Building Digital Bridges between Engineering and Software Development
As CEO of the moovel Group at Daimler, she recently established the mobility alliance with BMW before turning her back on the corporate world last summer after more than a decade and founding her own start-up: Daniela Gerd tom Markotten is not only an experienced manager with extensive knowledge of the automotive and digitalization environment but also supports courageous decisions.
What’s her experience of the digital transformation in the industry? What hurdles and pitfalls must be overcome? In our conversation, we talk about inquisitive engineers, how innovation can best succeed in companies, and why existing structures and past successes stand in the way of change.
Daniela could actually be a kind of universal wild card for answering the questions about the central topic of my blog. As an industrial engineer with a focus on mechanical engineering and a subsequent doctorate in information technology, her mindset already consists of a combination of hardware and software by virtue of her education. This knowledge has also made her a (digital) bridge builder at Daimler between the product and software developers. Now she brings her know-how into her own company. With iuhhoo GmbH, she develops digital business models, including the video platform AIVITEX, which, with the help of artificial intelligence, allows craftsmen to analyze problems and projects remotely, and solve them directly.
Daniela, how do you currently perceive the readiness for digital transformation in the German industry?
There are a lot of efforts, programs and initiatives now to drive digital transformation at all levels. But unfortunately, two things often cause these effects to fizzle out. Firstly, the necessity and urgency for digital transformation have not yet been recognized and internalized everywhere. This is because the current level of sales at companies are still stable and existing processes are able to run as usual, with or without digitalization. Secondly, from my point of view, the considerable success of Germany as a republic of inventors and engineers has made companies and large parts of the population risk-averse or at least quite relaxed.
Why are German companies having such a hard time with digital transformation?
It’s a matter of economic trade-offs. In most cases, digital transformation requires a high initial investment and the return on investment is difficult to estimate at this point. In particular, being the innovation driver of the industry and thus taking a risk makes such a decision difficult for many entrepreneurs. Moreover, in most companies, the CEOs are from the manufacturing sector and are not familiar with the methods of software development or the way that digital business models like marketplaces and platforms function. Because of that, they compare new ideas with traditional business models, where the unit economics are often proportional to the production costs and therefore easier to calculate. Therefore, in case of doubt, they decide against new, digital business models.
How can ambidexterity be achieved in companies?
For existing companies, it will always be a balance between using the existing high-revenue business to support innovations and, if necessary, even letting it cannibalize itself. The often underestimated but great advantage of established companies is what is often called “the unfair advantage”. This is where the customer base does not have to be newly established at a high cost, but rather direct access to an established market already exists.
Beyond that, what hurdles and pitfalls need to be overcome in order to create more awareness and necessity as well as willingness to change in general?
I would start with education. Digitalization is already one of the decisive core competencies in everyday working life and should be anchored in almost every training path. This also applies in particular to the convergence of engineering and digital sciences, the best example of which is the automotive industry. In the ever faster-changing world, it’s important to deal with new circumstances and technologies and to creatively link those new aspects with existing business models. Lifelong learning is essential, especially for entrepreneurs, in order to be able to continue to make competent decisions. For the willingness to change, it always helps to look beyond your own nose. I’m not a fan of group trips to Silicon Valley or Shenzhen, but even I’m always surprised at how quickly new business ideas become widespread in everyday life, especially in China. Another tip is to establish diverse teams. They demonstrably achieve better results and also train a constant change of perspective, and thus a fundamental openness to new things.
How can German engineering be combined with the culture and agility of a software-based company?
Engineers — quite rightly — only deliver their products when they are 100% perfect. Software developers, on the other hand, take a different approach: by quickly delivering a Minimal Viable Product (MVP) to the market, they receive feedback early on and continue to develop the product in many steps. I’m strongly convinced that the combination of perfection and speed is a real mix of success. Both cultures — if you want to call them that — have the same enthusiasm for “innovation”, and you can build on that successfully with mixed teams of engineers and software developers.
In this process of change, what needs to be done to bring engineers along, in the best possible way, from a purely hardware-based to a software-based company?
