Building a Future-Proof Automotive Leadership TeamHow to attract and retain next-gen digital and software talent

Software and digitization have redefined the automotive/mobility industry

The mobility solutions of the future will require higher levels of data processing, communication between infrastructure and cloud-based systems and, critically, a different executive profile. Russell Reynolds Associates recently spoke with 13 senior automotive executives who are at the forefront of this transformation to discuss the implications for talent and leadership.

The total value of software in a passenger vehicle is expected to grow from approximately 10 percent now to 30 percent by 2030.1 This rapid growth and enhanced value proposition will put further pressure on automotive/mobility companies to attract and develop software and technical talent that can help them partake in this growth story. Identifying, attracting, retaining and developing blue-chip software and mobility talent poses a huge issue for both OEMs and suppliers.

Within the next two to three years, we will change 80 to 90 percent of our senior leadership at the director level and above to reflect the impact of software and technology.

— SVP, Mobility at a leading global automotive technology company

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Electrification of powertrains requires more complex and centralized electrical/electronic architecture

In-vehicle networks today are robust computer networks that go

beyond traditional electrical vehicle architecture

The connected car trend not only requires automakers to develop

hardware-based innovations, but is also pushing them to evolve into

service providers with cloud-based data analytics capabilities

Autonomous vehicles are a top priority for most OEMs. Cars are being equipped with advanced driver assistance systems (ADAS) and autonomous-vehicle (AV) sensors

Smart vehicles of the future will have features such as advanced human-machine interfaces, sophisticated infotainment, voice recognition and traffic telematics

SOFTWARE AND ANALYTICS ARE KEY ACCELERATORS FOR AUTOMOTIVE INNOVATION

1. McKinsey, Automotive So ware and Electronics 2030.

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The DNA of a future-focused automotive/mobility leader

Based on our proprietary executive data pool, we used our Leadership Span tool to benchmark the psychometric profiles of automotive C-suite executives against those in software and cloud, hardware and IoT, as well as cross-industry executives.

In general, the automotive executive group can be described as disruptive risk takers, who tend to operate behind the scenes rather than leading in a highly visible and galvanizing manner. Furthermore, the automotive executives “span” less across the competencies than their counterparts in technology and may thus be a bit less agile. This may indicate that they are in general more traditional in their approach or more used to operating and leading in a certain way.

The talent war has moved beyond the traditional automotive industry as it competes with the broader ecosystem, including cu�ing-edge tech firms and startups for next-gen auto leaders.

Executives need to lead at the intersection of consumer and technology. Rather than being purely “revenue-driven,” there is a need for strategic, customer- centric leaders who can identify and bet on innovative opportunities early on.

Automotive leaders need to be “digitally literate” and embrace the “fail fast” mindset that will enable their teams to move rapidly from idea to concept to prototype and testing.

INDUSTRY ECOSYSTEM: FROM “HIERARCHY” TO “HUB-AND-SPOKE”

KEY TRANSITIONS WITHIN THE AUTOMOTIVE INDUSTRY TALENT IMPLICATIONS 

VALUE CREATION: FROM “ENGINEERING-DRIVEN” TO “TECHNOLOGY- AND CUSTOMER-DRIVEN”

AGILITY: FROM “BUILD-TEST-PERFECT” TO “TRIAL-AND-ERROR”

The long-established hierarchy of OEMs and suppliers has been disrupted. With the growing sophistication of so�ware (SW) and hardware integration, OEM-supplier collaboration happens at an earlier stage of R&D. Suppliers are pushed to collaborate closely with SW companies to provide total solutions for OEMs.

Automotive companies were previously manufacturing- and engineering‐driven, with long waterfall development cycles, huge capital investments and OEM-driven vehicle offerings. Now, as product and technology development has become consumer-centric, automotive companies must proactively seek out opportunistic investments and establish partnerships upfront. 

