Machine 2 Machine Vision

Last week I attended the latest meeting of the Payment Assurance Technology Association’s board of directors that was held in conjunction with the National Automotive Dealers Association (NADA) show in New Orleans. This sub-segment of telematics is currently in a phase of rapid growth due to demand created by the global credit crisis. I love being associated with this group because to me it’s a concrete example of the ways in which telematics and M2M technology can be deployed to solve broader business and social issues. I provide a description of the association and industry below.

The Payment Assurance Technology Association’s (PATA) serves the starter interrupt/GPS tracking industry. The PATA seeks to unify, standardize and validate the activities of the industry and markets engaged in the manufacture, sale and use of technology for monitoring or disabling vehicles and for other applications.

There are different methods applied in implementing payment assurance technology.

• In some systems, the vehicle is fitted with a small box containing a cellular radio, a GPS, and a micro-processor. This box is wired into the ignition system of the vehicle with associated warning indicators installed on the vehicles dashboard. If the customer falls behind in making their scheduled payments, a signal is sent to the box over the cellular network and a color coded indicator light is displayed on the dashboard, warning the customer that they are late in making a payment and that if they do not make a payment in a number of days they are liable to have their ignition disabled. If the payment is still not made after the prescribed number of days, the service company may send a signal to the system, disabling the vehicles ignition. The vehicles location may also be retrieved using GPS in order for the vehicle to be repossessed.

• Other systems are simple keypads that are installed on a vehicle’s dashboard and wired to the ignition system. Warning lights warn the customer that within a predetermined number of days, a code will have to be entered via the key pad in order to keep the vehicles ignition enabled. Customers are provided with the code at the time that they submit their payment.

The PATA and its members are very conscious regarding the safety of the operators and passengers of vehicles fitted with our technology. Systems provided by PATA members will only disable the ignition of a vehicle that is already stopped and turned off. This greatly reduces any potential danger that would be related to disabling a moving vehicle.

The PATA was formed in order to establish best practices and to formulate a set of guidelines under which its members should operate. It’s the PATA’s desire to ensure that the value of this very important technology is understood by all constituents including; the vehicle buying public, government and regulatory bodies, automobile dealerships, and finance companies. It is the PATA’s intention to proactively work with all parties to resolve any industry or social issues related to this technology as soon as they are identified.

The technology provided and deployed by PATA members makes qualification possible for people who would not otherwise qualify to obtain financing for vehicles and equipment. The world wide credit crisis has cut off credit to all but those who have excellent credit. The lack of available credit limits individuals’ ability to purchase vehicles that they may need to get to a job, to college, or to start a small business. The implementation of starter interrupt technology reduces the risk profile for providing financing to these individuals, thus making the financing possible. The technology can be viewed as a behavioral aid for those with poor credit or little credit experience. The payment assurance technology always provides warning lights days in advance, providing customers the tools to aid them in keeping in good financial standing with their finance company and in building a strong credit history. Disabling a vehicle’s ignition is always a last resort as it means that the remainder of the loan will probably not be settled, reducing profitability for the financing company.

The January 3rd edition of The New York Times had an opinion piece written by a Computer Science professor and a Product Manager from Google.

They suggest four ways that technology can help Detroit to save itself. At least three of these ideas could be considered telematics or an extension of telematics related technology and are not new ideas to those of us in the telematics industry. I have two reactions to stories such as these:

1. Joy; in that people from disciplines outside of telematics are now realizing the potential benefits that we have been speaking about for roughly a decade now.

2. Concern; because we now have the government and mainstream media heavily involved in determining the future direction of the automobile industry. Their statements (informed or otherwise) will definitely have an impact on the public’s expectations. There is no way that those who develop and put into practice public policy have any idea about the unique challenges of implementing wireless technology into an automobile.

With regards to item number two above, I speak from some experience. I come from the cellular industry and started selling wireless radios to Tier 1s for implementation in OEM telematics projects around 2001. At that time, I viewed everything through the lens of what is technologically possible. The wireless industry was growing in leaps and bounds, and I strongly believed that when combined with the power of the internet and location based applications then we could help to transform the automotive industry business and revenue models. The car guys were not moving at a speed that suited my vision, so I ended up labeling them as being dinosaurs who “didn’t get it”. Of course, at the time I had no idea about anything related to an automotive project. Over the years, I learned a lot. A lot about how cars are developed, a lot about the business models, and a lot about the safety and resulting liability risks that the car guys have to take into consideration for everything that they do.

What I learned from a career in the wireless industry:

A. Wireless networks are systems that continually evolve while in operation with the ability to overlay upgrades onto existing technology. The technology develops at a faster pace than it can actually be deployed. This will even happen with little understanding of the business dynamics which will ultimately impact that deployment. For example, in the late ‘90s I was involved in a thing called WAP. This was wireless internet technology that while it worked, didn’t have ready all of the business or market support process that it required. In that case, the failure wasn’t fatal, it was seen as more or less a learning experience in an iterative process that very soon led to the launch of GPRS, which led to an overlay of EDGE, etc.