There is an extremely high willingness to learn on the part of the engineers, as well as a great interest in new technologies, including digital ones. In my opinion, bringing engineers into innovation projects as consultants or project participants is an important key to the success of the overall project. As soon as you pursue a common goal, the fear of contact disappears. Here, it is most important that decision-makers encourage innovation and speed when setting goals.
My last interviewee, Andreas Boes, said that the transformation process needs physicists who have already gained a holistic view through their education and who work with uncertainty. In your opinion, which professional group is still needed to realize the transformation of companies in the best possible way?
Physicists are probably the secret all-purpose weapon, as they can abstract problems and develop solutions independently of current technologies. In addition, people who can drive the change in terms of content and already have expertise in this future area should be brought in. If I want to focus on electric motors in the future, for example, I will succeed more quickly if I bring people with experience in that area into the project. Change is often associated with uncertainty for the individual. The transformation process must be actively shaped, and the change must be accompanied by change and HR experts. Especially the decision-makers, who already have the new goal and possibly also the path to it in mind, must be aware that most colleagues and employees are still at the beginning of this process, so that’s where they need to be picked up.
How can innovation be promoted and implemented in companies?
The following approach has proven successful: start small and make the first, quick successes possible and visible. Furthermore, start with a group that is enthusiastic about the new topics and their possibilities. Then the risk for the company is minimized and you can approach new technologies and business models step by step. In most companies, decisions about innovations are still made by top management. In order to take the future orientation of a company into account, more decision-makers must be recruited from these future core competence areas, such as software development in the automotive industry. This will further spur the digital transformation.
Are innovation labs the right way for companies to approach the transformation?
It is best for companies to set up innovation labs outside the corporate structures and give employees the greatest possible freedom there. Because each of us can probably subscribe to the following sentences: day-to-day business kills innovation and encroachment is the enemy of any scaling. It’s much easier to build something new and fresh, with as much freedom and independence as possible, than to anchor it directly in the company. Here, too, colleagues from existing structures should be involved from the very beginning, if possible. They are important bridge-builders when it comes back to the group and then to scaling.
In your opinion, should software development always take place in-house?
The core competence that creates the unique selling proposition of a product on the market should really always be in-house. That’s the only way to control market leadership in the best possible way. Take the example of the car: until now, the engine was the decisive product feature in the vehicle. It was, therefore, important to have the best development engineers in your company. The vehicle is increasingly becoming a smartphone on wheels, and the software is thus becoming the value driver in the vehicle. Consequently, building up expertise in software development within the company is one of the most important transformations in the automotive industry that must succeed in order to avoid becoming a hardware supplier for large American or Chinese software giants.
You helped shape the Leadership 2020 initiative at Daimler, which developed impulses for the cultural transformation of the company. What lessons have you learned from this?
It sounds so simple: if I can communicate a vision, a meaning and a purpose, and give my employees far-reaching responsibility, success often follows on its heels due to the greater commitment of the employees. Unfortunately, when problems arise, we have a tendency to fall back into old patterns such as micromanagement. Resisting this urge and instead of offering support as a mentor or coach then leads to actual empowerment, far more motivated employees and rethinking within the company.
In your opinion, which companies can be considered role models for transformation?
In my view, Volkswagen is doing a lot right at the moment. They are making courageous decisions and focusing strongly: first with the focus on the electric motor, and now on building up core competencies in the area of software development. This consistent focus reduces complexity in the organization, increases the drive for implementation and speeds everything up. The Scandinavian countries are pioneers in digitalization and thus create an excellent climate for innovation hand-in-hand with companies. Here, too, it’s important for political decision-makers to set the course on which companies can build their digital transformation.
Thank you very much for the fascinating conversation, Daniela.
How to build a tech company?
An industry in transition: I would like to discuss with you, but also with international experts, what kind of organisation and processes are needed to create modern, innovative products that combine high-quality hardware with agile, smart software solutions. I would like to find out how we can jointly transfer German engineering skills into the digital or even autonomous age — which is why, in the coming months, I will be asking myself more than ever before: “How to build a tech company? Follow our Medium blog for this.
