The launch of Via series is just the beginning. India is a priority for TomTom. Peter-Frans Pauwels, Co-Founder, TomTom, tells us why…
The launch of Via series is just the beginning. India is a priority for TomTom. Peter-Frans Pauwels, Co-Founder, TomTom, tells us why…
1) What was the motivation behind forming Palmtop?
We formed the company in 1991, about 20 years ago. At that time, we saw the opportunity in making software solutions for handheld computers. Handheld computers in those days meant barcode reading and all those things; and we had a lot of solutions for this sector. That’s how we started – we were a software company, doing pretty fine at that time.
In mid-1990s, Personal Digital Assistants (PDAs) became highly successful in the consumer electronics sector. We saw the opportunity to make software for those devices and accordingly switched our business model. This was quite different from what we were doing. Till then, we used to create solutions for various companies based on their requirements, but now we were required to develop software products which would run on PDAs, completely different module. We were also into developing financial applications, travel guides, games, and mapping applications (without GPS). However, we soon realised that 60 to 70 per cent of our revenues was coming from mapping applications. We knew the future lies there. And by year 2000, couple of things that we thought were very important, turned out to be really important for us. There were many problems though. For example, memory cards or SD cards were very expensive. Also, it was not possible to put a lot of information into them. The problem before us was how to put information about the whole country into a card and yet make it affordable.
Thanks to the success of digital photography, prices of SD cards came down and their capacities went up, and suddenly we could put the required info about a country on SD card at an affordable price. The next thing that happened in the world of PDAs was the emergence of coloured PDAs; and the compact iPAQ was one of those devices. It was a landmark device and allowed us to do all kinds of multimedia things. However, the very important development took place in May 2000 when President Clinton signed a bill thereby opening up GPS for commercial use. That led to an integration of GPS into small chips. Here, we saw an opportunity. Already, people wanted to have maps. Navigation did exist at that time and we were fully aware about it but it was very expensive and hard to operate and not really for consumer use. We realised we had an opportunity here, so in 2002, we released our first navigation product which was a piece of software with a map that would fit on a compact iPAQ PDA. It included a GPS receiver. We started selling that and it was an instant runaway success. In 2001, our turnover was about 2 million euros which went to 9 million euros in 2002. We therefore decided to concentrate on navigation business. This was the big success. But after sometime, we realised that it wasn’t yet ready for mass consumer adoption. So in 2004, we launched our first portable navigation device with an inbuilt GPS and having audio capability. We had expected to sell 100 thousand units in the first year, but it was a runaway success and we sold 250 thousand units into the market. In 2002, we had about turnover of 9 million euros. In 2003, software was still the base for PDAs, but our turnover reached 14 million euros. But when we ventured into portable navigation device, our turnover touched 200 million euros. That was a big thing.
What led to the name, TomTom?
In 1990s, PDAs weren’t called PDAs. They were called palmtop computer and we were making software for those computers. Hence, we called ourselves palmtop software. Around the millennium, we got an opportunity to work with Ericsson. That was the time when Ericsson, Nokia and Motorola were promoting wireless internet with a technology called Walk. That technology failed miserably. But at that time, we were excited about it. Ericsson had decided to be big in location-based services and was looking for partners. They ended up with us. We worked with them in building maps for mobile phones. We soon realised that this is going to get global. At that time we were just 15 people. So the first thing that we did hunt for a new name for our company. The name had to be non-descriptive which would work in various languages. We roped in a creative agency which suggested a few names. The top most name was Tom. Although it sounds like a name in English, it’s non-descriptive and works in many languages. While we were deliberating about it, the word TomTom stuck us and we realised that this was the name we were looking for. It has got a nice feeling about it. It has been 10 years now, and the name works very well for us. It does work in many languages also – in fact, if you hear it once, you don’t forget it.
Later on, in a number of countries, especially in Europe, the name of our company became synonym for navigation systems, so people wouldn’t say they have a portable navigation device, they would say they have TomTom.
You have a number of products ranging from navigation devices to software. Can you tell us about them?
