Heavy Metal & Unicorns (aka Digital Transformation in the Automotive Industry)

This week I attended and presented at the Advanced Propulsion Centre's (#APCUK) event #road2nowhere, hosted at The Crystal in London. This event brought together a selection of industry experts, policy directors, FT Editors, and change leaders to explore what a post Brexit UK could look like for the automotive industry, and future technologies that can have a positive impact on climate change. Naturally, with all these subjects there are plenty of challenges!

To kick things off, we heard some of the statistics for the UK automotive sector, and on the face of things, its in relatively good shape. With circa ￡86Bn generated last year, over 850,000 jobs of which over 170,000 are in the manufacturing space, over 30 OEMs building vehicles and a supply chain of around 2500 suppliers. The numbers are pretty strong, although we are more reliant on import in the supply chain and exports on sales. The downside, we produced and registered less vehicles last year than the previous year, an issue that appears to be factored on both Brexit concerns and the negative press on diesel engines. There is an increase in alternative fuel vehicle sales, but (and as we will get to in a moment) potentially not increasing quick enough. The UK is behind on battery powered vehicle production, but our technology is strong. We now need to ensure we stay head and shoulders above the crowd to ensure we don't lose out on the market when compared with international, cheaper competition. Formats such as Formula-E and Roborace are continuing to be innovation platforms to help drive engineering excellence and reducing costs into these key technologies.

We then heard some worrying numbers regarding global climate change levels, something that the automotive industry is clearly focussed on. The numbers agreed upon as part of the Paris agreements, give the world a quota of emissions and for that quota to be reached in 2100. However, under current emissions rates, that 1.5 degree change in global temperature and therefore the quota set, would be exhausted in about 13.5yrs from now. This is a huge challenge for all industries, especially when at a time transportation as a whole is increasing annually. Policy is ambitious, the technology is not where it should be, and we have some serious gaps if we are to achieve anywhere near our promises.

When looking at Brexit impact on the auto industry, it's clear that a no-deal situation will have a direct and very immediate impact on operations. Out of the about 1.9M vehicles produced last year, around 1.6M of those were exported. Adding customs barriers, charges, delays etc is expected to increase costs to industry by around 10%. The economics editor for The FT regaled us with his personal memory of buying a vehicle on the continent and shipping back to the UK in the early 80's. Not a straightforward process, and one that requires proof upon proof of design to certain standards, build quality, emissions levels etc. There is a real possibility that we will be back into similar territory once again.

So, that's a good amount of doom and gloom, where on earth do Unicorns fit in? I think that's what the audience wondered too. I asked the audience a couple of simple, maybe even frivolous questions:

1. Who here knows or works with any Unicorns? - a few hands go up
2. Anybody here afraid of Unicorns? - a few sniggers

I went on to explain that a Unicorn in this context is not the horn-headed mythical creature, but in fact a privately owned startup valued at over a Billion dollars. The point to this intro is that in a world where Digital Transformation is on everyone's minds, these Unicorns are seen to be disruptors, digital transformation change agents (yup, still a mouthful even when written down). As such, one could be forgiven for believing that they had the magic recipe for successful Digital Transformation and that they must be studied and replicated. I'm certain there are occasions where that may be true, but it is my opinion that in fact, this is the exception and not the rule. Digital Transformation is in fact a change process, much like any other. Here, we should focus on three key components:

A. People

B. Process

C. Technology

A successful transformation will have struck the right balance between all three components, leveraging digital technology where possible to automate and enhance not just a singular manufacturing process, but the entire value network. When we look at the process many of us went through when introducing automation and controls in our processes, this feels similar in nature, its just a whole lot broader. Digital Transformation seeks to impact every process, every person and every technology, to ensure they are as optimised as possible, not just at the point of deployment, but on a continually improving basis, ad-infinitum.

Herein lies the problem. Digital Transformation will affect everyone, it is all-pervasive. And with any change, there is resistance. For the most part, the technology exists today to digitally transform organisations at least to a pretty high standard, even if we don't all get Minority Report style gesture based interactive displays and AI driven analytics. Thus, it's not a technical problem, in my experience its our application of the technology that's at fault. Typically, we try to force the technology into our process, because that way, the technological changes are more readily adopted by a workforce who is unwilling to change. That means we force technology to do things it usually isn't designed to do, resulting in compromises.

The logical conclusion therefore, is that technology driven Digital Transformation will (nearly always) fail. One must focus on the process and people changes, getting them involved in the entire change process so they are part of the decision, and therefore adoption is enhanced. Then, introduce technology as appropriate to allow those process and people changes to happen. This is the sweet spot for customer/user centric design, and outcome based sales. There will always be times where a technology is so disruptive, that it is naturally adopted as the norm, in which case skip steps A and B and jump straight to C, provided the business value can be tangibly calculated.

Digital Transformation is no panacea, there is no single path to success and anyone telling you otherwise, is selling snake oil. Likewise, this is a complex business. Most enterprise scale businesses will not transform themselves overnight, its a multi-year program that cannot be a hobby for one person passionate about technology, it requires funding and commitment to the vision, with strong leadership to deliver on it.

My thanks then to the #APCUK team for organising this event, and I look forward to our digitally enhanced #automotive #industry.