Show humility and respect toward the company’s history and values

Successful transformations actively engage with the past and uncover how the company’s ability to change has shaped it to date. The lead questions to be kept in mind are: where have we come from? Why is it like that? Which patterns can be broken and which ones not? Leaders should keep in mind that there are almost always good reasons why company structures are as they are and why people behave like they do.

By recognizing current structures and cultural patterns, and treating them with respect, leaders can evaluate where there is a need for action and where radical changes cannot be initiated overnight.

Convergence of strategy and organizational development are essential

Integrated strategy and organizational development involves combining the conceptual perspective of strategic thinking and acting with the organizational perspective and continuously harmonizing them. This is where we talk about ensuring convergence: the elements of strategy, structure and culture have to be continually examined for consistency and coherence, and the effects of change have to be monitored so that the whole system is optimized rather than only individual elements of it.

When it comes to transformation, the translation of strategy into organizational development such as organizational structure, monitoring systems, IT infrastructure and Human Resources should be examined and adapted just as leadership and culture should. This should be carried out very quickly after the finalization of the strategic target picture, so that a transformation concept for changing the relevant elements can be directly developed and implemented.

All too often, organizations are adapted after too much time has elapsed, and momentum for supporting the transformation cannot be used. Even if the idea of convergence is not new, in practice it is very challenging to implement because it requires a lot of cooperation and alignment between the relevant functions in the organization. There are usually no identifiable organizational tick boxes for elements such as culture and leadership. Setting organizational requirements such as re-interpreting the role of organizational development and investing strategic and organizational functions with creative and joint responsibility has proven to be helpful. This central function oversees convergence during the transformation and works closely with individual functions.

Set and follow your transformation plan consistently and purposefully

The planning component of a transformation is designed to deliver consistent implementation. From the outset, it is essential to convey the transformation plan in a clear and structured way and to set up a firm performance framework which is closely monitored by strict milestone tracking and impact assessment.

Of course, even with the best planning in the world, there is no protection against unfavourable and unforeseen outside conditions, as the events of the past three years have made clear. Leaders must therefore remain extremely alert to changes in the environment. Jim Collins even speaks of a “planning paranoia”, which can be converted into productive action.

The secret is to stick to planned objectives, not underperforming but at the same time not striving for even further-reaching results that go beyond the scope of the current transformation. This is because even if it seems tempting to overdo the speed, scope, and other elements, organizations cannot usually keep this up over the long run and the positive momentum behind the transformation is lost. For the same reason, it is important during the planning phase to scrutinize transformation plans closely and examine their feasibility for the organization.

Create the transformation team from a balanced mix of experienced and younger managers

The core transformation team plays a key role in the success of the overall initiative, and it is essential for top management to choose the members very carefully. In our experience, the ideal team is a mix of experienced managers and younger managers who are keen for change. Experienced managers are usually adept at assessing feasibility, practicability and potential risks. At the same time, there is also a need for adventurous and courageous input from those who see the situation with fresh eyes.

Whereas experienced people in the final stages of their career have little to lose and are in a good position to hand over the new course of action to the next generation, the most dangerous group for the success of the transformation is those who have achieved a degree of seniority and stand to lose it through the changes.

The importance of communicating in an empathic way therefore cannot be underestimated. Conceptual skills are in themselves not sufficient for a successful implementation of a transformation; rather managers are needed who lead staff with empathy and who radiate stability and security in uncertainty.

Make sure that every staff member recognizes their contribution to the transformation

Management needs to not only fully understand and steer the transformation with all its interdependencies; they also have to ensure that all members of staff can make a contribution. Leaders should ensure from the start that people can understand what the transformation purpose means for their role, discover how they can contribute to the purpose, and take ownership of it. Staff should understand why the transformation is the right thing to do, what contribution they are making, and what every individual needs to do to help the transformation take place successfully. If these elements are in place, the chances of a successful transformation will be considerably greater.

Innovation performance hinges on a company’s ability to transition from old to new business models.

New players have the freedom to fully focus on disruptive products for the future mobility ecosystem (green curve), within a culture that supports fast ideation and execution. The challenge for them is to rapidly respond to customer feedback and improve their product’s performance to make it relevant at scale.

Traditional companies, by contrast, have built their success on past disruptive innovations, which they now need to sustain to run their existing business (red curve) while also transforming to meet future customer needs. As a result, they face multiple challenges, including competing projects and resource requirements, developing future skills and building collaborative partnerships.

High market share allows companies to realize lowest costs per unit. However, as the competitive mobility landscape is changing with new products, services and technologies, automotive players need to understand their own cost position relative to their competitors’.

Traditional automobile manufacturers are paragons of productivity in several ways: they have deep engineering and industrial know-how and unrivalled ability to scale up to large production volumes. However, with the increasing need for new capabilities and partnerships along the value chain, they need to find ways to collaborate more closely with suppliers and close existing capability gaps.

In contrast, new players often have a lack of system and process know-how related to the automotive value chain, leading to great challenges to get products ready for series production. However, with greenfield operations set-ups and the flexibility to informally reshuffle resources, they have the opportunity to set up their operations for future productivity leadership.

The right people are at the heart of every successful company. But, with the increasingly high number of employees in the industry looking for new jobs, leaders must be very clear about their value proposition not just to their customers, but to existing and prospective employees alike.

The most competitive new players are already talent magnets. They have a compelling company purpose and culture, are fully focused on core priorities, and have flat team hierarchies. Rewards are high for star performers, who are paid according to their talent and skills, rather than length of service and seniority.

Traditional players have well-known brands and very good reputations as employers, as well as offering stable jobs. The bad news is that traditional companies typically suffer from convoluted corporate structures with multiple management levels, while internal politics often prevents a sharp focus on customer value. At its worst, this leads to directionless and demotivated teams.

Liquidity and cash flow represent a key success factor in operational management, in particular when it comes to the short-term success of the company.

In the past, traditional manufacturers were cash machines during strong periods of growth, able to generate their own liquidity from the business. To some extent this is still true, but they are operating in a market where their expensive infrastructure and high vehicle turnover increase the risk of costly bottlenecks, at a time when the pandemic and the war in Ukraine have severely disrupted supply chains and triggered spiraling inflation.

New players have a different challenge in the current volatile market conditions. They still need to prove that their value proposition will establish a viable business model in the long term. This will be an ever-greater challenge in the face of the looming recession, with more difficult access to capital.

In addition to liquidity, annual profit is an important factor for measuring short-term success. The effects of high market share and economies of scale are particularly evident here.

New players must invest heavily in R&D to build up their operational capacities and supplier networks. At the same time, they have limited turnover and production volumes and no opportunity to realize economies of scale. As a result, their profitability is generally low or they are loss making.

By contrast, traditional players leverage their deep industry experience to develop efficient operations. Their leading market positions and high vehicle volumes strengthen their negotiating power with suppliers and increase their ability to realize economies of scale. At the top end of the market, luxury models generate higher margins and profitability.