In 2016, BMW celebrated its 100th anniversary. With changes in digital technology, lifestyles, and regulatory requirements, the car industry faces the challenge that people of the future may no longer view individually owned cars as their main way to move around. As a global premium brand and market leader, BMW aims to be at the forefront of these technology-driven revolutions. It has positioned itself as a brand for safe and sustainable individual mobility of premium quality. Yet, where should BMW set its priorities and allocate its resources—especially research and development (R&D) investments—to lead the industry in the digital age? Who should it partner with, and for which initiatives?

One Hundred Years Young

Bayerische Motoren Werke (BMW) was founded in 1916 as an aircraft engine manufacturer. In 1928, it entered the automotive industry by acquiring Fahrzeugfabrik Eisenach.
In 1961, it entered the modern automotive industry with the BMW 1500. Since the year 2000, BMW has positioned itself as a global premium car brand. By 2016, BMW’s product portfolio covers the BMW, Mini, and Rolls-Royce brands. Mini is an icon with British roots in the premium small car segment, whereas Rolls-Royce is an ultraluxury brand with its own 110 years of history. The BMW brand serves a broad range of premium customers, including BMW-M for high performance vehicles with the flair of motorsport and BMW-i for energy-efficient cars with electrical drivetrains and lightweight construction.

The BMW Group operates in more than 150 countries, employing 130,000 people worldwide. BMW’s car sales network consists of 3,310 BMW, 1,550 MINI, and 140 Rolls-
Royce car dealerships. Its research and innovation network spans 13 locations in five countries, whereas its production network comprises 30 locations in 14 countries. At its historical Munich location, BMW produces the BMW 3 and BMW 4 series, as well as diesel and petrol engines. The most modern plants are in Leipzig (Saxony, Germany), Spartanburg (South Carolina, USA), and Shenyang (Liaoning, China). Its largest factory in Spartanburg produces sport-utility vehicles (SUVs) for global markets. In recent years, BMW has become the largest automobile exporter in the United States, exporting 70% of its cars made in Spartanburg and generating US export revenues of $10 billion every year.

BMW Group sales reached 2.46 million vehicles in 2017, compared to 2.29 million sold by its archrival Mercedes- Benz and 1.88 million by Audi. BMW’s global revenue grew 10% in 2017 to $12 billion with an EBT margin of 10.8%. Of revenues, about 6.2% were invested in R&D.

In 2015, BMW updated its strategy with a new vision statement: “We are Number ONE. We inspire people on the move. We shape tomorrow’s individual premium mobility.” BMW aimed to transform from an automobile manufacturer to a mobility service provider by exploiting opportunities created by the Internet of Things (IoT), digitalization, and new energy vehicles.

Innovations in Mobility

Rapid advances in technology, especially the use of big data and online connectivity, are creating new opportunities for changing how people interact with their cars. Yet, the bright new world of connectivity and artificial intelligence also brings the prospect of convergence across industries. Critical new technologies are developed not only by car brands, but also by technology companies like Google, Apple, Alibaba, and Baidu; by suppliers like Bosch, Continental, and Denso; and by start-ups like Tesla, Borgvard, and Neo.
Control over future technologies and platforms entailed the possibility of major shifts in bargaining power and profit potential in the car industry.

Connected Cars

New forms of data exchange between vehicles, drivers, and their environment open opportunities for new types of carrelated services. For example, BMW offers ConnectedDrive, a package of intelligent technologies that integrates driverassistance systems enhancing comfort and safety functions with infotainment and mobility products. Connected cars provide drivers not only with more opportunities for in-car entertainment, but also up-to-date information on shops and services available in the vicinity. Moreover, connecting the car with the manufacturer’s server hub enables real-time performance diagnostics and hence improved maintenance and performance. Car-to-car connections provide, for example, information on road congestion to support route planning.
Connectivity-based services also enhance drivers’ experience after they leave the car. For example, ParkNow, an app and web-based service, not only makes the parking space situation in a city more transparent, but also allows users to book their parking space in advance and then guide them to their selected spot. In addition, Connected-
Drive uses an intermodal routing service to find and book public transport or reserve bicycles from Call a Bike—a bike rental system in Germany. In this way, BMW contributes towards increasing intermodal mobility in cities.

