M2M or Telematics?

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.

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