Overcomplexity.

Our world has changed dramatically, almost unnoticed.

The BRIC countries account for 32% of GDP, while the G7 only account for 31%.

GDP is primarily determined by population x productivity.

Countries with old production methods and a large population, such as Egypt, still produce a relatively small GDP. Medium-sized countries such as Germany with modern production methods generate a large GDP. As a result, as productivity increases, so does GDP. The same is true for population and for both variables in reverse order.  

As a result, the increase in the BRICS countries’ share of GDP is primarily due to China’s productivity growth.

This massive increase in productivity (due to innovations) can be observed in the automotive industry.

BYD and CATL produce more than half of all batteries. BYD has sold more vehicles in China than Volkswagen. Chinese manufacturers can already sell electric vehicles for less than 6,000 euros. The country’s first driverless cab service is now in operation.

Although it can be frustrating to lose a productivity advantage, there is no need to panic.

There are many things that European manufacturers can do better, but in some areas we have fallen behind. But we can still respond.

We can react at the macro level.  

Due to the economic and political rise of the BRICS countries, the geopolitical framework conditions have shifted. A few years ago, the strategy was to shift development work to China in order to better meet local needs (China-for-China). This improves the ability to develop products for local demand and at the same time transfer productivity to China. This “China-for-China” strategy of car manufacturers is being questioned by EU governments in light of the recent tense relations between China and the G7.

In the long term, we can only respond to China’s challenge at home.

German developers will adapt to the new requirements, work together with their colleagues in China, but solve the most important challenges at home.

We still have a technological lead over the BRICS countries: Design quality, build quality and equipment levels are higher on average in Europe. Germany is producing the first semi-automatic L3 cars for widespread use on public roads. Battery research is underway, as is cell production.

In China, we are mainly seeing a “regression to the mean” effect.

Since China started at a very low level 30 years ago with little industrial infrastructure, they were able to interpret the current structures for today’s technologies and needs. The entire production structure for electric vehicles and automotive software was built from scratch and is now the most productive infrastructure for the production of electric vehicles in the world.

The Western automotive industry has created and optimized the infrastructure for a technology that is currently being phased out by the G7 governments: Internal combustion engine cars. During the phase-out, the industry needs to invest and build a new infrastructure to produce software-driven electric vehicles.

And the transition from old to new brings with it an unprecedented level of complexity.

This is comparable to changing the engines on a flying airplane.

The traditional car manufacturers fly with propeller engines while they install the turbines on the flight. The Chinese, on the other hand, have already launched their aircraft with new turbines. Tesla as well.

As a result, the current performance of many Western manufacturers and suppliers is admirable, even if their aircraft struggle to maintain altitude and speed. Some manufacturers will reach their goal, some will crash.

However, this is not the full extent of the problem.

The pandemic has made working on overly complex projects even more difficult.

The pandemic has slowed down the transition to the new infrastructure.

Critical team coordination has shifted to the digital realm wherever possible. But digital communication has lower bandwidth and is less effective for working on complicated problems, even though it is more efficient. Vehicle and software projects lag even further behind, with red lights flashing on status reports.

According to the developers I spoke to, overloads and task forces were subsequently implemented to compensate for the delays. Productivity has remained constant or fallen since then, while staff turnover and sickness rates have increased in some departments.

Last year, a saturation point was reached where productivity came to a standstill.

This is not only the case in the automotive industry.

A Microsoft study that analyzed data from 31,000 users from 1.2.23 to 14.3.2023 shows this “digital saturation” after the pandemic. Study participants reported too many inefficient meetings and unclear goals that provide little inspiration.

The productivity of teams, which has been growing for years thanks to digital tools, paradoxically declines after this saturation point.

How can this sudden change in productivity be explained?

Many tasks are simplified and automated by digital tools. An unintended consequence is that the simpler and more automated the tool is, the lower the threshold for initiating unproductive interactions. The tools are designed for such a low threshold. Sending an email, calling a team meeting or creating a presentation has never been easier.

However, every email sent has to be read, which is inefficient at first. And virtual meetings and presentations tie up participants’ time and prevent them from doing productive things.

In such an environment, uninterrupted, concentrated work becomes almost impossible.

“However, the Chinese are facing the same challenges.” You could say. That’s true, but as already mentioned, their business system for manufacturing electric vehicles and software needs to be less complex.

Extremely complex working environments require highly developed concepts, high-quality code blocks, extensive quality checks and thoroughly analyzed requirements for effective team collaboration. Uninterrupted, concentrated work is the basis for team success.

However, when work is interrupted by changing demands, meetings, presentations and a stream of emails and chat messages, the lack of output leads to frustration and digital fatigue.

The solution is obvious.

We need clarity in order to be able to deal with these extremely complex environments.

Overly complex environments such as the production of automotive software are difficult to understand, analyze and master.

Each team member asks themselves: What is my mission for today, for the week, etc. and my role in the longer term? How does optimal collaboration work? What is the goal for me or my team? What should I decide, what can I decide and am I trusted in my decisions? What is the current degree of fulfillment in the project and where are the biggest levers?

These recurring questions must always be answered clearly and unambiguously so that the team can complete the actual tasks.

The mistake lies in answering recurring questions ad hoc.

