“We estimate that the value of the automobile will evolve from being a 90-per-cent hardware device today to being a 60-per-cent software device once cars are fully autonomous,” Morgan Stanley analysts wrote in a recent report. “This is critical to Apple’s involvement in the car. Apple has both hardware and software design expertise and the rebalance of the hardware versus software equation in the car can create a void that only Silicon Valley (and a select few existing auto makers and suppliers) can fill.”
To ward off the attack of the tech monsters, Mr. Balsillie suggests a defence neither the auto industry nor competition watchdogs seem likely to embrace: Team up and deploy their combined market clout to head them off by coming up with their own value-added model.
“If I were the automotive guys, I would get together … without violating collusion [rules] and grab my competitor’s smartest strategic guy and tell him we have to co-operate before they divide and conquer us.”
Like the record companies and cellphone makers before them, auto makers are focused on besting their main rivals. “They don’t realize there’s a bigger competitor around the corner that can wreck everybody’s business model by introducing their own,” Mr. Balsillie says.
The music industry only needed three majors to team up to offer an effective downloading service like Apple’s. But two of them couldn’t even reach a deal. So Apple, which produces no music and employs no musicians, swooped in.
“They were stuck in their existing competitive world, and tech preys on that,” Mr. Balsillie says. “They count on the entrenched guys being so stuck in their models that they don’t rethink [them], and they know they’re not really capable of topping them on the innovation front.”
Via Bertel Schmitt.