Two days ago, Nokia announced a $100 million investment in “connected and intelligent vehicles”. Nokia, which was once the world’s largest phone manufacturer, already has a big footprint on in-car technology with HERE, its map service. The phone maker’s plan consists of a fund that will “identify and invest” in companies that relate to intelligent vehicles. The announcement comes as a surprise while the company is still struggling to come out of its own financial troubles. However, Nokia’s move paints a different picture for the future of automobiles.
Why are tech companies investing in auto technology?
While we don’t have a definite answer, there are several reasons that come to mind. First, let’s remember that car production and innovation have been handled only by a few companies during the last hundred years. These are the incumbents, and they’ve done a great job at setting up the current models of production, which have in turn allowed for more affordable, better quality cars for mostly everyone. The incumbents have model refresh timelines (seven years?) and technology advancements build on existing ones, which serve their current customers. Although this model has its benefits (established production network, low cost labor, highly automatized), it is not perfect and discourages disrupting innovation*.
Tech companies however, small ones in particular, operate differently. They’re used to faster changes and are more agile at implementing new technologies. Today, the ball seems to be moving towards the future of transportation, and there’s an overall sense that a big change is coming. Tech companies don’t want to be left out when manufacturers move towards autonomous cars.
Also, 2007 brought in new entrants to the phone business (Apple, then Samsung with Android), allowing the creation of new value incumbents never imagined. Many tech giants saw their fortunes evaporate because they failed to see beyond their business and customers, which has made them more concerned about the future. Now these very companies are betting their futures on automobile technology.
This is all great news for the future of transportation, as there seems to be a new wave of interest in vehicle autonomy and other new technologies. Don’t be surprised to see more tech companies investing in automobile technology, or car companies partnering or buying tech startups.
*The word innovation is tricky and often misused. Disrupting innovation is one that creates new and additional value by creating new markets while draining resources from incumbents (e.g. The Ford production model disrupted the car industry by shifting to a streamlined one that no one foresaw, yet everyone copied. Ford created new value as it could produce affordable cars faster, and it ended up stealing the incumbents’ customers).
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