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You are here: Home > Rethinking Organizations > Assessing systemically: the business side #digital #transformation #automotive #mobility #Italy #Turin #FCA

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Published on 2019-09-23 06:15:43 | words: 5041

Human vs. Technical (and I am not referring to "Terminator")

If you read previous articles from this section of my website, you saw here and there that I consider false the dichotomy between "business&technology" and "politics&society" (and any variation thereof).

This article is actually the third part of a series started on 2019-09-16, scattered across few "channels", to keep each segment as short as possible.

Therefore, consider these articles as "draft" or "introduction" for future material, mainly to share some ideas- and questions.

The first "episode" was actually a simple post on Linkedin, using as starting point an article that, luckily, appeared on 2019-09-16.

#Scienza #Nuova in #Turin presented tomorrow (continues on Linkedin)

The concept of that initiative is to blend "technical" and "human" knowledge at the post-graduate stage: not really something that much new, but, in Italy, the dichotomy I talked about is actually converted into "business=technical" and "politics=human".

My position? I summarized it within an article that I posted earlier this week (on the background of this series).

Footnotes on two articles about #business and #politics crossing paths with #technology

Summarizing the summary: many that consider themselves within the "human" side are quite "technical": have their own lingo, work on patterns that are defined within their own community as a way to position themselves vs. those who do not belong to their community, etc.

Just because society considers some activities expressions of a "higher culture" (whatever that means, beside the "status" implications) and others of a "technical specialization", does not imply that the behavioral patterns adopted by the former is more open-minded.

In my pre-business activities (political, sales to consumers, (compulsory) army experience), I always saw that the "human" side and the "technical" side complemented each other.

Time, before and after the Internet

This post is about a first step in any cultural and organizational change initiative: assessing where you are.

Moreover, in the XXI century this implies assessing "systemically": technology is one of the elements, people another element.

I will skip the theory, and discuss examples, so that you can follow my simple line of reasoning and adapt, if interested, to what matters to you.

People have to be considered on (at least) three dimensions:
1. individuals
2. members of one or more groups or of a specific "tribe"
3. members of their social environment at large.

It was true also before, but what changed in the industrial era (and even more so in the Internet phase) is the speed of "interoperability".

To make a business example: before Internet was available for business purposes, exchanging data between companies of different sizes required often using first paper, then in the 1980s various types of magnetic memory devices, and I saw in the late 1980s how messy was something as simple as having your own branches receiving data from the HQ and sending back data, and Electronic Data Interchange (EDI) activities often were done as bilateral agreements.

Real-time? Not really.

In the late 1990s, in France, my USA colleagues were surprised to see that the for a private network across the country with a "peak data transfer" of 14.4k (9.6k guaranteed- and I am not joking) across few hundreds of branches was close to what they expected to pay for a T1.

Well, this is the "business/technical" side, but in common English (or for those who never saw a world without high-speed connections), the consequence was roughly the difference between paying to have few dozen seconds to transfer the equivalent of one A4 page, and transferring few hundred pages in the same time.

Imagine the difference if you want to transfer operational data to be consolidated within a corporate database, to provide a daily status of your business, instead of the usual weekly or fortnightly or monthly summary (and maybe potentially "polished") report.

But this contraction of reaction times did not affect just data: also the timeframe available for decision-making changes, when people get used to access(and reply to) data almost instantaneously.

Coping with reality

Some say that "Business rituals" adjust faster to technology and social changes than those of politics.



This is what used to be- currently, businesses are still faster in purchasing technology, but not necessarily faster in real adoption, i.e. not simply transposing existing "rituals" to a new technology, but rethinking them.

Since the first information systems spanning more than one domain of expertise or activity were introduced in businesses, change implied cultural change across "lingos", e.g. finance and manufacturing and marketing sometimes sound as if they live on different planets (or planes of reality).

In the 1990s, a common term in business lingo from the vendor side was "shelfware": business software purchased, licensed, maintained, but... almost never used).

Few companies now do everything "in house": most activities are partially or totally provided by a third party, be it credit scoring, hiring entry-level employees for specific business functions, covering logistics if they are a manufacturing or financial company (the letters you receive from your bank are not necessarily printed and delivered by your bank), etc.

In order to increase efficiency, this implies a certain degree of standardization that eventually reduces the differentiation.