New partnerships and cooperation models with third parties, such as tech firms and venture capital, as well as the new pace of vehicle R&D, are pu�ing new demands on automakers to move the dial on culture and mindset. These now must shi� from being focused on “perfection” to instead being concentrated on building a minimum viable product that will likely undergo numerous upgrades. 

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2

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About RRA Leadership Span

In conjunction with Hogan Assessments, Russell Reynolds developed Leadership Span, a unique assessment methodology that measures the ability of senior executives to span and adapt with ease to new situations.

Leadership Span is a proxy for agility, in that leaders who have higher span tend to be better at adapting and adjusting their leadership style and deploying different approaches as the business context changes.

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LEADERSHIP SPAN SCORES OF C-SUITE EXECUTIVES BY INDUSTRY

Automotive companies tend to spike on ‘loud’ factors, but span less across the competencies

AGILITY SHOULD BE IN THE AUTOMOTIVE LEADER’S DNA:

As automotive businesses seek to future-proof their business models, agility will be key. Automotive boards, CEOs and CHROs should therefore reflect on how they can embed individuals who “span” more broadly than traditional automotive executives. For example, not only do technology executives score higher on disruptive and risk taking, they score significantly higher on heroic and galvanizing.

FOCUS ON EXECUTIVES WITH A CUSTOMER-CENTRIC MINDSET:

With changing customer needs and preferences at the heart of the transformation of the industry, executives will need an increasingly customer-centric mindset to succeed. We know from our Leadership Span data that

“customer activators” are pragmatic risk takers and team-oriented relationship-builders. This allows them to make fast decisions, course-correct and iterate quickly based on an influx of data and information. Their pragmatic nature means they appropriately filter this information and determine where to focus and when to pivot.

5.0

5.1

4.3

4.3

5.6

5.0

RELATIONSHIPSAND

INFLUENCEGalvanizing Connecting

5.0

5.2

4.4

4.3

5.8

5.8

LEADINGTEAMSHeroic Vulnerable

3.9

4.3

4.6

5.2

6.3

5.3

EXECUTINGFOR

RESULTSRisk-taking Reluctant

3.9

4.0

4.7

5.8

6.5

5.9

SETTINGSTRATEGYDisruptive Pragmatic

Hardware & IoTAutomotive So�ware & Cloud Cross-Industry Average

0 1 2 3 4 5 6 77 6 5 4 3 2 1 0

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Automotive/mobility needs “future-proof” leaders with new skills

In addition to looking at our proprietary Leadership Span psychometric data, we spoke with several senior industry executives to find out what traits the future focused automotive leader has, and where the gaps are between the current automotive leadership population and the mobility leaders of the future.

Everyone we spoke with agreed that the current dynamics in the industry have manifested themselves in a more complex skill set demanded of automotive leaders. Historically, automotive players valued hiring leaders who were industry veterans, pragmatic revenue/growth-driven. Notably, future automotive leaders will need to engage beyond the automotive realm with automotive technology, the startup ecosystem and smart cities. At the core of all of the aforementioned lie changing consumer demands and expectations, which vary widely by region (and sometimes even by country).

THE AUTOMOTIVE/MOBILITY LEADER OF THE FUTURE

In order to harness this kind of talent, automotive companies should today be looking at potential candidate pools outside the industry. For external hires from outside the automotive industry, each industry, as well as each function, will have pockets of strength—for example, the best talent in infotainment and telematics can bring world-class customer experience knowledge related to the connected car. The strategic agenda of the company, and the value-add needed by the hire in question, must inform which talent pool is to constitute the “bull’s-eye” for talent.

