Watch Redware's Josh Bunyan's presentation from the recent Advanced Engineering exhibition to discover how disruptive consumers are impacting on the automotive value-chain, and how you can create a competitive advantage from developing the skills to adapt to disruption.
Or read the full script below
Hello everybody, and thanks for joining the talk today.
I have worked with Dealer Management Systems and Automotive Learning Management Systems internationally and have seen how the automotive industry is adapting to change. I have been privileged to be involved in conversations with business leaders, such as MDs of OEMs, importers and multi-national dealer groups, which has provided me with insight into contemporary challenges across the value chain, and working at Redware we specialise in learning technology and automotive learning strategies.
I hope today that I can discuss some of the major themes of disruption happening in the automotive industry, and perhaps introduce some new thoughts to you- particularly around learning strategies to foster agility.
When we talk about disruption we tend to think about the changes impacting on manufacturing. Today we are going to introduce the concept of disruptive consumers, and challenge that actually the disruption happening further up the value chain is being caused by a shift in consumer demands. If we think back to Henry Ford and the “any colour as long as it’s black” philosophy, we can really start to see the model that the automotive industry was built on.
Historically, OEMs have worked to maximum capacity and have attempted to create demand to match, through attractive financing, incentivising dealers through bonus schemes and many other tactics.
Arguably this model has sustained itself up until recently due to dealers understanding more about their products and services than consumers, giving them power in the buying relationship. I would argue that industry disruption is being caused by a shift in this paradigm, now consumers have more information available to them. We often hear from our customers that consumers research products to such an extent that they often know more about them than the sales staff. We like to refer to these individuals as disruptive consumers. They are more well-informed about products, they understand different channels they can buy through and are less concerned about ownership and more concerned about mobility services.
This shift at the bottom of the automotive value chain is the driving force in disrupting the industry and throughout this presentation we hope to share a little more about why we feel this is the case and more importantly, how learning and development can help future-proof businesses at any level of the value chain.
Introducing Disruptive Consumers
We as consumers are more connected now than ever before; we are used to information being at our fingertips and we are adopting technologies such as Uber, Amazon Alexa and connected homes to make our lives a lot simpler. The automotive sector has been a late adopter of technologies other industries have been using for years, even e-commerce is a relatively new concept to the automotive sector with Tesla adopting it in 2014 and Hyundai in 2017.
As with connected homes, consumers have an expectation that vehicle ownership, if consumers will own vehicles at all, which we will touch on shortly, will become simpler. Partnerships with companies such as Amazon are likely to see OEMs providing cars that are more connected and able to take a lot of the heavy lifting out of car ownership. I would envisage anything from workshop bookings through to MOT tests and insurance renewals will be handled without any intervention from the consumer.
The technology could be stretched even further with the introduction of autonomous vehicles. Rather than just handling workshop bookings, the car can transport itself for appointments and through Uber-style apps you could even car share from the comfort of your office desk. All of this is driven from consumers’ demands for more time through the smart application of technology.
Arguably even the development of new drivetrains stem from social pressure to address environmental concerns, as ultimately the will of government is representative of the electorate.
Financing and ownership
Financing and ownership is something else we have seen change in the automotive sector. Ownership used to be far more important to the consumer; if we take our mobile phones as an example, most of our phones are on a contract and many of us will never own the phone we are paying towards- we will upgrade. Car ownership can now be as simple as owning a phone, and occasionally at a similar price. An iPhone X could cost you £98 per month, and you can get a Kia Picanto for an additional £23. Although this is probably not new information for most of you, again we can see trends in other industries taking hold ahead of the automotive sector’s adoption; reaffirming the view of disruptive consumers. If we take the declining trend in vehicle ownership alongside connected and autonomous vehicles, you can begin to see why car sharing is likely to become more prevalent in coming years.
The Internet is one of the greatest disruptors and is constantly changing customer expectations. Some researchers have even cited the internet as driving the decline in car ownership among young people, as they now spend more time at home communicating through digital channels.
And, regarding buying expectations, if OEMs and dealers can’t meet these expectations, then intermediaries such as Car Wow and Auto Trader offer a service which does. Therefore, not only does the Internet mean consumers are more well-informed in making buying decisions (with 19 of the 24 average touch points being online), it also sets an imperative to dealers and OEMs to serve up what consumers require throughout their buying journey, to protect their margins from intermediaries.