First of all, we address four major markets – one is India. What we specifically do is that we deliver portable navigation devices to consumers. That’s what we are very well known for. In this business, we deal directly with drivers. We also deliver integrated navigation systems into the dashboards. We have been very successful in growing that business in Europe. Within two years, we have managed to capture 70 per cent of market share.
Then we also deal with companies who have a fleet of trucks and delivery vans and want to track them and see their location. Just knowing where the trucks are when they are delivering products allows an organisation to optimise its operational fleet and enhance the quality of service to its customers. That business is growing very fast. We operate in North America and Europe.
One of our major operations involves dealing with the massive amount of content that we have. We are one of the two companies in the world who own a global spanning map, and that is where we do a robust business. We have customers ranging from motor vehicles to internet space, to mobile phone sector. We are also working with various governments helping them plan road networks and other activities, for example, we work with US Department of Homeland Security. In the consumer space, we have portable navigation devices. Globally, we also provide navigation for iphones and other smartphones as well.
Also, the maps we have are enhanced with speed data, so we know exactly what is going to be the speed of vehicles for every stretch of road at a certain time of day. You can imagine how important that is for planning a route, especially in congested areas. Another very important service that we have is real-time traffic information service. You would generally find others deliver traffic information that links itself to highways. We go much farther than that – we deliver all sorts of information, underlying major artery, major roads and roads beyond that. We get really detailed traffic information – that’s the major innovation which happens to be very useful for drivers as well. We are very proud about it. Moreover, we allow people to edit our maps and share those changes with others. We have a global community around it and there’s also guarantee that we have maps which are always updated.
As far as India is concerned, we offer Via range, which is a premium product family. Its price starts at Rs 15,000. One thing that we want to do in India is to cater to its market. Today, the market is small – the people who are actually looking at navigation are the ones that are looking at the high-end product; and we want to bring a product for that category of consumers. Our product is very well designed, we have spent a lot of time doing that. We have concentrated on the more advanced feature – the larger screen, bluetooth, hands free calling – the highest end, the 5 inch device also has a voice control where you can speak commands to the device. We wanted to bring all these features to the market along with our new landmark navigation with all the localisation that we have done. So whether you are looking at 4.3 inch device with bluetooth or without bluetooth, 4.5 inch device with bluetooth and voice control – all come with landmark navigation, formal map of India and one year map updates.
HD Traffic forms part of LIVE Services. How do you ensure regular update of traffic information and how frequently is information updated during a day?
As of now, HD Traffic service is not available in India. It requires a wireless connection to the car. We have thus built wireless model into the portable navigation devices as well as integrated systems with utmost manufacturers in Europe and North America, so that as soon as we collect data from the car, we can send it to others. HD Traffic, as I explained, is extremely detailed representation of actual road-time traffic situation. We collect information from a variety of sources and then update it at least 30 times per hour, that is, every two minutes; we issue fresh traffic information.
Why did you decide to acquire Tele Atlas? How has the acquisition strengthened the company?
When we started to interact with drivers using our product, in a way, we made it possible for them to change a map and then share it with all other drivers. And we realised that this is actually editing maps. Another thing that we started to do was collect statistics about the usage of road network from our PNDs. This way, we began to understand how and where people are driving (not on individual basis but collective), what’s their average speed, how traffic direction has changed (a two lane road may have become a four lane road), etc. We began to wonder if we could actually couple this information with real digital base map and do a couple of things like that, we could actually increase the quality of map and bring down the maintenance cost. For us, that was the fundamental thing. How are we ever going to commercialise this capability beyond our own installed base of TomTom PND? And the answer was that we need to bring that capability together with more traditional digital map. This meant bringing those companies and capabilities together. And that’s exactly what we did. We acquired TeleAtlas. It is now deeply integrated into the company, the name also doesn’t exist anymore.
What are your plans for India?
In India, we plan to introduce more products with new features. We will also be looking at traffic in India. These are some of the plans and they are our priority. The first year was about focus – it was about bringing the product to the market, launching the brand and doing this in the most planned possible way which is a challenge in India. But we wanted to be very deliberate in everything we do and that means absolute focus on the product, on the channel, on what we do. Now that the product is launched, and the team has been built, bringing skills into organisation is our priority.
