Published on January 12th, 2020 | by Alex Voigt0
Like An Angel Is Pushing You From Behind
January 12th, 2020 by Alex Voigt
As a CEO of a large global automaker, you have a huge problem of existential dimensions. If you don’t solve it, it’s not just your job that’s lost, but you will be remembered as the person who is responsible for a century-long proud legacy ending. Your decisions in these coming few years will determine if your company will survive or disappear. If you reply to me that this to be absurd, my answer to you is, “You just have one try and the clock is ticking.”
The question to answer is, how to transform a so-far-successful combustion car company with a century-long legacy into a company that produces competitive battery electric vehicles? The short answer is, you don’t. The long answer you will find in this article.
It’s not a question any more of if the combustion engine will have a future — that question is answered already if you look at vehicle registration data of countries like Norway, the Netherlands, the USA, and China from the past up to today and continue that exponential trend just for 5 years or 10 into the future. We are past the point of discussing if it’s happening, as the hard facts are proof that it’s time to face the truth. It’s overdue, and you are late, but better now than even later because later will be too late. The customer has decided and the customer is not only king, but, as you may have heard, is always right. The customer has a choice that he or she did not have before, and having a choice changes everything.
I believe this article to be the most controversial I ever have written, and people will argue against it by calling my thoughts impossible, unrealistic, and nonsense — these are the polite words they will use. All of that, including the impolite words, is fully okay as long as it’s discussed, as this is all I am striving for. Let’s start to think in solutions instead of finger pointing.
In recent years, I did constantly criticize almost all large incumbent auto manufacturers for falling short of expectations on the transformation from combustion engine–centric organizations into companies that are putting the electric drivetrain in the middle of their businesses.
Pace of innovation is all that matters in the long run
— Buff Mage (@elonmusk) September 26, 2018
Many friends applauded me as a German engineer speaking out loud years ago that German auto companies have a severe issue to solve and that it will only get tougher. I appreciate that recognition, but it did not change anything with regards to where the incumbent auto industry stands globally today.
Many applaud Tesla for being right all day long with its fully electric vehicles (BEVs), manufacturing by far the best BEVs in the market, and now with a stock price heading from one all-time high to the next. But to the surprise of many, I claim that Tesla and Elon Musk fail if the auto industry is unable to follow and transform their organizations to produce high-class and efficient BEVs themselves.
One of my best friends, who argued with me for years that Porsche, BMW, VW, and Audi will be late but will bring better BEVs to market, and who called me a blind Tesla fanboy for years, in December 2019 finally said, to my surprise, that I have been right. Many called me a patriot trying to explain in a series of articles what these companies do wrong and why they will fail. Many called my predictions correct, my analytics accurate, and my assumptions the key points, but still all of this does not count and is not worth much — or is even worthless — unless it helps top automaker CEOs and others to reconsider.
It is worthless because if you don’t think in solutions, but just point out what is wrong, be it in retrospect or predictive, you do not change anything. It’s never been my ambition to write to be right. It’s been my ambition to write to be heard and listened to. I am trying to make a difference.
To criticize is easy, in particular in the aftermath when the ugly truth appears on the surface. To explain how to do better and improve is hard, which is the reason why you don’t hear much of this in all the articles, podcasts, YouTube videos, interviews, internet blogs, and forums. Most have no idea what heavy restrictions managers and employees in these large organizations are facing every day, and how hard it is to make any change, even if it’s just in a single department.
Imagine you hold an important management position in a car company and all day long people tell you what you do wrong. As a top executive, you have the loneliest job in the company and your managers and employees usually hate or fear you, but probably no one tells you the truth you need to hear. Let’s assume for a second you meet that top executive and get an opportunity to explain how to change his large auto company, selling today mainly internal combustion engine (ICE) vehicles, into a successful BEV organization. What would you tell him?
This article is a visionary attempt to explain how to transform a company with hundreds of thousands of employees from a manufacturer of cars with combustion engines into a technology-driven transportation enterprise in the age of software. It is about how to improve and escape the negative vicious cycle companies are tied into with BEVs falling short of expectations, with the majority of them not making a profit, but with them still eating the profits of the ICE vehicles that are not sold instead.
