Guest commentary: How to drive transformative change in the auto industry

The automotive industry is undergoing a massive shakeup. From significant shifts in product, consumer behavior and expectations as well as regulations to supply chains and materials, automakers need to reinvent themselves in more ways than one.

Connectivity, autonomy, shared and electric disruptions across the landscape are creating the biggest transformation the auto industry has seen. In 2000, the four largest producers of cars were Japan, the U.S., Germany and France. Twenty some years later, that list is China, Japan, Germany and South Korea.

Urbanization, climate concerns and the pandemic have driven changes in commuter behavior that are adding to the uncertainty for automakers and accelerating the need for change. Leaders and organizations are faced with the challenge of ensuring the internal pace of change keeps up with the external pace.

In addition to product innovation, retooling of factories and the establishment of new supply chains, companies need to focus on organizational capability and culture. Successful transformation will require an energized and engaged work force that understands how to lead and execute change.

Organizations that will be most successful are those that are able to adapt. This means they must have a work force that embraces change, has the capability to navigate it and operates in an environment that encourages innovation and experimentation.

The tendency to fear or embrace change is driven by whether it is seen as a threat or an opportunity. Leaders must help organizations acknowledge threats but also amplify opportunities and aspirations.

While knowing how the market will evolve is impossible but that progress is likely to be nonlinear, identifying the objectives involved in a change in strategy is necessary — whether that's curtailing production of new products, such as the Ford F-150 Lightning, or a shift in focus, such as General Motors' pivot to incorporate more hybrid vehicles in its plans.

External targets are a compelling narrative for employees but can be counterproductive if not presented in a holistic way. We have seen many businesses where a new product or technology gets all the focus and the resistance from those threatened by change slows down progress. This can be mitigated by communicating the organizational strategy, aspirations and benefits of leading the transformation and the very real impacts on existing operations. The key is to connect change to positive business and personal outcomes.

At an individual level, transformative change can be unnerving. Imagine mechanical engineers who have built their skills and careers around the internal combustion engine suddenly facing an environment where their expertise is no longer as valuable. Whether R&D, service, retail or manufacturing, automotive sector jobs require new skills and capabilities.

In addition to acquiring the technical know-how, organizations would be well served by helping their employees develop the leadership and self-management skills that allow them to make necessary behavioral changes and get the most out of new learning opportunities. Investing in employee development has a big impact on attracting and retaining talent. With labor markets projected to continue to be tight and new skills needed in the auto sector being more transferable across industries, it is increasingly important for automakers to invest in their employees.

A disruptive business environment places a premium on experimentation and rapid decision making. This requires more people identifying and acting on opportunities and challenges. Traditionally, automotive companies operate with a top-down approach. The divide between white- and blue-collar workers has not helped in creating the more dispersed leadership needed to be successful in the future.

Success requires enabling those closest to the challenges to make decisions. Experimentation requires establishing mechanisms to learn while also creating ways to minimize harm from expected failures. Dispersing leadership helps employees feel more in control of change, which reduces anxiety and change fatigue.

This once-in-a-generation change will reshape the market, creating significant opportunities and threats for established players. With the level of anticipated disruption, there is a big competitive advantage to be gained from being a more agile and change-capable organization. Companies that invest in generating clarity and alignment, developing their employees and creating an adaptable culture will be the ones that race ahead.