That the automotive industry is undergoing unprecedented change is not news. However, as the pace of change continues to intensify and accelerate, companies face a new set of challenges to stay ahead and remain successful.
As everyone in the automotive ecosystem races to bring new and different kinds of talent to the industry, strains are being put on leadership, organizational structures, ownership of new functions and company culture.
The accompanying paper explores these areas as they have grown from an influx of technical talent, particularly a move from hardware and electro-mechanical systems to an electronics and software-dominated world. Independent of the specific functional impetus, there are elements for success that are critical.
- For a company to prosper in today’s automotive industry, the vision, strategy and support for significant change needs to come from the top and become embedded in the organization.
- The best organizations create employee networks, support and awareness that ease integration of new talent into the organization. This often includes direct participation by the CEO and most senior executives for employees at all levels.
- The leadership team must understand the transition to an electronic and software-oriented business does not happen overnight and it requires significant organizational change. Those that have focused on redeployment of mechanically biased resources have found it challenging. Successful companies are willing to see through the transformation to its completion.
Organizational Structure / Ownership:
- When building new capabilities, tension often is created in the existing organizational structure. In this case, there is a particular tension between the inwardly facing capability traditionally embodied by the CIO versus the externally facing digital services represented by the Chief Digital Officer. This also raises a question of who is best positioned to own each piece of the capability and will drive its success.
- Much of the transformation today is being driven by a shift in consumer demand and the transparency of information. Today, the model has become one of consumers demanding features and capability, rather than the industry innovating and pushing technology and features out. Even for suppliers in the industry, the direct consumer pull on technology and user experience has an impact that is changing the way companies need to think about innovation and connecting with customers.
- Despite the amount of talk about the automotive industry not being located where technology and software talent wants to be located, there are more critical elements to success in the changing automotive environment. What is critical is the creation or evolution of a company culture that is inclusive and nimble; a culture that is less hierarchical than many traditional automotive organizations.
- The hierarchy in the industry from OEM to Tier 1 to Tier 2 is fading, and company hierarchy similarly needs to diminish. Employees are looking for an engaging culture where they can solve challenging technical problems; this is something the automotive industry can deliver like no other.
Cultural evolution can be successful only if supported from the top and at all levels of an organization. Evolution is the key word. A long tradition of loyalty and pride need not be undone, but an evolution toward the kind of organization that is required for future success is imperative.
Change and transformation are the new normal in the automotive and mobility worlds. The industry is deep and experienced in technology innovation. It is now being challenged with hierarchal, organizational and cultural innovation, which requires that companies adapt to succeed. Building more connected and diverse organizations that can act nimbly and are open and welcoming to talent coming from outside the industry is critical.
Ownership and the championing of this change needs to start at the top and be supported at every level within the organization. The pace of change will not slow. It is an exciting time in the industry, and those that can make the necessary changes will be rewarded for their tenacity.
Paul Stohr leads the Automotive/Mobility Practice for Russell Reynolds Associates globally.
Graham Ruddle is a core member of the Industrial and Natural Resources Sector for Russell Reynolds Associates.