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Digital capability building: Solving the key transformation bottleneck

Munich, December 2022

Digital capability building: Solving the key transformation bottleneck

Munich, December 2022
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pskilling and reskilling staff is critical for automotive companies as the industry’s transformation accelerates. We identify the obstacles that undermine capability-building programs and how to overcome them.

The irresistible rise of connected, autonomous, shared, and electric (CASE) vehicles, combined with advancing digitization, is re-shaping the automotive industry – but in most auto companies, the knowledge and skills of the workforce are not yet keeping pace with the transformation. Consider these striking numbers drawn from our global automotive industry experience and engagement with clients: 

Author
Dr. Frank Heines

Associate Partner

Transformation in the Automobile industry is in full swing with capability building becoming a key bottleneck for success.

Source: Berylls, Malik

  • More than 50% of CEOs see the lack of key knowledge and skills as a threat to their future business
  • More than 70% of CEOs are concerned about capability gaps in their organization
  • However, companies that continuously invest in upskilling and reskilling retain more than 90% of their employees

Disruption on the scale currently happening in the automotive industry dramatically reduces the half-life of existing knowledge and the value of established skills. Many companies also have ageing workforces, and the shortage of employees with the right skills will only add to this problem. In addition, new market entrants have brought fresh approaches to the industry, that in many cases have the potential to replace existing practices.

New expertise is therefore required, which sometimes nobody in a company currently possesses. And what is true for traditional skills is also true for new ones. They can become rapidly outmoded as the sheer pace of change across the industry turns the capability wheel faster and faster.

REINFORCING THE CAPABILITY BOTTLENECK

Companies cannot stand back and hope these challenges will resolve themselves over time. Instead, the solution is proactive capability building, which addresses how to develop new and existing knowledge and skills within the organization. A lack of action on this front amounts to what we call a capability-building “bottleneck”. 

Most managers we consult agree with this perspective, yet very few have so far succeeded in overcoming a challenge of such vital strategic importance. We have identified the following key issues from our engagement with clients that cause or reinforce a capability-building bottleneck:

  1. Inadequate capability pipelines: Transformation managers often attach too little importance to capability building. As a result, a “systemic pull” on the pipeline is missing across the company, from business operations to HR strategies.
  2. Lack of cutting-edge knowledge: OEMs and suppliers cannot upskill and reskill successfully through purely internal efforts because the new type of knowledge required is rare. As a result, it is dispersed too thinly across the company, or sometimes does not exist at all except via a small number of external experts.
  3. Insufficient time spent on learning: Managing transformation today consistently prevents learning for tomorrow, with the time spent on knowledge and skills training at all levels close to zero at some companies.
  4. Small-scale learning approaches: Imagine 10,000 people being trained in classroom training sessions over a short period of time. This kind of approach will not work in an industry with large-scale learning demands, and which is under increasing time and cost pressure, reinforced by the impact of Covid-19.
  5. Unsuitable learning environments: Digital learning environments currently often fail to meet the high requirements of both the industry and users, in areas such as security, compliance, robustness, usability and attractiveness, where technology is global but still must be customized to meet individual needs.

Several examples illustrate the scale of the capability gap facing the industry. Among suppliers, Bosch plans over the next five years to upskill and reskill up to 80,000 employees.  Meanwhile, ZF Friedrichshafen’s Electrified Powertrain Technology division has successfully launched the largest capability-building initiative in the company’s history as part of its e-mobility transformation.

ZF Friedrichshafen AG – Capability building amid transformation

More than 12,700 managers and employees at ZF Friedrichshafen AG worldwide are learning, networking, and developing themselves, and their teams to master the transformation from combustion engine to e-mobility.

Source: Berylls

Over at Continental, the company wants to enable its transformation by offering training in Industry 4.0, new drive concepts and digitization at its Continental Institute of Technology and Transformation (CITT). 

On the OEM side, software development is one of VW’s focus areas, with around 11,500 employees involved at its Wolfsburg plant. BMW has launched its largest-ever training initiative to deepen and expand the company’s expertise. Not to be outdone, Mercedes-Benz plans to invest more than €1.3bn in Germany alone in employee qualification and development by 2030.

It is a similar story beyond Germany. Stellantis recently announced an initiative to build up the next generation of automotive engineers. Ford has begun to raise overall business capability worldwide across key future and existing disciplines, and General Motors has declared that building a future-ready workforce is a key business priority to make its transformation a reality.

CAPABILITY BUILDING – BUT DIFFERENT

These types of capability-building initiatives by companies regularly exceed previous transformational upskilling and reskilling programs in their scope and scale. It is not just the large numbers of participants and the global ambition that increases complexity and makes these initiatives extraordinary. It is also the fact that they stretch across the whole organization from management to shopfloor.

