How to Build a Tech Company
Combining German Engineering with the Power of Disruptive Innovation
More than 50 years ago, the American computer scientist Melvin E. Conway gave his first thoughts on how modern software companies differ from their hardware counterparts. Conway’s Law, and many other studies after it, established a direct relationship between the necessary architecture of a tech product and the characteristics of the organisation that develops it. The experts agree: hierarchical companies with a hardware background, such as automotive or manufacturing, do not have the necessary structures in place to introduce technology-driven products and digital thinking.
A few scientific examples:
- A Microsoft research study calculated the complexity and error rate of Windows Vista from the complexity of the Microsoft organisational units entrusted with its development. The economists Rebecca M. Henderson and Kim B. Clark proved product innovations that change its overall architecture require a change in knowledge architecture and company structure.
- Dr. James D. Herbsleb of the Institute for Software Research and Rebecca E. Grinter (Georgia Institute of Technology) concluded that work on a modularized system should be distributed in such a way so that the separation of development corresponds to the distribution of modules. Conversely, development should only be split up if the products (or product parts) to be developed are well understood and plans, processes and interfaces are established and stable.
Cars turn into software-driven products
In the context of the digital transformation, consumer behaviour and distribution channels, this means competition and value chains are changing everywhere. In the case of the automotive industry, for example, digitalization is aimed precisely at the core of the product. Until recently, the engine was the technological heart of the automobile, but now software is taking over this role.
From now on, the competitiveness of OEMs and suppliers alike will be determined more by the intelligence of the system than by the performance of the machine. New intelligent sensors — together with increasing connectivity — are triggering a “data explosion” in the vehicle which needs to be processed intelligently and translated into new services. One of Germany’s most important automotive managers, Dr. Herbert Diess, explains the why in a nutshell:
“The car has ten times more code than a smartphone. The next ten years will revolutionize it once again. The car will probably be the most complex digital product in the world.”
Networking instead of departments: modern software systems at odds with today’s organization
The digital transformation is in full swing. In recent years, the USA and Asia have taken on a pioneering role in this area. The next few years will determine whether we succeed in maintaining and expanding our pioneering positions in key areas of our economy. Important questions for determining whether this is not only possible but conceivable include:
- How do we transfer German engineering skills to the digital era or the age of autonomous vehicles?
- What kind of organizations and processes are needed to create modern, innovative products that combine high-quality hardware with smart, agile software solutions?
- What kind of working environment is needed to bring together the level of competence and commitment needed to design and produce world-class solutions?
Software-centric companies such as Tesla, Apple, Uber, Microsoft and Tencent are increasingly intervening in areas where Germany and its much-vaunted art of engineering have previously set the international standard. However, organizational models of classic hardware-centric companies are fundamentally different from those of software-centric companies. Together with you as our discussion partner, we want to find out:
