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1、 2023 Boston Consulting Group1The entire$3 trillion,150-year-old automotive industry is shiing to a connected,electric future.And itis doing so faster than many believed possible.By 2035,electric vehicles(EVs)are expected toconstitute 60%of new vehicle sales worldwide.To meet this challenge,many lea
2、ding automotive playersboth carmakers and suppliershaveannounced bold visions for where they are headed.Carmakers are either planning or alreadyimplementing the following:a complete shi to EVs,becoming EV-first while maintaining a strongRewiring the Auto Industry for theElectric,Connected FutureAPRI
3、L 18,2023 By Abhijit Kodey,Mike Quinn,Aakash Arora,Julie Bedard,Julia Dhar,SK Missert,Tiffany Ho,SibleyLovett,and Kristy EllmerREADING TIME:15 MIN 2023 Boston Consulting Group2internal combustion engine(ICE)business,or spinning out new EV-only business.Suppliers,too,areforming new EV-oriented partne
4、rships,undertaking M&As to move up into soware,consolidatingoperations,and pivoting their portfolios to emphasize electric and electronic offerings.As ambitious as these visions and moves are,both automakers and suppliers run the risk oftransforming their structures so quickly that their operating m
5、odels,talent pools,ways of working,andcorporate culture simply cant keep up.In our experience,they are struggling to make the changesneeded to benefit from their structural transformations and reach their EV goals.Automotive players run the risk of transforming their structures so quickly that their
6、operating models,talent pools,and corporate culture simply cant keep up.To succeed,automotive players will need to exert more effort to address gaps in the key areas that,ifle unaddressed,will lead to a bumpy transition to EVregardless of how clearly the endgame isdefined.A Complicated Journey No ma
7、tter which structures auto players choose to pursue,they face four complicating factors that aremaking the transition to EV particularly difficult:the degree of change needed,the vastly expandedscope of business activities that must be managed,a scarcity of needed talent,and organizationalchange fat
8、igue.Degree of ChangeAutomakers are well aware that the coming transition isnt just about making more connected,electricvehicles.Its about reinventing themselves to look and feel much more like technology companies.Thisrequires rethinking every component of their operating model.In pursuing this goa
9、l,however,automakers have fallen into a few traps.Simply overlaying changes on top of their legacy modelsrather than redesigning the structure for the future only drives complexity.Neglecting key elements ofthe new model,such as ways of working and talent,leaves major gaps in how the new systemopera
10、tes.And limiting transformation efforts to legacy organizational silos,such as engineering,operations and sales,makes it difficult for functions to interact with each other.2023 Boston Consulting Group3Expand Scope of ActivitiesOn the surface,EVs offer a golden opportunity to simplify operations:les
11、s complex interfaces,fewermechanical parts,and online purchasing of cars,among other factors.Yet automotive players mustcontinue to deliver traditional systems such as seating,chassis,and safety even as they take on newdomains of activity like soware development,battery cell manufacturing,and advanc
12、ed driverassistance systems(ADAS).That means rethinking how they manage soware and learning to workwith partnersespecially technology players.Scarcity of ActivityWith the shi to EVs,the expanded scope of vehicle offerings,and changes to insourced versusoutsourced capabilities comes a massive need fo
13、r new and refreshed talent.Over the course of thecoming EV transformation,the US auto industry alone is expected to need more than 115,000 peoplewith new skills such as data and analytics,artificial intelligence,systems thinking and sales of services,EV engineering,automation and robotics,and a vari
14、ety of new blue-collar skills on the shop floor.Yetdemand for talent is expected to be six times greater than the supply.Organization FatigueAutomakers have faced persistent headwinds and uncertainty over the past three years due to theCOVID-19 pandemic,a shortage of chips,and supply chain disruptio
15、ns,among other factors.Inresponse,they have already undergone multiple transformations and cost-cutting efforts in an attemptto preserve the integrity of their operations and margins.The strain of the coming transformation toconnected EVs is only adding to their stress.Where to FocusTo overcome thes
16、e obstacles to a successful transition,automakers must address three key areas:refreshing the operating model,reimagining talent,and changing the organization culture andbehavior.Refreshing the Operating ModelAuto players can use the transition to the electric,connected future as a catalyst to rethi
17、nk how theyvealways done business.They can break through traditional development roles and increase speed tomarket,look at new ways to build and maintain direct relationships with customers,and streamlinetheir production operations while gaining more visibility into an increasingly complex supply ch
