VIRTUAL AND AUGMENTED REALITY IN AUTOMOTIVE

VIRTUAL AND AUGMENTED REALITY IN AUTOMOTIVE

IMMERSIVE TECHNOLOGIES WILL FORM THE NEXT WAVE OF DIGITAL DISRUPTION AR / VR / MR IF WE CONCLUDE FROM THE PAST, IMMERSIVE TECHNOLOGIES WILL REWRITE THE RULES MOBILE WEB 2.0? WEB 1.1 Peer-to-Peer Networks In-app Purchases WEB 1.0 Social Networks Personalized Ads PC Hardware Access PC Sales Internet Access Subscription Search Paid Search IN TERMS OF BUSINESS MODEL,ARCHITECTURE AND DOMINANT PROVIDERS Source: Based on Digi-Capital (July 2016) 2

AFTER SEVERAL DECADES ATTEMPTS AR AND VR ARE NOW POISED TO TAKE OFF Trial and Error (1950s - 2000s) Modern Age (since 2010) 1950s THE SENSORAMA First commercial VR use. Morton Heilig offers virtual motorcycle ride through NY for 25 cents per ride 1987 VR IN ARCADE Virtuality Group begins to sell VR gaming machines for $70,000 2014 GOOGLE GLASSES Google releases first light-weight device for consumers starting wearable AR trend 2017 ARKIT & ARCORE Apple s & Google s developer tools make (mobile) AR available for mass market 1968 SWORD OF DAMOCLES Ivan Sutherland created first VR HMD with NASA. Due to its weight, it was fixed to the ceiling (hence the name) 1991 COMMERCIAL VR GEAR Jaron Lanier is first to sell VR goggles ($49,000) and gloves ($9,000) 2013 VW MARTA VW develops Mobile AR Technical Assistance (MARTA). It uses built-in camera on tablet to display vehicle service information in real-time 2016 POKEMON GO Breakthrough for AR with Pokemon Go: Downloaded more than 500m times worldwide proofing revenue potential Source: Accenture (2017) 3

MAINSTREAM ADOPTION OF IMMERSIVE TECHNOLOGIES IS ONLY A MATTER OF TIME Head-Mounted Devices Handheld Devices HMD Device Shipments [in Million] Installed Base of ARKit and ARCore [in Million] 70 60 50 40 30 20 10 0 47 32 21 14 10 3 0 1 2017 2018 2019 2020 2021 61 Viewers VR HMDs 20 AR HMDs 2.500 2.000 1.500 1.000 500 0 1.695 814 853 586 434 391 740 72 2.052 983 2017 2018 2019 2020 2021 (ipads not included) VR Devices AR Devices ARKit ARCore HMD device shipment growth @ CAGR 54,1% to reach 81,2M IN 2021 ARKit and ARCore bring AR to mass market REACHING MORE THAN 3BN users in 2021 Source: IDC (2017); Accenture based on Digi-Capital & Artillry (2017) 4

TECHNOLOGICAL ADVANCEMENTS HAVE UNLEASHED THE FULL POTENTIAL OF AR-VR 1. Fast Connectivity Networks enabling high speed data transfer 1G 3G 5G 3. Sharp Cameras Video cameras with 60 fps rendering, 12 megapixel (iphone X) compared to 30 fps and 3.1 megapixels (iphone 3GS) 5. Keen Sensors Sensors to detect real-world objects, visual positioning and cognitive recognition Speech Visual Gesture 2.4Kbit/s 2 Mbit/s 25 Gbit/s 2. Powerful Processors High computation power. iphone X (2.3 GHz) is 6 times faster than the first iphone (400 MHz) 4. Affordable Devices 2013: $1,300 (Google Glass), 2016: $600 (Oculus VR), 2017: $600 (HTC Vive), $100 (Zeiss VR One), $15 (Google Cardboard) 6. IoT Penetration IoT penetration is driving the demand for faster, more intuitive visualization and interaction IoT Devices 2015 2020 10bn CAGR 15% 20bn+ Source: Apple (2017), Google (2017), Oculus (2017), HTC Vive (2017) 5

BUSINESSES ALREADY STARTED TO REALIZE THE BENEFITS OF IMMERSIVE TECHNOLOGY VISION PICKING Equipping warehouse employees with smart glasses that visualize where each picked item needs to be placed 25% increase in operations efficiency AUGMENTED MAINTENANCE Providing HoloLens to service technicians to visualize machine and establish direct communication with remote support Reduced average length of service calls by 4x Source: DHL (2017), Thyssenkrupp (2017) 6