To be clear, I expect no one to follow a single one of my proposals, as they are fundamental, radical, and painful. They include a type of suicidal attitude and long-term vision and mission you do not find in companies that are publicly traded on the stock market. Instead of a founder, they have a manager that knows he will leave in any case after a few years and logically maximize his benefit and chances of survival. Show me a top manager who is willing to sacrifice his job, reputation, and future and I will change my opinion. My proposal is so fundamental that it puts the reinvention of the entire brand and company in front of all people, processes, and products in the organization.
No one will follow my recommendations because it requires too high a sacrifice of yourself, likely of your own job, including uncertainty about whether you as an executive, manager, or employee will have a future in the new company you are about to invent. Show me that person willing to sacrifice himself after paying with blood, sweat, and tears — and the best decades in his life — to get into that top position and I will change my opinion.
No one will follow my recommendation because battery electric vehicles are an unproven business case for the incumbent ICE automakers, and everything that has no proven ROI (Return on Investment) has no justification of survival, as all incentives, bonuses, and recognition in these organizations are structured around incremental value creation, which does not include a long-term strategy or a disruptive technology shift. Show me the manager or executive who is earning his livelihood today by making sure the company still exists in 20 years and I will change my opinion.
My recommendation to top executives of the auto industry is a bold one, but I believe it’s the only path left to make sure you keep a top 5 position. The alternative is to transition into a niche player with a brand that has been lost to a stronger, faster innovating company in the market that is using your brand only for sales and marketing purposes — you may still have production facilities, but no say any more. All remaining options between these two are different versions of going bankrupt, like merging or tight cooperation between weak partners.
This process already started silently with companies like Daimler, in which Chinese investors get over time a larger and larger stake, more influence, and more say in critical decisions. It does not happen like a big bang, like Chapter 11 bankruptcy being filed, but instead in gradual ways mostly not noticed by the average shareholder, customer, or reporter.
Since I made clear why I believe no one will follow my drastic proposal, I want to explain the only path I see forward for incumbent ICE automakers, the only path I see out of the vicious cycle that they maneuvered themselves into. I have been thinking about this problem for years, and do indeed see only one single way out of the mess I believe they are in. It’s an approach that not a single automaker has tried yet, and it’s risky and unproven.
I recommend taking the best internal and external resources, assets, and people you have and getting them to build a new independent, privately owned startup that decides on its own destiny by using the best assets of the existing organization, which does not have any decision power and influence on the new one at all.
Now, you likely believe I have lost all of my remaining senses, but wait, it gets even better. You use the old successful company like an outdated car — you just take the parts you need but you don’t invest any serious capital in future growth and success. In short, you let it die a slow death. No gradual evolution of the old company, but a start from a blank sheet of paper, a revolution. No spinoff company from the incumbent, no usage of existing production capacity unless the new startup decides to use your plant and forces you to relocate. It’s an approach without mercy, without compromises. It’s ugly, and people do not like ugly.
The reason why I suggest such a harsh cut is because the issue and challenge you face is only in small part a technological issue, and is in larger part an organizational and cultural issue. It is an issue today becaucse Tesla is a competitor, innovating faster than you are able to copy its innovation. Let that sink in.
You could continue and make gradual changes without a Tesla, and without a world population demanding strong measures against climate change like zero carbon impact from your vehicles — healthy air, clean water, and clean soil — but that world does not exist any more and Tesla is here to stay and is eating your lunch while you watch in disbelief. Your business case for building cars with combustion engines is over because it’s not attractive economically for consumers, it’s technically inferior, and it’s not environmentally sustainable. It’s a losing business case on all metrics. It’s terminated.
Since the new startup will use all of your capital and assets, it will not need to be a public traded company but rather a private one owned by all employees and the visionary founders, to avoid external influence. Carefully select the top decision makers internally and externally, but recognize you as CEO of the incumbent ICE organization will not be a part of the new company, nor will you have any decision-making power or influence unless you qualify for a position, and that you do only if the thoughts you read here in front of you have been yours before. Be honest with yourself and careful with this because the new company needs a fresh start or will be dead in the water right from the start. You decide to give the power to new hands for the good of the company.
Every single manager in the new startup has to buy and own a defined share of the company with his private money, with the amount depending on their organizational role. He or she gets supported by a loan program from the old ICE organization if required to do so. Everybody’s destiny is tied to the success of the new company, but not from fear of losing an investment — because it will be paid back — but motivated by excitement from the opportunity to change the world of transportation and make a real difference in the world. Fear, pressure, frustration, all of these negative emotions need to stay outside of your startup or you just replicate what you already have today. Unlocking people means making them feel safe, motivated, and inspired. Your new executives need to be inspiring people — the most difficult hires of all.
