Digital & data disruption is on the verge of affecting many established industries like the Automotive one and by capillarity, their furnishers and partners. In this first series of Engineeronomics blog posts for the Technical Recruitment Agency Löger. MFG Labs Project Manager Paul-Mehdy M’Rabet explains how established companies can internally enable the development of user-centric digital services by building a Services Division. His proposal is to build a Strategy Hub consisting of a Specialist Product Team and “Catalyst Employees” working together in the context of a new strategic realignment.

Legacy businesses going digital and analytical

Many entities – start-ups and SMEs essentially - are scanning the customer journey of established companies to identify opportunities. They are looking at opportunities where they can take advantage of their speed of execution and their creativity to meddle and grasp cash or strategic data.

The goal of these start-ups and SMEs is to become a lasting cornerstone player without supporting the heavy investments required to sustain the value chain. And they can! Money, data and cutting-edge digital technologies are more accessible than ever.

*In order not to be overwhelmed by the emerging digital revolution, the established companies need to internally*
*come up with, implement and deploy themselves new services with added value to their clients and their employees.*

Problem is that, for many established industries, building services is not their core business. This is not in their DNA, in their culture, and they don’t know where to start. Let’s go through some best practices I have identified as a Project Manager working for and with many companies bracing for massive disruption.

Don’t subcontract, build a “Services division”

The first reflex for many established companies is to pay an agency and consultants to build the services they need. There is a logic behind it: they don’t know how to build services themselves so they hire someone who does. But this is a mistake.

Indeed, agencies might know better than you how to build a service. What most of them don’t know are the ins and outs of your industry, your customers, and their needs. So basically, you will pay them to learn it. It’s a better investment to pay yourself to learn how to build a service!

What established companies should actually do is to build their own “ Digital Services division”. Making digital services is not what pays the bill of established companies. Selling cars, selling plane tickets, clothes or renting hotel rooms does.

Divisions responsible for the core operations of established companies know that and may be reluctant and unwilling to give up responsibilities and scope to this new division. So established companies should make sure to have the services division onboard and to spend time explaining the strategy behind this.

Then they should hire the head of “Services division”. The should be sponsored by the board, be at the right place in the line management and ready to play some politics with the other significant stakeholders of the company.

The head should have extensive experience in managing digital organizations and previously have been successfully tasked to drive the change in established companies. Indeed its first mission won’t be to manage a division but to build a new autonomous one – not hampered by the potentially unsuitable established resources, values and processes that created previous successful mainstream services - and drive the change within your company.

Building a new division from scratch is quite of a headache. That’s why you many companies do it by adopting an offshoring strategy or through acquisition. For example, Groupe Renault acquired Intel’s French embedded software R&D activity in 2017.

Offshoring is cheaper if you take into account development only. Once you add management effort, delays caused by cultural gaps, incoordination, time difference and increased time to market, you may want to think about it twice.

Whichever solution you choose, keep in mind the following points:

Co-locate project management, product management, and development teams. If you can’t co-locate your development team with the product team, then consider using a proxy-product owner.
Hire specialists. Even if it’s tempting don’t recycle operational managers from your core business to become managers in your “Services division”. Someone who has an impressive record in building car front seats or managing draughtsman engineers should stick to just that.
Talent acquisition should be lead by services specialists too. If you don’t have that, subcontract.
“Hardware should never be an issue”. Be prepared, your new division will need new digital tools and software. You can’t build web services or Android apps with Catia – yet, and you can’t work properly on iOS environment without a Mac.
Build a culture of rehashing, don’t reinvent the wheel. Too many companies build their own solutions at huge costs instead of reusing the existing.

Fill the cultural gaps

Now that your “Service Division” is up and running, the most difficult task that lies ahead is to fill the cultural gaps. Chances are your “Service Division” will follow the Agile methodology, that can be summed up as follows: build fast, frequently (2-3 weeks), deploy it as frequently as possible and if a project is running late, change the scope and don’t make any concession on planning or quality.

Other divisions of established companies don’t work this way. For example in the automotive industry, the electrical architecture in vehicles is decided years before the car hit the streets. Meanwhile services requests are expressed by sales and marketing month – sometimes weeks – before the expected date.

Chances are you need some enablers in your core product to make great services. For example, an IoT manufacturer may need to add new BLE chips in their object to offer indoor positioning capabilities and use them in a digital service. How to match the two agendas?

Build a Strategy Hub where people will benchmark your competitors and trends in other industry.
They will define what direction your company’s services should follow in the years to come.
Build interfaces, in order to “protect” your Service division:
- Define catalyst employees. They will have to know your core operations very well and identify the right place, the right time and the right form to address all your enablers’ requests.
- Define other employees who will convert strategy hubs’ raw details into core business sense. The other employee’s will work with catalyst employees to make sure all enablers will be ready to follow the vision defined by your strategy hub.
- Define an intake process. Many people in your company will have services ideas and more or less specific needs. You should structure the way those employees will send you their requests and how you will prioritize them.
- One of the major roles of the interfaces described above is to make a cocoon inside in which your product team can have the degree of freedom necessary to build awesome services
Build a Product Team: The Product team is the heart of your “Service Division”.They will build, deploy and maintain the services.
They may follow Agile principles and should be protected from any external distractions. It will be a day to day challenge to make your different divisions working together so don’t make it more complicated with unclear roles and processes. Define them and communicate about it.

Surviving the Disruption Strategically

Unfortunately, massive digital disruption threat isn’t a matter of acknowledgment anymore. All management processes from operational, customer, innovation to regulatory need to be reorganized and reinforced to offer differentiated customer value.

To execute the digital strategy you should implement a new aligned culture, a new way of teamworking, and new type of leadership. This applies to almost every aspect of your organization – Talent acquisition, Information Capital, and Organizational Capital.

This is very challenging. In order to convert this challenge into an achievable goal, don’t hesitate to be accompanied by experts to lead the non-product related operations so you can focus on what matters the most: building user-centric digital services to survive the disruption.