The automotive industry is scrambling to transform itself in various areas: green (move to electric); smart (move to connected), etc. Much is being driven by nimble startups like Tesla, unencumbered by legacy concerns. This post focuses on two two areas that could further drive the turnaround and may be even more important because they are in white space.
Traditional car sales are on a downward trend worldwide – just do a search to fact check that. Other than necessity driven by environmental concerns, people increasingly eschew ownership – their needs are increasingly focused on mobility. Mobility as a Service has become a thing. Incumbent car companies recognise this and see it as an area of transformation – see Toyota’s focus on this.
Customers now seek experiences and the product orientation that has served auto companies so well in the past (especially Toyota with its emphasis on quality) needs to evolve. A greater orientation on services is key. Use of technology to understand and engage with customers and to enhance services and experiences help too. Work is being done in this area by many with varying degrees of success.
One area that has had little attention so far is to understand employee experience and its impact on the customer experience.
This post is a way to explore the subject as part of work on my As a Service trend report which will have a chapter on this industry (alongside one on retail). It touches on various aspects of the As a Service trend as a whole (see iceberg), with an emphasis on the user experience. Note the user is representative of the employee and distinct from the customer.
Many traditional auto makers make money predominantly on the manufacture and sale of cars but accessories and finance too – the first will continue to be a driving motivation. Some have started offering cars on a subscription basis in high profile launches. Follow my posts on this to see examples.
New strategic shifts and efforts to become a mobility company will help but its debatable how fast and far these will go to overcome challenges from the likes of Tesla which is now second in market value only to Toyota.
It will require fundamental changes in culture and business models to enable some of the shifts. This is hard work that in the first instance, has to be acknowledged and then embarked on in earnest. Few understand the challenge.
Embracing technology for the car and for the customer is needed and where most activity is happening. But it is not happening sufficiently for the employee and for the right reasons (e.g. as a way of changing culture and for impact on customer experience).
Often initiatives are spun off from the main business to drive activity in the mobility space but while this is beneficial for speed, its lack of connection back to the main business is a missed opportunity.
Doing things the same way based on how a company built its dominance is not necessarily going to work going forward and business models will need reinventing, cultures uprooting, work practices redefined. A great example from Toyota is their success with incremental improvements in how products are delivered for exceptional quality. This is embodied in The Toyota Way. The question is whether this will help them remain a leader. Spinning off initiatives is one consideration but wholesale transformation also needs to be considered.
The software industry has gone through a largely played out transformation to a Software as a Service model and there are many interesting and parallel lessons and practices that are being broadly categorised into the As a Service trend. These lessons and practices are in turn being recognized and co-opted by many industries, from retailers to the auto industry and brought into their transformations, indeed into their business models and operations.
McKinsey for example, working with the auto industry, has recognized one of the fundamental changes required is shifting from a product to a service orientation and focus. See As a Service Trend page for more on this. Additional and more specific aspects of this transformation from the As a Service trend that are being brought in are: subscription business models; technology playing a deeper role in digitizing processes and collecting and understanding data on product and service usage; a focus on customer experience; and a recognition that cultures and working practices need to change to enable the transformation, through a focus on employee experience.
The employee experience
Companies need to make the connection between employee experience and customer experience. Modernising and digitalising the workplace through programs are often the leading plays to do this and are happening. Not many have made the link between employee experience and how this translates into impact on customer experience.
And there is debate as to whether they are transforming the employee experience to a great enough degree and at great enough speed to be able to compete with new entrants and competitive activity.
Bad software effects employee experience. According to a G2 survey, more than half of all employees are unhappy at work because of the software they are using. Bad employee experience means lower productivity and employee churn. Modernising your software technology stack is critical. Not leveraging the opportunity to transform the employee experience and in turn the customer experience will lead to lost market share, revenue and reputation.
The Tesla experience
From the beginning of the car-buying experience, Tesla rolls out the red carpet. They sell cars to consumers directly instead of licensing them through independent dealerships. This gives them more control over how they present their vehicles and their sales reps’ scripts and understanding of the customer. Tesla’s stores have a minimalistic design philosophy, with small luxuries like free international calls, coffee bars, and internet stations.
This is all intended to optimize the customer experience. In turn, Tesla employees embody and communicate the business model and energy mission, even when someone’s not interested in buying a car. This is entry level competition in the new As a Service world.
What can be done?
Lead from the top
Efforts on modernising your workplace through a formal program need to be accelerated and tied in with the broader objectives the company has to become a mobility company. It needs to touch all parts of the business that this broader transformation effects and go far beyond IT as an owner.
Heads of the program and any spin-off initiative who are at the forefront of the transformation can make it happen faster and more efficiently if you raise their profile and have the right (As a Service) strategy in place.
Executives should get on board and sponsor the modernisation program and tie it into any mobility initiatives as fundamental for the success of the company.
CIO’s typically own modernisation programs but they need to get their peers and the CEO involved. Here are some recommended steps you can take as a CIO:
- Develop a simple proposition to take to other executives to get buy in for the formal program.
- Approach targeted business lines (low hanging fruit, strategic priorities, etc.) to do work with them to tie in evidence to specific business outcomes.
- Work with yours and their teams to prove and put a compelling case with clear evidence together. Present it to the board and spread out to other business lines that pull on the opportunity.
- In your presentations, share experiences of how other companies addressed similar approaches, e.g. work with Microsoft on adopting learning from its experience (see last section below) or from its customers who are often happy to share.
Measure to manage
Start with setting a baseline employee experience score. This would be a way to determine where you stand currently and what kinds of things impact on it. Then targeted improvements could be tackled in areas identified or any new areas specified, e.g. recruiting and onboarding effectiveness.
Thereafter, specific impact of employee experience on customer experience could be tackled, especially for customer facing roles but also for roles/activities that indirectly impact the customer experience.
The impact from these two elements should be traced to impact on the bottom line through reduced costs, increased revenue, etc.
Tackling this one area of derived business impact begins a data driven journey, correlating activities with outcomes. It allows for many of the specific aspects of the transformation around the As a Service trend to be investigated and correlated with business impact.
A data driven approach allows you to map new business practices and modern workplace technology adoption with key new business outcomes. These bring to life your progress on the journey to transformation and make it real.Tweet
Microsoft is a great example I am well versed with since I work there and am living the transformation. I am not trying to sell Microsoft as a partner, merely to show by example – whomever you choose, look at their journey as evidence.
With all of its experience transforming successfully to a SaaS company and in changing its culture and workplace through the use of its own tools, Microsoft is well placed to help customers with their transformation.
Its Modern Workplace technologies are obviously the core technologies that touch the employee experience but there is scope across the technology stack (Azure, Data and AI, Dynamics, etc.) depending on the scenarios identified.
Learning from Microsoft is not difficult since we often work closely with customers to expose our practices and share our experience. We also have a robust employee experience strategy and focus which we share with customers.
Contact me if you are interested in this area and not just if you are from an automotive company. I’ll try steer you in the right direction. If you are interested in getting regular updates in line with this post, subscribe below.