The Ripple Effect


In segment three of my interview with Chunka Mui, we discussed the ripple effect that occurs with emerging scenarios, in this case, the driverless car. Chunka Mui is the managing director of the Devil’s Advocate Group, a consulting team that helps organizations design and stress test their innovation strategies. Mr. Mui published a popular book titled The New Killer Apps.

What fascinates me about these scenarios is the sheer breadth and depth of societal impact. In this segment, Chunka Mui does a great job of describing this impact. Here is a seven minute animated version of our discussion that picks up where segment two left off:

You can view segment one here.

You can view segment two here.

Download The PDF Version of the Transcript


Beyond the Driverless Car

An Interview with Chunka Mui

Transcript 

SEGMENT 3 of 5:  The Ripple Effect

Frank Diana:  So, I want to shift gears. I want to focus on the ripple effects of these future scenarios. Specifically, but maybe more importantly, how the ripple effect starts to more intensely blur the boundaries across these various industries and I find that this autonomous vehicle scenario works extremely well to get leaders to see just how broad and deep the impact clearly is; and so, one of the things that you have done extremely well in your writing is to kind of make that real for leaders. Talk about the various things that the autonomous vehicle will impact and how it does cross industry boundaries, so walk us through some of the industries impacted, examples would be things like municipal revenue streams drying up because traffic accidents or traffic violations don’t occur or parking revenues drying up. Those kinds of things that people don’t normally think about. So, give us an example of some of the breadth and depth of this scenario.

Chunka Mui:  Sure. If we think about autonomous technology, I think there is a breakpoint if we think about extreme scenarios. There is a breakpoint at whether or not the car is autonomous – whether or not it requires a driver. That’s the extreme case, so if we have totally driverless cars, consider this possibility – business models today, automotive business models today are built on individual car ownership. If you did not require a driver in autonomous cars, you could:

  • imagine a driverless taxi service that instead of requiring you to buy a car that came to you and in a few minutes time took you point to point;
  • Then you start imagining that people might take uber-like services, instead of owning a car
  • And there has been financial modeling that says that those services could actually operate for about 20% the cost of owning a car
  • So dramatically less costly because you’ve taken the most expensive element of a car service, the driver, out of the equation

Okay, so let’s imagine that scenario:

  • You start having uber-like car services, instead of car ownership
  • Each year about 500B flow through US car dealers
  • So, if you started having a shift away from individual car ownership to mobility services
  • That money, that channel gets dramatically impacted
  • Now, people will still buy cars, because services like uber will still be buying cars, but they’ll be buying them as whole fleets, as opposed to individually
  • And they’ll be buying them from manufacturers
  • So here’s one technical capability that translates to enormous business model disruption
  • ½ trillion dollars a year…

Frank Diana:  Yep. Great example and what about things like less cars on the road, impact to the environment, fuel efficiencies that come from the ability for driverless cars to drag behind one and other. The need for infrastructure diminishes, because you again have less cars on the road. What about those kinds of things. You get a lot of that happening as well as this scenario plays out. Correct?

Chunka Mui:  Well, here’s another interesting statistic, in downtown city centers some studies find that as much as 30% of traffic is people driving around looking for parking spots. So, if you have a driverless car that drops you off and then drives away by itself, either to park itself far away in a cheap lot or just go to next passenger, you can dramatically reduce the traffic that’s going around looking for parking spots. And here’s another interesting ripple effect from that. Once you have that, then you start asking yourself – do I need parking garages? More specifically, do I need expensive parking garages downtown or even if I need parking garages at all, can I move them further away?

  • And suddenly you start thinking well what do you do with all that real estate that’s now devoted to cars? In some ways that’s good because you can repurpose that real estate for other uses. You might turn them in to parks; you might turn them in to commercial areas. But then suddenly, you also have this massive amount of real estate that’s flooding the market which may have dramatic negative effects

So, as you start thinking about these simple, relatively simple technical capabilities you can imagine the ripple effects on industry is dramatic.

Now, one of the things we have to realize is we don’t always understand exactly what’s going to happen.

  • In the sense that, if we make transportation cheaper by 80%, does that mean we have less cars on the road or do we have more cars on the road?
  • We certainly have more efficient use of infrastructure, if we have don’t have any more cars on the road, but we actually may actually have miles traveled go up.
  • Those are the kinds of question you have to think deeply through, if you’re in one of those industries where that’s a critical issue for you.

Frank Diana:  Yep and to your point there’s no way of knowing exactly how those scenarios play out. To your point on more cars on the road, the fact that young children that can be driven by driverless car and the parents not required or the elderly or disabled start driving again. All those things could actually lead to more cars in the road. Correct?

Chunka Mui:  Absolutely, absolutely. So that’s, I mean those are both challenges and opportunities. They’re challenges if you sit in an existing industry that’s built upon current assumption. So, for example, $80B a year is spent in the US on collision and auto repair – well when you start having fewer accidents that’s a bad thing, but if you’re in the business where you might profit from more people moving from the driver’s seat to the passenger’s seat, for example if you sell content or if you’re in commerce that may be a good thing. So, you have to take these developments and follow the trail of effects.

Frank Diana:  Well, I think in terms of the objective of that question, objective met because clearly we can see how many different industries, and we just touched the tip of the iceberg here, are impacted and how broadly and deeply you need to think about these scenarios if you’re going to be successful navigating them.

Well fascinating stuff Chunk and unfortunately, we’re out of time. So, I want to thank you for joining us today with those great insights and look forward to working with you in the future. If you’d like to learn more about Chunka and his perspectives on the future, please visit Chunka Mui dot com. You can learn more about our work at TCS by visiting TCS dot com or additional perspectives from my blog at frankdiana.net.

Thanks all for joining.

For Additional Information

Frank Diana

Tata Consultancy Services

www.tcs.com

www.frankdiana.net

Chunka Mui

Devil’s Advocate Group

www.chunkamui.com

4 thoughts on “The Ripple Effect

  1. Brilliant Thinking! Driverless Cars will absolutely disrupt the operating business models in mobility services, retail, real estate, healthcare, insurance and more… Let us identify the space to operate in, build coalitions and become part of this wonderful journey…

    Like

  2. Couple of areas I can visualize undergoing a major change are ..

    1. Public transport facilities: Can driverless cars help improve public transport quality in countries like USA ?

    2. Legal : Road transport regulations may need to undergo a drastic change as it will be difficult to identify stakeholder and fix responsibility of an accident in case of a technical failure ..

    Like

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