Alex Renz is a managing partner at Chicago-based New Mobility Consulting, which helps corporates, startups and investors take advantage of the digital transformation of mobility and transportation. He recently participated in a blockchain hackathon in Munich that included BMW Group, VW, Bosch, Amadeus, Deutsche Telekom and the IOTA Foundation. The challenge was for the hackers to build an open distributed operating system for mobility services using a distributed ledger. Renz spoke to The Innovator about the hackathon, the future of mobility and why corporates in the transportation and energy sectors need to adjust their thinking and their strategies as traditional industry value chains transform into cross-industry business networks.
Q: How should corporates in the transportation and energy sectors think about the future?
AR: Today companies have business models that are predictable and enabled through largely static, industry-specific value chains. Think about the sequential supply chains in automotive with Tier 1 suppliers, OEMs that are largely systems integrators and dealers that sell the cars. Existing business models are largely based on physical products. In the future these companies will be one part of a larger network that creates a service for a customer, like getting from A to B the fastest or at the lowest possible costs. Essentially a range of ecosystem players will form an ad hoc network to deliver a service that may involve multiple modes of transportation and service providers. As a company you will now be a part of a larger system of systems. In order for such a system of systems to work without a central platform intermediary, we need to create an open, permission-less system to establish trust and enable peer-to-peer transactions. Distributed ledger technologies such as IOTA can enable trusted identities and facilitate asset transfer and payments across such an open ecosystem. There is no need for a platform to act as the intermediary and the infrastructure is shared by all the ecosystem participants. This creates a level playing field for all participants and allows for rapid, open innovation to occur.
Q: Why is there a need for an open distributed operating system for mobility?
Many of the existing mobility players are at risk of being disrupted by powerful platform players. These players have a huge advantage in the sense that they not only have access to a lot of user data and sticky services that consumers use constantly in their daily lives. What is more they also control key technology components, such as operating systems, cloud infrastructure, machine learning and AI platforms, etc.
As consumers, we use a range of different mobility services in our daily lives. But getting from A to B typically means using a range of different modes of transportation and different service providers. Today, these different providers do not work with each other. We need an account for each provider and there is no seamless, end-to-end experience. At the same time, large technology players seek to become the dominant platform to enable this seamless end-to-end mobility. However, mobility is too important to leave it up to a few platform players who seek to monopolize mobility. We willingly give up control and ownership of our data, And what is worse, we create honey pots of data that put our data at risk. Centralized platforms seek to monopolize mobility and own and control the data, the services and the key technology components.
So, the question is how we can create a shared, distributed operating system for mobility that facilitates collaboration across the various players and puts us as users in the center?
Q: How did the recent hackathon in Munich tackle this issue?
AR: The scenario was focused on a user who wants to travel from Munich to Berlin to visit a friend. The challenge was how she might best get from her point of origin to her final destination using a range of travel options that would essentially bid for her business.
The various teams tackled individual challenges, such as the ability to use a single, shared identity to access multiple services providers. Another team demonstrated how the various different mobility services can essentially bid for her business and how the various services could be orchestrated end to end. One team tackled the issue of dealing with exceptions such as delays, which would require the ecosystem to adapt. Another explored insurance implications and yet another customer loyalty programs in this emerging world of distributed systems.
Other teams modeled a system of systems from the perspective of individual electric vehicles that want to offer their services but also need to monitor their battery status, find charging stations and make related payments.
Q: So, what does it take to create such a system?
AR: We believe that the right way to build these systems is not the traditional, monolithic applications, but rather distributed applications that are modeled in a holistic fashion. Essentially you want to model the various discrete components of a system and have them interact to form this larger, self-organizing system of systems. Of course such a system needs a trust layer and also be able to facilitate transactions across the various components.
That is why we believe that blockchains, or rather distributed ledger technologies have a large role to play in this future. Hence the participation of the IOTA Foundation in the hackathon. IOTA is a next generation blockchain called the Tangle, which is the very first distributed ledger based on a Directed Acyclic Graph (DAG). It promises to address the challenges of existing blockchain architectures around scalability, latency and transaction fees.
IOTA is unique in its ability to not only process P2P micro-transactions between machines in the Internet of Things (IoT), but it also enables secure data transfers and establishes trust in data. Data is the new oil and the system of systems we are describing here relies on data to enable smart decisions and being able to share this data in close to real-time with the larger ecosystem without giving up control. That is a key reason why so many large corporations are working with IOTA.
But not only do you want to be able to put trust in data, you also want to be able to monetize it. Think of all the IoT devices — from air quality sensors to autonomous cars — that will play a role in the future. The ability to share data and then also create new business models in this system of systems using the data will be huge. IOTA has the potential to become the underlying protocol to establish trust, transfer assets and enable micro-transactions without any fees.
Q: What steps should companies be taking now to prepare for this very different future?
AR: The first thing for the leadership teams is to realize that the future is all about digital business models and customer centricity. Most of the players in the mobility ecosystem understand the massive changes that are ahead in view of connected, autonomous, shared and electric mobility. The nature of competition is changing and traditional players are at risk of being disrupted by technology companies. The incumbents understand that tech companies not only own the key platform technologies, but they also want to leverage their existing services to ‘own’ the customer experience. Even the world’s leading car companies with strong brands and sound financials are at risk of being relegated to a mere hardware supplier if monopolistic platforms win this battle.
The alternative is to create a new, shared operating system for mobility that no single company owns and controls. The mobility ecosystem is a system of systems. More and more players understand that distributed ledger technologies can provide this shared infrastructure to create a level playing field and enable truly symbiotic relationships in these new cross-industry business ecosystems.
Blockchains and distributed ledger technologies are still in their infancy, but they have the potential to disrupt platform intermediaries and enable completely new business models. I encourage every business to explore the technology and assess what risks — in terms of being disintermediated — and opportunities — in terms of shaping the future — it creates.