Digital & data disruption is on the verge of affecting many historic industries like the Automotive one and, by capillarity, their furnishers and partners. Many entities – start-ups and SMEs essentially - are scanning the customer journey of these companies to identify opportunities. They are looking where they can take advantage of their speed of execution and their creativity to meddle and grasp cash or strategic data.
Their goal is to become a lasting cornerstone player without supporting the heavy investments required to sustain the value chain. And they can!
Technology is more accessible than ever. It takes only a couple of talented people to build an extremely powerful and user centric service.
All they have to do is taking advantage of the many existing open source libraries and cloud solutions with almost no upfront cost. Augmented Reality, Machine Learning, Natural Language Understanding… everything becomes a piece of cake with the right libraries.
And then, when the first version of the product is built, all the founders have to do to scale is raising a vast amount of money by proving to investors – VC and Business Angels mostly - there is a market fit.
In order not to be overwhelmed by this coming revolution, the historic companies need to come up with, implement, and deploy themselves - in-house - new services with added value to their clients and their employees.
Digital services can’t be confined to front-end sales & marketing applications anymore. You can not settle for a showcase and e-commerce solution anymore. Diverse user-centric digital services are now essential to survival and a great way to increase operational margin and gather data on competitors’ clients. If you don’t acknowledge that, someone else will.Problem is, for many historic industries, building services is not their core business. This is not in their DNA, in their culture, and they don’t know where to start.
Let’s go through some best practices I identified working for and with many companies bracing for massive disruption.
Don’t subcontract for service development
The first reflex for many historic companies is to pay an agency and consultants to build the services they need. There is a logic behind it: they don’t know how to build services so they hire someone who does, but this is a mistake. Agencies might know better than you how to build a service. What they don’t know are the ins and outs of your industry, your customers, and their needs. So, you’ll pay them to learn it. It’s a better investment to pay yourself to learn how to build a service!
Plus, agencies suffer from high turnovers. So, chances are they will lose pieces of the precious knowledge you paid them to gather and they will bill you again for it.The icing on the cake: if they don’t lose the knowledge, they will use it to sign a contract with your competitors.
Build a “Services division”
What historic companies should do is to build their own “Services division”. Making services is not what pays the bill of historic companies. Selling cars, selling plane tickets, clothes, or renting hotel rooms does.
Divisions responsible for the core operations of historic companies know that and maybe reluctant, unwilling, to give up responsibilities and scope to this new division. So historic companies should make sure to have them onboard and to explain the strategy behind this.
Then, they should hire the head of the “Services division”. The board should sponsor him, be at the right place in the line management, and ready to play some politics with the other significant stakeholders of the company.
He should have extensive experience in managing digital organizations and previously tasked to drive the change in long-established companies. His first mission won’t be to manage a division, but to build one and drive the change within your company.
Building a new division from scratch is quite of a headache. That’s why many companies do it through acquisition:
- Groupe Renault acquired Intel’s French embedded software R&D activity. With this acquisition, Groupe Renault will reinforce developments in next-generation embedded vehicle software.
- Ford invested $182.2 million in Pivotal, a cloud-based software company headquartered in San Francisco, to further strengthen its core software abilities and deliver innovations to customers more quickly.
Or by appealing to off-shore development. Offshore development is cheaper if you take into account development only. Once you add management effort, delays caused by cultural gaps, incoordination, misunderstanding and time difference, and increased time to market; you may want to think about it twice.
Whichever solution you choose, keep in mind the following points:
- Co-locate project management, product management, and development teams.
- Hire specialists. Even if it’s tempting, don’t recycle operational managers from your core business to become managers in your “Services division”. Someone who has an impressive record to build a car front seat or managing draughtsman engineers should stick to just that.
- Talent acquisition should be led by services specialists too. If you don’t have that: subcontract.
- “Hardware should never be an issue”. Be prepared, your new division will need new tools and software. You can’t build web services or Android apps with Catia – yet -.
- Build a culture of rehashing, don’t reinvent the wheel. Too many companies build their own solutions at an enormous cost instead of reusing the existing ones. Don’t build your own payment solution, use Stripe, Ayden, or SIPS. Don’t build your own development tracking tool, subscribe to JIRA, Visual Studio Online, or Pivotal Tracker…
- If you acquire a company, keep it as autonomous in their operation as possible and infuse your resources in it. They already know all the above.
Fill the cultural gaps
Now that your “Service Division” is up and running, the most laborious task lies ahead: fill the cultural gaps.
Chances are your “Service Division” will follow the Agile methodology. This can be summed up in: build fast, frequently (2-3 weeks), deploy as frequently, and if a project is running late, change the scope and don’t make any concession on planning or quality.
Other divisions of historic companies don’t work this way. For example, in the automotive industry vehicle’s electrical architecture is decided years before the car hits the streets meanwhile marketing and sales express service requests month – sometimes weeks – before the expected due date.
Chances are you need some enablers in your core product to make great services. For example, an IoT manufacturer may need to add new BLE chips in their object to offer indoor positioning capabilities and use them in a digital service.
How to match the two agendas?
- Build a Strategy Hub: Where people will benchmark your competitors and trends in other industries. They will define what direction your company’s services should follow in the years to come.
- Define catalysts people. They have to know very well your core operations and will identify the right place, the right time, and the right form to address all your enablers’ request.
- Define other people which will convert strategy hub’s artifacts into enablers requests to your core operations.
- Define an intake process. Many people in your company will have services, ideas and needs. Define and communicate about an only intake process.
- Build a Product Team: The product team is the heart of your “Service Division”. They will build, deploy, and maintain the services. They may follow the Agile principles and should be protected from any exterior perturbation. This is one role of the interfaces described above: making a cocoon inside which they can have freedom necessary to build exceptional services.
It will be a day-to-day challenge to make your distinct divisions working together, so don’t make it more complicated with unclear roles and processes. Define them and communicate about it.
Also, have clear communication with your clients – internal or external -. Your fresh ways might confuse them.
- In Agility, you don’t commit to a scope. You commit to planning and quality. At first, it looks counterintuitive. It may require some long explanation with your client to make him understand.
- In Agility, you deliver/demonstrate frequently. It will require a lot more willingness from them to be available every 2 or 3 weeks for the demos and acceptance tests. Consider adding a branch to your Service Division: account management. Responsible for dealing with your clients.
Massive disruption threat isn’t a matter of acknowledgment now. Everyone is aware of this risk of a new kind.
Unfortunately, acknowledging the threat is not enough. You should implement a new culture and new way of working at almost every level of your organisation – Talent acquisition, subcontracting, product management… -.
This is very challenging. To convert this challenge into an achievable goal, be accompanied by experts to lead the operations non-product related so you can focus on what matters the most: building user-centric services to survive the disruption.