CIO Lorenz says digitalization will bring lasting change to Porsche (Photo: Claus Dick)
Porsche CIO Sven Lorenz already is investing one-third of his project budget in connected-car technologies and the amount of investment is rising. Like other automotive companies, the premium sports car brand of the Volkswagen Group is streamlining processes all along the value chain. It also is developing new, digital products and functions, and is forging cooperations with partners from the high-tech industry.
“In Porsche’s digital transformation, we are in demand as a pioneer and enabler, whether this involves bringing out new products and services, exploring integrated options for customer interactions, or accelerating classic company processes,” Lorenz said in an interview with automotiveIT.
Mr. Lorenz, hardly any news made its way from Porsche IT to the public in 2017. Was there nothing to report?
Sven Lorenz: On the contrary: There was a great deal happening. We took on more work, and our budget has doubled over the last four years. Our staff also expanded significantly. There is a simple reason why you didn’t hear anything: We would rather get down to business than spend time talking about it.
Lutz Meschke, the board member in charge of IT, says that Porsche will have to become an internet company to some extent. What does that mean for information systems?
In Porsche’s digital transformation, we are in demand as a pioneer and enabler, whether this involves bringing out new products and services, exploring integrated options for customer interactions, or accelerating classic company processes. In fact, the share of IT components that we develop in the connected-car field has seen strong growth. We are already investing one-third of our project budgets in digital services, where Porsche plans to make money in the medium-term.
Will this share continue to rise?
I expect that we will be allotting nearly half of our project expenditures to product IT in the future.
On one hand, we are seeing a strong trend toward the individualization of products and services. On the other hand, companies in the auto industry are more dependent than ever on cooperative ventures. How is Porsche reconciling these trends?
We do not really see a contradiction here. It is more of a complementary relationship. We enter into targeted partnerships so we can offer new, innovative services. Consider the Porsche Passport, a simple, flexible mobility solution that we have piloted for US customers in the Atlanta area since last fall. For a monthly fixed price, you can drive different Porsche models and change cars as often as you want. In the basic package, called the “Launch” option, you have access to one of eight different models, including the 718 Boxster, Cayman S, Macan S and Cayenne. The monthly rental price not only covers usage but insurance, registration, taxes, maintenance and repairs as well. The interest has been greater than expected.
Are there any more examples of this kind of collaboration?
Of course. In September, through our subsidiary Porsche Digital, we took a stake in the Stuttgart B2B startup Home-iX, which two former Porsche IT employees founded. Home-iX enables us to offer individualized smart living solutions that network our vehicles with the homes of our customers. There is another example: At the industry level, the Volkswagen Group, including Audi and Porsche, is part of the newly formed joint venture called Ionity. We are teaming up with BMW, Daimler and Ford to build a network of reliable, high-performance charging stations along Europe’s main transportation axes. In Tel Aviv, Porsche has started setting up an innovation office to gain access to technology trends and talent there.
What are you finding there that Germany doesn’t have?
Tel Aviv has an incredible concentration of interesting technology startups. This is not a fad. It is the result of a targeted support policy undertaken by Israel since the early 1990s. The results that we are seeing today are remarkable. We are finding plenty that interests us as automakers, from telecommunication networks to IT security and artificial intelligence, all the way to sensor systems and battery technologies. That is why we and our joint venture partners Grove and Magma want to stay close to the developments there.
Other companies in the auto industry are turning to Israel as a center of innovation as well. It seems as though it is hard to escape the hype anymore.
I personally believe that we should not chase every trend. But we are in a period of massive upheaval and have to be much more inclined to explore than in the past. Today there is no longer just one productive business model. As a long-standing sports car maker, we have to be oriented to all sides of the transformation and see which variations and innovations will pay off in the end. We are aided by the driving forces that we get from technology centers such as Silicon Valley, Israel and China.
Everything that can be digitalized will be digitalized. But everything digital can be easily copied. Is the core of the Porsche brand at risk?
We see digitalization as an opportunity, not as a threat. The name Porsche stands for exclusive sportiness and a mobility experience that thrills customers. This core of the brand can even be expanded by digital means. Even with our digital services, our standard is to differentiate ourselves from the competition in typical Porsche fashion.
In 2019, the digitalization business area is due to have 900 employees, including both Porsche AG and subsidiaries such as the Digital GmbH. Are you on track?
