20 Oct 2016
Traffic congestion wastes money, pollutes the air, and raises drivers’ blood pressure. One company is in the fast lane to a solution.by Robert S. BenchleyTopics:
Photography by Brandon Patoc
You think the traffic is bad where you live? Be glad you don’t live in London, where the average driver wastes 101 hours a year—the most of any city in Europe—stuck in traffic, according to the Traffic Scorecard from INRIX, a global provider of real-time transportation information, connected car services, and analytics, founded by Bryan Mistele (MBA 1995). The figures aren’t much better in the United States, where Los Angeles tops the list at 81 hours. And in the rankings of nations, the US, with an overall average of 50 hours, is the most congested country in the world.
The numbers tell the story: There are approximately 1.2 billion vehicles on the road worldwide, and more than 250 million—roughly one in six—are in the US. Each of them spends more time than their drivers would like, either moving v-e-r-y-s-l-o-w-l-y or just plain sitting still. Much of the cause is pure congestion—too many vehicles trying to occupy the same stretch of road at the same time—but accidents, breakdowns, construction, bad weather, and potholes all take their toll, not to mention time that is spent looking for the parking spaces.
“What most people don’t know is about 30 percent of the traffic in most urban areas is caused by people just driving around trying to find parking,” says Mistele, the company’s president and CEO.
All that congestion comes at a high price. Mistele says the Texas Transportation Institute estimates the cost of congestion in the US alone—wasted fuel and lost business included—to be $124 billion annually, or about $2,000 per commuter.
Mistele and INRIX aren’t in the business of delivering bad news, however. They have been trying to do something about traffic congestion since the Kirkland, Washington–based company opened its doors in May 2005. In the intervening years, technological evolution has pushed INRIX’s capabilities far beyond just offering help to frustrated drivers on crowded highways.
“We began as a traffic company, and HBS wrote a case about us back in 2012 with that as the focus,” says Mistele. “Today, we’re a leading provider of a whole range of services—parking, fuel-price data, intermodal routing—centered on the connected car. Although the majority of our data comes directly from consumers—think of it as crowd sourcing of traffic information—we’re not a consumer brand. We’re a B2B data and analytics company, and a lot of our business involves selling the data we gather to governments and corporations.”
In fact, much of what INRIX has achieved is classic disruption, taking over the roadway data gathering and analysis that previously was done by government.
“When we started INRIX, government was the primary collector of traffic data—those tubes across the road that counted cars—but we have far surpassed that,” says Mistele. “Government is now mostly out of the business of collecting traffic data. The result, however, is much better data and coverage at a much lower cost, and government has now become a purchaser, rather than the generator, of roadway data. The early days required a lot of evangelism, but in the past five years, most governments have begun seeing how much more effective we can be.”
Turning government agencies into customers has also helped INRIX become a global company, servicing contracts with more than 200 government agencies in 40 states in the US and 60 countries worldwide. Its overseas business includes offices in a dozen countries, mostly in Europe, as well as in Asia and the Middle East. More than half of INRIX’s 400 employees and its $100 million in revenue are now outside the US.
“When we started selling data to government agencies, most of them didn’t know what to do with it, so now we sell analytics that help them make decisions,” says Mistele. “Most governments are struggling with not having enough funds to repair infrastructure, but less congestion means less wear and tear. We can help in areas like traffic-signal timing, congestion-based pricing on toll roads, and ramp congestion.”
For example, based on analytics supplied by INRIX, Los Angeles reprogrammed traffic signals throughout the entire city and achieved a 5 percent reduction in congestion.
“Cities can make improvements without making a big investment by using data and by being smarter,” says Mistele. “Data by itself doesn’t fix things, but it can tell you where you should invest. You can make data-driven decisions, rather than fund politically driven projects like bridges to nowhere.”
INRIX analytics offer similar benefits to corporate customers, Mistele adds, providing greater efficiencies to company fleet operations, commuting time estimates to realtors and home buyers, hourly traffic patterns to retailers and restaurants, true traffic-volume counts to electronic billboard advertisers, historical and real-time traffic information to insurance underwriters, and more.
Mistele was a Detroit kid, the son of a lawyer, who had an early interest in technology. “When I was in high school, I worked for an electrical engineering firm in Dearborn,” he says. “The entrepreneur who ran it was a role model for me. I decided back then that I wanted to do what he did, work in technology and build a business.”
That desire led Mistele to the University of Michigan, where he earned an undergraduate degree in computer engineering and then took a job at Ford as a computer applications engineer. Three years later, feeling he had the tech part down but needed to know more about actually running a business, he headed for HBS.
Mistele recalls writing down this pearl of wisdom one day in class: In business, you only have two assets—your network and your reputation—so begin early to build the former and protect the latter.
He took the advice to heart and refers to it often in public presentations. As with most successful entrepreneurs, his reputation is pretty much inseparable from that of his company, and Mistele is proud of what he and INRIX have achieved.
“We’re solving one of society’s biggest problems, traffic congestion,” he says.
Mistele’s network has become extensive, and the connections that began forming when he arrived at HBS continue to grow. He cites Lynda Applegate, the Sarofim-Rock Professor of Business Administration and chair of the HBS Executive Education Portfolio for Business Owners and Entrepreneurs, as his most influential professor, and says she plays an important ongoing role as an advisor to INRIX. He has also had many business interactions with classmates, and notes that INRIX’s first three venture capital investors were HBS alumni.
Following HBS, where he ran a job-finding software business from his dorm room, Mistele went to work for Microsoft. Over the next nine years there, he helped to launch four businesses, the last of which focused on automotive telematics, which is known more familiarly as “smart-car” technology. Convinced that the automotive future was going to revolve around connected services, Mistele left Microsoft in order to establish INRIX.
“When we started, there was no connected car, no iPhone, no iPad,” he says, “but we knew things were going to change. Every step along the way, I’ve been surprised by how quickly the industry changed around the ideas we had. Today, the car is a mobile computing platform and the average luxury car has more than 200 sensors collecting information. We pull information from various sensors in real time and create services around it.”
Mistele has speeded up INRIX’s growth through a series of strategic acquisitions. The first, in 2011, was ITIS Holdings, a UK–based competitor, which helped INRIX to extend its global reach. More recently, the company acquired Santa Monica, California–based ParkMe in 2015, which helps consumers find parking and make reservations and mobile payments worldwide, and, earlier this year, Seattle-based OpenCar, an automotive software and services provider.
“To become more horizontally integrated, we’re expanding the range of content we offer and moving from cloud-based data and services to in-vehicle software,” says Mistele. “The majority of carmakers use INRIX data now, and the acquisition of OpenCar enables us to provide a much better user experience—an end-to-end ecosystem for in-car applications. Today, if you want to play Pandora in the car or get advice from Trip Advisor, you have to plug in your phone or use the apps that the carmakers have developed, which are usually years out of date by the time they get to market. Our software allows drivers to download the apps they want from the cloud and run them in their car on their dashboard.”
The capabilities keep getting more sophisticated, too. INRIX’s new Autotelligent driver-assistance platform, which uses machine-learning technology, can provide customized daily routing advice based on prior driving patterns and the driver’s calendar and contact list. It can even let the people you’re meeting know if you’re running late and provide an estimated time of your arrival.
“Your car will get better over time,” says Mistele. “The software won’t be the same forever; you will be able to update it regularly, just as you do with your smart phone or laptop, and your car will learn your behavior and personal preferences over time to improve your driving experience.”
Class of MBA 1995, Section D