18、ain.Todo this successfully requires the discipline to completely reimagine the operating model.Exhibit 1outlines what such an approach could look like.2023 Boston Consulting Group4As auto players start to tackle these fundamental operating model issues,they must keep five keydesign principles in min
19、d.Subtract and Simplify.As the scope of activities required of successful automakers has expanded toinclude soware,battery design,and the monetization of services and data,the addition of newgroups and processes has increased complexity and interfaces.In the past,for example,sourcing aradio required
20、 automakers to interact with just a few suppliers.Today,however,they must manageacross hardware engineering,soware design,and external hardware providers.This means makingdecisions on a range of issues:Who has ownership?Who decides on the specifications?Whosetimelines should be followed?Indeed,the d
21、ecision-making process itself should be rethought.Onecompany,for example,used a simple design parameter to test new operating model designs:Howmany people do you need to talk to in order make a decision?Shi to“Systems Thinking.”Long accustomed to organizing capabilities within functional silos,autom
22、otive players now need to develop a far more overarching,cohesive model.Moving to a“systems”mindset requires end-to-end product ownership and decision rights.For example,productteams must no longer think about cooling the engine,cooling the electronics,and cooling thepassenger cabin as separate acti
23、vities and individual components.Instead,they need to think aboutthe“thermal system”and break down the elements it is made up of to arrive at a more elegant 2023 Boston Consulting Group5solution that cools the engine,electronics,and cabin while becoming cheaper,lighter,simpler,andupdatable with sowa
24、re.To get there,they must empower leaders with end-to-end accountabilityacross the enterprise.They must also reimagine the product lifecycle management process toseamlessly integrate multiple stakeholders and inputs,including the soware,hardware,and allpartners,and reset the definition of success to
25、 break down functional loyalties.Rethink Governance for Continuous Delivery.The auto industrys operating model used to bedefined by the“model year”approach.Automakers were good at defining and meeting stage gates,and it was clear who was responsible for what.Today,automakers are entering a world of
26、continuousdelivery that demands ongoing releases of both soware and hardware.When Tesla improves itssoware,the company doesnt wait for the next model or mid-cycle refresh,but instead releases it overthe air in a regular cadence.This requires more nimble governance mechanisms that allow forcontinuous
27、 synching,including real-time dynamic capital allocation processes,“product boards”toensure consistency across groups,and real-time dashboards that provide constant updatesespecially as some automakers choose to expand the scope of what they develop.Refresh Performance Management.Traditionally,auto
28、players had straightforward,well-definedKPIs,such as cycle time,equipment efficiency,and on-time delivery,that followed a clear timeline.Butin a world with cross-functional product development and continuous delivery,many of the old KPIsare no longer relevant.What matters now are installed base,atta
29、ch rate of post-sales products andservices,second owner activations,and over-the-air soware updates,not simply how many cars aresold.To reward the right behavior,automakers need to redefine what success looks like.Differentparts of the organization will require different success metrics;makers of EV
30、s may prioritize customerlifetime value while the legacy ICE business continues to focus on operational KPIs.Companies willneed to adopt a thoughtful,de-averaged approach to their definition of success,and align theirproduction KPIs with the frameworks they use to assess their people.Embed Technolog
31、y.Most automakers are working hard on various elements of technology,such asdata platforms and analytics,and greater factory automation.Yet there is an opportunity todramatically increase even further the use of these technologies,making them core to the operatingmodel.Currently available artificial
32、 intelligence and machine learning solutions,for example,are stillbeing deployed piecemeal by automakers.But they should look to deploy AI at scale to assist withtransactional activities,such as processing invoices,booking general ledger entries,scanning invoices,and the like.Reimagining TalentAutom
33、akers must deal with the growing scarcity of the right talent as they reinvent their organizationsand scope,but relying on hiring to fill the gap will not be sufficient.OEMs and Tier 1 suppliers mustbegin to diligently shi their efforts to attract,retain,and train talent with new skillsets.With surv
34、eysshowing that 98%of industry CEOs reporting that talent and skills are among their top three priorities,companies are fully aware of the growing need.2023 Boston Consulting Group6Yet all auto companies are struggling with how to tackle the problem.What specific skills should theyrecruit for?Where
35、from?How should they evolve their employee value proposition?And how can theyretain and develop the talent they do hire?Answering these questions requires an integrated talentstrategy.New Leadership.Automakers will find that upskilling current leadership or bringing in new leadersfrom industries suc
