How Automotive Companies Are Turning Disruption Into Opportunity In Product Development
Vehicles aren’t the auto industry’s only product anymore. The focus is on expanding to transportation as a service, enhancing consumer experience, and generating growth through innovative business models – creating a need for more intelligent product innovation systems.
For the past 70 to 80 years, the big automotive companies and OEMs have relied on a fairly static product development model built around predictable cycles of consumer demand for new vehicles. Companies would introduce new features and technology through a structured and disciplined process that played out over four to five years from drawing board to showroom floor.
Things have changed. Today, people are thinking of transportation in different ways. While it’s still true that many of us want to buy or lease a car in the same way we always have, new paradigms and technologies are shifting our assumptions about how we move people and goods. You can see it in the change from internal combustion engines to electric vehicles, which could make up five percent of the overall global light-vehicle market by 2020. You can see it in the introduction of more driver-assisted technologies and the emergence of autonomous vehicles. And you can see it in the new business models that reflect a changing mindset about vehicle ownership. Instead of the traditional models of buying, financing, and leasing, we’re seeing options emerge such as ride-sharing and short-term vehicle subscriptions (an estimated 16.3 million new and used vehicles are expected to be part of the vehicle subscription market by 2025). Instead of vehicles being the primary product, companies are turning their focus to consumer experiences and innovative business models. It’s all part of an industry-wide shift toward mobility-as-a-service.
New business models, new ways of working
So, how do these changes affect product development in what we used to know as the auto industry? First, it’s still the industry’s job to make great products that consumers love. Whether they’re buying, leasing, or just riding in a vehicle, people want beautiful, well-performing, and well-functioning products and experiences. In fact, the expectations for those products are higher than ever before – and they’re continually changing. Yesterday’s groundbreaking innovation is today’s me-too feature. And continuous innovation is just part of the picture. Companies still have to maintain the highest standards of safety and quality. At the same time, they’re still dealing with the pressures to maintain manufacturing efficiency, workforce productivity, and profitability. The bottom line is still the bottom line.
This mix of old and new imperatives is putting unprecedented pressure on the industry’s product development teams. They’re scrambling to find ways to rationalize the sometimes-competing requirements from marketing, program planning, manufacturing, and their supply chains. These requirements often require trade-offs and compromises. Based on its research, marketing may want a specific feature. The engineering team has to decide how to translate that idea into a workable reality. Those decisions then affect manufacturing and supply chain schedules.
The industry’s traditional approach to this dynamic was fairly linear. Product marketing would define the vehicle requirements and then give them to engineering, who would then transfer designs to manufacturing. Once built, sales and marketing would take over to sell the vehicle to consumers through established dealer networks.
This approach was built to meet the market’s expectations for new models every few years. Now, the demand cycle is much shorter. Technology changes virtually overnight. Innovation happens faster. Companies have to develop new products on an accelerated timeline to keep pace.
Also, to accommodate these compressed demand cycles in the new era of mobility, the functional entities inside the automotive enterprise are increasingly linked. There’s more interaction and collaboration across departments that were previously functional silos. Product development isn’t the exclusive domain of engineering. It’s now an ongoing give-and-take that draws on every area of the business. In other words, companies aren’t just rethinking their approach to emerging technologies, they’re also rethinking how the enterprise works.
Product development in an intelligent enterprise
How can automotive companies strike a balance between innovation and efficiency on the accelerated timeline of today’s market? One way is to make the enterprise more intelligent by making information more readily available, real-time, and accurate. Several years ago, I was involved in a study with one of the industry’s big OEMs. At the time, the company’s engineers estimated that they spent as much as 70% of their time hunting for information. That meant that they could devote only 30% of their time to doing engineering work. By making accurate information easier to find, the enterprise could free its engineers to do the creative work that is the wellspring of innovation.
Another example that came out of that same study dealt with warranty issues. One company found that 80% of warranty issues involved problems that someone in the company had already solved. After some digging, they would often find that a division in Europe, for example, working on a different vehicle program, would have already encountered and addressed the same challenge. The company had the institutional knowledge it needed, but it couldn’t share it effectively.
It’s important to remember that these companies weren’t dysfunctional or poorly run. They simply lacked the means to share information and collaborate in an intelligent way. Today, we have the tools that can help automotive companies overcome these obstacles.
Winning the war for talent
If a more intelligent enterprise is one prerequisite to successful product development in today’s market, another is the ability to find, attract, and retain the right talent. The new demands on the automotive industry call for new thinking and new skills. That’s why so many automotive companies are focusing on upgrading the employee experience. They don’t want their employees to waste their time, talent, and energy getting tangled up in bureaucratic red tape and hunting information. They want to free them from tedious tasks and administrative busy work. They want to stand out as exciting, dynamic places to build a career. The more intelligent they can make their enterprises, the richer the employee experience will be – and the easier it will be to win the war for the best and brightest. (See my colleague Ellen Sasson’s blog on this topic for more.)
As the industry moves closer toward a real-time model of product development, companies will find that the pressure to do more, do it faster, and do it with less money and fewer resources will grow. Traditional methods and processes are already buckling under the demands of this new era. To keep competing, enterprises will have to become more intelligent in the way they’re structured and how they operate. Internal hierarchies and organizational silos will become less important than seamless collaboration and the free flow of information.
Source: Digitalist Magazine