B. Devices are even less problematic in the industry. The expected life span of a mobile device is somewhere around two years with no requirement to maintain form, fit, function over any period. If the device breaks, throw it out and we will give you another new one with an extension of your service plan!

C. Just keep technology moving forward, because if you don’t you run out of things to sell.

What I learned as an automotive outsider who tried to sell technology to the automotive industry:

A. A car is a static, closed system and is assembled from various sub-systems. Once all parts, sub-systems, etc. are tested and approved, there shall be no changes until it goes through production. Even after production, there is really nothing in it for an automotive company to make a car “upgradeable”. You already own it. Allowing for changes introduces risk to the overall performance of the vehicle, thus creating a liability risk for something that was already shipped and paid for.

B. It takes over three years to define, develop, test, correct, retest, and approve all of the parts so that the final vehicle can be locked down and go to production. Most of the parts and sub-systems in a car are specifically designed and develop to be part of the car. This allows for incremental improvement of features and cost, without radically changing the sub-system that would require major new design, testing, and approval. These incremental improvements can take place over five to ten years, minimizing continued large investments.

C. In the car world, change equals cost related to redesign, retest, etc. As such, all of this additional cost needs to be justified in an ROI.

If you match up the items above to their corresponding letter, you start to see that this is not a matter of what is technologically possible. It’s a matter of completely incompatible business models and development cycles. The folks inside of the auto companies understand this, but they do not currently have the highest level of credibility. So you get outsiders from “successful” industries suggesting what Detroit needs to do to save itself.

Being that I come from the wireless side of things, there is no benefit to me in making the implementation of wireless technology into an OEM vehicle sound any harder that it is. As a matter of fact, it would have been a great couple of years for me and the companies that I worked for if it was easy. I also sincerely hope that this crisis can be a catalyst for changes in the automotive development and business model that will allow the industry to overcome these challenges. However, I am not sure how you maintain the quality and risk mitigation that is required to avoid product recall / litigation while keeping up with the technology cycles of consumer grade offerings that have little, if any, impact on public or individual safety. These are very big issues for very smart guys. I hope that the expectations of government and the public can be properly managed as the issues are worked through.

Here is a story from December 31st’s NY Post .

It’s about a victim of a home invasion robbery who breaks free of his bonds and follows the perpetrators (I’m from NY and that is what NY cops call criminals) in his car while having OnStar relay his movements to the police. Seems a little dangerous to me and is definitely not part of OnStar’s sales pitch or stated services. However, this story does point out that once technology is released to the public they will find unintended uses that provide value in a specific situation.

A disclaimer: In my humble opinion, it is not wise to follow armed and dangerous men once you have safely freed yourself from their presence. In other words, don’t try this at home.

Being that I love to observe markets at work, I am particularly interested by the way the broader “telematics” industry is forming up. For the past several years I have worked in what is generally known as the M2M (machine-to-machine) industry of which telematics is viewed as a major segment. I always tell people that M2M is not a segment, but an enabling technology that horizontally crosses multiple vertical segments. In the early days, I simply considered telematics to be one of those vertical segments. I think that previously most people in M2M bundled any applications that were installed in a car or truck as being “telematics”. As applications become more specific – in many cases being pulled in a specific direction by users – it becomes even clearer that the term telematics is much the same as M2M, a general bundling of specific applications that share common technology. By this I mean that the majority of the technology used in deploying a telematics solution is very common, but that everything else, including the value chain, purchasing decisions, etc., are very unique. For example, let’s take two distinct applications:

• Aftermarket AVL
• Sub-prime auto sales payment assurance technology

Both segments use some combination of a wireless radio, a GPS, a basic processor and connectors into the vehicle. So if you are a developer of telematics solutions, you might develop a business plan where you develop one basic platform and then make the specific modifications required for each one of the segments, thus greatly expanding your potential addressable market. This is a very strong strategy, but ultimately it is a technology or product strategy. Many technology companies fail to realize that a unique marketing strategy may be required for each of these segments in order for the overall business plan to succeed. For example:

• In aftermarket AVL, the company that is selling the service will have a business plan, but it is very dependant upon individual sales to individual consumers. There are a lot of issues at work here. What is the distribution or sales channel to the customer? Is the sales staff properly incentivized to proactively sell the product and service? Are they properly trained? Is the service offering attractive to the consumer at a price that communicates value? As a developer of a telematics box, you are dependant on many issues that are completely out of your control.

• In sub-prime auto sales, the sale is not to a consumer or vehicle owner, but there is an economic buyer – that being the finance company. The finance company will decide what features, quality, and cost is appropriate for the business objectives that they are trying to achieve. The service provider will actually be the party purchasing the box, but pretty much with the guidelines for features, price, quality, etc. set by the finance companies requirements. In this case, your shipments and sales will be somewhat more predictable as sub-prime used car sales can be benchmarked using sales history from a particular dealer with deviations being more or less driven by macro economic drivers.

My point in this post is to not lose sight of the unique value chain and market drivers for each sub segment under the telematics umbrella. Addressing multiple sub segments gives you the ability to smooth out the business cycle as each sub segment will move at its own clock speed.