Digital transformation and the connected car

Key highlights

• Enhancing the car ownership experience is the main reason cited for owning a connected car
• Pay-how-you-drive and proactive servicing are examples of the kind of offerings that are being explored
• IoT presents new opportunities for mobile operators to leverage their core assets and move up the value chain
• Operators have the opportunity to refine and add value to data, based on its value, rather than based on its volume (GigaBytes)
• Service providers get new opportunities to digitalize their service offerings through the digital platform

Telia’s ambition is to transform into a new generation telco, where applications and customer solutions have an important complementary role to traditional network services. Their connected car offering, Telia Sense, is central to this solution. According to Telia’s research, simplifying ownership is a main concern for car owners, and connectivity can deliver on this requirement. However, the benefits of connected cars go beyond connectivity, as they can be linked to an ecosystem of services relevant to car ownership.

Factors driving consumer interest in connected cars

A survey revealed that enhancing the car ownership experience is the main reason cited for owning a connected car, with cost reduction, increased control and safety, and greater convenience also cited as major factors. Car owners interact with their car in many different ways, which presents opportunities to offer a variety of services at different points in time.

Consumers also want more value from their cars. Another survey of car owners indicated that interest can be divided into three areas: connectivity, car control and offerings from service partners. 

Digitalization of ecosystem partners

Ecosystem partners can reach drivers and passengers with new services and information, building on customer relationships and increasing their brand value. This is exemplified in the Telia Sense case with the objectives of initial partners, such as Bilprovningen, Bilia and Viking. 

Pay-how-you-drive offerings

Folksam¹ considers digital transformation to be an important focus area for the company going forward. A usage-based insurance offering is one example of how digitalization can enable new opportunities.

Folksam has created an offering called “Köra Säkert” (Safe Driving) to incentivize customers to drive more safely. This offering is based on a pay-how-you-drive concept, where the customer can influence their car insurance premium.

When signing up for the service, the customer receives a small LED indicator that can be mounted on the car’s dashboard to inform the driver if they are speeding. A red, yellow or green light provides feedback to the driver on whether they are sticking to the speed limit or not. This indicator communicates with the telematics unit, and an app provides feedback that can encourage safer and more environmentally-friendly driving.

The long-term goal is to save lives and reduce the number of traffic accidents; the incentive could also result in a discount of up to 20 percent on drivers’ insurance premiums.

Proactive servicing

Another possibility enabled by digitalization is proactive servicing. Auto inspection company, Bilprovningen, is aiming to enhance the customer relationship through providing proactive services, such as reminders of inspection times, as well as alerts relevant to car owners.

Automotive service company, Bilia, also aims to provide service offerings like car diagnostics and proactive car maintenance, as well as tailored customer offerings and promotions.

Road assistance company, Viking, sees opportunities for a deeper and proactive customer relationship with improved service offerings enabled by digitalization.

Value creation: an evolving two-sided business model

Many mobile operators have already built IoT solutions around their core assets, such as network connectivity and experience of aggregating, analyzing and acting on network and user data. In the Telia Sense case, connectivity is provided by an LTE network, which delivers app coverage for mobile broadband and supports IoT services. Another asset is the platform’s capability to refine data and turn bulk data into smart data, which allows third party service providers to utilize the information. 

The business model is twofold: B2C revenue streams are based on a one-time cost for the telematics unit, and a monthly fee for the connectivity and car control service, whereas the B2B revenue streams are from ecosystem partners; including a set-up fee for the service and a monthly fee per connected car or event. The size of the B2B revenue is based on the value of the refined data from the platform, which varies for different businesses. This value is leveraged by two interrelated factors: the local market knowledge of the B2B partners and the continuous refinement of the offerings enabled by analyzing the flow of data.

IoT presents new opportunities for mobile operators to leverage their core assets and move up the value chain, through providing intelligent platforms, facilitating ecosystem collaboration and becoming a transformation partner to other industries.