers, which creates dependencies and the
end responsibility for a product feature need to define and manage clear interfaces.
(i.e. minimum viable product increment). In addition, we are talking about embedded
In analogy to the most common agile software development with significant
framework, Scrum, teams are by definition hardware shares. These circumstances pose
feature teams; development is consequently new challenges to agile working models,
oriented toward the highest customer value which have their origins in pure software de-
and prioritized via a backlog of development velopment. In order to cope with such high
items. Consequently, the organization levels of dependency and hardware shares,
continuously strives to achieve a global op- companies have to be willing to continuously
timum. A perfect feature team is able to do challenge the status quo and adapt where
all the work necessary to complete a feature necessary. When considering introducing
(backlog item) end-to-end. Cross-feature an agile working model, you should ensure
alignment is self-organized and all feature that not only is it compatible with your over-
teams work on a common software re- arching product development process, but
pository. Operational and organizational also meets the demands posed by supplier
structures are integrated and streamlined relationships, hardware development and
to focus on value-adding activities while computing power constraints. Bill Gates
eliminating overhead. famously coined the phrase: "Intellectual
property has the shelf life of a banana." If
Many companies view agile as the holy grail you want to create the future, you have to
for securing innovation leadership, which innovate as fast as your competition, at the
leads to massive transformation programs, very least. Becoming agile and adaptive
sometimes without taking the necessary can help achieve that goal, but you need to
time to analyze and evaluate the full spec- be smart about it. Agile transformations in
trum of implications. Agile (software) de- complex environments such as the automo-
velopment brings many benefits, but it has tive industry constitute a fine line between
to suit the purpose and environment. The significant performance improvements and
dynamics and challenges in pure software the complete inability to act.
development environments such as banks,
insurance companies or in app development

40
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

»Today, companies have to radically revolutionize

themselves every few years just to stay relevant. That's
because technology and the Internet have transformed
the business landscape forever. The fast-paced digital
age has accelerated the need for companies to become
agile.«
Nolan Bushnell (Co-founder Atari, Inc.)

41
You also need to use the right scaling strat- quickly enough and therefore cannot sus-
egy. Autonomous driving development divi- tain the momentum, support and positive
sions typically employ several hundred em- energy required to drive the undertaking
ployees for the software content alone. It is towards success. Top management as well
a tremendous challenge for any organization as employees will soon lose trust in the
to change everything from the ground up. A change if it does not yield positive results.
real agile transformation not only changes Therefore, we recommend starting with a
the way developers work with one another; pilot, a small agile nucleus, where a group of
it fundamentally changes how the organ- highly motivated people come together to
ization operates, from the organization function as spark for the change and drive
structure, via the operating model, product its initiation phase. Word about the pilot's
architecture, verification and validation pro- first successes will soon spread into other
cedures, to the culture, to name but a few. groups or departments, who will then be
For example, hierarchical barriers are bro- eager to "go agile". Figure 16 shows an ex-
ken down, technical experts become tech- ample of a structured agile transformation
nical leaders empowered to make technical roadmap, including some of the most crucial
decisions without the alignment obligation steps to consider in an agile transformation
with their superiors, silos are eliminated and (Deloitte's structured enterprise agile trans-
replaced with strong cross-functional team formation playbook).
setups - in short, interaction mechanisms,
processes, structures and skill requirements
change and need to be re-trained. For tradi-
tional car manufacturers, this is a particular
challenge owing to long-established and
perfected processes, legacy systems and
complex dependencies across departments,
cooperation partners and suppliers.

Our experience with hundreds of agile

transformation programs across the globe
has shown that large enterprises are suc-
cessful when they follow a structured agile
transformation playbook. Most often, a "big
bang" implementation, where the entire
organization is flipped at once, culminates
in a "big failure", simply because the or-
ganization is not able to change everything

42
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

»Agile is more a 'direction', than an 'end'.

Transforming to Agile culture means the business
knows the direction they want to go on.«
Pearl Zhu (Author of "Digital Master" book series)

43
Figure 16 – Deloitte's structured enterprise agile transformation playbook

Lean change: An agile approach to change Structured ...

Build

Work streams

Pivot Pursue
MVC

Operating model, alignment

and organization design
Measure Learn

Measurement Framework

Architecture and DevOps

Operating
model and
alignment

Organization Architecture
design and DevOps
Agile Team Process and Practices
transfor-
mation
program

Training Coaching

Team Training and Coaching

process and
practices

Source: Deloitte 2018

44
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

... enterprise agile transformation playbook

Scale
Pilot Refine Adopt

Establish agile vision and Define agile change and Stand-up agile change and Establish enterprise
success criteria ops team ops team wide agile COE4

Define base operating Stand-up organization and Integrate and extend

Refine and extend
model and road map team structure across the enterprise

Assess architecture and Componentization and Refactor architecture and Mature architecture
DevOps capability DevOps strategy stand-up DevOps and DevOps