New Energy Vehicles

Environmental regulation and new technologies push the development of cars with engines other than the traditional combustion engine. BMW launched its first fully electric car, the BMW i3, in 2013 followed by the hybrid BMW i8 in 2014.
These models with new standards for energy efficiency through lightweight construction use new materials such as carbon fiber and new battery technology. Innovations developed for the i series are gradually transferred to other car series. By 2017, several BMW models as well as the MINI Cooper Countryman were available in an electrified version, and sales of electrified cars reached 100,000 units.
However, uptake of electrical cars in Germany has been slow. A critical barrier to the adoption of electrical cars was the charging infrastructure as drivers want to be sure they can recharge their car anytime anywhere. BMW aims to overcome this bottleneck with its 360° ELECTRIC service package, which includes recharging both at home with the BMW-i Wallbox and at 38,000 public charging points worldwide. The service also helps to install charging points at their home. Globally, pressures to develop new energy vehicles have arisen especially in China, where regulators require all major car makers to sell a substantive share of the cars as new energy vehicles.

Autonomous Driving

Driver-assistance systems already play an important role in the premium segment. Using a variety of sensors, they observe what is happening on the road in order to warn and support drivers. BMW’s personalized digital driving assistance uses state-of-the-art sensor systems to provide early warnings, speed control, and assisted driving on congested roads. For example, the Driving Assistant Plus is a steering and lanecontrol assistant that also enables remote-controlled parking.
The lane-control assistant with side-collision protection not only ensures that cars do not leave their lane, but also actively controls the steering wheel to avoid accidents caused by vehicles approaching from the side.
In 2016, BMW announced a new collaboration with two leading technology companies to deliver fully self-driving vehicles by 2021. The partnership with Intel and the Israeli computer vision company Mobileye aimed to create an open platform for the next generation of vehicles. The objective was to develop the “iNEXT” as a basis for future fleets of fully autonomous vehicles for both highways and urban environments. However, BMW predicted that steering wheels and pedals would remain in the fully self-driving vehicle in case the driver wanted to be in control. CEO Harald Krüger announced this breakthrough agreement:
“With this technological leap forward, we are offering our customers a whole new level of sheer driving pleasure, whilst pioneering new concepts for premium mobility.”
A critical technology for automated driving and other connected car services is highly detailed and up-to-date maps. Thus, in 2015, BMW teamed up with Audi and Daimler to acquire from Nokia the map service HERE, which provides maps and location-based data for almost 200 countries in more than 150 languages. They aimed to develop HERE as an independent platform for the automotive industry that is accessible beyond the industry. The combination of high-accuracy maps and data from the vehicle’s environment are essential for many of the services envisaged to enhance diving comfort, and autonomous driving in particular. To broaden the shareholder base, additional investors, including Intel, Bosch, and Continental, joined HERE in 2017.

Urban Mobility Systems

BMW anticipates that the ways people use cars will change fundamentally over the next decade, especially in urban areas. Individual car ownership will no longer be the norm but will be replaced by business models offering temporary use of cars. Anticipating these trends, BMW partnered with car rental company Sixt to create a joint venture to offer a car-sharing service branded as DriveNow. The service provided shared use of BMW cars, including electric vehicles. By September 2016, DriveNow had a total of 700,000 customers worldwide, more than half of which were in Germany. Since 2015, DriveNow’s car-sharing fleets include the BMW i3—including a lead project in Copenhagen, Denmark, with 400 BMW-i. In 2018, BMW pools its ride-sharing operation with Daimler’s in a mobility services joint venture.
BMW also established a research center for urban mobility. This interdisciplinary team has the task of working with cities and local stakeholders to develop and promote solution for urban mobility. New business concepts are to use cars more efficiently by applying new digital technologies and by partnering with local authorities and complementary service providers.