The information technology area alone will grow to more than 600 employees in 2018. And then there will be growing numbers of software developers in departments such as Electric/Electronics Development, who handle the substance of digital products in and around the vehicle. If we count everything, we’ve reached the 900-employee mark needed to energetically advance the company’s digitalization. In fact, we have surpassed it.
Does that mean the operating departments are not involved?
On the contrary: They are all being asked to integrate their ideas. We want to use digital technologies even more heavily to make processes more efficient and expand our advantages.
Whether we are talking about digital offices or highly automated production – the best technical solution is nothing without employee acceptance. How is Porsche handling this?
Training and continuing education play an important role. We fully understand that digitalization is not a purely IT issue. It will bring a lasting change to the way the entire company works. We are attempting a balancing act, allowing certain freedoms – for example, in the selection of an end device or a communications tool – while pointing out what tool is best suited to what use in certain scenarios. Whether a team then uses the web-based instant-messaging service Slack to quickly come to an agreement or sets up one of the more than 180,000 Skype sessions we have per month, it can make the decision on its own within a certain framework. On the other hand, we don’t want the use of just any tools with similar functions to get out of hand.
But it is not just the technology that is changing. It is the way employees cooperate within the company.
Naturally. The new world of work at Porsche goes hand-in-hand with spatial openness, brighter colors and greater flexibility and agility. This is also important because we have recently brought many younger employees into our ranks, and they have clear expectations.
When we talk about digital transformation, where do you see Porsche to be furthest along?
If we want to be successful, we have to understand from the ground up how digital markets and business models function. On both the product and services sides, we are gradually learning what is feasible and what works, like all the other manufacturers. Consider an example from connected-car services: In the current Cayenne, we have taken networking to a new level – all its functions, services and apps are part of Porsche ConnectPlus and are included as standard equipment on the model. We have certainly come the furthest with the transformation in the digitalization of our core company processes in development, production and sales. Here Porsche has succeeded in setting benchmarks in several areas.
Does that apply to IT?
(Laughs) IT has always been digital at Porsche… Seriously, IT management processes are being digitalized, of course. Especially for the preventive maintenance of equipment, highly automated data analysis in complex chains of events plays an important role, and I am explicitly including our hardware and software systems here. For example, we use Splunk as a monitoring and analytics platform so we can identify warnings and intervene early. This is an interesting issue because we will be able to evaluate consolidated data streams with the help of AI algorithms and neuronal networks even better in the future and obtain even more precise forecasts.
What makes it possible to do all this?
There are no limits on creativity. For example a so-called “sound detective” was developed in our digital lab in Berlin. It involves automated noise analysis based on neuronal networks, and it can be used to monitor complex mechanical devices, components and entire facilities. The typical noises during normal operation are constantly examined for anomalies. Tolerance deviations and required maintenance are often heralded by extraneous noises that very few of us can categorize. I am certain that we will be using sound detective applications in one of our factories in 2018.
Let’s stay with manufacturing for a moment: Does industrial production with a rigid one-line concept have a future? Or will we also see flexible, combinable stations at Porsche?
As CIO, I can say that we can support both production models. As things now stand, the flow principle and sequence stability are the core elements of the Porsche production system, and I think this will continue to be true until it is proven that other principles deliver better results. We are, of course, looking at models for modular production where individual stations are no longer tied to one common cycle and the product moves autonomously via a driverless transportation system through the manufacturing area to find its next workstation. We are also actively sharing information with our sister brands within the Volkswagen Group.
In conclusion: You did your doctoral thesis on the knowledge-based processing of natural speech. What do you think of Amazon’s Alexa? Volkswagen and Seat have already brought the service on board.
I find digital assistants fascinating. The technology has seen remarkable development since I was deeply involved with it during my time at the Institute for Natural Language Processing at the University of Stuttgart. For example, during the 1990s, the speech recognition and translation program Verbmobil still needed powerful servers at the backend during the 1990s to manage machine-based translations in a rather narrowly defined language context in real time. In 2001, the German Research Centre for Artificial Intelligence (DFKI) won the German Future Prize for it. Today a speaker that fits on any desk offers a degree of functionality that is clearly more suited to everyday use. But its analyses draw on a powerful backend. I have personally tried out Alexa at home. But back to your question: I can’t yet say whether she will find room in a Porsche as a passenger.