The automotive industry is faced with unprecedented change, not only in terms of scale but also complexity. The first problem with complex problems is they usually can’t be solved alone. The other problem is recognising the fact you’re faced with a complex problem. Maybe that sounds obvious but you’d be surprised how many companies don’t realise until too late. Surely now is the time to harness the power of true collaboration because, even in a competitive environment, it just might be the difference between thriving and surviving!
If you didn’t recognise the words in the title, they’re from The Wizard of Oz, spoken by Dorothy when she first finds herself transported from her farm to a strange new world. For some, they’ve become associated with stepping outside of what you previously considered normal and having to deal with an unfamiliar and disconcerting new context. Automotive manufacturers, in fact anyone in the automotive value chain, must be feeling a little like that at the moment. Unfortunately, unlike our heroine in the film, returning home isn’t an option. This is the new reality!
In the previous blogs in this series, I’ve discussed the major trends currently reshaping the automotive industry. Environmental legislation is accelerating the phase out of internal combustion engine (ICE) models and necessitating their replacement with electric vehicles (EV). Cars are rapidly evolving from being isolated and analogue to connected and digital, in turn spawning a new industry in automotive Big Data. With the intervention of big tech companies, autonomous vehicles suddenly look like an achievable goal and traditional manufacturers have been forced to double down on their own projects. As if that’s not enough, agile new entrants are disrupting with innovative new business models at a time when new vehicle sales are falling and cost pressures are increasing. Each one of these is a big, expensive challenge in its own right. Unfortunately, they’re all happening at once. The threat landscape for the automotive industry is arguably more aggressive, diverse and complex than ever before!
New Game. New Rules.
Traditionally, the car industry has been ferociously competitive with joint ventures being the exception rather than the rule. Manufacturers were more likely to merge or acquire in order to gain IP than to collaborate or share. Maybe I’m biased, but one of the few examples of open sharing I can think of is the three-point safety seat belt, developed by Volvo in 1959 and made available to other manufacturers for free in the interests of passenger safety, reportedly saving just over a million lives!
Perhaps that mindset is starting to change. In 2017, Ford acquired a majority stake in Argo AI to accelerate its development of autonomous vehicles, a standard playbook move. However, in July 2019, it did something very different and announced a collaborative relationship with Volkswagen, in which VW took an equal equity stake in Argo and Ford paid to get access to VW’s MEB platform for EVs. Their collaboration allowed each to leverage the other’s strength in an area in which they were behind the curve, saving both time and money. It’s a long way off Volvo providing an open patent for seat belts but it’s a start.
I believe the scale and cost of the challenges facing the automotive industry have fundamentally changed the rules of engagement and tomorrow’s winners will be those companies best able to build and run the most effective eco-system with the customer central to everything they do. Whether I’m right or not will play out over the next decade – maybe less. It’ll be a battle between two very different philosophies, one focused on gaining the biggest slice of an existing pie and the other focused on creating the biggest possible pie. “Winner takes all” isn’t necessarily the best strategy when the problems have this many moving parts and the stakes are this high.
Building a Bigger Pie
Autonomous vehicles are probably the nearest match to the Volvo seat belt example in that lives rather than just commercial advantage are at stake. It would be to everyone’s advantage to share testing scenarios and lessons learned. Autonomous driving systems (ADS) could be “taught” to recognise and successfully react to a deeper and broader range of possible circumstances across a more diverse set of driving environments – not just, for example, the relatively benign driving environment offered by places like Phoenix, Arizona. The benefits are easy to imagine – consistent car “behaviour” across brands in a wider range of possible circumstances and a resulting reduction in conditions autonomous cars aren’t programmed for, and hence, can’t deal with. Everybody would win, and by everybody, I mean society as well as manufacturers.
I’m pleased to say someone is trying to make this vision a reality. Launched on 31st March this year, the Safety Pool Initiative, set up by WMG at the University of Warwick and Deepen AI, is “a global database of shared driving scenarios and safety data for autonomous driving systems” (https://www.safetypool.ai ). It’s intended to create common processes and infrastructures with which any manufacturer’s automated driving system can be transparently tested, validated, and certified. Participants can access a database of ADS test scenarios, making their test strategy far richer than anything they could develop alone. The really clever bit is that companies get access to curated scenarios that match the value of their contribution; it’s an incentivised environment in which the more you share, the more you gain. Safety PoolTM is supported by both the World Economic Forum and Innovate UK.
In his book Black Box Thinking, Matthew Syed contrasted the starkly different attitudes towards sharing information, specifically regarding accidents and incidents, in the airline industry and the medical profession. In the former, crashes are investigated and analysed, causes are determined, solutions are defined – and communicated across the industry. In the latter, the tendency is to cover up mistakes, which wastes opportunities to learn and improve. The causes are many and various, not least of all the risk of litigation in the medical profession, but the result is clear – flying becomes ever safer because airlines and airplane manufacturers globally benefit from lessons learned, whereas hospitals and doctors are denied that chance and lives are lost through avoidable repetitions of known mistakes. If the medical profession was able to adopt the airline industry’s sharing philosophy, how many lives could be improved and saved?