Not all people and associates you worked with successfully in the past are a good fit for the new company. Start by defining a mission statement that you will try to accomplish — define it in detail. What do you want your new organization to be in 10 or 20 years, a time when you as an executive will no longer be in charge and will likely have resigned, been fired, or retired.
Stop thinking like a manager and start to think like if you are a founder and true entrepreneur. This is your own company and you can change what you consider right, but you will stay within it until you are an old man, like a true entrepreneur. This company is your heritage, destiny, and obsession and you will do all it takes to make it a success. If you are not able to feel like that, you are not the right person to make that decision.
You need to go back into a startup situation to start to act and feel like a startup. You may object to having a few hundred thousand employees, a tradition, equipment, and experience. Be realistic and accept what challenge you face. It’s an illusion to believe all will remain and you can somehow take what you have — the assets, employees, production equipment, robots, and facilities — and somehow keep it all going despite producing an inferior product with low innovation. The customer has a choice, and does not care.
Make sure to implant a new culture, atmosphere, and DNA, one that is open minded and welcomes bold, incredible, first-principles approaches that sound nuts when you hear them the first time but would be a game changer if possible. Make your organization a place where people love to work and do their best to go the extra mile by supporting them to dare to make mistakes. Ask them to try the impossible but change course with agility if it’s obvious it will not lead to the required goal. Assure that everybody understands to a certain extent the entire product you are trying to build to make sure systems are not engineered in silos, only working within defined constrains. Hire people to support this culture and fire everybody who doesn’t. Disregard education, prior accomplishments, and university degrees. Look for the smartest, most eager people you can find emotionally and technologically.
Success, incentives, and bonuses of the new company are at the start defined as market share growth and unit sales, and explicitly not as profit or cost. Over time, while growing and bringing successful BEVs to market, profit and cost will play a larger role, reflecting a company that like a startup is focused on growth at the start and developing into a profit-generating company over future years and decades. Not being listed on the stock market will help the executives to establish these objectives.
Equip them with all they need and let them start without the burden and restrictions of and within the old company. Give them enough capital and the brightest battery and software engineers you have. Don’t put internal managers from your old company in — instead hire preferably external eager and hungry managers. The best are people who tried and failed with their own startups before but learned from that failure that you are able to stand up again and again. That is more valuable than winning without having lost before.
I am not talking here about a spinoff or about parallel companies, but about true independence in which the new company has, without restriction, access to all required assets of the old, and the old has no influence on the new and its decisions. Yes, I am talking about some sort of suicide for the old ICE company to give the new one the best chances, because the old ICE is, let’s face it, dead already despite still running. The only reason you keep the old ICE company is to finance and nurture the new BEV organization.
Allow them to build their own vision, and while they invest in R&D and hopefully grow, don’t interfere or let anybody from the old company do so, as they have nothing to say. Over time, when the new startup grows, more people may either move over or be hired externally while the business of your old company will either stall or shrink from producing ICE vehicles in a time when more and more consumers ask for BEVs, like we see in markets like California, Norway, and Netherlands that are ahead of the curve.
In the long run, you want your old company to die and your young company to grow, prosper, and succeed, replacing what you had before. It’s a hard cut from the past, but a required one. You leave the ICE world behind in your old company, and if it continues to succeed, that’s not bad for you. Many will leave the old ICE company themselves who do not believe in the vision or don’t want to be a part of a slowly dying organization, and there is nothing wrong with that.
I said to you it’s a bold move and I predict no one will do it because it’s a recipe for getting rid of your own job, but it’s the only valid path I see moving forward if you as an organization and large automaker want to play a role in the future and be one of the top 5 automakers in the world.
Forget all that you have built in the past, be it experience, brand, or market recognition, as it’s without any value for the BEV future and more of a burden than helpful in the new world of battery electric vehicles. This may sound like an impossibility for you as an executive, and maybe it is, which qualifies you for staying in the old company, but the reality is you don’t have any other choice. If you had one, you would have developed a BEV that could compete with the Model S built in 2012 (8 years ago). You and your peers did not. Accept that reality. Get out of the bubble telling you everything will be good. Stop with dreaming.
Get rid of your illusions and realize that you can only win in the world of BEVs without compromises. You cannot win with old weight that does not bring any good. Do not waste energy, capital, and people in an attempt to change a large tanker into an agile, small motor boot.