AND INDUSTRY EXPERTS ARE CONVINCED: AR-VR WILL CHANGE EVERY ORGANIZATION IT IS GOING TO CHANGE THE WAY WE USE TECHNOLOGY FOREVER. Tim Cook, Apple, November 2017 EVERY ORGANIZATION NEEDS AN AR STRATEGY. Michael E. Porter, HBR, November 2017 Source: Apple (2017), HBR (2017) 7

NOW WHAT ABOUT OEMS? Source: Volkswagen (2017) 10

A STUDY BY BVDW & ACCENTURE OUTLINES THE OPPORTUNITIES AND CHALLENGES OF AR-VR IN THE AUTOMOTIVE INDUSTRY AR-VR IMPORTANCE IN AUTOMOTIVE AREAS OF VALUE CREATION OF AR-VR RECOMMENDATIONS FOR OEMS Qualitative Insights 25 External / Internal Expert Interviews 11

WHAT IMPORTANCE DOES AR-VR HAVE FOR OEMS? 13

OEMS HAVE IDENTIFIED THE POTENTIAL AND ARE RAMPING UP THEIR ACTIVITIES Source: Automotive News, CIO, Innovators Magazine, VRfocus, Haptic.AL (2017) 14

WITH PROJECTED AUTOMOTIVE SPENDING VOLUME IN AR-VR TO RISE TO $12,8BN IN 2021 2017 2021 $0,2bn $12,8bn AUTOMOTIVE SPENDING WILL GROW @ CAGR 182% TO REACH $12,8bn UNTIL 2020 Source: Accenture based on IDC, Gartner, Frost Sullivan (2017) 15

WHAT ARE THE OPPORTUNITIES FOR OEMS IN AR-VR? 16

AR AND VR CREATE BUSINESS VALUE ACROSS THE VALUE CHAIN AND BY BECOMING PART OF THE CAR AREAS OF VALUE CREATION 1 Value Chain 2 Product AR-VR can IMPROVE PERFORMANCE ACROSS ENTIRE VALUE CHAIN from R&D to manufacturing, sales and aftersales AR-VR become part of car and ecosystem CREATING ENHANCED USER INTERACTIONS and helping OEMs to better DIFFERENTIATE THEIR PRODUCT Source: Accenture based on HBR (2017) 17

WIDE RANGE OF AR-VR OPPORTUNITIES ACROSS THE ENTIRE VALUE CHAIN OF OEMS Non-Exhaustive Research & Development Manufacturing & Supply Marketing & Sales Aftersales AR Beta-Prototype Testing with End-Customers Training Virtual Remote Development / Prototyping Smart Glasses Assistance in SCM / Production Augmented Car Configurator Rescue Assist App Self-Driving Car Testing Quality Control by Overlying Target Situation Showcasing Exterior Accessory Parts Augmented Control of Production Line Vision Picking in Logistics Virtual Factory Twin Virtual Car Configurator Virtual Test / Training Drives (inside / outside the car) Virtual Showroom Virtual Technical Handbook (for service / workshop) Augmented Damage Analysis Virtual Remote Control of Production AR VR VR mostly used for TRAINING PURPOSES AND IN REMOTE SETTINGS Source: Accenture (2017) OEMs already working on AR-VR since late 1990s LARGE NUMBER OF USE CASES ALREADY IN PILOT ADVANCEMENTS IN AI opens up more sophisticated use cases, e.g. AR supported error recognition in production 18

BMW AUGMENTED REALITY VISUALIZER ENABLES SHOWROOM EXPERIENCE AT HOME Augmented Car Configurator Description As a simple AR configurator, the BMWi visualizer allows to change basic settings such as color or wheels and put the car into different environments. Benefits The interactive visualizer creates an immersive and engaging customer experience offering diverse future potentials, e.g. in the direction of upselling or aftersales. Source: BMW (2017) 19

THE DISRUPTIVE IMPACT OF AR-VR INTERFACES ON THE CAR AND ITS USAGE LOCATION-BASED VISUALIZATION INTERACTION GAMIFICATION AR SIGNS HOLOGRAM MENU NAVIGATION GEOCACHING NAVIGATION VIRTUAL TECHNICAL HANDBOOK BACKSEAT ENTERTAINMENT Source: Accenture (2017) 22

WAYRAY S AR NAVI PROJECTS HOLOGRAPHIC IMAGERY AND NOTIFICATIONS ON WINDSHIELD Augmented Reality Navigation Description The startup projects a virtual dashboard onto a driver s windshield displaying information such as speed, arrows and other elements to support navigation. Benefits By delivering contextually relevant information to drivers, they are fully informed, are helped to stay better focused leading to an increase in safety. Source: Wayray (2017) 23

