Johann Jungwirth, the Volkswagen Group’s chief digital officer, explains how he is moving quickly to transform the company and its brands.

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Jungwirth sees “transportation as a service” as a key business model for the future

Like most of the world’s carmakers, Volkswagen is turning itself into a mobility provider with a range of new businesses and business models. That’s not an easy task with 12 brands and more than 600,000 employees worldwide. CDO Johann Jungwirth, a former Apple executive, is nevertheless optimistic about the potential for digital services and new customer experiences.

Mr. Jungwirth, Volkswagen’s latest corporate brand is a mobility platform. Are we on the brink of a new age at VW – do the Beetle and the Golf belong to the past? In the future, are we going to be chauffeured around by robotaxis like Sedric with the push of a button?

Johann Junwirth: Yes, we are at the start of a new epoch and a new age for the auto industry. I am firmly convinced that we can create mobillity for all with the Sedric family of products and the accompanying mobility platform – and we are working on this. From today’s perspective, I know that it is still a bit hard to imagine a future that would look like this. But we will start the implementation in many metropolitan areas, cities and regions in a few years. We are definitely moving toward a new world of mobility.

When will the scenario that you are describing become a reality? And will people in these regions really benefit from it?

We’ll already see the first major step in 2021. That’s when I expect the first self-driving cars to be on the road. They will take people from point A to point B within cities. That in turn leads to an increase in social mobility and the democratization of mobility. In this way, we can offer individual transportation to the weakest elements of society, the old, the sick and the blind, as well as children. Real-life tests with customers have already begun in the first cities.

You have said that Volkswagen is changing from a hardware company to an integrated hardware, software and services company. Can you please explain the strategy to us? How do you intend to implement the project in a company with 600,000 employees?

That is in fact the great challenge: the transformation to a vertically integrated hardware, software and services company. The hardware – and to me this includes quality, the best design, emotionality, reliability and perfect implementation – will continue to play a central role. So we must not ease up on the hardware side. Now it is essential to bring software and services to the same high level that hardware has reached over the past 100 years, with the same focus and attention to detail…

An ambitious goal for an automaker…

That’s why we are deliberately moving on two tracks. On the one hand, we are developing innovative software solutions in our digital competence centers and labs worldwide. In these locations, we are already turning to agile work methods and interdisciplinary exchanges of information like those in Silicon Valley. On the other hand, we are working on this transformation systematically with our 12 vehicle brands. We have to see the value of the software, the value of the data and the value of the services and, as a result, are bringing part of the value creation back into the company, especially in the software and services area. This is the only way that we can run updates in the course of the year and work in an agile manner. This will ultimately give us a decisive competitive edge.

So Volkswagen wants to buy fewer IT services from external providers and instead does the programming itself?

Exactly, especially in product development. For example, we have purchased control devices as black boxes until now. All the companies in the auto industry do it this way. But in the future, we will derive value from software and services. That’s why we need competence, flexibility and speed in these areas.

You’ve now been in the company for more than a year. Is there still resistance to the transformation?

I sense no resistance. On the contrary, the brands, the board members and the works council are all coming along. In the end, this affects us all. Instead, I sense a spirit of optimism and the will to make the transformation a success.

How do you intend to position the individual VW Group brands in the digital world? Every brand had its place in the analog world.

Every brand must go through this ambitious process on its own and ultimately have software on the same level as its hardware. We work as a strong cross-functional, multi-brand digital team, with high synergies and in close cooperation with one another. In parallel, we have “speedboats,” which can quickly implement services, data analytics and key issues such as artificial intelligence.

By speedboats, do you mean the 24 IT labs and competence centers in Germany and the labs in seven other countries, which were erected in short order?

Precisely. These labs, digital units and future centers have dedicated assignments with very specific projects to work on. Their output goes directly into our major product and company strategy.

jungwirth-on-court-300x192 Jungwirth shows automotiveIT editors Hilmar Dunker (l) and Ralf Bretting (r) VW‘s new work spaces.

Are there varying requirements for the brands? For example, does a Porsche move faster digitally than a Seat?

Every brand has its own customer groups, which in turn have different needs. We have to be careful here. Seat is a good example. The company is moving in a very agile manner. Based on Android smartphones, which Seat sells as an option, engineers have developed a complete Seat operating surface that is controlled by the smartphone. Seat is currently the only brand within the group that has implemented a solution of this kind. And the new system’s high rate of installation makes a strong case for it.

Like many other automakers, Volkswagen has been acquiring stakes in young companies, has become involved in cooperative ventures and has taken its own initiatives. Viewed from the outside, everything seems somewhat frenetic, and a bit like action for the sake of action. The industry is obviously under pressure. Is this the right way to hold your ground against the big data players and lure young talent?

It is definitely the right way. In simple terms, we need the best talent in order to design this demanding process. And this doesn’t only require initiatives and collaborations; it demands a rethinking of the workplace configuration, for example. Look around: This hall is transparent. It is a completely open space where managers and staff collaborate. In this way, you can develop your full creativity. This allows ideal collaboration, ideal cooperation and above all ideal project work. This aspect is definitely a requirement. This has nothing to do with action for the sake of action. I find that the opposite is the case. We have a clear strategy, a clear sense of where we want to go and everything that we are doing and aiming for is bringing us a bit further to our goal.