Your new company is driven by software as its core asset, as well as R&D and innovation. The entire hardware development and manufacturing is an expression of the software architecture, skill, and ability to provide continuous improvements. Everything — be it parts, systems, or services — is vertically integrated unless you have suppliers who are better on different levels than your own organization. The best part is no part and the best employee is the person who knows how to merge two systems, parts, or departments into a single superior one. The new company is demanding, and high employee fluctuation is a healthy expression of that. Every dollar invested will be invested in the product and not in any marketing efforts.
Find a new name and DNA for the new BEV company. Forget your old established brand and the billions of worth it once had. It’s worthless today because you did not manage to bring a single good and competitive BEV to market, and now it’s seen as a brand producing BEVs that are inferior and lacking. You lost billions in brand worth by launching bad BEVs. Therefore, start from scratch with a new name and destiny. You don’t make it better by putting lipstick on the pig or by putting more marketing dollars into it. Instead, you make it worse, as you can’t fool the consumer long and those who know you did will not return. To win a lost customer back is harder than to win him or her with a new company.
You will need 10 years at least to develop a competitive battery drivetrain. For that reason, do all you can to license the existing battery technology from Tesla. If you manage that, you will win. If not, your destiny will be a declining company for the next decade. If you have to take a loss per BEV sold, take it. You have to build a new reputation and you start where every startup starts, which is at the very bottom.
You may not be able to license the battery technology from Tesla, as the company is supply constrained for the unforeseeable future, so what do you do now? You will be forced to develop your own, as suppliers can’t do it or they would be already a core supplier for the best drivetrain in the world. The best and largest battery R&D department globally has tested and is unable to deliver. My modest recommendation is, therefore, to trust and listen to those engineers, as their products show us they know something we don’t. Everybody now claiming that it will take 10 to 20 years for this startup to develop a competitive battery drivetrain and grow to a decent size is right. 10 years R&D is a long time, so you better start today.
This is not any longer about who will win, but about who will survive. It’s about if you will be a member of a small group surviving or if you will continue to shrink. Options are to be bought by someone with higher profits or to go out of business. To be frank, as of today, I do not see one single German automaker making all the right steps to assure their position in the auto market. Some make steps in the right direction, but none has the balls so far to do it without compromises. Without compromises means you not only have to develop your own battery drivetrain, but also your own fast-charging network. No compromises means you should consider a closed loop energy transformation and transmission with solar and wind to storage in the house and consumption there as well as in transportation.
If you don’t believe in my words, that is fine, but look at the market where you lost the biggest share in recent years with your best-selling sedans and compare what your managers and engineers told you 5 years ago about where you as a company would be with ICE and BEVs. Compare that to where you are today. It’s a pipe dream to assume you can somehow rescue the old company and over time develop good electric vehicles. You tried it for years and it did not work, so why should it work now when you do not have the time any more to risk another failure. Stop fooling and lying to yourself and start with honesty. Honesty means you and your predecessors made a ton of mistakes, but you are still alive, so use the time left wisely.
Many will say it is too drastic to build a new company from scratch, trying to make it grow with an uncertain result and letting the old company that was always successful slowly die. They will say that taking the best resources out is a prescription for a slow, ugly death — and my answer to them is, you don’t have a choice. The company you have is not the company you need to develop and manufacture competitive BEVs in a world where Tesla exists. If you don’t follow that recommendation, you go out of business one way or the other with likely a brand shell left. You will die a slow death in any scenario I can imagine. Having a young, growing startup that is the future for your organization is the choice you have, but trying to reinvent your ICE organization will make you slow and the pace of innovation and growth is all that matters in a disruption like the one we are in today.
In Germany, we have a saying, “wash me but don’t make me wet,” which actually tries to express the request for change without facing the required consequences to make that change happen. I am afraid I have to convey the unpleasant truth that if you try to get washed without getting wet, that’s not possible. You are losing the most valuable asset you have, which is time. Without time, even if you want to change and make the right steps, you can’t. Time is running out, like the sand in the hour glass, and although it’s right in front of you, you either can’t see it or you don’t want to.