Personally, having started to work in the 1980s, beside some national differences on payroll, financial reporting, etc., over the last 30+ years routinely found that processes that used to be differentiated even within the same industry looked increasingly similar, all across Western Europe (I never worked onsite in the former COMECON countries).

Within the European Union, this applies partially (should say increasingly, for Schengen+Euroland countries) to politics, or at least for the implementation of laws.

Even national laws have to comply with a shared framework, and this both reduces and standardizes the degrees of freedom and levels of flexibility available.

But another article of this series will be focused on these issues, so, let's see an example of business and politics communicating.

The politics of business and the business of politics

On 2019-09-19 the closing keynote at the German SAP User Conference in Nuremberg was actually delivered by Gregor Gysi, a German politician formerly in the DDR.

So, a business&technical conference invited a politician from the left to discuss digital transformation.

Well, what he said was common business&social sense, e.g. politicians should actually get involved into digital transformation if they want to understand it, and obtaining the benefits of digital transformation in developed countries still requires investment in infrastructure so that all its components are up-to-date.

In the past, lobbying was the traditional way for businesses to influence politicians, as various types of "organized influencers" (trades unions, interest groups, etc) were just another form of lobbying.

Nowadays, politicians are getting used to be influenced by actions of their (potential, actual, past) voters acting as a "swarm", actions that they did not necessarily coordinate.

Also if sometimes, to overcome resistance, is easier to "seed" those actions by starting them through selected few, and then let them generate consensus by circles of influence and "convergence of swarms"- but, in reality, this approach has been used in Ancient Rome and Greece.

As we move from "corporate social responsability" to "lifecycle sustainability", "business policies" will blend with, overlap, influence and be influenced from actions, not from words.

Consider this example: we continuously read reports and papers on cutting emissions, and the mis-alignment between skills that will be needed in 5-10 years (or even earlier) within business and those that we are currently building up in students.

What is a better way of influencing politicians: sending a letter to members of the Parliament?

Or actions such as buying a fleet of electrical vehicles (as announced by Amazon: 100,000 Rivian delivery vans between 2020 and 2024; Rivian investors include Amazon and Ford) and sponsoring a STEM training programme (a href="https://www.sae.org/news/press-room/2019/04/fca-foundation-partners-with-sae-to-expand-stem-education-in-illinois-indiana-michigan-and-ohio">as announced by SAE with FCA funding, in the USA but recently a similar programme was announced for Italy, too)?

A cultural case: Italy

In Italy, often our historical dichotomy between "technical" and "human" affects the ability of both business representatives and politicians to jointly design something: a dialogue requires if not shared values, at least a shared lingo, not considering the other party naive or intellectually inferior.

As I wrote often in the past, in Europe 4G had to wait, as operators had made massive investments into 3G and services that nobody used.

So, often, while our research identified "the next optimal step", we e.g. did a massive change to introduce a new form of TV broadcasting, while TV itself was shifting toward the Internet.

On the financial industry side, until PSD2 will fully deliver its value on banking data access from a different operator (does anybody remember how GSM number portability, i.e. switching operator while retaining the same phone number, was often a nightmare in Europe, at the beginning?), we will be a long way from something such as M-Pesa in Africa (for mobile payments where many do not have a banking account).

Probably, in our times, business should more often and more explicitly state its political aims (and "sustainability", corporate social responsability and the like are just a first step), not just through lobbyists.

At the same time, politicians should have a better understanding of what is going on in business, technology and, at least in Italy, society.

And maybe, just maybe, the latter doesn't apply just to Italy.

Now, as a case of what this "systemic view" implies for both businesses and politicians but from the business side (the politicians side will be in the next article), I will focus on automotive.

A practical case: automotive, mobility, smart city

Frankly, also most people working within the industry and commentators seem still to be talking about 1970s automotive competition.

A competion between car makers focused on the number of vehicles sold and aftersales services and spare parts.

As shown by the recent figures on the number of cars sold in Europe, numbers are down.

Yes, there are the side-effects of the diesel emissions scandal.

And for some manufacturers the issue might also be self-inflicted.

Continuously discussing potential mergers and partnerships, but without a clear roadmap, and flip-flopping between alternatives, might turn potential new or returning customers into procrastinators.

But even in professional conferences, it seems that way too many plan for a near future market that looks a lot like the past, not the present.

