_This is the second part of our field study into how digital is transforming the auto industry. Here, we focus on seven key principles that can help shape a successful digital strategy in the face of constant change. And if you missed it, catch up on part one which details five of the most common blockers to successful digital strategy. _

_This post has been adapted from Humanising Autonomy: Where Are We Going, the new book by ustwo Auto — download it in full here. _

Part Two

In the past couple of years, we have been working closely with partners in the automotive industry. They are going through a fascinating change, both as companies, but also as part of a constantly changing technology landscape. In part one, we addressed some of the things that can go wrong and why they run into problems. Now, we’ll discuss how companies can develop a strategy to face constant change and what some of the key building blocks for success are in that environment.

The automotive companies are very good at building really complex hardware, and they have refined this process over almost an entire century. Now, they are facing a similar challenge to that which happened in the PC and mobile phone industries — cars are becoming more software oriented and connected. It is easy to say the automotive companies must change, and they need to work differently to be responsive in such a context. Building products in a waterfall method over several years inevitably leads to obsolete software solutions, before the product is even launched. However, we believe we must respect the extreme complexity these companies face — both the new organisational needs, and a technology environment that is constantly changing.

In a world of great transformation, it is incredibly hard to develop a sustainable strategy. Yet, over time, we have managed to find some ideas on how to approach strategy through chaos and complexity. As things get more complex, it’s hard to predict the future. You cannot rely on old methods to analyse your environment and decide the best path. Instead, you need to understand that certain things remain constant even in the midst of chaos. This is what guides us and prepare us for future change.

Finding Focus in Chaos

Whilst this is not an exhaustive list, here are seven core principles to consider:

1. Understand your real customers

It is surprisingly easy to get tunnel vision, by following industry trends and expert analyses. However, because your competitors are generally following the same trends, you are unlikely to reach any remarkable innovation. Despite listening to our own marketing teams, we spend too much time focusing on who we would like our customer to be, and not enough effort genuinely trying to understand who our customers truly are, and how they behave. By investing time understanding our real customers, their lives and challenges, we will gain a deeper clarity of the problems they face and what opportunities there might be to make their lives better.

2. Lead innovation with user insights and unique core skills

Recognise that true innovation either stems from a deeper understanding of your customers or is rooted in unique core skills that only your company possess, which is difficult to replicate. Any time that innovation is misguided by quantity of features or more novel features than competitors, we are likely to stagnate and fall behind.

3. One core opportunity is worth more than 100 ideas

It might seem that following Mao Zedong’s “let a hundred flowers bloom” sentiment would be a good idea. The more features or opportunities we identify, the more chance of success, right? Sometimes this is true: if three startups out of 100 are successful enough to outweigh the investment in the 97 that failed, then great. But it is important to recognise that this comes at a cost that most automotive manufacturers are not too keen to accept.

If you do not have a clear strategy as to how to monitor and experiment with 100 ideas, and then shift all your effort towards those real innovations you identify, this could be even more painful. If you pursue 100 ideas with equal effort, it will be extremely expensive, your team will lose focus and your customer will be unclear about the value you offer. Therefore, it is typically better to experiment at very low cost, then narrow your focus to prioritise, and realise only the few ideas that are likely to be core drivers in your industry.

4. Take a holistic view — your company is part of a bigger ecosystem of change

Because automotive companies typically are already made up of complex ecosystems of suppliers and partners, it is easy to forget that your customer also lives in an ecosystem that’s going through change. That is why it is important to understand your product as part of a social ecosystem, as well as a technological one. It might be wise to encourage your suppliers and partners to take an equally dynamic view of their role in the ecosystem. Just because your car radio came from one supplier 20 years ago, does not mean that same supplier is necessarily equally well-equipped to provide your in-car system today, which is infinitely more complex and interconnected. Perhaps they need to seek partners, in order to stay relevant as part of the supply chain.

5. Build for constant evolution, not occasional updates

Cars are typically built as standalone models. Manufacturers then review, analyse where the industry is going, and then make some improvements for the next model. Sometimes there are big innovations, sometimes just small evolution. In this context, it’s easy to assume that as long as what is built has some flexibility and room for improvement, it’s good enough.

However, growing customer expectations, and a competitive marketplace mean that software is built in a context where you may need to fundamentally re-engineer your entire system every two to three years. So to meet people’s evolving needs for their personal ecosystems, the automotive industry must build systems that are intended for constant change. Not just a user interface facelift — new services, new security threats and new patterns of behaviour must be accommodated on a regular basis.

6. As you scale up, you increase complexity and slow down innovation

Typically, companies that have historically built products on a large scale assume that putting more people on a project will speed up innovation and progress. Unfortunately, the opposite is often true. There is a reason why Amazon’s Jeff Bezos advocates “two pizza teams”.

A small team can be constantly in tune with one another, and respond to change in a very agile manner, whereas a big team quickly increases complexity even to coordinate activities. This is one of the most crucial reasons we think large software projects in the automotive industry have been surprisingly slow, despite the amount of investment.

7. Recognise that change will be continuous, and set yourself up to respond rather than predict

Behind many of our ideas above, there is a realisation that we are not very likely to predict the future, or to mobilise our teams in due time towards that change. In other words, we can’t plan one or two years ahead and set up our teams to build according to predefined plans.

Guiding Principles

So instead of planning for what we cannot control, let us identify the principles that guide us through change.

Of course, this is a broad analysis of our view of the automotive industry and large companies going through digital transformation in general. For a broader view of the dynamics of digital transformation, we recommend reading our post on 10 Principles of Digital Transformation.

Each company might identify slightly different guiding principles that work within their context. While these principles can seem abstract, they could be broken down into a day-to-day mindset and rituals your team can follow to increase chances of success.

If you’re interested in working with us to help find clarity in the uncertainty you can contact us hello@ustwo.com.

Additionally, you can read more about digital strategy in the auto and mobility space by downloading your own copy of the new book from ustwo Auto, from which this post was adapted.

Originally published at https://www.ustwo.com.