Ford adds Apple sauce to its next-gen services ambition

Ford’s announcement that it has hired former Apple services executive Peter Stern to lead its own services push is significant in many ways. These plans don’t seem to extend to media or content and shouldn’t involve paying to unlock features you already use. But the hire reinforces the argument that future vehicles will be platforms and it hints about Apple’s own plans.

Before he left Apple in January, Stern was seen as the successor in waiting to veteran Apple Services Vice President Eddy Cue. In his role, he led the evolution of services across Apple, helping build the $50 billion/quarter business it has become today.

What Stern will be doing

In a statement, Ford said Stern will lead work to:

  • Build out the business tied to Ford’s BlueCruise hands-free highway driving system and productivity and safety/security services, including those from the Ford Pro Intelligence business.
  • Imagine and deliver exciting new high-value services.
  • Lead services marketing, certain out-of-vehicle customer experiences, and Ford Next.

“I love creating new services businesses and this is the perfect chance to do just that,” Stern said in the same statement. “The auto industry is undergoing an unprecedented transformation, from gas engines to electric vehicles and from human to autonomous driving. At the same time, the basis for differentiation is shifting from the vehicles alone to the integration of hardware, software, and services.”

In May, General Motors hired Mike Abbott, Apple’s former vice president of engineering for iCloud services. In that case, Abbott was hired to lead a new software development arm.

What Ford isn’t doing

That’s a significant hire moving to significant company, so Ford hosted a media event to discuss the move. You can glance at the transcript of that call here. The approach Ford seems to be taking should inform any company attempting to build next-generation services to exploit the advantages of digital transformation.

One thing the company isn’t doing is exploiting customers, promised Ford CEO Jim Farley: “I want to make something really clear to the media because it’s a theme coming up in the questions that I really appreciate,” he said. “So, we at Ford … are not going to charge for things that don’t make sense for us to charge for. If someone has a heated steering wheel or heated seats, that is literally the opposite of our approach.

“We’re charging for making our customers’ lives better. We don’t really see us charging for content [and] there’s been some brands that have even charged for e-commerce capability. That’s not the direction we’re going as a company.”

What Ford is doing

In other words, Ford won’t make customers pay more for things they feel they already own. Nor is the company particularly focused on creating its own media services to compete with Apple Music, Podcasts, or anything else.

“We’re kind of going in a completely different direction,” said Farley.

For example, Ford already offers driver assistance software that can monitor driving habits and train drivers to drive more efficiently. It also offers pro customers software to predict component failures, which is a really useful tool to fleet managers.

The idea he seemed to stress is a vision in which software augments driving experiences in a positive way, rather than wriggling a proverbial hand into customer pockets when they least expect it.

Farley put it this way: “I mean the place where we have the rights to improve people’s lives … is when the vehicle data uniquely allows us to create services. And I think that needs to be said because our industry is littered with bad choices about subscription services. And that is not the direction we’re going in. I hope that’s clear.”

Augmenting lives one car at a time

The direction Ford seems to be taking is to apply in-vehicle intelligence to enable concepts and services that weren’t possible before. Cars already contain a lot of technology, so how can these smart components work together to make driving better?

That’s fine for electric vehicles (and Ford stressed that its vision extends to existing vehicles), but the introduction of vehicle autonomy — hinted at beginning around 2025 during the media briefing — lends new opportunities.

Based on what Ford said, I’m betting these will include “Autonomy as a service,” with drivers subscribing to autonomous AI to drive them in specific places. That makes sense, as Ford would want to recoup on large investments in road traffic management information, real-time analysis, and software.

I expect there’s also going to be a need to secure connected vehicles just like any other endpoint, while enterprise IT will seek tools with which to manage vehicle fleets. Fleet managers will inevitably be interested in next-generation services, such as pre-emptive repair packages in which the engineer is despatched before the vehicle even hints that it might break down.

There’s an Apple touch there, too. Given Ford’s use of names like Ford Plus, I’d be completely unsurprised to see such a service called FordCare+ (including use of a top-end smart courtesy car during repair). You can see how these kinds of services may ramp up, without needing to charge users to switch on their heated car seats.

Following the money

There is big money at stake. Boston Consulting estimates the car subscription market in Europe and the US could reach $40 billion by 2030. With this in mind, it’s interesting that Ford has turned to an Apple executive to lead its services vision.

Ford already has more than 550,000 paid software and services subscribers, more than 80% of them through the Ford Pro commercial unit.  This is generating hundreds of millions of dollars in revenue with 50%+ margins. “The basis for differentiation is shifting from the vehicles alone to the integration of hardware, software and services,” Stern said. 

So, what’s the takeaway?

The primary notion is that once you put intelligence into something, you gain the opportunity to create new products and services to augment your initial business income.

When you do so, it’s truly important to place your target customer at the center of that transaction; customers will not thank you for being forced to pay extra for products they consider they already own. But they will cough up good (high-margin) cash for services that augment those products in imaginative ways.

Further, just as with everything else in tech, services are more effective if they echo the nature of the original brand. There are multiple great examples of that way of thinking across rapidly evolving smart agriculture ecosystems.

The Apple approach I think Stern will be able to exploit most at Ford will be the iterative innovation that has characterized Cupertino.

Think how the iPhone was built on the technology, hardware, and software that was iteratively developed on the back of the iMac, iPad, and iTunes. That integration of hardware, software, and services is precisely the mantra Stern has at Ford, which suggests the digital road trip auto makers are about to explore will follow a very similar playbook to Apple’s adventures elsewhere in tech. And the companies that work hardest to put the customer at the center of those experiences will be the ones most likely to reach the finish line.

With such highly placed ex-Apple luminaries in the command seat, will Ford strive to reinvent the wheel, or partner in the evolution of it?

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Copyright © 2023 IDG Communications, Inc.


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