I will avoid writing again what I already posted online, so, let's summarize few key points (and I am not the only one converging on these points):
1. current urbanized consumers in their 20s and 30s in Western Europe are interested more in mobility than in owning a car
2. hybrids are in the interest both of States and companies, as an instantaneous and massive shift toward e.g. electrical vehicles due to a change in regulations would disrupt entire industries and generate massive layoffs
3. margins are already contracting, despite the announce of large investments to create the infrastructure needed to support electrical vehicles
4. while many already present the future as if it were tomorrow, we aren't yet were we would need to be
5. even the ISO15118, the standard focused on interactions between vehicles and charging stations, a recent whitepaper (20190513) stated that, on a key element (security): "the ISO 15118 PKI policies and requirements fail to adequately address necessary aspects of a functional, scalable, multi-root PKI. These shortfalls increase vulnerabilities and decrease interoperability at all levels".

Just a note on point 2: it is just a matter of components and subsystems- look at what is needed for a car with a combustion engine vs. a purely electrical vehicle; some industrialized countries (but not all) are already introducing changes that go beyond technology, and impact social life, welfare, lifelong learning and re-training, etc.

As an example, if you have a company delivering components useful only for combustion engine vehicles, you may look into a future based on maintenance of a dwindling base of vehicles, not massive production runs for new vehicles.

To phase-in e.g. shorter working weeks (which will anyway be needed not just for automotive- also other industries will be impacted by industry 4.0 and further "smart" processes) requires changes both on the employer and the State side, as all the welfare system has to be redesigned.

Business models? Not what you are used to.

Just consider how much your own car is on the road with you at the wheel, and how much sits parked.

In Italy and Germany, but also while living in Brussels a decade ago, many in the 20s and 30s did not even have a car.

A decade ago, used they a shared cab when needed, and maybe had a car to be used only over the week-end or occasionally in the evening.

Since 2017, increasingly I heard about shared and pay-per-use cars, e.g. car2go, and a bicycle or moped used when the car is not needed and public transport not convenient.

And I am still referring to an automotive world that is closer to Womack's 1990s "The Machine that Changed the World".

If you look at the futuristic side (e.g. Mitchell's "Reinventing the Automobile"), we are talking about reorganizing not just how work is distributed within a company, but also what work and mobility mean, and where personal vehicles will fit.

An apparent digression: FIAT evolution in the XXI century

I am currently based in Piedmont and I was born in Turin, a company town in the past associated with FIAT (now part of FCA), a town still struggling to transition toward a different future without tossing away a century accumulated knowledge infrastructure.

If you search in this site for Turin, FCA, FIAT, you can find recent and not so recent articles discussing various transition issues, including FCA's negotiations with other car manufacturers, and group restructuring announces.

As I wrote often in the past, FIAT over the latest 15 years mainly worked on improving its finances, that in the early 2000s were considered critical enough to have newspapers and politicians worrying about the future viability of the company.

We Italians in the past identified FIAT with cars, but actually it was at a time a conglomerate that spanned across many industries.

That side is currently more part of Exor, a holding company created in the late 2000s to continue and expand on the role of the former companies containing the Agnelli's family shares into the group units.

I think that actually the creation of Exor was a turning point within the history of the involvement of the founders within the management of the FIAT company, as slighly later FIAT became a shareholder of Chrysler, and then a merger de facto created a new entity, less Italian and more global.

It was partially not well understood by many Italians, who often saw having an Italian CEO (the late Sergio Marchionne) as a sign of "italianità".

Acquiring Chrysler and then creating FCA wasn't a gamble: Chrysler was in critical conditions but had a market presence and product portfolio (notably Jeep), both useful to improve FIAT's global reach.

A characteristic of the resurrection of FIAT was "unbundling" brands, e.g. converting units into companies, so that this could "deliver value to shareholders" (as it was often repeated).

Actually, each one of the "new" companies (both already created, e.g. Ferrari, or discussed as potential new companies, e.g. Alfa Romeo, Lancia, Iveco) had been independent before.

Years ago, there was a discussion on newpapers about the price that Jeep as a brand could attract from an Asian partner (a market where FCA is still relatively weak, if compared with other European competitors)- but, eventually, it was decided to "unbundle" Magneti Marelli (components etc), and probably also companies operating in automation, and maybe other companies and brands.

The next asset transfer recently discussed on newspapers is Iveco, formerly a truck maker, now "on highway" vehicles, as it is the current parlance, also if frankly obsolete if you look just 5-10 years into the future.

