BMW – Deferral of gratification.

BMW plays right into Google’s hands.

• BMW is the latest company to jump on the digital assistant bandwagon but it has put a lot more thought into its product which may see traction as long BMW resist the temptation to charge for the service.
• The assistant will debut from March 2019 in models that use BMW OS 7.0 and above and can be ordered in the 3 series from November 2018.
• The assistant can also be remotely installed and upgraded without a visit to the dealer.
• The fact that “it can be ordered”, “will be included for 3 years” and the “scope of functions can be extended with the Connected Package Professional” sounds an awful lot like it will be a feature that BMW users will have to pay extra for.
• I see this as a major error of judgement on BMW’s part.
• This is because:
  • First, competition. Like or not, in digital, BMW’s main competitor is not Audi or Daimler but the smartphone.
  • Every smartphone these days includes at least one free digital assistant and the choice to download many others.
  • Furthermore, these are the best digital assistants currently available and while BMW’s assistant will be able to do more in the vehicle, it will be hopelessly outclassed in all other areas.
  • Smartphones also include a full Media Consumption offering including FM radio as well as a range of Navigation options all free and with real-time updated maps.
  • Furthermore, as infotainments systems are on the same design cycle as the vehicle, they are invariably 4-5 years out of date before the vehicle even rolls off the forecourt.
  • Smartphones can sometimes have less than a 1-year cycle meaning that in terms of performance, a $150 smartphone has better performance than most premium infotainment systems.
  • In a premium vehicle, this issue is even more acute as the owner will, in all likelihood, have a premium smartphone which will be even more superior to what is embedded in the dashboard.
  • Hence, BMW is competing against a superior product both in terms of hardware and software where the services are provided for free.
  • Therefore, charging for the personal assistant will have the effect of driving users to spend more time with their smartphones in the vehicle rather than the infotainment unit.
  • Any vehicle maker that wants to have a digital strategy must drive usage to the infotainment unit otherwise, the unit may as well not be there.
  • Failure to do this almost certainly guarantees a future where the vehicle is merely a handset on wheels.
  • Second, data: Digital assistants improve and get better by generating usage.
  • This tends to mean that they are not revenue generating in their own right, but by being easy and fun to use as well as intelligent, they drive loyalty for a digital ecosystem as well as generate insight that can be monetised elsewhere.
  • This is how BMW should view its digital assistant rather than as a chargeable service.
  • Charging for it will reduce the number of users that sign up meaning that BMW will: understand less about its user pool, have a relationship with fewer users and be in a weaker position to drive loyalty to its brand.
  • In effect, this will drive users further into Google’s clutches in the automobile.
• From an automotive mindset, BMW has created something that it thinks that its users will pay for because they love BMW vehicles and in the short-term, this is absolutely right.
• However, when things become electric, much of the edge that BMW has over other OEMs will be eroded meaning that it will have to increasingly rely on digital to drive brand preference.
• This is why it should forgo short-term profits now and put all of its efforts into driving as much usage if its digital services as it can.
• Making them free and available in as many devices as possible is exactly how Google has managed win over 2bn users.
• If it can be successful there, then it will have a head start when these features become crucial in the vehicle purchase decision.
• This is how BMW can earn by far the biggest return on its digital investments as well as keep the digital ecosystems peripheral in its vehicles.
• Google will be very pleased to see this strategic blunder because it is the Google ecosystem that is most widely used on smartphones.