Driving Change: The Dual Approach to Automotive Innovation

Let's cut to the chase

We could spend time here up front setting the scene in detail for the automotive industry, looking at the imperatives for sustainability, at increasing competition, and at the growing expectations of customers.

But we know all these things. They are challenges that are all too real. We know too that organizations need to change in order to meet them. The big question is how. How can automotive businesses not only keep pace in this fast-moving world, but actually get ahead?

It's more than digital

The answer to this question you'll most often see is: digital transformation. And yes, it's true that digital technology can make a game-changing difference to business efficiency, performance, and decision-making.

But it can't do everything - and that's because automotive is an industry rooted in the tangible world of stamped steel, forged, and injection-molded plastic parts, and also of employees and third-party suppliers.

For the automotive world to tackle today's major challenges, what's needed is an approach that accommodates both the digital and the physical - an approach that addresses life on the shop floor and the world beyond as much as it does the systems that support the business. Because not everything is digital.

Four key priorities for automotive business

For automotive organizations, digital and physical solutions need to come together to address the following key priorities. In all these cases, it's not just a case of throwing tech at a problem - it's also about two other things. The first is the physical - the nuts and bolts of the business; and the second is having the commitment and leadership to see it through.

1: The need to drive improvement in core engineering

Automakers need to upgrade their core engineering functions, integrating new technologies to reduce engineering costs and time to market while scaling up production. This includes taking advantage of efficiency tools such as AI, digital continuity processes, and automation - but physically, it also means transforming their engineering teams and processes. This will enable them to bring new vehicles to market quickly, reduce lead times, and streamline production processes to become more efficient.

For instance, an automotive OEM looking to develop a small urban vehicle established a "one-stop-shop" project organization with a close and experienced leadership team in the front office. By managing engineering teams across best-cost countries and driving the full project scope including purchase, testing and accreditations, savings of more than 20% were made on the engineering costs against the initial estimate with a cost-efficient project delivery set-up - and innovative design features were introduced too.

2: Ensuring internal processes and operations are ready for anything

Automotive businesses need to develop flexible, agile processes and systems that can handle frequent updates, integrate emerging solutions without disrupting ongoing operations, and respond quickly to changes in market conditions.

This might mean finding ways to spread manufacturing activities strategically across multiple sites to mitigate the risks associated with reliance on a single supplier, tier one, or location. But this might also mean updating your processes and skills to be future-ready.

Here's an illustration. A vehicle system manufacturer developed the tools, methods, and business skills essential to industrialize the growth of its software development center while boosting the skills of the teams using it worldwide - and another business established a global software organization, applying automotive software best engineering practices, with a delivery methodology bringing together safety and security by design, to scale and accelerate its delivery on software while at the same time infusing a new culture around software knowhow.

3: Accelerate the smart, safe & sustainable mobility experience

With demand growing for customized passenger experiences, enhanced safety features, seamless connectivity, and greater comfort and convenience, automakers need to accelerate value with smart, connected vehicles while also improving the way they design, produce, and deliver their product or service.

Technology now makes it possible to provide services and experiences that evolve and improve throughout a vehicle's lifecycle. By integrating features such as personalized in-car experiences, remote vehicle monitoring, and advanced safety updates, manufacturers can generate consistent revenue streams beyond traditional car sales. To achieve this, OEMs are developing intelligent, data-driven processes that create a fully connected ecosystem around the vehicle. The premise is technological, but it manifests itself in wheels on the road and in the knowhow of the team that makes it happen.

For example, Opmobility, expanded its focus from parts to software so that it could offer its customers a unique range of integrated solutions and services, such as merging radar data processing software with lighting technologies.

4: Reconciling business and planet

Sustainability has moved beyond regulation. It's becoming a metric by which customers judge brands and choose to invest in them, both emotionally and financially. Automakers can therefore boost market share by meeting environmental goals. To meet these twin goals, they need to reduce their scope one and three emissions, ensuring the traceability and responsible recycling of key components such as batteries, and integrate renewable energy sources into manufacturing processes.

For instance, a major automative OEM is developing a complete new high voltage battery system platform for their new generation electric cars including a whole new set of hardware and software components.

More than digital - and more than physical

The last example is a good illustration of the point about commitment. Indeed, the success of the program was predicated on it. A project such as this stands or falls not just on technology and process but on the knowledge, energy, and enthusiasm of the people involved in it.

In fact, this is true of all the priorities addressed in this blog. Whether it's developing and consolidating the core business, building flexibility into it, satisfying evolving customer expectations, or growing towards sustainability, automotive manufacturers need to bring together not just the digital and the physical, but the willpower too.

It's about building and sustaining momentum behind a combination of smart solutions, of robust and flexible processes - and an energetic, can-do mindset.

Senior figures in major engineering and R&D-intensive (ER&D) businesses are of course aware of this. They have to be. We recently published a report examining trends faced by such organizations. It is interesting to read the views of ER&D leaders on the challenges they face and the solutions they propose. You can find the report here.

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