I rather talk about "asset transfer" than just "selling assets", because when you sell an asset to a company that actually is already operating within the same or a close sector, while retaining shares, it is "growth and consolidation through asset transfer", not just a financial transaction.

If you couple the mantra of the latest decade for the group ("extracting value for the shareholders") with the transfer of some other units (e.g. Magneti Marelli) to other manufacturing companies, while retaining within Exor a share within all the new units, all converges toward one point.

The founders and their heirs have had a clear perception for a couple of decades of the value within the group, but also recognized that a consolidation was needed to be able to compete.

Moreover, as discussed in other posts, Italy, despite the size of its economy, has an economy still based mainly on family-owned companies where the owners are directly involved into operational activities

In the 1960s and 1970s there were efforts to create few "talent greenhouses" (in the private sector back then, I am thinking to ELEA for Olivetti, ISVOR for FIAT), but eventually it wasn't enough.

Italy lacks something similar to the much criticized but useful French ENA, whose graduates apparently seamlessly transition between business and politics.

In Italy, since the 1980s gradually also the few remaining "company management training centres" either spawned new branches of existing universities, where eventually the academic side took over, or were slowly downsized.

So, we lack local opportunities to generate and develop a local market in management talent able to work in multinational environments with a multinational attitude and mindset.

As the first one can fake it, the second is shown whenever a crisis arises.

In other terms: unless Italy opens up, and it will take a while, we lack the "scalability" element of management- and way too often since the 1980s in Italy I heard management attitudes that considered that "scalability" implied "pyramid".

Or: whenever the business grew, more management layers were added.

And, actually, one of the first steps of Mr. Marchionne's tenure at FIAT was "de-layering" the company.

There are cases when more layers increase efficiency and efficacy, but, frankly, in most industries and companies I worked for around Europe, more layers negatively impacted on decision making and increased bureaucratic "self-survival".

Therefore, if you cannot attract management from abroad, and you cannot "open the minds" of local management fast enough, the solution is to find an industrial partner who could manage scalability better than you expect to be able to in the next 5-10 years.

The only issue now still open is that a potential partner would talk about future potential. Industrial potential.

For FCA, the first phase of the 2019 negotiation with Renault was on current financial value, a value that was partially leveraged by the "unbundling" approach used over the last few years, while brands, except Jeep (that, as I wrote before, somebody in the industry said half-jokingly that already had sustained two companies in the past, since the 1940s), lack one element: a wide enough product portfolio.

Just having fans isn't enough, if they cannot either afford (see Ferrari) or buy products.

I remember that few decades ago I was told that, in another industry, Ferrero had some products whose marketing budget was basically equal to the income, as those products allowed to expand the market of any product with the "Ferrero" brand.

But cars aren't (for now) purchased on "impulse shopping", or priced accordingly.

Albeit, as I discussed about in the section on the future of mobility, "impulse shopping" could become the case, when "ownership" will mean something different, and "interoperability of data" might imply that your customer, when choosing the car to use for the day, might receive offers from various partners.

I do not expect anytime soon people to change the color of their vehicle to align with what they are wearing, but maybe a group could "pay-per-use" a two-seater or a mini-van according to the number of the people within the party, if they will not want to use public transport.

Then, brands with an iconic status associated with some properties will actually be able to deliver more value than mere technology.

I remember colleagues torturing my ears with the characteristics of a rally car produced by a FIAT company, but also other brands within the FCA portfolio could leverage on fashion or specific features, e.g. Abarth, or Y10.

Therefore, while e.g. the future potential of Renault might be its prior investment across the range of non-combustion engines and associated components and platforms, FCA's value might be on the untapped iconic value of some of its brands, its presence in markets where Renault isn't present, and its ability shown over the last couple of decades to completely re-invent itself, including its production lines, plants, processes.

But, in a negotiation, in the end it is a matter of choices. And in a negotiation for a merger or an acquisition, it is also a matter of converging views on what the future might be (including when you sell 100%).

Look at the turnoaround e.g. of the plant near Naples, and the widespread introduction of modern manufacturing concepts (see this 2015 article discussing differences between USA and Italy FCA plants in WCM, reporting on positive feed-back not just from management and workers, but also trades unions).

Personally: I saw plants in the group since 1986, always as a non-employee, and when I saw occasionally between 2002 and 2017 how they had evolved, it was a different world; one of my favorite daily sights was watching, in the morning, on my way to office, a sign showing since how long there had been no accidents.

