One of the biggest trends driving competition in the auto industry in recent years is the race to offer new and better "connected-car"

One of the biggest trends driving competition in the auto industry in recent

years is the race to offer new and better "connected-car"

technologies—including those that enhance safety, monitor maintenance

requirements, provide Internet connectivity, and offer seamless integration

with smartphones and wearable devices. A 2015 study of the worldwide

auto industry projected that customer spending on connected-car

technologies will exceed Є40 billion ($42 billion) in 2016; that number is

expected to more than triple to Є122 billion ($129 billion) by 2021. Tech-

savvy consumers increasingly expect their cars to serve as extensions of

their personal technology, and one company working hard to exceed those

expectations is German automaker Bayerische Motoren Werke AG—or

BMW, as it is more commonly known.

BMW was founded in 1916 as a manufacturer of aircraft engines, but the

company soon branched out into other areas. Today, the BMW Group

manufactures motorcycles in addition to its three premium car brands

(BMW, MINI, and Rolls-Royce), and it is now represented in over

140 countries—including 30 production locations in 14 countries. With

close to 2 million cars sold in 2014, BMW is one of the world's most-

recognized luxury car brands, with a reputation for consistently delivering

high-quality cars built on a foundation of advanced mechanical

engineering. To maintain its edge, BMW is now expanding its focus to find

ways to improve its cars through cutting-edge technological innovations.

According to Dieter May, BMW's digital business models senior vice

president, "Our competitor is not Audi, Jaguar Land Rover or Mercedes, but

the space of consumer electronics players." As May sees it, one of the

biggest questions facing BMW—and other auto makers—in the coming

years is "How do we take the connected home, personal digital assistants,

and advanced sensor technology, and connect all these trends?"

BMW has responded to this question by building an extensive array of new

technologies into its latest models. Through BMW's iDrive information and

entertainment system, drivers can access ConnectedDrive, a portal offering

a wide range of location-based services, including concierge services, real-

time traffic information, and access to more than 12.6 million searchable

"points of interest," ranging from gas stations to restaurants to tourist

attractions. Another ConnectedDrive feature, the Head-Up Display, projects

important driving information—such as current speed and warnings from

the car's night vision system—on the windshield, allowing the driver to

keep his or her eyes on the road. The Speed Limit Info feature uses a car-

mounted camera along with data from the navigation system to keep

drivers informed of current speed limits, including those in effect due to

road construction and weather conditions. ConnectedDrive, which can be

controlled from the driver's smartphone, also offers mobile office features,

such the ability to dictate and send messages, and a ConnectedDrive Store,

where users can purchase apps and services directly through the iDrive

interface. And at the high end of BMW's model line, the 7 Series full-size

sedan, BMW's flagship vehicle, is the first model to accept gesture-control

commands for the iDrive display as well as a completely automated self-

park feature that can be operated when the driver is outside the vehicle.

BMW is also working to ensure that the car-buying experience is keeping

up with customers' expectations by encouraging its dealerships to create

more digital showrooms, with flat screen displays and virtual

demonstrations to appeal to the many customers who are accustomed to

the online shopping experience. In addition, BMW is adding "product

geniuses"—like those found in Apple's retail stores—to its showrooms.

The specialists have no responsibility to sell; their job is simply to spend

whatever time is necessary to explain and demonstrate each car's various

technological features to potential BMW customers.

To continue to develop the complex technological innovations it needs to

maintain its edge over competitors, BMW has explored possible

partnerships with technology companies such as Apple. Currently,

however, the auto maker is focused on building up its in-house expertise

and speeding up its internal software development cycles. In 2014, BMW

spent over Є4.5 billion ($4.75 billion) on research and development, and it

spent, on average, more than Є6,000 ($6,370) per car on connected-car

technology. BMW is making it clear to potential customers and competitors

alike that is committed to competing and winning on the digital front.

1. Other than selling more cars, what potential benefits do connected-car technologies

offer auto makers such as BMW in terms of enhancing long-term customer

relationships?

1. What responsibilities does BMW have to its customers regarding the data it captures

via the various connected car technologies that it builds into its cars?

1. Of the primary components of an ERP system that were identified in this chapter, which

modules are likely to be of highest importance to BMW if it continues to focus on in-

house development of new technological features and services rather than partnering

with an established personal technology company, such as Google or Apple? Would

those tools need to change if BMW establishes a long-term partnership with a

technology company?