Future needs origin: Transformation strategies in the automotive industry
“Digital transformation is not about updating your technology; it’s about updating your strategic thinking.” The transformation from being a car manufacturer to becoming a tech company dramatically increases the demands placed on strategic decision-makers in the automotive industry. On the one hand, strategies today must provide orientation to an unprecedented extent in an increasingly unfamiliar environment; at the same time, established approaches and methods of strategy making function less and less under the rapidly changing framework conditions. An ongoing study in cooperation with the BMW Group is investigating how strategy work changes when established companies want to successfully reinvent themselves in today’s environment.
The challenge of Digital Transformation
Proud traditional industries such as the automotive industry are undergoing radical change. Strategists therefore increasingly assume an expanded key role for successful transformation: Not only must the direction of the company and the future of its core business be redefined; also, strategy-making is more and more about activating a large number of employees that have identified with the company’s current identity over decades. How can companies with a proud legacy continue to develop strategies to lastingly stand out from the competition? What can strategists concretely do to leverage the identification potential of unique corporate legacies for transformation?
From the driven to the driver of change
Strategy researchers have long ago started to investigate the changing external conditions that strategists are confronted with today. The core problem of conventional approaches in strategy-making: In an increasingly uncertain and volatile market environment, the usefulness of analyses of the external environment alone is continuously decreasing. Take connectivity, for example: what appears to be the benchmark for digital services in vehicle interiors today may be obsolete in a year’s time already. The result of an exclusively outside-focused approach: an endless race to catch up, in which car manufacturers are quickly threatened to fall behind and lose their leading position in the market. In order successfully set their own standards and shape new sources of competitive advantage, the question of how established companies can create a fundamental strategic orientation and attitude also from within is moving into focus.
Research at the pulse of current developments
In a current long-term project, we integrate strategy, change and behavioral science research. Using concrete case studies, we examine the current challenges and emerging solutions in strategy making in the context of the automotive industry. The current developments in the automotive industry offers an excellent opportunity to both better understand the changing role, practices and success factors of contemporary strategy work in established companies and subsequently transfer them into an application-oriented process model. The aim is thus to contribute to a changing understanding of strategy-making and at the same time to support users in practice in successfully shaping the transformation of a key industry.
Our calls for action
First results indicate that the success of strategy work increasingly depends on the ability of moderating a continuous, participative process and inspiring the people in an organization for the transformation also on an emotional level. Two principles can provide orientation for practitioners:
1) From WHAT to HOW
First meta-analyses and interviews show that strategies less and less aim to give detailed answers to the question of WHAT one should do in the future. Rather, the focus is on HOW people have to work together inside and outside the company in order to continuously develop solutions and adapt them to continuously changing circumstances. Figuratively speaking, strategy work is therefore less and less like a look into the glass ball, from which detailed goals and plans arise. Rather, strategists have to deal with a set of new questions: What are the overarching issues that have increased relevance for us and where we can make a difference? How can we organize and accompany the strategy process from the outset in such a way that maximizes the probability of participation and implementation success?
2) Future needs origin
As strategies are less and less able to provide clear guidelines, the activation and commitment of employees are gaining in importance. But how does implementation and active participation in the strategy process not just become a mere fulfillment of duty, but a personal matter of the heart? Usually, the prevailing opinion is that strong organizational legacies are obstacles to transformation efforts. Initial results, however, suggest that from a behavioral point of view, identity-creating legacies can in fact play out as a strength and enabler under high uncertainty. For instance, the unique legacy of a company can be used as an effective starting point for the definition of overarching guidelines and prioritization in strategic change processes. Further studies are currently investigating the extent to which a clear reference of transformative strategies to corporate legacies has a positive effect on the emotional commitment and engagement of employees.
More regarding our research
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Rogers, D. L. (2016). The digital transformation playbook: Rethink your business for the digital age. Columbia University Press.