Because security in manufacturing (e.g. consider the investments in cobots for industry 4.0) isn't just a matter of being "humane"- it is a matter of motivation and efficiency within a learning and working environment, an environment where production will be constantly evolving.

If you want a collaborative manufacturing environment, it has to be at least a safe environment, and potentially enjoyable, not hair triggering.

The only way to generate improvement ideas continuously is to have all contributing to it, not an ivory tower of consultants or "experts"- they are needed later to evaluate feasibility, number crunching costs, etc.

What's next? Well, the next section (for the case selected) and the next article (for the role of the public sector and different forms of private-public systemic integration) contain few questions that derived from my experience

Using the past as a springboard

The unique position that held before the FIAT group in Piedmont (first employer) and Lombardy (I think it was at a time the second employer), i.e. within the past industrial engine of Italy (currently partially shifted to Emilia Romagna, for automotive, and Veneto for other parts), can actually bring something more useful than few more shopping malls.

Why I am stating "shopping malls"?

Because, frankly, it seems that in Italy, notably in Piedmont, whenever a factory is closed, its future is either as a new set of apartments blocks, or a new shopping mall.

What a waste: the concept, should be unbundling without dismantling, i.e. repackaging for the future, whenever feasible.

We create more land- and resources-absorbing structures that generate minimal revenue, instead of repurposing areas for something that could leverage on what Italy (and Piedmont) can offer and attract new companies.

At least since the late 1950s, most "industrial areas" created for large companies, also due to the small size of our traditional companies, required creating infrastructure that might be obsolete, requires re-investment, but is not what would be needed for apartments or shopping malls.

So, eventually, most of the old infrastructure will just simply decay, unless repurposed or renovated.

Recently, at least a foreign car maker expressed interest in setting up a research centre in Turin, thanks to its universities, automotive industry ecosystem, and probably also potential quality of life and lower costs.

If the merger of FCA with another partner goes ahead, shouldn't the new group reconsider which plants still make sense, and how?

As for FCA plants that are underused now and could be even less used in the future, notably in Northern Italy, sometimes there might be other uses, within the new configuration of mobility and energy production.

Why not convert the unused parts with other industrial partners (or independent third parties that act as "umpires" or "facility managers") into what is needed to ensure global interoperability within the new future mobility?

There was a time when FIAT had a test track over the Lingotto plant (a plant that was praised by Le Corbusier, as far as I remember, for its use of new construction techniques, partially licensed from abroad).

Actually, had also a test track along a highway, Torino-Savona, if I am not wrong.

Converting parts of Mirafiori, in Turin, into a global urban mobility research and test centre, could be an idea.

A centre open to any provider and manufacturer according to a shared set of engagement rules could deliver the automotive/mobility equivalent of those "testing scenarios" used in the military for urban training, or what was build in... USSR to train those who were then sent spying in the USA (yes, I used a lot "Potemkin Village" in my articles, but this is the real thing).

Turin has already a real set of roads where you can test autonomous driving, and a former industrial area that can be used to test drones, both through the Torino City Lab initiative, as announced not too long ago.

The unused parts of Mirafiori, thanks to their town-in-a-town structure, with a part of the Turin Polytechnic already within and around it, could become an extension.

As you test on the road what is not too far from production, but there are plenty of stages before that and, moreover, there are plenty of future stages that would require building environments that do not exist yet in real cities (e.g. the interaction of land-based vehicles and passenger or delivery drones).

Sometimes, these "live simulations" might actually be a "test drive" to define the optimal configuration in a specific city or location, sometimes could just be what is needed to identify the best combination of features and costs, before scaling up a solution.

Many years ago, I met a company that was a customer of a business partner.

This customer had a test wind tunnel that wasn't used full-time by the company.

The quality function, as in many companies, was a cost, not a profit centre, and therefore no funding was available for improvements.

So, they asked for an authorization to use the available time with third parties, and this way they were able to procure funding for improvements, improvements that were then potentially beneficial also for the mother company.

In this case, repurposing Mirafiori into a permanent "virtual futurama" (the 1939 one sponsored by General Motors, not the cartoon) could actually be a business.

The public sector, as done in other cases, can facilitate navigating through the bureaucratic hurdles and ensuring that all the relevant parties are talking with each other, e.g. such a venture would need a different approach from hotels, transportation companies, etc.

But, again, I think that this repurposing should be funded and managed by private partners.