Ad hoc meetings and ad hoc emails to answer recurring questions are indicators of an inadequate system to deal with excessive complexity.

There are two directions of impact to limit the number of ad hoc events.  

The first is the standardization and simplification of workflows with a focus on the essentials, visualization and so on. This is exactly what happens with agile methods or system design. Both represent management systems that contain specific processes, methods and tools.

As managing directors, we feel as familiar as a fish in a pond when it comes to processes.

This is because processes standardize activities, establish metrics, etc. Employees can be trained until they fully understand the process and their role. Resource or qualification deficits can be identified and filled, and quality and productivity can be improved. In other words, the spontaneous need for coordination decreases, while the output per unit of time increases.

But agile methods or system design alone cannot cope with the complexity of the accompanying software engineering in the context of legacy vehicle development.

The complexity is simply too great.

Think of controlling the integration of control units from different suppliers and managing software releases in relation to product life cycles.

There are currently no “off-the-shelf” management systems that can deal with this complexity. However, these will gradually emerge over the next few years.

In the meantime, we need a different practice: “dealing with emergence”.

Emergence refers to the occurrence of new, unpredictable events that arise from complex systems.

Environments that are too complex have this pitfall: every now and then something happens that could not have been predicted beforehand. Even with strong expertise, adaptability and tolerance for ambiguity, working in such environments is extreme and demanding.

Emergence is a beast. And employees dealing with emergence deserve exceptional, unparalleled support to succeed.

Support capable of firing a moon shot.

The Apollo 13 mission reacted extraordinarily to the Emergence Beast.

This mission will always be remembered as a case study in successful failure.

An oxygen tank exploded 200,000 miles from Earth, causing the mission to nearly end in disaster, which would have been a setback for the entire Gemini program. But the Apollo 13 mission was successful because the mission team and astronauts were able to develop innovative solutions through collaboration, creativity and determination.  

James Lovell, John Swigert and Fred Haise were as lonely and alone as you could imagine when the oxygen tank exploded. Their goal changed from landing on the moon to surviving and returning home safely.

While they were in constant communication, Houston helped them set goals, assess the situation, structure and prioritize activities, quell distractions and find unconventional solutions.

The crew practiced all the tasks required for a safe landing.

Despite the high stakes, Houston did exactly what a professional trainer would do. The crew’s conversation with the space center proved to be the best way to handle the advent of this lunar flight using 1970 technology.

The mission was saved thanks to professional, disciplined discussions between the crew of Apollo 13 and the Houston Space Center, which made it possible to deal with sudden events. This is still the fascination of the Apollo 13 mission today.

Safety protocols and crew training were improved after Apollo 13, as was crew resource management (communication, teamwork, situational awareness, decision-making and leadership). The key feature here: structured conversations.

In retrospect, structured discussions and standardization following the experience of the event helped to simplify a previously complex environment.

And nobody masters simplification better than the automotive industry.

While cars were manufactured almost exclusively by hand for the first 50 years, the introduction of automation and robotics steadily doubled the productivity and quality of manufacturing. As a result, manual labor and complexity (worker coordination, rework, etc.) have been eliminated, the manufacturing process simplified and production volumes increased. Unit costs are falling and soon almost every Western family will be able to afford their own car.

But today, as software-controlled electric vehicles and cars with combustion engines are produced in parallel by the same manufacturer, the complexity has grown again. Due to the necessary changeover from the old engineering production system (cars with combustion engines) to the new engineering and production system (software-controlled electric vehicles), the complexity today is unprecedented.

And it will take many years to standardize and automate this complexity.

But the conditions for traditional car manufacturers are far more complex than ever before.

Car manufacturers currently find themselves in a moon shot environment.

Car manufacturers currently find themselves in a moon shot environment.

Only disciplined, professional conversations can create clarity. Focused conversations at scale to support teams. Where observations can be reflected upon, repetitive activities are automated and less important information and activities are systematically suppressed. Where the space and time are created for teams to develop creative, high quality solutions to overcome the obstacles, to turn the traffic light from red to green. To give control back to the teams.

The next few years will show which manufacturers and suppliers can convert their engineering and production infrastructure to build software-driven electric cars (from propeller engines to turbines) with outstandingly high productivity.

The conversion of the engineering and production system on this scale has never been carried out before.  

This can only be achieved by dealing with and containing excessive complexity. Standardization and practices for dealing with emergence are the two dimensions of impact.

Dealing with emergences should be the top priority of the automotive industry in order to bring new technologies to the market.

Dealing with emergence requires a structured, disciplined conversation that complements standardization techniques.

Standardization goes hand in hand with agile methods and system design, which will continue to evolve (e.g. ASPICE 4.0 was recently announced).

And there are numerous approaches to implementing structured conversations on a large scale.

Coaching platforms that enable structured conversations on a large scale can help with this. Structured conversations drive agile teams’ flexibility and self-direction to new levels. Coaching can help automotive companies struggling with high levels of complexity find new ways to double, triple or tenfold productivity.

Can we find new methods to increase productivity, to learn faster and in a more targeted way? To maintain our automotive value creation? To maintain our prosperity, GDP growth over the next 20 years, especially in Germany, the economic powerhouse of Europe, where the automotive industry is so crucial to GDP?

The importance of learning for industry and the economy cannot be overestimated.