Ability to buy online
Part of this consumer buying journey is the ability to buy online. We have already seen OEMs such as Tesla and Hyundai adopt this, and it is a channel of growing influence. This means consumers will be able to complete their buying journey entirely online, although how many will adopt this is still to be seen.
A personal, human experience
Despite more of the buying journey moving online, consumers demand more personalised services and products. This is where dealers have an ongoing role in providing personalisation and expert insight that a consumer is yet to be able to achieve online.
The Impact on Dealership staff
So how do these changes in consumer behaviour translate for dealer staff?
They need to foster agility to be able to respond more quickly to change and this ultimately will be achieved through the development of a Learning & Development strategy.
When we look at connected vehicles, sales staff are having to learn additional options and functions to be able to effectively communicate them to customers. As personalisation becomes more important to consumers, Just-in-Time learning, an idea borne from lean manufacturing, enables dealer staff to access information at the point of need.
When we have a question we need answering, we all head straight to Google, because it’s quick and easy to get that nugget of information we need. This is very similar to Just-in-Time learning and accessing training at the point of need. Less often will salespeople be completing half-day courses for new product releases. They will be able to access specific information relevant to their appointment with a specific customer to become their trusted advisor- and all of this could be achieved through data gathered throughout their personal buying journey.
Finance and ownership
When it comes to finance, dealer groups are already responding. We have seen the introduction of financially-trained Business Managers to help guide customers through the various financing options available.
Dealers must already field more digital enquiries as consumers begin their journey on the Internet, however as more of the buying process continues to move online, staff can expect to be dealing with better-informed customers when they step foot in the dealership. This could mean that salespeople will have to provide a more personalised service based on data from the online buying journey.
As consumers can gather more information online, it is important for dealers to offer a service which cannot be achieved elsewhere. A large part of this is salespeople being elevated to trusted advisors. BMW already have their product geniuses, who help to answer their customers’ questions without the pressured sales tactics. Perhaps the personalisation at dealer level will translate further up the value chain to OEMs and suppliers.
Harley-Davidson, for example, have specialised in customisation throughout their history. Historically, this personalisation was completed as part of the vehicle preparation process on the dealer side. Now, a more detailed online buying journey, with a wider array of options, allows the bikes to be customised through the online vehicle configurator and the customisation is completed throughout the factory build. Digitalisation and capable systems allow for this flexibility, but it is consumer demand that drives the change.
Ultimately, the rapid change caused by consumer demand requires dealer staff to become more agile in their approach. Skills need to adapt and change as quickly as technology and customer demands, and by taking inspiration from manufacturing, people can become agile learners. Organisations with the strongest learning cultures are seven times more likely to have cultivated agility than those with the weakest. Implementing techniques such as Just-in-Time learning, where an individual learns at the point of need, when paired with greater detail around the customer’s requirements from their online buying journey allows salespeople to add greater value to their customers.
Wholesalers and Dealer Groups
As we move a level up the supply chain to dealer groups we can start to see how they are addressing disruptive technologies.
As the market has become more competitive and margins have slimmed, we have seen consolidation across the dealer network, meaning more franchised outlets are owned by large dealer groups. This has allowed for greater centralisation and streamlining of processes. As more of the customer journey is completed online, contact centre staff play a vital role in engaging with customers throughout their buying journey where the possibility for traditional face to face interaction has been removed. What this does allow for is for these dealers to provide a better service for their customers through gathering more data, enabling them to provide greater personalisation in their service to consumers. This does however create a training need for centralised staff in contact centres and central teams such as marketing to effectively interact with their customers.
The Retail Model
The drive to provide a personalised service has other implications. We may see the dealer model becoming more akin to retail, with some dealers already occupying retail store fronts and many having pop-ups in shopping centres, all helping to build brand recognition and engage with customers in a less pressured sales environment. This is where roles such as the BMW Product Geniuses are vital.
And as we have already alluded to throughout this presentation, the customer should be at the heart of everything dealers do. Delivering to each customer’s specific requirements, both through their online presence and face to face, is important in building their brand as trusted advisors and remaining integral in the buying journey.
Finally, as we have seen with Hyundai and Tesla allowing customers to purchase vehicles online, we are also seeing efforts from some dealer groups to enable buyers to complete their used car buying journey online as well. Dealer groups are investing more into developing their web presence and investing in technologies to help drive their performance and meet their customers’ needs. This creates an imperative to hire, train and develop technical skills within the organisation.
The Impact on Manufacturing
When we come to manufacturing, we not only see digitalisation as a power for transformation within the manufacturing process, but also as an enabler to deliver many of the demands of modern consumers we have discussed today.