Define core agile SDLC1

Refine SDLC method Apply and refine agile SDLC method
method for pilots

Stand-up tooling Stand-up tooling

Define agile tooling stack Setup agile tooling
enablement team enablement team

Define training and Execute training Program

Train pilot groups
coachinng program (executive, management, PO2, scrum master, RTE3, team)

Coach pilot groups Transition portfolio, programs, and teams by waves

1
SDLC: System Development Life Cycle 3
RTE: Release Train Engineer
2
PO: Product Owner 4
COE: Center of Excellence
45
Typically, you need to overcome a number Figure 17 – Barriers and solutions in the agile transformation
of barriers during the agile transformation
(see Figure 17). First, humans have the ten-
Typical Barriers
dency to resist any kind of change in culture,
structure and roles within a company. You
can counteract this resistance by creating a Human resistance to
mutual understanding of the change, adding change in culture, structure and roles
new competences and trying it out in a pilot.
Next, there is a lack of open communication.
Instead of forcing a form of communication
onto employees, create transparency, e.g. Lack of open communication
through sharing information, avoiding
information access restrictions or working
in pairs. Especially large, established corpo-
rations are often too risk-averse. In order to
Being too risk-averse
become agile, you need to adopt a fail fast,
learn fast mentality, because "failure is suc-
cess if we learn from it" - Malcolm Forbes.
Another crucial aspect is the often seen lack
of leadership buy-in. If there are no senior Lack of leadership buy-in
leaders backing the agile transformation, it
is doomed to fail. You have to provide a solid
mandate to managers and strong leadership
support if you want the transformation to An agile transformation requires a hypothesis-driven,
be sustainable.
Source: Deloitte 2018 “Agile 101: Discover the agile ways of working”
Naturally, agile working models do not
respond to the same steering mechanisms
as waterfall approaches. The following
paragraph discusses the differences in more
detail.

46
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

New Steering Model

Solutions
Classical KPI-driven reporting systems
Create a mutual understanding of often follow an underlying traffic light logic.
the change, add new competences Holistic top-down defined project plans with
and try it out in a pilot detailed milestones and deliverables for
each single work package (or even on the
task level) are still considered to be the holy
grail. On the other hand, a few months after
Create transparency through sharing
implementing a steering model, the mile-
information and working in pairs
stone-related progress tracking with classic
KPIs usually indicates a (negative) deviation
from the originally projected timeline and
Fail fast, learn fast.
consequently leads to red traffic lights at
„Failure is success if we learn
aggregated project tracking overviews. Of
from it.“ – Malcolm Forbes
course, the underlying reasons range from
bad planning accuracy and over-optimistic
assumptions to execution problems. The
Provide a solid mandate to real problem here comes into play because
managers and strong leadership of natural human behavior: Every single
red traffic light seems to indicate a need for
action. As a consequence, countermeasures
feedback-oriented focus and implementation are often initiated to fight red traffic lights
individually without keeping an eye on the
big picture, see Figure 18.

47
Figure 18 – From KPIs to progress Indicator

Traditional KPI-driven steering model Steering in an agile working model

If KPI shows a red traffic Product Owner (PO) prioritizes the product backlog based on a
light, specific counter- comprehensive picture enabled by a holistic set of progress
measure has to be indicators and feedbacks
defined and triggered

1.
If KPI target value is
2.
achieved, no counter 3.
measure is needed

Bottom-
Top-down
up Self-
Steering
organized
Trans-
Concealment
parency

Counter- Fail, Learn,

measure Correct

Cross-
Silo
functional Progress
Mentality
KPI Mindset
Indicator
Target Indicator for
Values Prioritization

Split Shared
Holistic
Responsibili- Risk of Local Responsibili-
Interpre-
ties (Individual) Optimization ties (Team)
tation

Source: Deloitte 2018

48
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

Agile working environments require (objectives and key results) which combine
progress indicators more as a compass to top-down planning (approx. 30%) with
ensure movement in the right direction bottom-up defined OKRs (approx. 70%).
rather than a numerical control on detail It is more important to spend some time
level. The old mantra of "the more, the defining the right OKRs rather than having
merrier" in terms of numbers of KPIs does too many, and they should follow some
not hold true anymore - and in fact it never simple rules: Define SMART goals (specific,
really did. Likewise, agile working principles measurable, actionable, relevant and time-
should not be used as an excuse to avoid ly). Furthermore, make sure that there is
any type of top-down milestone planning. one responsible individual for each OKR or
At the end of the day, project success in progress indicator. The tricky part is being
agile environments is similar to sailing: If smart in aligning the big picture milestone
you do not plan any course or direction plan with short- and midterm agile pro-
before you set sail, you will not know where gress indicators and deriving reasonable
you end up. Even Silicon Valley tech players holistic countermeasures in case of major
from Intel to Google use so-called OKRs deviations.

