We spoke to Ed Smith, Chief Technology Officer of Cox Automotive, which owns Autotrader and 22 other vehicle-related companies globally. Smith provided us with a snapshot of how technology will impact the future of car buying. As the sharing economy continues to take hold of everyday life, the automotive industry is seeing a big change. Corporations like Uber, Lyft and Zipcar are changing the face of car ownership and so too how car companies are doing business. As everything is becoming more digital (including the cars themselves), Cox is leveraging big data to help customers get the best deal and help find them the right cars.
Where do you think the auto industry will be in the next five years? What will change about the way things are operating?
We’ve seen lots of changes in automotive today, both in and outside of the U.S., as car sharing and the whole sharing economy has become a really big deal. Automotive manufacturers and consumers are looking at different ways to own and use vehicles.
We’re trying to be on the forefront of what’s happening in different ownership models, like Uber and Zipcar, and understanding what we can do as a company with new models for car ownership and transportation.
This push to mobility is also changing what people are expecting out of car dealers. I recently bought a car the other day, and they have a whole department that just deals with electronics and helping customers understand the electronics in their vehicles. I think as cars become more connected, our expectations of a seamless experience—whether we’re buying, servicing, or owning our vehicles—is going to continue to grow.
Do you think advances in car technology will affect the industry?
It’s so early in the connected car space. I think what’s going to happen—and we’re seeing some of this today—is users wanting a complementary experience in their car as they might have on their phone or their desktop. So if you’re getting ready to go someplace, you expect your car to know where you’re planning to go. And it’s as easy to put in your navigation information as it would be your music preferences as you move between different vehicles.
So I think to the extent that a mobile phone can help your car know who you are, then your car can adapt to your preferences. We’re also seeing some really neat things done with the OBD (onboard diagnostic) connectors, and we are in discussions with several of these around the type of information you can get from your vehicle, such as how you’re driving it and what kind of car would work best for you based on your driving behaviors. And that could go into test drives, for example, helping to optimize the type of vehicle you’re looking for, as well as once you buy the car, making the actual driving experience more socially connected to your network.
How is the role of software impacting how Cox Automotive does business?
I think our software strategy has really grown. We started off with predominantly inventory-based software products, and now we are going all the way through the lifecycle into ownership and servicing, in addition to how dealers manage inventory. I think we’re going to continue to see that evolve and become more of the fabric of our overall business as we create new products.
From an application perspective, we’re looking at mobility as how it extends the experience for a dealer who may be checking in a vehicle. And he can do that through a mobile device. Or when customers are on the lot, we can enable them with applications for when they want help negotiating a price for a vehicle. Or we can create applications that geo-fence, which helps us understand where a consumer is on the lot when they’re interacting.
We’re also looking at new mobile experiences and how they could relate to the car-buying journey. I saw a demo of a watch application the other day that helped extend the desktop or mobile phone experience into a more intimate environment on your wrist. So we’re looking at this technology to understand how we can ensure a complementary experience on a variety of devices.
How has Cox Automotive unlocked big data for business advantage?
Data is probably one of the most important elements of our digital transformation. We’ve got great products, great engineering teams, and great solutions in the market, but as we share that data, we get insights about consumers’ shopping behavior that we can use to optimize processes at the dealerships and better target products and services to them. In the end, we can help consumers and dealers collaborate much more transparently with each other.
We’ve established a big data strategy and provided easier ways for our analysts to look at what the data says and provide insights for new products and services. We then work those insights back into our products through real-time architectures. This allows for much more personalization on consumer applications.
Real-time data into our products is really exciting. For example, you can see when a consumer comes to a website for the fifth day in a row, or when they’re spending more time on a particular vehicle than the other vehicles. You can gauge their interest. You can gauge sentiment in real-time about what’s happening for a dealer on their virtual lot. With that data, you can then make more compelling offers. You can tailor advertising. You can extend that experience between all your properties.
What is the strategy for Cox over the next five years in terms of building out your software platforms?
The interesting thing about our strategy is that as we’ve acquired different companies along the automotive value chain, we’re able to build products with the data that exists between those points in the value chain. So for example, we can deliver new ways to price your vehicle based on what’s actually happening in the market. We can build new mobile apps that address real problems that dealers have. And the neat thing is that our competitors—who don’t have the same breadth of assets—can’t compete with those kinds of new software projects and software development activities.
However, that requires us to have a very sophisticated way of sharing data across our products. We have to have a more complementary, agile development approach so that we can share that data and undergo projects that live in between two different development centers. More than half of our capitalized development happens between development centers, as opposed to just at one of the individual business units.
And that’s really exciting because I think it gives us sustainable differentiation in the market and helps us solve problems that other vendors can’t.