Ecosystem-level thinking: Deep understanding of the new automotive industry dynamics

Consumer-orientation: Knowledge of changing consumer landscape and needs

Startup exposure: Understands the entrepreneurial environment through working in or closely with startups

So�ware and data capabilities: Understands SW modeling, analytics, AI, machine-learning. Other good-to-have skills may include ADAS design, mechatronics implementation, sensors, cybersecurity, robotics

Strategic vision: Identifies opportunities, potential partnerships and strategic M&A

Workforce evolution: Ability to sensitively manage reskilling/upskilling programs

Cultural dexterity: Adjusts to both tech and automotive cultures; promotes cultural evolution

Disruptive and change management capabilities: Hands-on approach to change implementation

Commercial mindset: Understands how to monetize data through new services and offerings

EXPE

RIE

NCE

SCO

MPE

TEN

CIES

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POTENTIAL TALENT POOLS OUTSIDE THE TRADITIONAL AUTOMOTIVE INDUSTRY

Three key steps to future-proof an automotive/mobility business

In our interviews, several executives addressed the concern that many C-level leaders and board members need a deeper understanding of software and its impact on the industry. According to Russell Reynolds Associates’ latest Digital Pulse survey, the automotive industry overall lags a bit behind other industries on the digital journey, especially when it comes to full organizational commitment to digital, the drive from the top and the ability to change and react fast enough.

AUTOMOTIVE TECHNOLOGY

“BORN DIGITAL” OEMS

INFOTAINMENT& TELEMATICS

CONSUMER CLOUD, CONNECTED

DEVICES & PLATFORMS

Strong connected-solution

innovation focus, industry shapers that

look toward the future

Existing knowledge of automotive industry,

pioneers in digital/so�ware technology and

connected vehicle ecosystem

Strong customer-oriented

mindset; companies tend to be scrappier and growth-oriented

Strong digital experience and deep connected-solution

innovation experience

ENTERPRISE AND

INDUSTRIALIOT

Connected digital solution innovation

with a strong industrial

manufacturing foundation

1 Enhance leadership buy-in

If an executive doesn’t value the long term benefits of so�ware initiatives and/or lacks an in-depth understanding of so�ware and technology, the result is o�en a slow response to changing market demands and shortsighted strategic decisions.

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AUTOMOTIVE LAGS BEHIND SOFTWARE IN TERMS OF HAVING A CLEAR DIGITAL STRATEGY, AND IN ONLY ONE OF THREE CASES DOES THE CEO OWN IT IN AUTOMOTIVE

Our advice on enhancing leadership buy-inDIGITAL INITIATIVES SHOULD BE BACKED BY THE CEO AND DRIVEN “TOP-DOWN”:

Automotive CEOs need to reinvent themselves as software and technology advocates in order to allocate resources optimally, create board engagement, set out a clear agenda for transformation and redefine ownership between business functions. When planning out succession for future leadership, companies need to look for CEO candidates who span broadly (see page 4) and have an agile mindset. CEO candidates will increasingly have had exposure to software and digital enterprises as opposed to having spent their entire careers in traditional automotive.

INCREASE THE DENSITY OF DIGITAL TALENT IN THE ORGANIZATION:

The automotive industry not only needs to recruit an army of software engineers and data scientists to build in-house data/software capabilities, but also needs general managers and P&L leaders who can effectively understand and lead different parts of the business. Such leaders should bring knowledge of new business models and data monetization models from other industries.

WHO SETS THEDIGITAL VISIONAT YOUR COMPANY?

WHAT IS THE CURRENT STATUSOF YOUR ORGANIZATION’S DIGITAL STRATEGY?

Automotive

So�wareAutomotive

CEO

CIO

CDO

CTO

Head of Strategy

35%

18%

10%

10%

10%

CEO

CIO

Other

CTO

CDO

64%

9%

8%

6%

5%

So�ware

All industries

Source: RRA 2018 Digital Pulse survey of 40 automotive executives and 64 so�ware executives. (Total: 1,381 executives across industries surveyed.)

