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How Digital Business Models Pay Off In The Automotive Industry

When it comes to digitalization suppliers such as Tesla are putting the automotive industry worldwide under enormous pressure. Now the industry is following suit with numerous new business models and services. In order to be able to implement them quickly and on a large scale, automobile companies need flexible monetization solutions – otherwise their brave new world will not pay off.

by Henner Heistermann, CEO Nitrobox GmbH

When people talk about digital services, everything sounds so nice and easy. A new world has emerged where consumers have more options and can get everything they want whenever they want. That’s great, but from a corporate perspective digital business models still represent quite a large hurdle when it comes to getting them on the road quickly.

And that is already the keyword, as it is the automotive industry in particular that has to continue to follow suit with digital services – but is at the same time making good progress. However, the digitalization of business models has a very specific characteristic. It doesn’t just mean that I now sell the products online that I previously sold offline, but rather that much more changes as a result of digitalization. In the automotive industry one can see very clearly that the product as a whole is changing because it is suddenly dependent on service and use. After all, car manufacturers are building completely new mobility services. Although the previous product is still being manufactured and put on the market, the business model behind it now is different.

Seat heating on demand

This transformation also exists in other industries; software no longer needs to be purchased – in principle it is rented instead. At Adobe, designers can even rent individual filters to edit images.

Thus I no longer have to pay for the whole software package with all of its individual features.
I think this can be even more fine-grained and the degree of complexity will continue to increase. Automobile manufacturers are constantly coming up with new concepts that work according to the motto “functions on demand”. This can mean that a seat heater, for example, is installed in a vehicle – but I don’t necessarily have to buy it. Instead, it is offered to me based on use. So I might pay a few cents per minute or book a winter package that includes a few hours for the use of seat heating.

More complex payments

In principle, there is no limit to such business models. With e-tron – the first completely electric
Audi – I can even add a performance update. This means that I can subsequently call up more engine power as needed and pay the price for using it to the manufacturer or my employer if it is a company car. This can be interesting if I as an employee wish to have more power for private use on the weekend.

This means that all of a sudden completely different contractual constellations with other parties are involved, while different insurance and tax regulations come into play. Thus relatively small amounts are booked back and forth between several contracting parties in order to make this degree of individualization and convenience possible. The user only has to enter his or her payment data and book the service, but behind this is a highly complex process chain that only makes sense if there is a profit in the end.

And that is a real challenge for car companies. After all, the process costs for billing can be in the mid double-digit range. But if a digital offer only costs twelve euros, then the company will pay extra for every booking.

How to make it profitable

Companies that put digital business models on the market in order to modernize their operations therefore have to rethink their financial processes as well. This challenge led to the establishment of Nitrobox GmbH. In a way, we are a “level editor” for digital business models. Our tools and modules can map the areas of billing, payment and accounting in such a way that new services can be efficiently billed in the shortest possible time and process costs reduced to a minimum. With our solution even micro-transactions can succeed in generating costs of only a few cents. This is necessary in order to be able to run a profitable digital business model. At the same time, we can map complex contractual relationships and, if necessary, handle many thousands of payment processes every day. The Nitrobox solution acts like an additional feature of the respectively existing financial system.

I am convinced that monetization is one of the most important elements in a process environment in general. If this area does not work, then digital business models cannot be operated at all, or at least not efficiently – regardless of the size of the company behind it.

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