“Future Map” is a roundtable discussion series initiated by Garage 42 to provide foresight into the future of automotive technology. In the midst of overwhelming information, it aggregates the most valuable insights to catch a glimpse of the future. This column welcomes contributions and can be contacted via the WeChat account “iidaji”.
Author’s profile: Mr. Hou works on product planning and definition in a traditional host factory.
“I’ve worked in the software industry for 20 years, and I can confirm that software is not magic, it’s technology. To manage software, you need software engineers and a software-oriented organizational structure. If you expect hardware managers in the hardware industry to manage your software, it will not succeed.
10 years have passed, and the existing industry has been unable to develop effective IT and software operating systems for their BEVs. They still make the same mistakes – outsourcing technologies that are crucial to their success, profits, and future.”
——Peter Mertens
Peter Mertens’ article is surprising.
The president has always believed that, as a former Audi R&D executive and board member, he is theoretically not supposed to be so straightforward about a company’s internal issues – after all, revealing problems is equivalent to embarrassing the leadership and the entire company.
But the publication of this article means that there is a serious problem in the Volkswagen System – the fundamental “organization” on which the company depends for survival is facing a problem.
What is an organization
According to the description in the “Chief Organization Officer” book, “an organization” is:
“A dynamic social system created by humans to achieve specific goals.”
Considering the scale of the automotive industry, the automaker can actually be seen as a “miniature society”, or even a “miniature country”. For example, you can think of Japan or Germany as a country made up of the automotive industry.
It can be said that “organization” is the foundation of a company’s existence.
To facilitate understanding, let’s break down “organization” into 5 basic elements.
Successful companies have excelled in these 5 areas.In the era of traditional internal combustion engine cars, the four components of a car were respectively: body, chassis, powertrain and electronic equipment. As an industry leader, Volkswagen has advantages in body/chassis/powertrain, such as the modular architecture of MQB/MLB, the all-aluminum body of Audi A8, the 48V electric drive stabilizer bar, the laser headlights, the rear-wheel steering, or the complex engines with electronic turbos, and the DCT gearbox that is energy-saving and fast-shifting.
With a full understanding of the European and Chinese market environment, setting ambitious strategic goals, developing a comprehensive development process and collaborating with the German engineering culture focused on highly educated professionals, the Volkswagen Group has covered the market from the small car Polo to luxury SUVs such as the Urus and Bentayga, ultimately becoming a huge presence like an aircraft carrier fleet with modular architecture and a rich variety of internal combustion powertrains.
However, this organization, composed of an engineering culture, a professional manager system, and an outsourced supplier system, suddenly failed in recent years.
Failures of the Organization
The failure of the organization originated from the huge environmental changes.
While the automotive industry has been developing products based on the traditional definition of body/chassis/powertrain and iteratively improving the scattered electronic modules, Tesla created a groundbreaking new product based on a brand new central control logic and pure electric powertrain.
If you’re driving a car from made from a traditional automaker today you probably have… hundreds of separate chips that have been independently designed to run a very complex network. But these haven’t been integrated or consolidated. Tens of thousands of suppliers participate, sometimes collaborating and sometimes working independently. The one commonality is that all subsystems only operate within their own little box, and they don’t communicate with the central computer — or, to stretch our analogy, the arms never reach the octopus’s central brain.
Before Tesla released its first BEV (battery electric vehicle), the automotive industry was a world that went undisturbed. Tesla was the first company to release a car that was custom designed — managed (vertically integrated) by a central processor that controlled all core and edge functions. You couldn’t see it from the outside, which is why people still don’t understand why Tesla is so different — these people only tend to notice when they step on the pedal.
——Peter MertensAs a leading enterprise, Volkswagen realized 10 years ago that things were not going well, and then started to catch up. However, under the long-standing, unchangeable processes/mechanisms/systems and the talent constraints based on the ICE era, Volkswagen used a mature approach to solve a new problem – the supplier system.
The approach of this model is that the senior leadership of Volkswagen gives a target, which is then broken down into various functional blocks to analyze their own needs, and then sent to the supplier system for bidding and development of solutions, which Volkswagen then integrates. However, the problem is that this development model is only suitable for traditional cars, not for new era cars dominated by Tesla.
For every component of traditional cars, the original equipment manufacturers have extensive experience and established extensive experiments and acceptance criteria to determine whether the parts meet the standards. Therefore, the model of breaking up the development of components and distributing them to various component suppliers can effectively reduce the costs of the original equipment manufacturers. The original equipment manufacturers only need to grasp the most core integration link to obtain the largest part of the vehicle value.
However, in new era cars with software and electronic architecture as the main value, the content of the software is no longer such that it can be split into pieces and distributed to countless suppliers in the form of code segments, and then integrated together.
