6 minute read 1 Jun 2017

Four themes to help automotive companies focus on the future

6 minute read 1 Jun 2017

For automotive companies, the road map for success is centered on strategies built around purpose, agility, talent and change management.

The Fourth Industrial Revolution — encompassing technologies such as robotics, machine learning and autonomous vehicles — represents an existential threat to companies in every industry. For automotive incumbents, the challenge is to move beyond traditional business models as the industry changes at warp speed, positioning themselves as providers of mobility instead of manufacturers.

Original equipment manufacturers (OEMs) have been reluctant to take the lead into innovative areas that may cause them to have to face difficult choices. This is mainly because it is hard to anticipate the way the markets will change in today’s volatile environment but also because automotive incumbents are not set up to deal with exponential growth in new business models.

As OEMs and suppliers focus on the future of mobility, they need to prepare for this change at a global scale, managing their customer and employee perceptions in the process.

Our research and survey of C-suite executives of automotive companies, academics and other industry experts revealed a number of themes that are integral to the industry transformation. With these drivers in mind, and following a broad review of successful organizations, we have set out to map the journey toward becoming the future enterprise.

Six trends to know

There are many drivers pointing towards the need to transform from product to customer centricity:

  • Battling to own relationships: Who owns the relationship with customers — and gains their attention, revenue and data? This has traditionally been a question for manufacturers and dealerships, but new entrants have joined the chase.
  • Digitalization across the value chain: Owning the customer also means getting to leverage customer and vehicle data, used to generate new monetizing streams, create customer initiatives, improve efficiency and more. But there are cyber risks and privacy issues.
  • Securing resources for business continuity: In this disruptive era, vital strategic resources aren’t limited to hard assets such as factories, materials, dealerships and capital. Intangibles of talent, knowledge and intellectual property and the ability to adapt it are also crucial.
  • Diverse sources of unpredictability: Having a presence in most major markets forces industry players to face unpredictability: social and demographic forces, economic uncertainty, geopolitical instability, shifting national priorities, protectionism and more.
  • Unprecedented scrutiny: Pressure from regulators, activist investors, advocacy groups and the public continues to grow, straining an industry already struggling to cope with transformation. Companies across the ecosystem also must provide more transparency on their use of ethical business practices while delivering higher returns on capital.
  • Accelerated pace of disruptive competition and innovation: Most of the leading new entrants in the automotive industry aren’t manufacturers — they’re technology companies and mobility service providers. This means a new type and intensity of competition that is disrupting traditional business. Incumbents are forced to run faster to stay in place.

The four cornerstones of responsive companies

These themes, which are not exclusive to the automotive industry, are being addressed skillfully by a different kind of emerging organization. These are organizations that are responding well to the pace of change in their environments and are successful at mobilizing early, implementing quickly and being agile and adaptive. Such companies are fueled by four themes.

1. Purpose

Our research shows that there is a type of company that is doing better than the rest in thriving in today’s uncertain times: ones that embrace purpose and fully align all they do in order to pursue it. These organizations, where purpose becomes a driver of strategy and decision-making, report a greater ability to drive successful innovation and ongoing transformation, as well as revenue growth.

Within automotive, high-profile issues concerning quality control and compliance with environmental, trade and safety regulations have negatively affected customers’ perception of the industry. Purpose plays a prominent role in reshaping customer attitudes.

Manufacturers and suppliers have an opportunity to restore trust by reorganizing themselves through purpose-led initiatives such as promoting sustainability and, in the process, creating next-generation vehicles and mobility services — positively impacting the communities in which they live.

The key to deriving value from purpose is how well integrated it is within an organization. Integrating purpose brings benefits, but only talking about purpose could expose a company to risk.

An expansive, socially engaged definition of purpose has emerged, increasingly at today’s most admired companies. This broad understanding of corporate purpose includes bringing value to customers and benefiting employees, both of which reflect a company with broader human-centric concerns than simply maximizing shareholder value.

2. Agility — the two-speed organization

Newly affordable technologies, and how they could be applied to an ever-growing set of use cases across the industrial world, caught many industrial companies by surprise. While much has been written about the digital transformation of the industry, few automotive companies have fully undertaken the daunting work of actually transforming.

Successful organizations have shifted focus from defending their core business and are moving strongly into a growth orientation by investing in new capabilities and pursuing new business models. These companies use their stable core as cash flow backbone, invest significantly on new business models and consciously address how to be flexible in the market.

This requires building a platform and enabling new business by focusing on identifying and developing the new competencies necessary to effectively lead in the digital age. This can include techniques like ways of decision-making and co-creation, but also ranges to entrepreneurial spirit and purpose on an individual level, enabled by facilitated coaching and new ways of learning.

3. Employee experience

The expectations of consumers and employees are higher than ever. Those organizations that are focused on creating a compelling employee experience are more likely to be successful in securing the right talent.

In this context, the employee experience should be defined broadly and would take into account the physical environment our employees work in, along with the tools and technologies that enable their productivity, to achieve their best at work. Seven areas can improve the employee experience:

  • Teaming ability
  • Digital leadership
  • Collective purpose
  • Physical environment
  • Performance and rewards
  • Technology experience
  • Mind clarity
4. Change

Change management, far beyond the established lean or quality optimization techniques, must become part of the automotive organization’s DNA for the organizational transformation to succeed. Automotive companies should view change management as an ongoing capability.

So far, change has been entrenched as a “freeze or unfreeze model.” Change initiatives have traditionally been conceived to manage a financial crisis, a downturn or other specific circumstances. In the future, areas of faster and slower change need to be defined within an organization.

Similar to how we as humans benefit from having both the logical and imaginative sides of our brain, organizations need to harness the powerful combination of analytic and humanistic perspectives to create change. Humanistic approaches to change recognize that people are at the center of change — without people changing their behavior, change is not sustainable.

A future where we all profit

Of course, none of these suggestions are necessarily quick or simple fixes to the scaling challenges that the industry faces.

However, they may be a good starting point to creating the transition to a brighter future where OEMs, suppliers and other parties in the automotive ecosystem work purposefully to create sustainable solutions for consumers around the world.

Summary

Successful organizations have shifted focus from defending their core business and are moving strongly into investing in new capabilities and pursuing new business models, while never losing sight of purpose.

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