But if we understand you correctly, this means that any company that does not pursue this course systematically will have a hard time in the future – even in recruiting young professionals?

The fact is that we are in the middle of the greatest transformation in the auto industry’s history. Three points are crucial: Every company must produce digital innovations. Without them, you no longer have a chance of placing products in the market. Second, we all need much more talent for the digital transformation than in the past, including data scientists. Sales and the approach to the customer are also changing.

In the future, we will sell cars online as well, and deliver them to customers at home. New technologies and digital platforms are part of this. The third point is digital disruption. This will certainly separate the wheat from the chaff. Not every company will succeed in reinventing itself and in making autonomous mobility and the corresponding mobility platforms a reality. After all, this is 80 percent pure software. Accordingly, we are already putting a strong focus on this third part at our Future Centers, where we support and guide the first two parts.

The auto industry has still not found reasonable responses to Tesla, Uber and similar companies. In the end, might disruption only be possible from the outside, by players external to the industry?

They say “disruption never comes from within.” People quickly realized that this is, indeed, the case and they have responded. That’s why the company has brought in people from the outside (laughs). This has now turned into a massive movement at Volkswagen. With the help of views from the outside, I am firmly convinced that we can implement digital disruption successfully with new business models, in addition to the digital transformation and innovations in the core business.

How many employees in the company are involved with the digital transformation?

We now have established CDOs or organizations with digital responsibilities in every brand. And we have our group IT, which supports us very strongly and with which we cooperate very closely. We are probably talking about thousands of specialists working on these issues. In all, a major transformation is underway, across the entire group.

CEOs in Europe look at Silicon Valley, where you have long been active, with admiration. The valley is not just a high-tech center but a pilgrimage site. In return, would you ever advise the youngsters in the Valley to come to Germany?

After seven years in Silicon Valley, I can certainly say that great admiration for Germany’s small and medium-sized businesses prevails there. What companies in this country have accomplished in specialized fields, with special technologies, precision technologies and innovations is unique worldwide. And, just like Silicon Valley, it is not replicable. That’s why the guys from Silicon Valley, including Tim Cook of Apple, visit their valued partners in Germany. To me, it is natural and logical that people are cooperating and that precisely these two regions, Germany and Silicon Valley, are joining forces and working together on solutions to the world’s great challenges.

A new Silicon Valley has emerged in Israel. Young, creative companies are settling in Tel Aviv and other cities. What potential do you see there?

The potential is good. To me, Tel Aviv is in second place, after Silicon Valley, as far as its startup culture, venture capital investments and innovative strength are concerned, the latter in selected areas.

Let’s take a look ahead: What digital business models are you contemplating at the moment?

“Transportation as a service” is the greatest digital business model for the future – mobility for everyone, at the push of a button. Here is our vision: Any person in the world can call on the vehicle merely with a smartphone or the Volkswagen OneButton. A single push of a button or a voice command suffices, and the next Sedric pulls up and brings me to my desired destination. Mobility as a service with an associated ecosystem will make up the largest portion of revenue and profits in the new digital age.

The economy of the future demands products with added digital benefits. As matters now stand, you are swept away if you can’t handle this. The auto industry is still having a hard time setting up new business models. Everyone is rigging up his own platform. Isn’t that the wrong way to go?

In my opinion, one should differentiate between simple cloud providers that have large data centers worldwide, with which you can book “cloud as a service,” among other offerings. I believe it is neither sensible nor necessary to compete on this terrain. In the end, it is enough to have four cloud providers worldwide – Amazon, Google, Microsoft and Alibaba.

I see a clear competitive differentiation and a huge competitive advantage for us a level higher, when ecosystems are the issue, where every customer has his own mobility ID, where every individual has a profile. We want to create new solutions that customers really love because they are tailored to the individuals. This customer profile becomes more and more comprehensive and is self-learning. The vehicle becomes a good friend who knows me, and the threshold for a switch to a brand outside our company rises higher and higher. This is similar to what we see in smartphone ecosystems. It produces a positive lock-in effect that, from the customer’s standpoint, is desirable as long as the individual has found the most attractive ecosystem.

Here we can score points with our 12 brands. This is why we absolutely have to keep this part of the digital platform in our own hands. Accordingly, in my opinion, this is why it makes no sense to tackle a cross-manufacturer platform – especially in the passenger car field. On the other hand, it does make sense for buses and trucks, where we will soon be represented with our new RIO platform. We integrate entire fleets for customers, such as a shipping companies, on this platform, regardless of the vehicle’s brand.

In conclusion, many people associate a temporary transformational assignment with the role of the chief digital officer. When will your contract with Volkswagen end?

In many technologies, we are only at the start. We can improve many of the company’s processes with artificial intelligence and boost efficiency and productivity. And that’s just one example. I don’t see an end to it. Maybe we’ll be here again in 10 years and ask ourselves the same question all over again.