How to Build a Tech Company: “We must overcome the logic of the machine”

The interplay of software and hardware is one of the central challenges of the 21st century — and thus, for me, a driver and challenger of the entire automotive and mobility industry. As part of this dialogue platform, I discussed with Professor Dr. Andreas Boes (ISF Munich), one of the pioneers of digitization research in Germany, what the successful formula for this transformation might be — and why physicists need to play a greater role in it.

Photo by Ant Rozetsky on Unsplash

Andreas gets to the heart of the matter right at the beginning of our conversation: “Engineers have learned to interpret the world with the logic of a machine. And as a result, they could become an obstacle to transformation.” The digital expert has been working on the computerization of society and the future of work for more than 30 years. With his team at ISF Munich, he is currently researching the challenges related to the German transition to an information economy, and the conditions for success in shaping this development in a more human way.

The problem: software-driven systems and organizations behave fundamentally differently than hardware-driven ones, says Andreas. A paradigm shift must take place — not only for technology but also for the “human resources.” In the past, engineers have always dismissed the introduction of software solutions as an appendage of hardware. This was also reflected in the company hierarchy: employees with a software background could, at most, be promoted to the level of sub-project managers — the upper management level was often united by a hardware mindset. A real problem — also for diversity within the company. It is true that there have traditionally been significantly more women in software than in the core areas of the hardware. But their way up the ladder was blocked due to the subordinate treatment of software experts. This was detrimental to diversity in management.

Mastering the triple jump of matter, data and information

As the transformation progresses, this construct is beginning to falter. How can we counter this process, or rather, how can we accompany it? Andreas says that from now on, it is a matter of mastering the triple jump of matter, data and information. Because systems are increasing in complexity, the profession of engineering must finally overcome its simplistic thinking, framed in terms of rigid cause-and-effect relationships. This has long been the case in physics. “From now on, it’s about a holistic view and about the unknown. That’s why physicists are often found in companies in places where complexity is increasing– and not engineers.” One key reason for this is the scientific training in dealing with complex and chaotic systems, which better prepares physicists for the future.

Photo by Hack Capital on Unsplash

Thinking from software to hardware — not the other way around

The strong point of the German economy has always been its expertise in mechanics, the domain. The challenge is to reconstitute this knowledge about information — Andreas and I agree on this. However, an insufficient understanding of this topic in both education and practice is hampering awareness and the recognition of its urgency: “You have to learn to think from software to hardware and not the other way around,” he summarizes. If the software is conceived from the control unit, i.e., from the bottom up, as has been the case until now, one inevitably runs into problems that are so complex as to be unsolvable, as the recent past has shown. The operating system of a car, however, cannot be understood as a sum of individual parts, but rather, as the abstract information model of the vehicle with regards to its usability within its environment. In several software layers, it mediates between the vehicle’s control units and its imagined possibilities of use in the physical world and in the world of data and information. Thus, it is not the materials that make up the product, but the possibilities of use envisioned in the business model that ultimately define the object of development. Since these can change dramatically with every business model innovation, the software is the strategic starting point from which a vehicle is to be developed.

But how can companies shape this paradigm shift? Is empowerment the key to success? How do you build a successful software company? And how do we transfer the strength and expertise of German engineering into a digital and fully-connected age?

Andreas says that at least German entrepreneurship is still too attached to the machine — in other words, there is still too much focus on scaling in linear processes. The parameters for success are predominantly mapped in the logic of machines. With the introduction of or takeover by software and intelligent technologies, however, a completely different innovation and work mode is required. “Software is not finitely determined. It is raw and can be changed — so it invites an iterative, experimental approach,” he explains. “Programming is always craft, so it’s also art and architecture — and thus dependent on human excellence.” A very apt comparison, I think.

What Andreas still identifies as a key sticking point, however, is that software is still far too primitive in terms of the individual control units, at least as it is introduced in companies in this country. Cloud or OS solutions, which are necessary for new data-based business models, are still a long way off, the digitization expert confirms in the interview. No wonder — after all, education in Germany still does not cover this sufficiently, both in computer science and in engineering. An interesting point, which my diconium colleague Daniel Rebhorn has also explored in-depth here on Medium.

Photo by Marília Castelli on Unsplash

Empowerment without team building doesn’t work

But how can we do it differently, how can we do it better? Andreas suggests that companies need to think up a system of “iterative acceleration processes” that enables permanent feedback between customers and developers. “This requires a so-called ‘participatory organizations,’ which doesn’t just give individuals a voice, but also creates opportunities for team building. Because you can’t have empowerment without a team,” he clarifies. “Agile work and diverse teams can be very supportive of that.” But these “soft” factors, just like the meaningfulness and purpose of work, are predominantly ignored in Germany, he says. Unfortunately.

More vision needs more diversity and more leadership

Andreas describes the role of leaders in a “participatory organization” as a “node of gene-networked systems.” He says: “More vision also requires more leadership.” A participatory organization requires a different type of leader. Managers need to connect with each other, motivate employees, and give them a sense of purpose. Tesla founder Elon Musk is doing a lot of things right in this respect when he claims that he is fighting for a different, even better, world and commits his employees to this very goal.

In summary, the process of combining hardware with software is primarily about showing hardware-driven people a path from the old to the new world, says Andreas. Ultimately, the mobility of the future can only be developed through a new interplay between hardware and software. Learning to do this, he says, is a strategic challenge for the future of companies in the automotive and mobility industries.

Prof. Dr. Andreas Boes

About the author

Andreas Boes is one of the pioneers of German digitisation research. He has been working on the computerisation of society and the future of work for more than thirty years. With his team at ISF Munich, he is currently researching the challenges of the transition to the information economy and the conditions for the success of a humane design of this development. Andreas Boes is on the board of ISF Munich and director of the newly founded Bavarian Research Institute for Digital Transformation (BIDT).

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.

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Anja Hendel

Anja Hendel

Managing Director @ diconium | #Innovation #DigitalTransformation #Mobility | How do we transfer the successful German art of engineering into the digital age?