“Volkswagen attempted to concentrate 10,000 IT resources in a new department to solve the software problem of ID.3, but in fact, 100 (or even 50) exceptional software engineers would have been enough. This is the stupidity caused by misunderstanding of software.”
Finally, Herbert Diess lost his position as CEO of the Volkswagen brand, paying the price for his ignorance and blindness.
No Exegesis
In the “degeneration of the organization” model, there is an extremely extreme case of degeneration.
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When the environment, strategic goals, cultural capabilities, and results all fail, the only thing left for this organization is the previous processes, mechanisms, and systems. Such an organization needs to be “reversed” dramatically, because the general “transformation and upgrading” can no longer save the situation.
In early June, Audi announced the Artemis high-tech project plan aimed at developing a new generation of electric vehicles. The project selected Alex Hitzinger, who is responsible for Volkswagen Group’s autonomous driving work, as CEO. He will also have access to all resources of the Volkswagen Group globally, with great flexibility and breaking the current bureaucratic framework.
The name “Artemis” comes from Greek mythology:
“Artemis, as Zeus’s favorite daughter, makes any request, and Zeus will not refuse.”This initiative can be seen as awarding the “Treasure Sword” to Alex and his project team.
It can also be seen that Volkswagen Group has considered the complete failure of past departments, processes, mechanisms, and systems. Only through complete subversion can products be created that lead the future era.
Case
The president gave an example of the shortcomings of the old system to explain.
After a certain product was launched, the president visited a 4S store and found that when displaying the LED headlights, the brightness was often too high, making it difficult for consumers to carefully gaze at the beautiful LED beads. Meanwhile, to display all functions on the internal large screen, the vehicle had to be turned on.
The president hoped to follow competitors such as PSA, Geely, etc., and develop a large screen “demo mode” exclusive for static displays (which is very common at car shows), as well as reduce the brightness of the vehicle’s headlights in the demo mode.
When the president presented these ideas to the engineer in charge of electronic architecture design, as an engineer, he had no idea that competitors had such a demo mode (competitors had been using it for many years). After understanding the specific requirements, he responded in the following way:
“Your idea is good, but this demo mode can only be useful during sales and is not helpful for customers during normal use.”
“I suggest that the marketing and public relations departments make video promotional materials for the features that need to be highlighted. It is more cost-effective and convenient to spread.”
“Real vehicle experience can be guided by static displays and dynamic driving experience perception to train dealers on what work conditions they can experience corresponding functions. For example, for headlights, we can organize night test drive events or setup a darkroom for display.”
In fact, we can see from this case the working mode derived from the “obedient organization” system – the KPI-based work method.
What’s written in my KPI performance, I will do every task assigned by the superior. If it’s not assigned to me by the superior nor is it included in my KPI, I try to push it away.
The content of my KPI is guaranteed not to make mistakes. I won’t do extra or redundant things because it won’t make mistakes.
And people like this are in line with the promotion logic of this “obedient organization” – after completing various tasks assigned by the leader, he now represents the senior manager.
In Frederick’s “Reshaping Organizations” book, obedient organizations are described as:
“Promotions may bypass the most competent person and be given to the person who just fits the so-called correct standards.”
Conclusion
Richard Buckminster Fuller said:
“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”Tesla does it, and so does Artemis.
Peter said something profound in his article:
“…today, all those managers have left, but their successors still hesitate, or don’t know how to cut ties with the past and start a revolution. Instead, they continue to adopt a slow evolutionary approach – but they don’t really have time for it. Time is the most valuable and limited asset in the automotive industry today. It’s an asset that can’t be bought with all the money the industry has. You can’t solve software problems by pouring in money and resources.”
We’re living in a time of change. We can no longer iterate slowly with old ways of thinking because we simply don’t have enough time.
May this article wake up dormant leaders in traditional car manufacturing.
But only if you’re not pretending to be asleep.
References
“There Will Be Blood – We All Did Sleep” – Peter Mertens
https://cleantechnica.com/2020/06/13/there-will-be-blood-peter-mertens-former-head-of-audi-rd-we-all-did-sleep/
“Next Will Be Bloody – We All Sleep” – Hou Shelin
https://weibo.com/ttarticle/p/show?id=2309404520570153730069#_0
“Chief Organization Officer – Transformation from Team to Organization” – Fang Shengtao, Zuo Qian, Fan Li
“Reinventing Organizations” – Frederick Laloux
“Architecture, not Software, Defines a Car” – Procsql, 42Garage
https://mp.weixin.qq.com/s/5VoTHoKmA2pcEZuwlucwcw
“Audi Launches ‘Artemis’ Project: Highly Efficient EV Coming In 2024” – Inside EVs
https://insideevs.com/news/426069/audi-artemis-project-highly-efficient-ev-2024/
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.