Let’s look at traditional manufacturing, which was focussed on conventional processes and standardised projects, delivering high levels of efficiency. With Agile philosophy, organisations became far better at delivering uncertain projects. With the advent of Industry 4.0 we can see organisations transforming, through digitalisation, to realise the benefits of both. With data driving the equation, organisations are able to maintain consistency and predictability at the strategic level, whilst operationally and tactically remaining agile.
The human still plays a vital role in this equation. Therefore, when it comes to human-robot collaboration, reskilling is vital in maintaining agility and efficiency through uncertainty. This reskilling may need to be rapid, as 85% of manufacturing executives expect a collaborative production line between humans and robots by 2020.
Training for Success
And reskilling isn’t a need only identified by senior executives and management; workers want to develop alongside technological change, with 9/10 workers wanting their company to offer more learning opportunities. And this is an important consideration for manufactures, as two out of three workers have left a job due to a lack of development opportunities. Retention and retraining is a far more cost effective way of re-skilling your workforce, especially when competition to hire can be aggressive for technical roles with skills shortages.
As I mentioned previously, the harmonisation of traditional efficient and predictable manufacturing and agile manufacturing pivots on the availability of data. Manufacturing becoming more digitally connected presents the opportunity to meet the disruptive consumers’ demands and remain relevant in a rapidly-changing market.
OEMs have already identified the need to move towards software skills and focus more on mobility, with an understanding that this could result in decreased production volumes. For example, Rolls-Royce Aerospace now derive more revenue from data services than engine manufacturing, perhaps this is something we will see in the automotive sector as OEMs become mobility service providers.
Some OEMs want to move entirely away from their manufacturing identity, as they expect their suppliers to complete even more of the manufacturing process and to use a more modular approach to vehicle assembly. These changes create an imperative for an even more closely linked and digitalised supply chain, with data sharing being of paramount importance to build efficiency in the relationships.
With these changes in mind, be prepared for the new skills demands – we may be seeing a fall in demand for some job roles now, but we are likely to need more employees with new skills in future. For example, between 2001 and 2015 technology contributed to the loss of 800,000 jobs, but also helped to create 3.5 million new jobs in the UK alone, and it is predicted that by 2020 we will see a 28% rise in demand for data analytics skills.
As data-driven production allows for more personalised manufacturing, helping to deliver to the needs of the disruptive consumer, data-driven learning can deliver similar benefits. Personalised training is faster, easier and can become a frictionless part of the job. To foster true agility, your workforce need to be agile.
Just like productivity can be improved with lean manufacturing, learning can be improved by applying the same principles. By eliminating the wasteful content, you can make it easier for workers to access valuable information and drive their own productivity. For example, short-form, Just-in-Time learning can be implemented to help learners develop required skills at the point of need. As personalised production becomes more important, individuals will not be working to such repetitive patterns, creating the need for multi-skilled workers. Just-In-Time learning can be a useful refresher for skills they do not use quite so extensively.
And more productive training equates to more productive workers, with organisations that report productivity improvements from learning innovation seeing an average 13% productivity improvement.
Although nothing I have shared today is ground-breaking, and most of you are probably aware of many of the themes we have covered, hopefully we have introduced some new ways of thinking that were perhaps a little different.
We argue that disruption is human-driven and introduce the concept of disruptive consumers. With the wealth of information available to consumers now, we have seen a shift in power in the buying relationship. Rather than them fitting into our processes we are having to adapt our approach to meet the customers’ buying journey- how they research, decide and buy vehicles.
Although this is a simple premise, and you may say that we should always deliver exactly what the customer wants, it is quite a shift from the traditional model of vehicle sales. This is not only causing disruption for dealer staff and dealer groups but is also creating disruption further up the value chain with OEMs and suppliers. Therefore, agility in meeting consumer demand at every level is vital. We are all disruptive consumers and can help our organisations to develop the agility to prepare for disruption at any time, but only if we are provided with the right tools.
Disruption is by definition difficult to predict and therefore fostering a culture of agility is vital in preparing for it. Learning & Development is vital for developing an agile mindset needed to seize the opportunity presented by disruption.Finally, I would like to bring the presentation full circle, and share another Henry Ford quote. “Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young.” A pioneer of the automotive industry, he created a great deal of disruption, not entirely dissimilar to today. We are undergoing a period of dramatic change, but still Henry Ford’s quote rings true. Through learning, we can take challenges and turn them into opportunities.