Toyota hit by software, the viral business

Do you remember the joke from the days when Microsoft was poised to take over the world? We’re talking end of 20th century here.

Bill Gates had said that if only the car industry had kept up with the technology like the computer industry has, we would all be driving $25 cars that got 1,000 miles to the gallon.

GM (indeed) replied that if it had developed technology like Microsoft, we would all be driving cars with the following characteristics:

1. For no reason whatsoever, your car would crash twice a day.
2. Every time they repainted the lines in the road, you would have to buy a new car.
3. Occasionally your car would die on the freeway for no reason. You would have to pull to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue. For some reason you would simply accept this.
4. Occasionally, executing a maneuver such as a left turn would cause your car to shut down and refuse to restart, in which case you would have to reinstall the engine.
5. Apple would make a car that was powered by the sun, was reliable, five times as fast and twice as easy to drive – but would run on only five percent of the roads.
6. The oil, water temperature, and alternator warning lights would all be replaced by a single “This Car Has Performed an Illegal Operation” warning light.
7. The airbag system would ask “Are you sure?” before deploying.
8. Occasionally, for no reason whatsoever, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key and grabbed hold of the radio antenna.
9. Every time a new car was introduced car buyers would have to learn how to drive all over again because none of the controls would operate in the same manner as the old car.
10. You’d have to press the “Start” button to turn the engine off.

And what do we see? Toyota (indeed) is forced to a recall of its flagship Prius model, because the brakes don’t function properly, and the remedy is: a software update.

This is generally interpreted as a serious blow to Toyota’s brand value, and the reputation for quality they had been able to build over several decades.

I think one of the major causes of this PR disaster is the fact that Toyota does not realize it has become, to a much larger extent than they envisage, a software business. And it has not adapted to integrate this fact.

As I stated in an earlier blog, software is becoming more and more important in other businesses. The reason is simple: the added value of software innovation increases much faster than that of hardware.

So, once a product (from cars to mobile phones to CCTV systems) has an important software component in it, that software component is set to become the most important feature, and the hardware drifts towards commodity status.  (That is not to say that innovation in hardware technology is unimportant – I’m only stating that the relative importance of information and intelligence will increase in the overall combined product value).

And Toyota, as most car manufacturers, does not yet consider its cars as computerized user interfaces with added mobility functionality (i.e., it has four wheels and will get you from A to B).

Why else would Toyota recall hundreds of thousands of cars, just to plug them in, and download and install some software? Have these people ever heard of the Internet? Wireless data traffic? Secure, on-line software updates?

Why are they not providing a monthly update of their software online? It can’t be that hard, even Microsoft manages to do it?

It is clear that car manufacturers, as other hardware-with-some-software manufacturers, have to become aware of the fact that more and more of the value they offer (including the “look-and-feel” factor that seems to be the most decisive factor in purchase decisions of a car) is in the software functionality and the user interface related to that functionality.

When can I get a car, where I just plug in my mobile phone, and tell it to “drive to work”, while calling on-screen the newspaper, or my email account?

As a result, car manufacturers need to work much harder at understanding and integrating how software works, how it is protected, which IP rights are in it, and which business model is most effective in bringing that innovation it to the market.

If they don’t tackle this issue today, chances are the iCar or OScar will be built by software people, and household names such as Toyota, GM, Renault and many others will be at serious risk.

After all, why would anyone buy a car that does indeed function as Microsoft Windows 98?



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