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ZF focuses on system solutions based on data

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Tags: Connectivity
Interview with Gahl Berkooz, Vice President of Data Monetization and Venture Acceleration at ZF
Susanne Szarowski, November 12, 2020
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Susanne Szarowski has been in corporate communications at ZF for ten years. As a member of the editorial team, she is responsible for digitization and software.
The sale of data solutions generates new business for ZF and provides customers with additional benefits. How this works, explains Dr. Gahl Berkooz, VP Data Monetization and Venture Acceleration.

Dr. Berkooz, what is data monetization and how do you turn data into money?

Dr. Berkooz, what is data monetization and how do you turn data into money?
For ZF, data monetization is all about looking at data that is produced by systems we sell to OEMs and looking how to use the data in new and innovative ways to develop business solutions in partnership with our customers. Our target is to provide information derived from the data to the OEM who will make additional revenue. This will also result in incorporating more ZF systems into the vehicles. ZF will also be able to make additional revenue from these systems.
Drives data monetization at ZF: Dr. Gahl Berkooz, Vice President of Data Monetization and Venture Acceleration.

What are the challenges?

What are the challenges?
The major challenge is to identify potential business cases. We have been able to develop cases for the data of our ZF Ball Joint Sensor – a chassis component – like road condition monitoring, predictive maintenance, impact detection and load monitoring for fleet vehicles. We are developing additional use cases for ADAS, brake system, and transmission data. Our goal is for every ZF system to have a Data Monetization opportunity, making it more valuable both to ZF and to the OEM.
ZF Ball Joint Sensor

How can we do that?

How can we do that?
Let’s take the Ball Joint for example. By incorporating the ZF Ball Joint sensor into the vehicle and using the ZF data monetization algorithms, the OEM can now provide new solutions to their costumers enabled by ZF. The OEM can make more money from those solutions and ZF can also benefit from that incremental revenue.
In the original use, the ZF Ball Joint Sensor enables better chassis control; in the extended-use case, it offers options for load and road monitoring and predictive maintenance.

The data monetization approach is that data collected by components can also be used. With the algorithms, AI also comes into play. Can you explain this connection to us in more detail?

The data monetization approach is that data collected by components can also be used. With the algorithms, AI also comes into play. Can you explain this connection to us in more detail?
There are two main steps in this process. One is identifying the business opportunities. That’s done through our monetization process which looks into different business problems out there and relating it to data that is available from the components. Then, there is the step of developing the specific algorithm that takes the data and translates it into what the condition of the road is. For that, we use a variety of algorithmic techniques including AI when appropriate.

Specific business models generated from the collection and sale of data are not necessarily a new concept. But is it new to many in mobility or automotive industry?

Specific business models generated from the collection and sale of data are not necessarily a new concept. But is it new to many in mobility or automotive industry?
It is not new in the automotive industry but there are actually new business models associated with it. As an example, the OEM can buy the Ball Joint Sensor from ZF and develop all the algorithms to use the data by themselves. This is the traditional model. What’s new is that we have in the future two more potential models: One is a licensing model. The OEM can license ZF’s IP or ZF’s algorithms, run them in their environment and derive the business solutions from the data to sell them. The other is a service model where the OEM transmits the data to ZF who runs the algorithms, sells the business solutions and splits the revenue with the OEM.
The OEM can buy the Ball Joint Sensor from ZF and develop all the algorithms to use the data by themselves or ZF sells the business solutions and splits the revenue with the OEM.

Which specific business models are derived from this for ZF?

Which specific business models are derived from this for ZF?
What’s unique about ZF’s approach is that we don’t sell data. We sell solutions based on data. And there are the two business models as we discussed: One is an IP software licensing model and the other is a digital service model.

The OEMs are close to the customer and know their needs. However, the manufacturers need the data from the suppliers. What are the advantages and disadvantages of being a supplier regarding data monetization?

The OEMs are close to the customer and know their needs. However, the manufacturers need the data from the suppliers. What are the advantages and disadvantages of being a supplier regarding data monetization?
The supplier understands the data from its systems much better than the OEM. Let’s look at the road condition monitoring algorithm of the ZF Ball Joint Sensor again: It’s much more economically efficient for ZF to develop and validate this algorithm once and license it to the OEM than each OEM developing its own road condition monitoring algorithm. Furthermore, some of the new customer for the data are not the traditional OEM customers anymore, and in this case ZF actually has an advantage in accessing these customers because we understand that data and algorithm better, and can represent a larger volume of vehicles.

What are the next steps?

What are the next steps?
Overall ZF’s strategy is to enable data monetization over its entire product portfolio. That will make the systems more competitive because they will be smarter. Our target is to become the strongest partner of all the tier-1 suppliers to OEMs when it comes to data monetization. This provides both a boost to our core business because it will make our components more competitive and it will provide us more direct revenue from data monetization.

What are our competitors doing in the area of data monetization?

What are our competitors doing in the area of data monetization?
When it comes to ZF systems they are not ahead of us because nobody understands our systems better than us. And we can monetize the data for our systems. We also have the advantage of partnerships like those with Microsoft. Some of our competitors decided to build stand-alone platforms all by themselves. We avoided that and focused instead on the algorithms and the business problems, and partnerships with market leaders for platforms. We have been very efficient in our focus on maximizing value and minimizing costs.

Which countries are already creating the right framework conditions and are pioneers?

Which countries are already creating the right framework conditions and are pioneers?
In Europe, there is a lot of government-driven initiatives for making data available to suppliers for monetization. In the US, the OEMs are very active in marketing their data capabilities. But all in all, it is early days for data monetization in the automotive industry as a whole. There are no major revenue streams at this point. So, it remains to be seen which approach works better – the centralized data exchanges approach in Europe or the OEM driven approach in the United States.

What are the next steps for ZF and what’s the time horizon?

What are the next steps for ZF and what’s the time horizon?
We started during this year with one customer to go over the portfolio and the capabilities and to establish joint roadmaps for data monetization and we will be expanding the numbers of customers we work with in 2021.