The reason for the McKinsey focus is due to this part of the automotive sector beginning to develop several new digital products, services and processes. Tier refers to how the supply chain operates in relation to core businesses, in that Tier 2 companies supply Tier 1 companies with the products needed; and Tier 1 companies provide core manufacturers.
The McKinsey report notes that the path to digital transformation will not be smooth and that attempts to develop roadmaps will require a large number of revisions, due to the plans starting out as too vague or too narrowly-focussed. A major stumbling block at the moment with automotive suppliers on this stage of the business journey is the lack of any overarching digitization strategy or coordination within an organization.
To assist companies, McKinsey recommends a “Blueprint for successful digital transformations for automotive suppliers”. In this the analysts pinpoint six important areas, noting how “Leaders in the automotive-supply sector are mastering six elements of successful digital transformation—and reaping the rewards.”
Digital strategy and targets
The report begins noting that any business strategy needs to take into account how digital technology will add value. This includes finding new approaches for engaging with customers; and with developing autonomy, connectivity, electrification and shared mobility.
There also needs to be an internal focus, considering how digital technology can make the business and organizational processes more efficient.
Digital transformation requires a revamped structure. This can be achieved, according to McKinsey, by putting in place a new, separate digital unit or by embedding a digital business within an existing unit. Alternatively, and the most recommended option, is to establish a digital center of competence with a chief digital officer appointed.
Pilot projects that use a test-and-learn approach
The survey suggests that new projects be run by small cross-functional teams create allowing for the testing of prototypes. For this to work, teams need to be selected with the right people and based on well-crafted testing and accountability protocols.
Talent and capabilities
To help to attract the best talent, the McKinsey report suggests situating offices close to technical hubs. This could help to draw in right talent.
Digital transformation relies on attracting appropriate partners. McKinsey recommends tapping into tech hotspots to learn about new technologies and novel working practices. For this, working with startups is of importance.
Most studies of digital transformation agree there should be a culture change, and the new report is no exception. All employees need to have a clear understanding of the opportunities and how they could transform the business.