The automotive industry is inherently competitive and will remain so, even as the pressures on it increase. However, the challenges currently facing it are so large that surely there is an argument for a more collaborative approach. Like the Ford/VW example, there’s a lot of sense in sharing talent, experience, and capabilities in areas that are too costly for everyone to build from scratch. Like the Volvo example, it also makes sense to share when safety is enhanced, or society as a whole benefits or it allows a particular feature to reach a higher level of maturity quicker.
Understanding the Problem
At the start I said there are two issues with complex problems, the fact that you can rarely solve them alone and recognising you’re faced with one in the first place. Some of you probably nodded but some of you probably wondered “What the hell does he mean by complex problems?”
Here at changemaker we spend a lot of time helping people understand the types of problems they’re facing and how best to solve them. The problem with problems is they’re not all the same. Simple problems have an obvious relationship between cause and effect – if you do X, you get Y. The outcome is obvious to anyone and it’s predictable. Complicated problems require a little more thought. Cause and effect are linked but it’s not an obvious relationship, it takes some analysis, and probably a degree of expertise, to work it out – but once you have, the rest is relatively easy.
Complex problems are the knottiest to solve because cause and effect are so tightly intertwined that the relationship between them only makes sense in hindsight. Just think about that for a minute – you’ve got to do something and see what happens before you can work out why it happens. This is dangerous ground for many businesses because it means designing experiments big enough to give meaningful results but small enough not to bring down the company if they fail. And even if they’re successful on a small scale, it doesn’t necessarily mean the solution will scale. For complex problems there’s usually a network of relationships which have non-linear links, meaning a small change in one area produces a disproportionate impact elsewhere.
What’s the point of explaining this? Well, we all have our preferred way of solving problems and it’s usually defined by a combination of the type of problems we usually deal with and our personal preferences. Everyone’s heard of the expression “When you’re a hammer, the whole world looks like a nail”. No-one likes to think they’re a hammer, but we all are to an extent. It’s human nature; we do what’s worked well for us in the past. If you work in a highly structured, process-driven environment you’ll probably be more used to dealing with simple, “do X, get Y” problems. The danger comes when we fail to recognise we’re not in Kansas anymore. Suddenly, previously winning strategies become less successful or even detrimental.
Collaboration – The New Competitive Advantage?
I believe the automotive industry has travelled over the rainbow and arrived in the middle of a world of complex problems.
Consider electric vehicles for a moment. We not only need to create a car that runs on batteries but also create a charging infrastructure which will affect the current and future urban environment as well as the power generation industry. It’ll also create social impacts with the possibility of inequality as those with drives and garages can charge their cars on cheaper tariffs and even use them as a cost-effective way to power their homes, whilst others living in flats or terraced houses have to use public or commercial facilities. EVs aren’t just a new type of car; they’re a response to climate change and hence sit within the wider context of the clean energy sector. Connected cars are similarly complex problems. Not only will the huge amounts of data they generate need to be protected and regulated, but also that data only becomes valuable when you share it with someone for them to create services from (such as an app to find a car park space or report a pothole).
EVs, connected cars and autonomous cars are not challenges car manufacturers can address alone. They require collaboration with other industries – and they have a social impact necessitating collaboration with governments and regulatory bodies. Now add the desire to make things easy for the consumer, integrating their existing personal preferences and emerging desires (such as we’re seeing with new ownership models). Suddenly Business Design case studies start stretching across industry and sector boundaries and creating competitive solutions quickly becomes something beyond the capabilities of any one organisation.
When no-one can possibly have all of the necessary expertise and resources in-house, collaboration isn’t just a strategy for winning, it’s essential for survival!
Collaboration comes naturally to some companies, less so for others. Sometimes it depends on the industry. Sometimes it depends on the mindset and culture of the company. In either case, it’s a learnable skill and one that delivers competitive advantage, but often it’s easier to learn with the help of a coach who’s trod the path before.
Here at changemaker, we support organisations and individuals in delivering sustainable and lasting change, especially during pivotal times of transformation. Our deep experience in realising sustainable change together with our unique collaborative delivery model allows us to help identify the changes that need making then bring a structured process to change that fully engages your people. This makes change predictable so you can be certain of realising your goals in an increasingly uncertain world.
I’ll be looking to share further thoughts and insights on several other automotive-related topics in the coming months so please continue to look out for further blog posts. As always, if this blog or any of the others has sparked an idea that you’d like to talk about, please get in touch.