WHERE WILL AR-VR HAVE THE BIGGEST IMPACT FOR OEMS? 24

MOST PROMISING USE CASES IN AUTOMOTIVE Cost Reduction Process Optimization Added Customer Value Research & Development Manufacturing & Supply Support Functions / Training Aftersales Marketing & Sales Product Most promising Use Cases Virtual Prototyping Augmented Training Immersive Showrooming Source: Accenture (2017) 25

WHAT IS PREVENTING OEMS FROM UNLEASHING THE FULL POTENTIAL OF AR-VR? 26

TECHNICAL MATURITY OF HW REMAINS MAIN CHALLENGE FOR AUTOMOTIVE OEMS Hardware Maturity Limited processing power and battery life, low resolution, hand-eye tracking, unaesthetic form 77% User Acceptance Constraints with unknown physical impacts and concerns about privacy & aesthetics UI and Experience UI not yet optimized for AR/VR experiences. Mobile-like forms offer poor UI 54% 69% IMMATURE HARDWARE SLOWS DOWN IMPLEMENTATION OF USE CASES Data Management Complex integration of IoT data to enable visualization & interaction Business Case Often unclear ROI no comparable projects 38% What are the top three challenges your organization is facing in the implementation of immersive technologies, n = 25 46% IOT PLATFORMS CAN HELP TO HARNESS DATA Source: Accenture (2017) 27

WHAT DO OEMS HAVE TO DO? ESTABLISH A DEDICATED AR-VR STRATEGY! 28

MAKE AR-VR AN INTEGRAL PART OF YOUR ORGANIZATION Start with creating a DEDICATED UNIT TO ESTABLISH THE INFRASTRUCTURE for AR-VR to flourish AR-VR Unit Business Unit Organization AR-VR Strategy Business Unit Technical Infrastructure Budget / Operations Budget / Operations Governing AR/VR UNIT Defines overall AR-VR strategy and sets priorities Defines technological standards and processes Enables business units Operating BUSINESS UNITS Operates own AR-VR projects Shares overall AR-VR strategy Adheres central technological standards and processes BENEFITS Synergies leveraged Knowledge shared Business Units enabled AR / VR Adoption facilitated Strategic Initiatives prioritized Source: Accenture (2017) 29

CONSIDER WHERE AR-VR CAN BRING MOST VALUE IN YOUR ORGANIZATION 2. SELECT RELEVANT USE CASES Flawless HW, SW and user interaction Financial potential Generate user advantage Cover user needs Qualitative factors 1. PERFORM A VALUE ANALYSIS IDENTIFY KEY INITIATIVES AND THEN 3. PROTOTYPE & TEST Measure impact Collect user feedback Source: Accenture (2017) 30

AR-VR WILL BE DIFFERENTIATING BUT TOO COMPLEX FOR ONE COMPANY ALONE Illustrative CONCEPT MODELLING ENHANCEMENT DEVELOPMENT & UX/UI DESIGN Use cases Storyboard Concept art Texturing Rendering Animations Gesture Recognition Voice Recognition App Development API Development UI / UX Design Customerspecific Inhouse or Partner Sensitive Data No competitive advantage from doing in-house Outsource Highly specific capabilities required Outsource app and design Outsource or Partner Gain first mover advantage Continuous know-how development needed Partner for backend integration Source: Accenture (2017) 31

WITH RIGHT APPROACH, OEMS CAN EXPLOIT FULL VALUE OF IMMERSIVE TECHNOLOGIES BEFORE MAINSTREAM ADOPTION, OEMS NEED TO DEFINE A DEDICATED AR-VR STRATEGY 1 2 3 ORGANISATION IMPLEMENTATION COLLABORATION Make AR a priority Build an governing AR- VR unit to establish the infrastructure Consider where AR-VR can provide most value Identify most valuable use cases Partner up to leverage the full potential of AR-VR Outsource nonconceptual activities Source: Accenture (2017) 32

DISCUSSION Please get in touch with the initiators of this study to discuss: Ricarda Wagner Referent Digitale Transformation, BVDW Phone: +49 30 206218619 E-mail: wagner@bvdw.org Tobias Lucas Manager, Accenture Digital Phone: +49 15117156296 E-mail: tobias.lucas@accenture.com Copyright 2017 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association Copyright between 2017 Accenture Accenture. and All the rights lawful reserved. owners of such trademarks. 33