36、h as technology and gaming can jump-start their talent transformation.ConsiderFord,which has hired a sizeable portion of its senior leadership team from leading technology players,including Apple,Tesla,Hewlett-Packard,and Amazon.Whether appointed from inside or out,theseleaders will need to be equip
37、ped for a new style of management,managing far more engineers thantechnology companies typically employ,across both mechanical and digital realms,and blending theminto the institutional knowledge and culture of the automotive sector.More Multidisciplinary Thinkers.While auto players are catching up
38、on identifying next-generationtechnical skills,they must also keep up with the paradigm shi from technical expertise to more“T-shaped”skills profiles,with both deep technical expertise and cross-functional skills.For example,engineers will need a strong foundation across physics,data science,program
39、ming,machine learning,2023 Boston Consulting Group7and AI if they are to innovate across a range of increasingly common integrated components such asADAS and advanced connectivity systems.Exhibit 2 illustrates many of the new customer-centric,dataengineering,and design skills needed throughout the p
40、roduct lifecycle.A Multipronged Approach to Hiring.The talent gap is too big to overcome simply by hiring morepeople.Automakers will need orders of magnitude more talent in some areasand less talent inothersand so must take a de-averaged approach to talent acquisition.In occupations where moretalent
41、 is needed,such as digitization,teams must deploy a range of levers to expand their talentacquisition processes,and funnels.These include“building”talent internally,“bot-ing”or automatingaway work(as is already happening in many production facilities),“borrowing”contract workers to fillniche skill g
42、aps,and“bulk buying”through M&A.The right answer to these resourcing strategydecisions will depend on the organizations current baseline skills and anticipated needs.Ways of Working for Retention.Acquiring talent is hard,but rewiring the operating model to keepthem can be just as difficult.Automaker
43、s,particularly legacy players transitioning away from the“oldschool”practices of long-standing OEMs and Tier 1s,will need to change their ways of working andadopt new policies,such as more flexible career paths and more agile teaming models,to avoid“organ rejection”of hard-won talent.Consider,for ex
44、ample,the far more rapid cadence of technicalupskilling or the expectations for decision-making speed at companies like Apple and Googlecompared with legacy OEMs.These are table stakes for the right talent,and automakers need toinvest to keep up.Distinct Operating Models,One Purpose.Many organizatio
45、ns try to find the right balance betweenseparating and integrating“OldCo”and“NewCo”operating modelswhether to maintain distinctways of working,tools,and technology in recognition of different production processes.This approach,however,risks the organization getting stuck in an interim state that can
46、 erode the employee valueproposition on both sides.Employees focused on ICE production may feel devalued if they have lessgrowth potential or compensation than EV employees,while EV employees may feel hampered by theold ways of working on the ICE side of the business.To avoid this outcome,organizati
47、ons must ensurethat all employees maintain a shared sense of purpose and collective success,and actively cross-pollinate high-caliber talent across business units.An HR-Business Partnership.To succeed,HR must work side-by-side with business leaders toensure the talent transformation is deeply integr
48、ated with strategic priorities,with ready access tofunding and resources.HR leaders can also turn to third-party partners across the human capitalmanagement ecosystem to augment their talent-building efforts and free up more time for higher-value-add work.Changing the Organization Culture and Behavi
49、orRegardless of the strategy,structure or organization model automakers choose,the EV transformationwill require a massive shi in culture,behavior,and people engagement.None of these changes will 2023 Boston Consulting Group8happen by magic.Given that only one in four transformations succeed over bo
50、th the short-and long-terms,the odds are stacked against transformation leaders who do not embark on a change journeywith a strong plan to deliberately change culture,anticipate and overcome behavioral obstacles,andthoughtfully engage their people.Achieving the desired organization culture requires
51、leaderenablement,people engagement,and executional certainty.(See Exhibit 3.)Desired Culture.Make a purpose-led case for change:take bold steps to reimagine the culture andbehavior of the organization around EVs instead of traditional ICE operations.This is especiallyimportant for companies that cho
52、ose to integrate or accelerate EV development versus spinning it offor splitting it out.Through these changes,there are fundamental shis in human dynamics that needto be managed as workforces begin to identify with the organizations new purpose.Organizations that previously lived their culture throu