Clear digital strategy

embedded across the organization

Clear digital strategy but lacks

clear organizational

ownership

Does not have an integrated strategy to

leverage digital

27% 35% 38%

77% 9% 14%

33% 30% 37%

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BROADEN LEADERSHIP’S DIGITAL ACUMEN AND APTITUDE:

Automakers should actively broaden their current leadership team’s digital acumen. One solution is establishing a technology advisory board to provide advice and insights pertaining to a variety of evolving technological trends that impact the business. Ideally, the advisory board is comprised of members from diverse backgrounds and from other disruptive functions and industries. Exposing the advisory board to the broader group of executives can have a profound impact on the leadership team’s knowledge of the disruptive trends in the industry.

Similar to any other industry undergoing digital transformation, software initiatives and digital efforts in automotive companies often start with specific projects isolated within traditional functions. Digital teams are embedded in different functions of the organization and are not necessarily linked or driven by a common strategy. This type of “early adopter” structure helps the company develop go-to-market strategies quickly but could lead to potential issues in terms of consistency across the business and missed opportunities for digital synergies.

As the digital element becomes more complex, automakers will need to evolve into a “digital-native” mindset, where the digital strategy is set at the top of the organization and capabilities are embedded in all functions. It is critical that the strategy is well communicated and understood by the entire organization. A digital “center of excellence” (often led by the CTO/CDO) can be established as a standalone, cross-functional unit that links the business efforts in different functions that pertain to digital mobility.

CTOS AND CDOS NEED TO BE THE “CAPTAINS” DRIVING THIS CHANGE:

While CEOs and board members need to be sold on the benefits of the digital initiative, CDOs/CTOs should be elevated to the ExCo to advise on the possible advantages of particular software and technology. For the transformation agenda to succeed, CDOs/CTOs need to actively engage and manage stakeholders—including convincing the board and the traditional functions—as they invest in the future. When hiring for the next CDO/CTO to be the change agent, companies need to assess for a disruptive mindset, personal impact and change management skills.

ALL LEGACY BUSINESS FUNCTIONS SHOULD BE INVOLVED:

As it becomes an increasingly table stakes strategic issue, it is crucial that not only the C-level executives have a clear vision for software, but that each function and department be fully equipped with both digital capabilities and the software talent to implement the strategy. Companies should not only place digital talent at the top, but also gradually embed digital brainpower across each legacy business function.

� Gain insight about future trends and opportunities in order to stay ahead and prosper

� Provide refined knowledge and deep subject ma�er expertise on a variety of relevant topics

Chair: Member 1:

Member 2:

Member 3:

Member 4:

CTO of the company (ExCo member)Principal, international technology- focused venture capital firm, former CEO of telecom companyHead of automotive association

Former CEO of a mobile telecom company

Senior leader in technology

� Long-term trends in technology

� Regulatory change� Connectivity/

infotainment� Energy and the

environment

CASE STUDY: TECHNOLOGY ADVISORY BOARD, LEADING GLOBAL AUTOMOTIVE TECHNOLOGY COMPANY

Key objectivesTechnology Advisory Board Themes covered

2 Define clear organizational ownership of the so�ware transformation agenda

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When talent joins us from a small startup environment, their speed to move from concept to prototype testing can be as short as a few days or weeks. In automotive, they are finding that this method is challenging, as the processes take years and are incredibly expensive.

—CTO, leading global automotive technology company

Virtually all automotive executives identified two common pitfalls: the traditional “build-test-perfect” automotive culture and rigid compensation models. These two features currently prevent companies from being competitive in attracting and retaining top software talent as well as fulfilling the full potential in talent when integrating software leaders into the current automotive leadership team.

Like any organization undergoing transformation, culture is central to success. In order to cultivate a future-proof culture, the mindset in automotive companies must thus switch from being rigidly engineering-/product-driven to being more agile, flexible and decentralized.

CULTURE DIFFERENCES BETWEEN TRADITIONAL AUTOMOTIVE AND SOFTWARE COMPANIES

Our advice on cultural transformation ESTABLISH “INTERNAL INCUBATORS”:

Many automotive players have begun to adopt new strategies to tackle the culture issue, one being to relocate “disruptive” talent away from the HQ and to a tech hub (such as Silicon Valley) so they are in an entrepreneurial environment. Setting up local tech labs/centers allows automotive companies to promote entrepreneurship and recruit top-tier software talent directly from the front lines.

