Tesla’s soaring (possibly overvalued?) stock price, and its continued ability to design and deliver market-leading electric vehicles, raise some serious questions about the structure and culture of the incumbents in the automotive sector. Bosch CEO Volkmar Denner warned this week that we may already be past ‘peak car’ and Volkswagen’s CEO Herbert Diess warned the firm might end up as another Nokia unless it changes. So, what is it about the way these firms are managed that, with all their design, engineering and production excellence, they have struggled to come up with a mass market rival to the Tesla range in the eight years since the Model S was first launched?
Earlier this week, Tom Peters tweeted one of his favourite quotes from Gary Hamel:
“The bottleneck is at the top of the bottle. Where are you likely to find people with the least diversity of experience, the largest investment in the past, and the greatest reverence for industry dogma? At the top.”
We have done some interesting and rewarding work with leading automotive firms in Europe, and whilst they are genuinely interested in agility and more digital collaboration, their addiction to bureaucratic management and planning continues to result in both poor strategic decision making, such as pursuing the long-term dreams of autonomous driving and mobility-as-a-service over the short-term imperative of producing good, affordable electric vehicles; but also slow execution, because of their vertically-divided structures and top-down culture.
There is often no shortage of skill, talent and innovative potential in these organisations, and writing about this challenge a couple of years ago, I felt the tortoise could still beat the hare in the long run; but I think there are now real questions about whether their management culture can adapt quickly enough.
Digitisation should not just be applied only to achieve incremental improvements of existing processes and structures. That is like chasing cleaner diesel or hybrids (PHEV) – transitional at best. We need to grow new natively-digital and connected structures (BEVs, not PHEVs, in the language of electric vehicles) from the isolated green shoots of new ways of working that have emerged inside the old structures over the past few years.
Pursuing organisational digital transformation promises to significantly reduce overheads whilst enabling greater agility across the organisation by taking management and process costs out of large enterprises, promoting automation and decentralised working, and using technology to coordinate value creation rather than manual management methods. This need not imply a loss of control or quality.
Embodying rules, standards and strategic goals in automated services, platforms and algorithms is just as effective (if not more so) than current methods.
This is not a simple choice between rigid hierarchies and flat, self-managed structures – each organisation needs its own model that mixes centralised and decentralised approaches. Besides, Tesla and Apple are proof that a basic hierarchical template based on functional structures, minimal bureaucracy and strongly aligned product groupings – with an obsessive customer-centric culture – can produce success in the digital age; and, if anything, they also demonstrate the power of focused visionary leaders, rather than highly political and internally-focused management boards.
Apple have navigated the shift from product to product + services, Microsoft from Windows to cloud. Can the automotive firms break out of their management orthodoxies to achieve something similar? Let’s hope so, if we care about jobs and the transition to a carbon neutral future.