53、gh a focus on creating the largest and mostpowerful motor vehicles must now shi to small,smart,technology-driven precision.As they do so,leaders need to ensure that their people see as much of themselves in this future as they did in thepast.Companies should seize this opportunity to use EV transfor
54、mations as a catalyst to implement a high-performance culture,one willing to accelerate and centralize product development,adopt agile ways ofworking,automate manufacturing,and introduce new enhancements to soware and electrical 2023 Boston Consulting Group9architecture development.Ultimately,using
55、the shi to EVs to fuel performance improvements for thebusiness will go a long way to positively changing traditional ways of working.Leader Enablement.Organizations need leaders who can shi their mindset to focus on the futureneeds of the company and be honest and clear about where ICE fits in futu
56、re operationsanother keyfactor in transformation success.To disrupt traditional ways of working,leaders need to take boldsteps to live desired behavior shis and reinforce the new culture.For instance,for companies whichwill remain reliant on ICE for key offerings in the near term,leaders need to mai
57、ntain a unified frontfor how they speak about the future of ICE operations and how EVs will scale within the business.Visible demonstrations of collaboration and support,such as town halls,common meetings,andparity on the organizational chart,will help minimize feelings of alienation and highlight t
58、hat whilethere may be very different capabilities,speeds,and products in each business,they are ultimatelyworking to build the same vision.People Engagement.In embarking on transformation journeys,automakers are working with adouble-edged sword.They have strong,distinctive cultures,in many cases dev
59、eloped and nurtured overmany decades.These cultures provide a strong foundation on which to build a shared agenda.Being apart of a strong culture is oen a reason why employees join these companies in the first place.On theother hand,these cultures are notoriously difficult to change.Successful execu
60、tion of automotive players EV strategies hinges on equally boldtransformations to their operating models,talent strategy,and culture.Attention to the human element is a key factor leading to transformation success.As Exhibit 4 shows,employee-centric change management can help improve realized value
61、by 66%,and employee buy-inby 50%,compared to average transformation efforts.(See Exhibit 4.)2023 Boston Consulting Group10Executional Certainty.To drive accountability and achieve the expected impact of EV goals,organizations should empower a Transformation Office responsible for developing and driv
62、ing the end-to-end implementation roadmap for the shi to EVs.Having a dedicated team will drive the pace oftransformation,prioritize and sequence initiatives,and reduce the risk of siloed operations that cannegatively impact production and coordination between business units.The tactical activities
63、to support a move to an electric,connected future are not easy,but they arenecessary for OEMs and Tier 1s to ensure their continued existence.From the pressures ofenvironmental concerns to the increased competition between startups and legacy OEMs,a successfultransition to electrification is becomin
64、g increasingly vital.Many automotive companies have taken the necessary steps to declare targets and develop thestrategies needed to complete the shi to EVs and soware development excellence.No matter whichstrategy they turn to,successful execution ultimately hinges on equally bold transformations t
65、o theiroperating models,talent strategy,and culture.2023 Boston Consulting Group11AuthorsAbhijit KodeyMANAGING DIRECTOR&SENIOR PARTNERBostonMike QuinnMANAGING DIRECTOR&PARTNERDetroitAakash AroraMANAGING DIRECTOR&PARTNERBostonJulie BedardMANAGING DIRECTOR&PARTNERBostonJulia DharMANAGING DIRECTOR&PART
66、NERBostonSK MissertPRINCIPALBostonTiffany HoPROJECT LEADERMinneapolisSibley LovettPRINCIPALBoston 2023 Boston Consulting Group12Kristy EllmerMANAGING DIRECTOR&PARTNERBostonABOUT BOSTON CONSULTING GROUPBoston Consulting Group partners with leaders in business and society to tackle their most importan
67、tchallenges and capture their greatest opportunities.BCG was the pioneer in business strategy when it wasfounded in 1963.Today,we work closely with clients to embrace a transformational approach aimed atbenefiting all stakeholdersempowering organizations to grow,build sustainable competitive advanta
68、ge,and drive positive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range of perspectives thatquestion the status quo and spark change.BCG delivers solutions through leading-edge managementconsulting,technology and design,and corporate and digital ventur
69、es.We work in a uniquely collaborativemodel across the firm and throughout all levels of the client organization,fueled by the goal of helping ourclients thrive and enabling them to make the world a better place.Boston Consulting Group 2023.All rights reserved.For information or permission to reprint,please contact BCG at .To find the latestBCG content and register to receive e-alerts on this topic or others,please visit .Follow BostonConsulting Group on Facebook and Twitter.