Fehlerkultur is apparently untranslatable into English, at least according to Michael Würtenburger, the head of BMW car IT. His best try was "no-blame organization." His theme echoed many other presenters during the two days, that the automotive industry has to change. It has to make cultural changes, and those are the most difficult of all to make. I will use Michael's presentation as a backbone to this post, but slip in supporting points and graphics from other presenters. This presentation, and several others, had the tenor that the Ludwigsburg conference was all industry types, and they could drop the facade that everything was perfect, and talk about the major challenges facing the industry. The Future Is Software The change is summed up in the picture above and the obvious implications: these two things cannot stay separate any more. Cars are becoming part of the software/service ecosystem, not off in a world of their own. One big implication of this is that they are less in control of their own destiny, selling a vehicle to a buyer in a transaction, and more becoming part of their customer's digital lifestyle. This has all sorts of implications: Shifting power between different suppliers New competitors from Silicon Valley (Google, Tesla, Faraday Future, Apple?) New participants in the supply chain (Apple, Google, Amazon, Tencent, Alibaba, Baidu...) New business models and substitutes for vehicle ownership (Uber, Lyft, MyTaxi...) New consumer needs from digitalization New Thinking The first change in thinking is putting software first. That has implications all through the product development process, and the management culture of the company. The first change is to switch thinking from "What product are we going to develop?", which is the old hardware way of thinking, to "What problem are we going to solve?", which might involve hardware, software, services in the cloud, or some combination. For a traditional OEM, this is a big change. They are used to assembling a vehicle out of ECUs (hardware and software combined) that were designed by their tier 1 suppliers (primarily Bosch in Germany). The old way of doing things took several years from concept to deliver a vehicle, with minimal customer feedback during that period. Once a car was shipped, then it was done. The car companies were in the business of selling cars, and afterwards their dealer networks (largely independent of them) would service the vehicle. But there are new ways to think about things, and the car companies are not the ones on the leading edge of doing this. For example, cars in Germany are a €60B industry, but mobility, the way a company like Uber thinks of it, is a €155B industry, 5% of German GDP. Transitioning a Big Company Jeff Bezos in a 2016 letter to shareholders talked about "day 2". Day 1 is being grounded in the present, and the opportunities and threats today. Day 2 is just carrying on another day. Jeff said, in response to an employee question at an all-hands meeting: Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come. Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. The outside world can push you into Day 2 if you won't or can't embrace powerful trends quickly. If you fight them, you're probably fighting the future. Embrace them and you have a tailwind. For Day 1 you need to make fast decisions, which is easy for a startup company and really difficult for a large organization (like a car company). However, speed matters. One lesson is not to use the same decision process for irreversible and reversible decisions. You need to make decisions with about 70% of the information you need, rather than make a very slow, very reasoned, decision with a long period gathering 100% of the data. Jeff Bezos had a phrase that Michael really liked: "disagree and commit." It is a phrase that will save a lot of time. What is required at BMW (and, by implication, any car company) is what Michael called "Fehlerkultur" which doesn't really have an equivalent in English. "No-blame organization" was his best translation, or for startup companies and divisions, "fail fast." Try lots of things cheaply, and nurture the successes, and kill the things that don't work out. Learning from Software Software development has been getting faster for some time. There is even a name for it: Agile software development. The manifesto is above. Another datapoint is that smartphone companies put out new designs every year or every six months. Car companies need to learn from these other industries since they need to get faster. Otherwise they will be out-competed by Silicon Valley companies. It is instructive that Uber was not invented by a car company, but a company outside the industry. Self-driving technology is most advanced at Tesla, which is a car company, of course, but is more of a software company, and didn't come "from" the car industry. If you ask someone about self-driving cars, they probably first think of Google. (Actually, it's called Waymo now, but most people don't even know that, they still think of Google self-driving cars.) Get Out of Control Car companies have historically been very disciplined, very structured, process-oriented...but slow. That won't be good enough going forward. Michael wrapped up with a quote from a famous British racing driver of the 1960s, Stirling Moss. In some ways, he was the top racing driver of his era (the late 1950s), but he never won the world championship. Between 1955 and 1961, he was either second (four times) or third (three times)...but never first. 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