First part of the Interview
Dr. Mehl, your study, “The Need for Speed”, contains some warning signs for digital transformation in the car industry – only a minority of respondents believe that their company has the capabilities needed to handle these challenges. Isn’t this a surprising contradiction, given all the flagship digitization projects in the industry?
RM: It may seem that way at first glance. But if you take a second look, there is normally a common denominator for these projects: the digital counterpart in R&D, the smart watch on the production line, or the dealer’s virtual showroom – these are all examples of using individual technologies as anchors for digitization.
These are all very well and good, but the digital transformation of a company encompasses much more – such as customer relationships, the digital skills of staff across all divisions, and of course the ability to continuously develop their business model. And it’s in these essential points that our study shows alarming shortcomings in the automobile industry, compared to other sectors.
“Digitization in the sense of ‘digitize your current business model’
is far too short-sighted.”
Mr. Derakhchan, do you also see the need for catching up, when it comes to making executive appointments in the industry?
MD: There is of course a “gap” between the challenges of digitization and the right expertise. In the case of the automobile industry, you also shouldn’t forget that the complex value creation structures behind the car as a product have developed over almost 100 years, and can’t be reinvented in just a decade. The problems at Tesla and the modest success of “agile market disruptors” such as Borgward, Polestar, and the Apple Car are evidence of this.
But I agree with Dr. Mehl that “Digitization” in the sense of “digitize your current business model” is far too short-sighted. It’s right to make a product and the production process behind it better. But a “business as usual” approach, with new tools that happen to be digital, will not suffice in the medium to long-term. That’s because the GAFA line-up (Google, Apple, Facebook, Amazon) of technology companies, and their Asian counterparts, are very clearly positioning themselves in the direction of mobility services …
RM: … which is the original core business of the automobile industry. This is where I see an urgent need for action, to above all implement the shift from a product-focused to a customer-centric business strategy.
What should executives at automobile manufacturers be focusing on to achieve this?
RM: In general, on two aspects: firstly, understanding the digital customer journey about the vehicle as a product, and then on identifying opportunities for mobility services. How can I delight my customers, beyond the driving experience? Maybe by getting them faster from A to B, also by other modes of transport?
“If you want to hold your own against ‘GAFA’ competitors, you need to use the same asymmetrical weapons that they do.”
Secondly, if you want to hold your own against the ‘GAFA’ competitors that Mr. Derakhchan mentioned, you need to use the same asymmetrical weapons that they wield. This means identifying and occupying all of my customer’s digital networking areas of interest that are engaging over and beyond the vehicle: pay by click when parking and refueling, insurance services according to driving behavior, fleet leasing with blockchain contracts. As an OEM, if you fail to harness these kinds of opportunities, others will certainly do so.
This sounds like an unmanageable plethora of pain points …
RM: Certainly, it’s no walk in the park. But if you’re a manager, whether at a top executive level or on other levels of the hierarchy, you’re not alone when you work for a car maker. It’s worth looking at partners in the existing value creation structures in a new light – suppliers, dealers, after sales, third parties such as insurers, and financial service providers: who can you rapidly construct an eco-system with and what digital tools can you use to appeal to new customers and secure the loyalty of existing customers to the brand? That’s also an asymmetrical weapon that Amazon and the others are so adept with …
MD: What’s more, don’t underestimate the potential within organizations, and that’s certainly the case for OEMs. Of course, there is a similar challenge here: For me, “digital leadership” also means creating smart, networked eco-systems within a company. This is important not just to protect IP (intellectual property), but also to get this IP circulating with cross-functional projects – and it’s exactly such skills that endow global players like Google, Netflix, or Amazon with their much-touted agility. But agility isn’t their invention – it can be implemented with any management team, by breaking up the silo structures of R&D, marketing, purchasing, production, and so on and moving them into a constructive new system – or even better, into a new culture.
But obstructing this is the aspect that you mentioned at the beginning: corporate cultures that have grown over decades, complex value creation structures that can’t be completely reinvented in just a couple of years …
RM: Indeed, many car makers find establishing a matching culture to be a major obstacle in their transformation – in our “Need for Speed” study, this was by far the biggest obstacle mentioned. And yes, these silos and the existing hierarchies, they’re hard wired. They’re not only firmly anchored in the career system, but also in the appraisal and the incentive systems. So change affects fundamental aspects of the organization. Interestingly, it’s also the case that both employees and managers clearly perceive the leadership team as having a responsibility as role models for new ways of working.
MD: But please also bear in mind here that a “digital culture” is not just driven by technology. If you’re a manager and succeed in replacing a workforce management IT system that is perhaps not particularly agile with a Doodle app, you’ll be promoting a “digital spirit” in the company. That’s important for the process-related and operational sides of the business, no question.
But without the other half of the equation, strategic and visionary beliefs and convictions, any cultural change will peter out quickly. In the recent past there were perhaps some misunderstandings here and there – hammocks, free lattes and VR glasses don’t create new cultures. Leaders create new cultures by setting clear targets on the operational side, while also understanding the need to give the team meaning and purpose with their employment – such as the company moving towards being a dedicated mobility services provider, as we talked about earlier. To achieve this, you need managers who develop, articulate, and transform this “purpose” into tangible results.
“Without a strategic, visionary belief,
any cultural change will burn out.”
That sounds logical – but where specifically do changes need to be made?
RM: The starting point is of course different in every company. But generally, I recommend establishing a digital Center of Excellence (CoE) to empower executives to make digital changes – and above all to make the issue and progress visible directly to the board.
The CoE is a digital platform, ensuring that managers can access the skills and specialized knowledge throughout the organization. Ideally, the CoE will be located in a dedicated area of responsibility, such as with a CDO (Chief Digital Officer) and will have its own budget to carry out critical projects that are required by more than one business unit.
This appears to be something quite practical. Are there lessons from other industries for more agile, more flexible corporate organizations?
MD: That reminds me of the consulting industry. It’s rooted in the DNA of consulting to undertake project work on individual problem areas, while not losing the instinct for the big picture. But it’s less important to me that consultants have the advantage of taking an unclouded, outside look at routines that have become entrenched. What’s important is that our work is always measured based on the performance of our projects. We receive project-related targets, are judged based on our ability to drive good results back into the organization, into a performance review, etc. But the foundation is what happens in the project. And applied to the automobile industry, this means: If you have your successes and failures right in front of you, you won’t lose control when it comes to digital transformation.
RM: I share this view. Metaphorically speaking, we as consultants always live in tents and not in palaces. Instead, we put up our tents wherever our projects happen to be. And we bring the skills into these camps that we need for the specific project, from the entire organization. Careers are made in the project, in these camps.
And once the camp is over, the next one will be on the horizon. It’s not important to touch base regularly with all the hierarchy levels at some headquarters. Project performance is what counts. This success model of bringing the right talent together in the projects, whatever their roles may be, is certainly a crucial success factor for digital transformation.
Dr. Rainer Mehl is Executive Vice President of Capgemini Invent and heads its global automotive and mobility business. He is also in charge of consulting for Manufacturing and Life Sciences and is part of Capgemini Invent’s global leadership team. He supports companies confronting digital transformation with focuses on customer centricity, agile organizations, and new business models.
Marcel Ramin Derakhchan is responsible for filling top executive management roles in companies in the business & professional services sector, as well as for software and high-tech companies. His specialty lies in complex search assignments that require an interdisciplinary approach of search, organizational consultancy, and individual coaching.