EV start-ups are typically 12-24 months late to market relative to their originally stated launch date, with most of the delay during the transition from digital to physical. In his fifth entry to the Industry Reflections series, Lio Grealou pivots from established OEMs to start-ups, outlining lessons learnt from various start-up engagements that can benefit new start-ups seeking to optimise the jump from digital design to physical line.
Above: Start-ups aim to turn ideas into reality; and in doing so, they build attractive new ventures to capture the interest of investors and customers, who in turn enable them to scale and grow to the next level (image credit: Unsplash)
Based on a QR_ study of global automotive OEMs, EV start-ups are typically 1-2 years late to market relative to their originally stated launch date. The study highlighted one of the key reasons for these delays was the transition from digital to physical, and the impact of physical debt. This manifested most clearly in the extensive time it takes to fix physical issues when discovered in late-stage development or prototype builds.
Interestingly, the study also highlights that once start-ups finalize a concept and have funding, they are far quicker than established OEMs at making decisions and progressing the concept and design. Nevertheless, transitioning too early from digital to physical can have massive impacts on validation and launch phases. Start-ups are likely to lose their up-front agility edge and associated bold thinking if unable to scale on time, expanding and adapting their operations to flawless manufacturing, supply chain and production quality requirements.
In this article, I elaborate on lessons learned from several engagements with start-ups, and the importance of talents and digital solutions in scalability readiness.
Businesses are always looking for that novel idea that will help accelerate and sustain their competitive advantage. Established OEMs must do this in the context of their existing portfolio and operations; start-ups must craft and tune an entirely new operating model to make it happen.
Making it real: starting off on the right foot
Beyond the ability to craft and market novel ideas, the key elements of successful start-ups include:
1. Getting the right founding team—people are core to getting things started; often with a few individuals who are driving things forward, especially when starting from scratch.
2. Being focused on time management—this implies driving accurate delivery and bringing the enterprise to the next product development milestone (as well as the next funding milestone).
3. Preparing to scale—the ability to transition to stable operations and grow is often what makes or break a start-up.
4. Knuckling down, getting things done—the need to be hands-on is probably the most valuable ability at a start-up.
These four factors are central to developing a learning and rapid decision-making culture (and vice-et-versa). They are also essential when transitioning from product concept to industrialization (production and commercialization), and making things happen with limited resources.
For start-ups, time is of the essence. Often, they are driven by deliverable- or milestone-based funding and must reach on-time the required profitability targets to sustain investment and growth. This emphasizes timely decision-making, ongoing adjustments and swift course corrections when required.
Onboarding talent that can think outside the box
Start-ups are about sharp product vision, execution, and intense teamwork. Flat structures provide agility, yet they rely on a few individuals to set the direction and bring things forward. New talent brings new perspectives, combining expertise and experience. Ideally, management is able to blend a mix of experienced veterans with new talent for a fresh perspective. This avoids being constrained by established knowledge or thinking patterns, while retaining the lessons these employees have learned from past challenges. Finding resourceful and self-motivated talent is mandatory but not sufficient; they must also align to company values and demonstrate their ability to “do extraordinary things” (Gulati and DeSantola, 2016).
This can be triggered by either bringing domain expertise from other industries, extending someone’s existing role to a new discipline, or combining several complementary skills into a single team to foster experimentation.
In other words, this means finding the required balance between:
• Leveraging existing expertise versus the ability to learn new stuff.
• Hiring new talent within the existing organizational structure versus realigning activities across existing teams, creating a new team or developing a new function to align with a new operating model.
• Capitalizing on industry experience versus building new knowledge, and how the two can be combined in a new context (cross-learning).
• Generating new ideas versus the ability to effectively implement them.
• Solving versus anticipating problems.
• Adopting good practice from the industry or solution platform versus defining a bespoke way of operating. Often referred to as so-called ‘best practices’, they can often be of limited relevance and success is organization dependent.
Thinking ‘outside of box’ implies learning from others, across disciplines or industries, trying new things, experimenting, and doing things using unconventional approaches or techniques. In other words, it is about trying different perspectives and not being afraid of failure, breaking existing codes or habits and embracing new challenges. To bring a new product or service to life, start-ups must be ambitious, iterate quickly, fail fast and renew their approach.
Such principles also apply to operational delivery and enterprise digitalization. They are not simply the means to an end, but also the foundation of a progressive and mature operating culture.
Building a culture of empowerment and agility
Building investor relationships while developing a credible and attractive product or service is another critical factor for start-up longevity and success. Achieving this requires the right information visible at the right time, empowering individuals to make the best possible decision – effectively running the business. While not every decision is data-driven, complex engineering and manufacturing deliverables certainly require informed decision-making at all levels.
When it comes to developing and running a start-up, is about product and data confidence and credibility across core functions:
• Creating a culture of empowerment: enabling high-performing engineering teams to focus on creativity and problem solving—basically, focusing on value-added rather than non-value-added activities (ENVA).
• Building the relevant information system: defining a holistic master data strategy across the digital thread, combined with robust integration architecture and connectivity to ensure that the right data is available to the right people at the right time.
Empowered engineers can actively contribute to new idea experimentation and be made accountable for their development, together with the management of associated risks and mitigation strategies. Transparent and timely data management is an essential aspect of this empowerment—eliminating administrative burden and the lack of trust in data which can undermine their performance. Engineers must feel they are responsible and involved in all business aspects, including innovation, materials, suppliers, finance, sales and marketing processes, not just technology.
Data and process agility helps to ensure right-sized solutions, with similarly right-sized operations, processes, governance, and approvals. Fundamentally, things like capabilities, features, and functionalities should be business-driven, with data at their heart.
Preparing to scale, learning to launch the first product
The objective of every start-up is to scale. In financial terms, scalability is the ability to increase the size of a business while either maintaining or increasing its profit margin. Scaling implies building an operating model or system capability that allows for rapidly expanding and increasing scope. Typically, the ability to mobilise and cope with rapid change is what can make or break start-ups, as they implement their scalability roadmap.
Getting ready to scale starts with building a flat management structure that can maintain flexibility and agility, while sustaining spontaneity, adaptability, and speed.
"As just about any rapidly growing start-up will attest, scaling up is challenging. […] Effective internal organization frees them up to keep pursuing new opportunities and brings long-term survival within reach." Gulati and DeSantola (2016)
Assigning ‘best athletes’ to a certain job means selecting the best person to complete the job, not just plan for it. Similarly, when selecting and implementing operational processes and tools, bringing the right partner can be a valuable investment—especially if the partner can also drive product development governance and introduce valuable continuous improvement contributions. Onboarding the right partner at the right time to support product development operations can significantly help accelerate digital adoption.
What are your thoughts?
Grealou L (2015); Value-Added vs Non-Value-Added Activities; virtual+digital.
Gulati R, DeSantola A (2016); Start-Ups That Last; HBR.