Keeping Europe’s automotive industry competitive requires not just a refined focus on existing strengths but also an acceleration of existing efforts.
In the report is stated that the European auto industry is in the midst of the greatest change in its history. In service of helping the industry remain globally competitive, the report outlines a road map of seven pillars for stakeholders to act on.
You can read the full report from McKinsey at: www.mckinsey.com/industries/automotive-and-assembly/our-insights/a-road-map-for-europes-automotive-industry
Summary of the article
The European automotive industry is undergoing a significant transformation, presenting both challenges and opportunities. In response to these changes, a roadmap consisting of seven key pillars has been outlined for stakeholders to act upon. These pillars encompass various aspects of the industry’s evolution:
- Maintaining Competitive Advantage: European automotive companies currently generate substantial revenue and earnings compared to their Chinese counterparts, giving them a strong position. However, they must act swiftly to maintain this advantage.
- Customer-Centric Innovation: European companies should focus on understanding customer needs and preferences in the context of software-defined electric vehicles (EVs), tailoring products and services to meet evolving demands.
- Cost Efficiency and Speed: Reducing costs and accelerating development cycles are essential to remain competitive, with a particular focus on narrowing the cost gap with Chinese OEMs.
- Resilient and Sustainable Supply Chains: Creating resilient and circular supply chains, especially for critical components like batteries and semiconductors, is crucial to mitigate disruptions and improve sustainability.
- Battery and Semiconductor Industry Growth: Europe should strive to become more competitive in battery manufacturing and high-end semiconductor production, potentially through regulatory alignment, knowledge development, and strategic partnerships.
- Advanced Driver Assistance Systems (ADAS): Collaboration within the industry, standardization of sensor communication, and shared data pools can help advance ADAS technologies and maintain competitiveness.
- Closing the Software Skill Gap: European automotive companies need to enhance their software capabilities, which may involve shared software platforms, early hiring, reskilling, and attracting software talent.
To drive progress and success in these areas, it is essential to establish a supportive environment that involves:
- A clear and actionable roadmap with quantifiable targets.
- Competitive regulatory standards and interoperability.
- Investment in EV infrastructure, including charging networks and renewable energy sources.
- Collaborative platforms for horizontal, vertical, and cross-industry partnerships to address evolving challenges and opportunities in the automotive sector.
This comprehensive approach aims to guide the European automotive industry through its transformative journey and ensure its continued competitiveness in the global market.
Considerations to the stated focus areas
In PEDCO’s opinion, a clear Lean-Agile QMS helps in 4 out of the 7 focus areas, namely ‘Customer-Centric Innovation’, ‘Cost Efficiency and Speed’, ‘Resilient and Sustainable Supply Chains’, and ‘Close the Software Skill Gap’.
In ‘Focus relentlessly on cost and speed’, the report talks explicitly about reaching this by applying agile principles to software development. Across all processes, co-locating cross-domain teams and setting up task forces for products. As the report states, the European automotive industry is undergoing a profound transformation, with a strong emphasis on Agile and Lean Development, as well as Relentless Improvement. These principles are crucial for maintaining competitiveness and driving success in this dynamic landscape.
Agile and Lean Development: In response to the rapidly evolving automotive landscape, European companies must embrace Agile and Lean Development methodologies. These approaches prioritize flexibility, adaptability, and efficiency in product development and innovation:
- Flexibility and Adaptability: European OEMs must streamline their development processes, breaking down silos, and fostering cross-functional collaboration. Agile methodologies allow for rapid iteration and adjustment to meet changing consumer demands and technological advancements in the software-defined EV era.
- Efficiency and Optimization: Lean Development principles should be at the forefront of product design and manufacturing. By eliminating waste, improving productivity, and optimizing processes, European companies can reduce costs and accelerate development timelines. Structural product design, battery production integration, and scaling EV production are key areas where Lean principles can be applied.
Relentless Improvement: Relentless Improvement is essential for European automakers to remain competitive and close the gap with their global counterparts, particularly in cost efficiency and development speed:
- Cost Efficiency: To catch up with Chinese OEMs, European companies should continuously seek cost reduction opportunities. This includes strategies such as insourcing battery production, exploring cost-efficient battery cell chemistry alternatives, and identifying premium features consumers are willing to pay for, such as brand differentiation, environmental leadership, and superior safety performance.
- Development Speed: European OEMs should address the lengthy development cycles by redesigning processes for innovation and industrialization. This can be achieved through accelerated product design methods, decoupling hardware and software development, and embracing Agile principles in software development. Collaboration among cross-domain teams and task forces for projects with delays or supply bottlenecks can further expedite development.
In conclusion, Agile and Lean Development, coupled with a commitment to Relentless Improvement, are pivotal for the European automotive industry to thrive amid ongoing transformations. These principles empower companies to adapt swiftly, optimize operations, and continuously enhance their products and processes, ensuring their competitiveness in the software-defined, electrified automotive landscape.
In our Experience with Applied SAFe, not only for cost and Speed, but also for Customer involvement, Supplier Involvement, and accelerated ramp-up time for new hires or new job assignments.
How to support such a roadmap with Applied SAFe
Certainly, incorporating Lean Quality Management Systems (QMS), SAFe (Scaled Agile Framework), and it’s implementation with Applied SAFe can further enhance the European automotive industry’s ability to tackle the challenges of Agile and Lean Development, as well as Relentless Improvement:
Lean Quality Management Systems: Lean QMS principles play a pivotal role in ensuring that the European automotive industry maintains high standards of quality while embracing Agile and Lean Development:
- Continuous Quality Improvement: Lean QMS emphasizes continuous improvement, which aligns seamlessly with the concept of relentless improvement. It encourages European automakers to monitor and enhance product quality at every stage of development, from design and manufacturing to post-market support.
- Waste Reduction: Lean QMS principles help identify and eliminate inefficiencies and defects in processes. By minimizing waste and optimizing quality, European companies can enhance their competitive edge, especially in cost efficiency.
SAFe (Scaled Agile Framework): SAFe is a structured approach to scaling Agile principles throughout large organizations, including those in the automotive industry. It offers several benefits when addressing the industry’s challenges:
- Framework for Agility: SAFe provides a structured framework that allows European automotive companies to apply Agile practices at scale. It helps them coordinate and align work across multiple teams and departments, ensuring everyone works towards a common goal and maintains a customer-centric approach.
- Improved Collaboration: SAFe encourages collaboration among cross-functional teams, which is essential in the software-defined EV era. It enables faster decision-making, enhanced communication, and better synchronization of efforts, all of which are critical for Agile and Lean Development.
Applied SAFe: Applied SAFe is PEDCO’s product a practical implementation of SAFe principles and practices within an organization, which is particularly relevant for the European automotive industry:
- Tailored to Industry Needs: European automakers can apply SAFe principles in a way that suits their specific industry requirements. ‘Applied SAFe’ allows for customization to address the unique challenges and opportunities presented by the automotive sector’s transformation.
- Alignment with Lean and Agile: ‘Applied SAFe’ ensures that SAFe practices are in harmony with Lean and Agile Development methodologies. This alignment helps companies maintain efficiency, speed, and adaptability in their operations.
Incorporating Lean QMS with Applied SAFe into their operations empowers European automotive companies to create an environment that fosters Agile and Lean Development while emphasizing relentless improvement. By effectively implementing these frameworks, automakers can navigate the industry’s transformation with a strong focus on quality, efficiency, and adaptability, ensuring their long-term competitiveness in the ever-evolving automotive landscape.