Is this the long-awaited disruption?

Is this the long-awaited disruption?

The coronavirus is inducing unpredicted effects and leading to a critical review of how the society will be, to set the bases for the recovery and the prevention of future turbulences.

One clear example of the urgency for a significant change comes from the automotive industry. During decades, this sector played from a position of strength, while now proves to be weaker than expected (sourcing issues, manufacturing interruptions, failing logistics, closure of dealer networks, new consumer behaviours). It’s time to innovate.

On the manufacturing side, changes can’t be as fast as we would like: the inertia caused by strong investments, legislation and regulations set what and how can be produced. Nonetheless, flexible approaches – at all levels – mitigate the “push the metal” effect for products with less demand and protect the profitability of operations, improving integration and quality from the source (ex.: the new Seat León platform can host an unprecedented variety of engine schemes).

Integration and interaction along the value chain don’t not mean necessarily a cost-cut effect, but also the ability of sharing know how to avoid mistakes and misleading shortcuts. An example: the complex supply chain and the dependence on long-distance supplies bring to a reconsideration of insourcing, reshoring, just in time; nonetheless, a closer analysis drives to carefully think about the concrete feasibility of “appealing” solutions.

What about sales? The response to the crisis is different market by market, but a common feature is the potential adoption of public “recovery packages” (together with various incentive schemes) that follow well known paths. In the short run, they work, but for the long term the industry needs more: reading the change of the consumption paradigm, in addition to the technological one, leads to the introduction of flexible and effective solutions, decreasing the dependence on external help and stimuluses.

[Casa SEAT; John Moavenzadeh 2020]
[Beyond the coronavirus: the way ahead for the automotive aftermarket; McKinsey, 2020]

There is a need of ideas, out of consolidated schemes, to achieve concrete results and higher proactivity, whereas the automotive sector sometimes acts reactively. The awareness and the ability of being “creative” will allow to build a long-lasting advantage.

Imagination and sense of urgency drive “traditional” players to explore new schemes for overcoming the current concept of dealer network without displacing it (ex.: VW and the VAPV dealer association agreed on a new distribution model in Germany for the all-electric ID. range) and manage sales under innovative umbrellas. On the service side, “contactless”, “no touch”, “remote”, “safe” are the words guiding the development of new operational processes. This will protect and keep the territorial presence (advantageous position), without succumbing to the newcomers (not based on an expensive and complex background).

Automotive professionals must trigger and accompany the change, to make it permeate all layers of the value chain. This industry increasingly embraces the cross-contamination, more dynamically and stronger than ever: the way to the continuity start from here, with an acceleration of the innovation cycle.

The shape of the recovery curve impacts on immediate decisions, but can’t affect long-term effect decisions, the will to evolve and the ability of managing the change. On the opposite, it has to further motivate it.

The collective intelligence has to guide an “out of the box” thinking, because the situation is “out of the box”. In the Post-Covid 19 we’ll learn to put ourselves in discussion continuously, in view of new turbulences, not necessarily as painful as the current one. As far as manufacturers and networks will be able to listen to signals coming from increasingly evolved customers (empathy) and go beyond customer centric slogans, replacing them with behaviours – conscious and meaningful -, will also be able to build flexible strategies that grant legitimacy – the right – to be on the market. Not only that; the profitability – at all levels – can grow and be “healthier” (how many pockets of inefficiency can be detected? When aftersales will be effectively converted in “pre-sales”?).

The automotive is (still) deeply embedded in our lifestyle: mobility, flexibility, status symbol. For how long? How long the “New Normal” will last? When will it become “old”? We’ll realize soon that what we are living is the disruption that will bring an evolution the sector needed: as far as we’ll be prepared, the change will be a tool and not a threat.

Jet Consulting About the author
l.ballabio@jet-consultants.com