ALIGN MOTIVATION WITH SOFTWARE/DIGITAL STRATEGY:

C-suite leaders and HR must partner with software experts, internally and externally, to design KPIs that reward software innovation and the monetization of data. The compensation structure also needs to evolve from the traditional “base, bonus, equity” to an incentive- and equity-driven formula more aligned with the technology community.

3 Transform your culture into one that is agile and entrepreneurial

Rigid

Demandexpertservice

Safetyconscious

Strict/longdevelopment

cycle

Hierarchical

Stable

Seeksperfection Decentralized

organization

VisionarySelf-

Service

Flexible

Interfaces

Speed Agile

Innovative

Bo�om-up

Connected

Customer-centric

Continuousproduct life

management

Top-down

Product-centric

Automotive companies So�ware and startup companies

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PREPARING THE WORKFORCE FOR AGILITY:

In addition to redesigning the organizational structure and company culture, developing talent is the key success factor for agile transformation. Developing the skill set and mindset for agility within the current workforce and leadership should be among an automotive company’s top priorities. Senior individuals can get valuable experience by serving in board positions on startups (for example, the ones their business invests in).

SET UP NEW LEADERS FOR SUCCESS:

Once the right external talent has been identified and hired, it is crucial that they are empowered to create high-performing teams and provided with the right resources to execute on their mandate. This is paramount to the success of the new talent as well as their ability to have a positive impact on the organization.

Accelerating the journey

Key recommendations to future-proof automotive leadership teams:

ENHANCE LEADERSHIP BUY-IN

ɳ Digital initiatives should be backed by the CEO and driven “top-down” ɳ Increase the density of digital talent in the organization ɳ Broaden leadership’s digital acumen and aptitude

DEFINE CLEAR ORGANIZATIONAL OWNERSHIP OF THE SOFTWARE TRANSFORMATION AGENDA

ɳ CTOs and CDOs need to be the “captains” driving this change ɳ All legacy business functions should be involved

TRANSFORM YOUR CULTURE INTO ONE THAT IS AGILE AND ENTREPRENEURIAL

ɳ Establish “internal incubators” ɳ Align motivation with software/digital strategy ɳ Prepare the workforce for agility ɳ Set up new leaders for success

Leading players in today’s automotive industry have already started their journey of building out their software and digital teams and reworking their organizational structure. To remain relevant in the automotive/mobility ecosystem of tomorrow, transformational talent must be coupled with leadership buy-in, clear organizational ownership and an agile and entrepreneurial culture.

You can make money in the present while looking and building toward the future.

—CTO, leading tier 1 auto supplier

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About Russell Reynolds Associates

Russell Reynolds Associates is a global leadership advisory and search firm. Our 470+ consultants in 46 offices work with public, private and nonprofit organizations across all industries and regions. We help our clients build teams of transformational leaders who can meet today’s challenges and anticipate the digital, economic and political trends that are reshaping the global business environment. From helping boards with their structure, culture and effectiveness to identifying, assessing and defining the best leadership for organizations, our teams bring their decades of expertise to help clients address their most complex leadership issues. We exist to improve the way the world is led.

www.russellreynolds.com

© Copyright 2020, Russell Reynolds Associates. All rights reserved. This material may not be copied, reproduced or redistributed, in whole or in part, without the prior express written consent of Russell Reynolds Associates.

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AUTHORS

DIANE GE is a member of the knowledge team for the Automotive Practice. She is based in Shanghai.

GRAHAM RUDDLE is a senior member of Russell Reynolds Associate’s Global Automotive Practice. He is based in Chicago.

PAUL STOHR leads Russell Reynolds Associates’ Global Automotive Practice. He is based in Minneapolis.

NATASHA TRESCHOW is a member of the knowledge team for the Automotive Practice. She is based in London.

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