Any capability-building initiative of this ambition is bound to fail if business divisions do not take the lead in ensuring success. Without their leadership, the initiative and ultimately the transformation will lack guidance, purpose, and role models. In addition, day-to-day business and project management decisions will not be aligned with the initiative’s goals.  

Given the number of disruptive trends impacting the automotive industry, capability building is essentially about safeguarding functional strategies in areas such as management and value creation, thereby securing underlying core services in the long term. Proactive capability building addresses these issues before it becomes clear that existing capabilities cannot meet changing market conditions and customer demands.

Companies need to create a holistic, modular competency model that is regularly updated and incorporates both the strategic perspective of the business and the needs of employees. They should use hypothetical employee profiles that reveal behavioral patterns to meet the requirements of different target groups. The model should combine awareness, upskilling, and reskilling offers to fix basic problems or to bring employees up to the next level.

When it comes to scalability, flexibility, online and offline availability, effectiveness and efficiency, the advantages of digital learning in transformation and change situations outweigh the disadvantages of higher initial costs and longer preparation times before programs can be launched. Live online formats can be a significant part of blended learning and make highly personalized learning journeys possible. The service should also be supported by learning analytics and dashboards to advance overall progress toward the achievement of educational goals.

BRINGING CAPABILITY BUILDING TO LIFE

Transformation of this size can feel like bringing an elephant to a dance. So lastly, here are the key factors that can help secure the ultimate success of a capability-building initiative:

1. Only work with the best of the best

As we have noted, the types of knowledge and skills now required are new to most employees and the organization in general, apart from a few experts. Second-best capabilities will not help a business seize future opportunities and nor will they motivate employees or attract outside talent. It is far better to bring internal and external experts together to create a world-class content, teaching and learning experience.

2. Avoid the priority trap

Overwhelming workloads are a serious issue during business transformation projects. However, there is also the danger of falling into a trap where managers feel forced to decide whether capability building or current business targets are the top priority, and to ask who will benefit if employees are released for upskilling or reskilling programs. Both questions are wrong because over time, solving capability-building bottlenecks benefits the whole company.

3. Focus strongly on activation and engagement

From the outset, it is a mistake to underestimate the importance of ensuring the highest possible engagement rates, an active learning culture and the integration of capabilities and mindsets into daily workplace routines. This effort should start weeks before the initiative’s formal launch with sneak previews, teaser videos, testimonials, games, email communication, and large-scale kick-off events. 

4. Personalize everything

Companies should create learning journeys based on individual readiness checks followed by personal learning recommendations to engage participants and tailor learning to meet their needs. General personal development processes and capability building should be combined in a way that immediately supports participants in their daily business activities.

5. Create a seamless "killer application"

The whole program must be scalable, personalized, available online and offline, continuously extended over-the-air, and have maximum user acceptance, to enable the best possible individual and group learning experience. Enabling participants to use their own devices makes the task far easier to address.

CONCLUSION: TAKING A SYSTEMATIC APPROACH TO CAPABILITY BUILDING

Capability building is a matter of long-term viability for automotive companies. Many OEMs and suppliers in Germany, the rest of Europe and globally have started to address this fundamental challenge, demonstrating an increasing awareness of the urgent need to upskill or reskill their workforces to fill new job profiles. Yet the results of these initiatives are still extremely variable.

As we have noted, too many companies are burdened by inadequate capability pipelines, gaps in their knowledge, insufficient time allocated for upskilling and reskilling, and small-scale learning approaches. All these shortcomings lead to a capability-building bottleneck.

By following our recommendations, companies can largely avoid having to take a trial-and-error approach. Based on our engagement with clients, we believe that the chances of success are dramatically improved by working through the systematic approach we have set out in this paper.

Please contact us to find out more. We look forward to hearing from you.

Dr. Frank Heines
Dr. Frank Heines (1967) joined Berylls Strategy Advisors as Principal in September 2016, and is based at Berylls’ Swiss office. He started his career at the postal automation division of Siemens AG before changing to a medium-sized electrical and electronics company where, in his position as responsible for the technical department, he soon became member of the board. In 2003, he began his consulting career at the Malik Management Zentrum St. Gallen, becoming Partner and member of the group management board in 2007. The focus of his consulting work lies in strategy development, organizational design, productivity increase as well as in integrated organizational development and transformational management.
Economics at the University of Constance, Germany; business administration at the University of Zurich; Ph.D. at the University of St. Gallen, Switzerland.
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