It’s time to make a step back after all your unsuccessful attempts to manufacture competitive BEVs. If you look at the result, you need to realize you did not succeed. This is true for all BEVs in the market today except Tesla. Many won’t like to hear it, but the fact is we don’t have a single decent competitor to any of the cars produced in Tesla’s Fremont factory or in Shanghai, and soon in Berlin/ Brandenburg and other places. It does not get better from here, but worse. More models will be launched and eat your market share away.
It’s a very uncomfortable truth, but it’s all now about whether you realize where you are standing in that process. Don’t ask your engineers, because they will tell you they will manage, which they have proven not to be able to do in the past, so why should they do it today or tomorrow? What is different today to what you asked them to do a year ago or a few months ago? Nothing is different other than time passed by. The situation with a more and more frustrated team trying its best but not able to make a large shift is obvious. Your situation is worse than it was and the bad news is it won’t get better.
Let’s talk about charging. It’s time that all BEV manufacturers globally are responsible for a working fast-charger network in markets they sell into. Stop thinking in silos but from the perspective of a customer and what he or she needs using a BEV and living in an apartment or house, driving daily somewhere in your market to work or for long distances to visit family, or 1,000 miles to a holiday destination. This is your responsibility because the product experience includes the charging experience and you can’t divert the one from the other without disappointing your customers.
Many people in the world cannot afford more than one single car, but need even less than one, so think about how you can make this BEV usable for others as well. Think about making a BEV a mobility as a service offering and how you can make them improve over time, and that you have to build a software company instead of a hardware company. Get a Tesla and cross the continent regardless of where you are for a few weeks and make notes about your experience and what you would like your customers to feel when they use your cars in such a way. If you don’t feel you have the time because you have a battle to fight, my answer is this is the battle to fight. The battle is your perception, knowledge, and understanding of what a BEV customer wants from you as a manager and executive, what they want from you as a company.
It’s time to realize that what you always considered to be your advantage — which is experience, your people, the know-how, the facilities, the brand, and your customers — are all of a sudden a disadvantage. This may sound like another mad claim to you, but it’s not mad. It’s a reality that you as a company are fighting an uphill battle against new startups like Byton, Rivian, and Tesla. It’s fully okay to fight an uphill battle if you recognize whether you are on the hill or in the valley. So far, you act as if you are on the hill, but you are not. It’s your perception where you are and what is happening, which is your biggest enemy — not the Rivians, Bytons, and Teslas of this world.
My expectation is that no one from the auto industry will like my proposal, as it’s a hard break from their experience after managing every industry shift in the last 100 years successfully without shutting down a part of their company and reinventing themselves in a new startup. All of them have been successful and stood up so far, strengthened and more powerful than ever. Why should people with that experience ever believe this time they will lose if they don’t go a different path?
It’s indeed a break from the tradition and myth, as it’s a complete new and complex technology they have zero experience in. But the issue is they believe it’s simple and easy. The new product you try to invent has nothing in common with the old product you sold other than it has 4 wheels and does transport people. All that you learned in 100 years is all of a sudden worthless. It’s a shock and you do not like to hear it, but the results you produce confirm this to be right. Claims how you want the industry and your customers to be will not bring you further along, but just be another nail in the coffin of your proud company, and with it of your career. History will judge based on what you decide, and it will be a hard sentence.
Let’s think about if there are any viable alternatives or other choices. Yes, they do exist, but they all put your organization at a higher risk of bankruptcy and in a lower likelihood to stay independent or remain as a major player in the market. What you are dealing with is not electric battery vehicles but a shift in consumer expectations. Your enemy is not Tesla but the expectation from customers for a seamless integration of software and hardware into products that they can use, make money with, drive, let drive, and see improve on their own. A promise of an autonomous world, a dream of a clean future without regret. Never try to compete with a dream, as you will always loose, and understand your enemy is in this case your friend.
Making yourself free from what you did so far and striving for the unknown and impossible, try to find people who share a vision and building something no one else did before. Don’t try to be like Tesla or anybody else, but try to be your own vision.
Driving an electric vehicle from your company needs to feel like flying the Messerschmidt 262 plane, the first ever in series produced jet engine from the Nazis in Germany in the 1940s, passing by a Bomber of the allies with a speed difference of 250 mph.
As a bomber pilot of the allies, you felt like an UFO just passed by and you are standing still in the air and as the pilot of the M262, like an angel, is pushing you from behind. (This is not an endorsement of Nazis in any form, just a technological comparison.)
This is what you have to feel when you build your new company and your new product:
“It feels like an angel is pushing you from behind.”
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