Detroit Won't Surrender to Google in Self-Driving Cars

Detroit Won't Surrender to Google in Self-Driving Cars

As Silicon Valley expands from the Internet of people to the Internet of Things, the failure of Detroit and Google to form a partnership to build self-driving cars is an instructive tale regarding the challenges Silicon Valley and industrial America will continue to face as they are forced to work together in the future.  Like any massive disruptive technological change, a world where the machines have control over machines is easier to people to design, than for people to safely and profitably deploy.

The Internet of Things (IoT) is the movement from interactive communications between individuals to objects, to communications where objects talk with objects.  From rudimentary beginnings in 2003, more than 12.5 billion devices were connected by 2010.  Cisco’s Internet Business Solutions Group predicts that 25 billion devices will be connected by 2015.  By 2020, Cisco expects the number will double to 50 billion things.   

Automotive electronics have increased from 20% of the “total vehicle value” in 2008 to 35% today.  Powerful micro-controllers, semiconductor switches and sensors independently provide engine management and transmission control.  Low cost, high reliability electronics have made convenience, infotainment, and safety applications standard on most modern cars.  

Twenty typical American households now generate more internet traffic than the entire internet in 2008.  A Dutch start up named Sparked is using wireless sensors continuously monitor cattle and communicate with ranchers if any of their herd becomes sick or pregnant.  Corventis Corporation makes a wireless cardiac monitor that continuously evaluates the health of patients and makes the decision when to send a message to a physician if an intervention is advisable.     

In a recent survey of 1,000 large companies commissioned by network control company Infoblox, over 75% of information technology professionals say they have a large enough budget and sufficient staff to implement IoT projects within their organizations.  They report that despite the trend of growth slowing in traditional IT processing budgets, 89% of managers say they are “very” or “quite” likely to receive more budget dollars in the next year due to planned IoT implementations.  

But the spectacular success of this roll-out is straining the capability of individuals to keep up with their own technology.  IT managers were almost unanimous in worrying that there may not be enough network capacity to handle the demand that will accompany an anticipated explosion in the number of connected devices.  Infoblox found that 63% of IT professionals believe IoT is also a threat to network security.  According to Cricket Liu, chief infrastructure officer at Infoblox:   

“With so many objects and IP addresses being added, it’s important for network teams to keep track of what’s on their network at any given point, and also to bear in mind all these objects and IP addresses are potential weak links in an organization’s IT infrastructure.”

Both sides were enthusiastic about embracing futuristic technology to build self-driving cars when several of the world’s largest car makers met with a dedicated team of Google Inc. engineers in 2012, according to a Fox News report.  But hopes for collaboration quickly broke down over Google’s demands that Detroit agree to a plan to rapidly bring a full Android controlled cars to the commercial market. 

When technology fails in Silicon Valley, new companies jump in with creative solutions.  When technology fails in Detroit, car companies are saddled with legal and regulatory sanctions that lead to long term damage to the brand.    

General Motors latest recall of 7.6 million vehicles on June 30th brings the total recalls for the first 6 months of 2014 to 28,470,653 vehicles, more than all the cars GM has produced since emerging from bankruptcy on July 10, 2009.  General Motors’ earlier recall of 7 million vehicles in April included 2.6 million with a faulty ignition switch tied to at least 13 deaths.  The $1.3 billion cost associated with that recall alone wiped out 92% of the profit on the company’s $37.4 billion in sales.

Google has been telling analysts that they have invested tens of millions of dollars in an effort that’s only a side project for the company.  But the advent of self-driving cars would free people to do more things during their daily commute, like spend more time web surfing that could earn billions of dollars more for Google.  The sooner Google finds a way to get drivers’ hands off the wheel, the financially more advantageous for Google. 

Detroit understands that the technology will eventually be adopted by consumers, but they do not want to speed up the inevitable costly market disruption.  “Google is the 800-pound gorilla in the room and nobody wants to miss the boat,” said Edwin Olson of the University of Michigan, who works with Ford on an automated vehicle project, told Fox.  “But at the same time I don’t think automakers want Google to be dictating terms if the time comes and Google is the only game in town.”

The author welcomes feedback and will respond to reader comments
From July 15th to July 29th, Chriss Street will be teaching “Entrepreneurship and Capitalist Strategy”           at Ho Chi Mihn University in Vietnam


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