What kind of strategy are you planning to create awareness about it?
For this, you have to put everything in the context of time. At present, the market is nascent – the channel is very much car-accessory driven. If you look at the buying behaviour of people, they generally buy at the time of purchase of a new car. Hence, we need to address these people. That means being visible at outlets like reliance digital and other retail outlets. We are also going to be at a number of high-end car accessory dealers. We are going to concentrate on educating people, provide a lot of information to them. We are in the market and gradually our strategies will evolve. But right now, our complete focus is on the way purchase happens today, on education people and creating a one-on-one relationship with customer.
Getting updated maps is considered to be one of the major problems in emerging markets like India. How has your experience been so far?
The map of India goes through exactly the same process as the map of US – so there’s no map that is good or otherwise. For us, they all are same. We do map making on a global scale. This is our job, we know how to do it, how to collect data and how to pull in different sources to validate the data that we bring. We have got hundreds of operators literally looking at intersections. We have got very competitive maps and very competitive map update cycle. We now release a new version of map every quarter and we will continue to improve upon it. Also, our Map Share technology allows users to do corrections directly on their device and send those corrections to us.
Most of your products operate using GPS system. Are there any plans to amalgamate them with GNSS?
We rely for a GPS system on our suppliers. We work closely with them to ensure that we get chips and other materials which are used in as many satellite systems as possible. We are, in reality, fully dependent on their capabilities but I do see that coming. In a way, we are agnostic with satellites; we just want to make sure that we get the best user experience. And the great news is of course, when we have more satellites around the globe, it’s going to be more powerful, like you are going to find your position in parking garages and so on. It’s going to be exciting times ahead.
Recent reports have suggested a decline in the demand for personal navigation devices (PNDs). In fact, TomTom had anticipated 15-20 per cent fall globally, with the steepest falls in North America. Your comments.
There is a generic change in the market in terms of the size of the PND markets. At the same time, we are being hit by big crashes in the western world – those are market changing forces. The anticipated figure is indeed what we expected to be the change in the market, but the change is taking place at a different rate. But fundamentally, we were expecting it. We have evolved our business to mobil level, whereby we can do with multiple market opportunities – consumer markets, tracking and tracing market, licensing content – we are growing those businesses rapidly. Overall, we have a strategy in place to do it.
I believe that PNDs have a long time to go. But the question is where will navigation, turn-by-turn navigation be, after ten years from now? For me it’s very clear, it will be integrated into the car and every car will have it. It will happen. I believe it’s the best experience to have navigation system integrated into the car. We are already doing that. In future, we might see that the navigation system warns drivers if petrol tank is nearing the empty mark and then aids the driver in quickly locating the nearest petrol station. That’s where it will ultimately go.
There is this ongoing debate over privacy with respect to location data? TomTom too has faced the wrath of it. How do you intend to address this issue?
We indeed experienced it earlier this year. We have dealt with the situation by making sure that the way we license content to certain parties, doesn’t allow for a repeat of the experience. It has never been in our interest to see anything happen with our data, or our customers. That has always been very clear. This was a very unfortunate incident. We have taken the appropriate measures and we are reviewing and improving the measures that we have in place. Also, it has never been possible for anyone to look at our data and trace the individual from whom that data has come. It’s not possible. We are only interested in big statistics because that helps us improve the map and the navigation experience.
How do you envisage the future of navigation business?
We are in a unique and happy position as we have managed to bring all essentials for navigation under one roof. It starts with the map and it starts with all the great content that you can build on that map, as we are surely doing with traffic information and with community based inputs. But then how do you use that map to deliver the optimum navigation experience? This question, of course, keeps us busy on a day-to-day basis. That’s a need that will never go away.
Navigation is here to stay. It’s fundamental to people moving around, fundamental to mankind. It all started a few thousand years ago, when couple of guys got together and scribbled a map. This was followed by invention of compass and so on. It would not be an exaggeration if I say that navigation is a progress. It’s going to be everywhere. We all want to understand what surrounds us, always. We want to understand where we are going, our relative positions from friends and buildings, and things happening around us – it’s just a very fundamental human need.