»Measuring programming progress by

lines of code is like measuring aircraft
building progress by weight.«
Bill Gates (Founder Microsoft)

49
 Figure 19 – Cooperations and partnerships

2.1.4 Mastering New Technologies

FCA
As mentioned above, autonomous driving
Continental Car2Go
is one of the most complex development
Bosch
challenges in the automotive industry. Aptiv DriveNow mytaxi
The broad range of required skills and
Magna BMW MERCEDES Uber
capabilities barely exists in-house at any
traditional OEM, supplier or tech player. The Intel HERE
latter are well positioned when it comes to HERE
software development and agile working Jaguar
Mobileye NVIDIA
Landrover Lyft
principles to achieve shorter development
cycles and time to market, but often lack the FCA WAYMO
experience with industrialization and scaling
a real hardware business like building cars.
On the other side, OEMs and traditional
Intel
automotive suppliers often struggle with the
Harman Baidu
transformation towards a new agile product Honda Lyft
and software development system with HYUNDAI GM
significantly shorter cycle times for E/E and KIA
software-related functions. Cruise
Aurora
Mobileye
Cross-industry partnerships are an inevita- Samsung
ble prerequisite to mitigate these complex Telenav
Velodyne Lyft
challenges and to close own technology
blind spots. All major stakeholders engaged
FORD
in the development of autonomous driving Saips
solutions have established or joined specific Ford
Argo AI
cooperations or partnerships (Figure 19). In Gett
Audi Civil Maps Autoliv
addition to the lack of technological or pro- Uber
cess expertise, there are several other rea- MOIA Geely
sons to join forces. Reduced development
Delphi
VW VOLVO
costs and risk sharing between partners are
NVIDIA Microsoft
further important drivers for the emergence
HERE Zenuity
of those cooperations. Lastly, from a topline
perspective, a larger addressable customer Aurora NVIDIA
base and associated revenue potentials
have to be mentioned.

50
 Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

Automotive Specific collaboration setups range from

Mobility
OEMs classic development contracts to joint ven-
Provider
& Suppliers tures and mergers and acquisitions. While
European automotive OEMs tend to prefer
contractual development agreements to
Technology Firms coordinate collaboration efforts, especially
US companies are more open to buying
stakes in startups, like General Motors did
for example with Lyft and Cruise Automa-
tion. Either way, the key success factor for all
types of cooperations is to align and stream-
Why Partnerships? line the interests of all stakeholders towards
a common goal. This sounds trivial, but has
Gain access to necessary capabilities often been a major obstacle for sustainable
results and success in former cooperation
Partner up with others to combine complementary ca-
initiatives.
pabilities in order to create a superior product or service
and cover own capability blind spots and/ or resource
bottlenecks

Foster sales & market penetration

Gain access to foreign markets and customers by collab-

orating with local partners in unexploited geographic re-
gions and leverage regional know-how and relationships

Share risks

Share commercial (investment, deployment) and techni-

cal risks (feasibility, operability) among several partners
as well as potential risks resulting from liability and
warranty claims

Reduce costs

Reduce own investment costs (manpower, equipment,

R&D) and create further synergies through joint activi-
ties, e.g. industrialization

51
The Way Forward
The trend towards a continued substantial increase in the importance
of software development and the application of artificial intelligence and
machine learning techniques in the automotive industry is irreversible,
or in the words of Marc Andreessen: "Software is eating the [automotive]
world".

OEMs and suppliers are already aware of the Figure 20 – Lines of code in millions
situation, but sometimes still struggle to em-
brace these inevitable changes. The trend
500+
from hardware to software in the automo-
tive industry requires new thinking, starting
with innovative product architectures (i.e.
onboard vs. off-board service architecture)
up to new target costing approaches and
entire vehicle business cases. Independent
from the vehicle ownership question, future
revenues and especially profits will gradually 100
shift towards the aftersales phase. Frequent
0,4 14
remote software updates and the provision
of new (software-enabled) functions over
Space Boeing 787 Modern Fully
the entire vehicle lifecycle will change the ex- Shuttle Dreamliner car autonomous
isting profit generation pattern in the auto- 90 vehicle
motive industry. It is not clear right now who
the leaders of tomorrow's mobility world will
be, but if OEMs consistently work on their
ability to quickly adapt to these changes and
become digitally fluent, they are in a strong
position to capture a significant share of the
future automotive and mobility value chain.
Source: Deloitte research 2018, FEV 2018, Wired 2018, NXP 2017, MIT 2016

52
Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

53
Authors

Dr. Harald Proff Thomas Pottebaum

Lead Partner Director Monitor Deloitte Strategy
Operations Germany Automotive
Tel: +49 (0)151 5800 2696 Tel: +49 (0)151 5800 4516
[email protected] [email protected]

Philipp Wolf
Senior Consultant
Strategy & Operations
Tel: +49 (0)151 5807 0480
[email protected]

54
Autonomous Driving | Moonshot Project with Quantum Leap from Hardware to Software & AI Focus

55
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Issue 01/2019