Digitalization of Operations

Digital technologies also offer opportunities to revolutionize production processes. In particular, new technologies help to produce more flexibly and efficiently and thus respond more individually to customers. IT-supported technologies can enhance complex workflows by using automated data collection and analysis, flexible robot systems, intelligent tools for staff, and production simulations. Oliver Zipse, a board member with responsibility for production, argued: Digitalization gives us new leeway and greater efficiency in some processes, and this provides a sustainable benefit to our workforce. In the future, people in production will be creators of their work environment to an even greater extent than they are today. Plus, they benefit from the declining share of physically strenuous tasks.
Automated data analysis enables major improvements in product quality and operational efficiency. Especially in parts provision and component production processes, connected and automated data provide transparency and safety by recording the flow of goods and providing specific information about the quality of each part. Fully integrated data management helps optimize logistics and production processes. For instance, data of any individual screw bonding process can be automatically assessed by comparing them to standard process curves to identify potential faults.
Any deviations from the standard can then be remedied immediately before affecting the production process.

Human Robot Co-working

New generation robots are able to interact directly with humans. Accident risk traditionally associated with workers operating in the vicinity of robots can be eliminated using lightweight designs and sensors that recognize the actions of humans. Thus, no more safety fences are needed.

The new robots in particular reduce the strain on workers arising from physically demanding and nonergonomic tasks. Lightweight robots, thus, ensure the same high level of quality throughout, especially for repetitive and tedious tasks. Since 2013, BMW has been using lightweight robots for a variety of tasks, such as fixing the sound insulation to the inside of the doors under precise and steady high pressure or applying adhesive to windscreens. Lightweight robots are integrated into regular production at the plants in Germany (Regensburg, Dingolfing, and Leipzig) and the United States (Spartanburg).

Intelligent tools also directly support staff in carrying out their tasks and simplifying complex processes. In a pilot project, BMW’s Munich and Leipzig plants are testing smartwatches that alert workers when a car with special requirements is approaching on the production line. A display light and vibration alarm informs workers of the next process step required—for instance, a different number of screws needs to be fitted. As another innovation, in the Wackersdorf plant an autonomous guided vehicle (AGV) moves parts weighing up to half a ton in the supply logistics hall. Equipped with a wireless transmitter and a digital map, the AGV can find its own way through the complex system of halls. Built-in sensors recognize possible obstacles and stop the AGV if necessary.

Additive Manufacturing

BMW’s Rapid Technologies Centre produced the first prototype parts by additive manufacturing in 1991. This technology, popularly known as 3D printing, is especially useful for components that are both highly customized and complex. It is less effective for producing large volumes of standardized parts where scale economies are important.
For instance, more than 10,000 additively manufactured parts are built into every Rolls-Royce Phantom.
Replacements parts for historical cars are produced with a batch size of one to serve specific maintenance requests. Another important application for 3D printing is new vehicle development, where prototypes can now be built much faster and more cost efficiently. Udo Hänle, Head of Production Strategy, explains:

Additive technologies will be one of the main production methods of the future for the BMW Group—with promising potential. The integration of additively manufactured components into Rolls-Royce series production is another important milestone for us on the road to using this method on a large-scale.

Outlook In view of technological disruptions on many fronts, BMW is facing challenging decisions on how to invest in the future. Standing still is not an option. With limited financial and human resources (compared to high-volume competitors such as Toyota, VW, and General Motors), BMW faces the key challenge of how to set priorities and how to partner with others to develop capabilities and business models for human mobility in the 21st century.

Case Discussion Questions

1. What are BMW’s key resources and capabilities?

2. How has BMW been able to maintain and extend these resources and capabilities for more than 100 years?

3. What are the main competitive threats for BMW in 2016?

4. How do you propose to address these competitive threats?