The document discusses business agility in the automotive industry and its implications for OEM operating models. It provides examples of automotive companies that have shifted to software-defined models and developed in-house software capabilities. The document also describes a case study of an automotive OEM that implemented a dual operating model based on SAFe methodology, with agile release trains focused on products and a line organization developing skills in capabilities. Key takeaways include the need for OEMs to focus on software as a differentiator, for CIOs to lead business agility transformations, and to start transformations by applying proven frameworks like SAFe.

1. Automotive IT Strategy 2022
Edition 6 – Business Agility and its Implications on the Operating Model of OEMs – A Case Study

2. Automotive IT Strategy 2022
2022 Deloitte 2
General observations
» 7 out of the 10 most valuable companies worldwide have
mastered scaled agile software development.3
» They are able to shorten lead times by 106x and increase
development frequency by 208x while decreasing time to
recover from incidents by 2604x3
Car.Software Organisation (CARIAD)
• VW launched Cariad, an in-house automotive
software development organization, in 2020
• Addressing automotive trends around
electrification, digitalization and automatization
• Over 4.000 employees4 develop differentiating
software products for all VW brands
Tesla
• “Tesla is a software company as much as it is a
hardware company”, Elon Musk5
• Strong focus on SW capabilities early onwards
enabling unique infotainment, autopilot, etc.
• Data-driven core to drive autonomous driving
program and excel in customer engagement
B++
• BYD launched D++, an open-source platform6
• Developers can develop in-car apps through an
open app programming interface
• BYD charges developers for different access
plans/permissions
Ford Transportation Mobility Cloud
• Ford partnered with Autonomic to build an open
platform for cloud connectivity services and app
development services7
• TMC is brand agnostic and allows car makers and
app developers to leverage TMC to build their own
connectivity services
Michelin Solutions
• Business unit to promote SW
and data-driven services from
tire sensor data
• E.g., Nespresso, McDonalds use
ViaMichelin service to display
points of sale1
Skywise
• Open data aviation platform for
Airbus planes2
• SW and data-driven services for
Airbus planes improving
operations, cost-efficiency, and
safety
As a result of these automotive trends, OEMs shift away from the traditional hardware-defined cars towards software-
defined cars propelling automotive software (SW) capabilities as a key enabler and differentiator
Automotive Trends
Cars are transforming to software-defined products4 propelling software capabilities as a
critical competence for OEMs and automotive suppliers5
1Michelin Solutions (2022)
Automotive Industry Examples – Moving towards software-defined cars
Cross-Industry Examples – SW as key enabler and differentiator
Players across industries push towards supporting traditional
products with software capabilities to enable key differentiation
6Chinadaily, (2018); BYD (2022) 7Ford (2019); Metropolismag (2019)
4VW (2021); Automotiveit, (2021) 5LA Time(2018)
2Airbus, (2022) 3Google(2019)

3. Automotive IT Strategy 2022
2022 Deloitte 3
Business Agility is a top priority for automotive organizations to be able to adapt quickly and efficiently to changing
market conditions in a VUCA world
Business Agility
• The delineated automotive trends show that cars are
transforming to software products2 and software
engineering becomes a critical competence for
German OEMs and automotive suppliers.3
• Even more, the pandemic and semi-conductor
shortages made clear that to survive and to compete
successfully, automotive organization need to be
capable to adapt in every area not only quickly but
also efficiently.
In a business context, agility is the ability of an organization to rapidly adapt to market and environmental
changes in productive and cost-effective ways. Business Agility is the ability of an organization to3:
• Adapt quickly to market changes - internally and externally
• Respond rapidly and flexibly to customer demands
• Adapt and lead change in a productive and cost-effective way without compromising quality
• Continuously be at a competitive advantage
• Adapt and develop values, behaviors and capabilities that enable the organization to be more
adaptive, creative and resilient in a VUCA world
“Every business is a software business now.
Achieving a state of Business Agility means that the
entire organization […] is engaged in continually and
proactively delivering innovative business solutions
faster than the competition”
(Dean Leffingwell, Creator of SAFe)
People Management
One Team
Strategic Agility
Enterprise Agility
Process Agility
Structural Agility
Growth Mindset
Ownership & Accountability
Craft Excellence
Individuals
Operations
Workforce
Partners Boards
Customer
Leadership
2Carlota Perez: Technological Revolutions and Financial Capital (2002); Peter Mertens: Wir haben geschlafen (…) es wird blutig (2020)
1Frank Thun: Your Spaltmaß is Killing My Software (2020) 3Graphic based on Business Agility Institute (2022)

4. Automotive IT Strategy 2022
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• “Creating a powerful coalition” is an essential key factor for
successful transformations2
• CIOs need to lead and live change
• The CIO is the kinetic leader, who boldly reinvents the enterprise1
• Business Co-Creator is the significant CIO pattern in an ideal future state1
• Change orientation is the most important tech leadership trait for the future, yet
most aspire to be business cocreators focusing on strategic business & tech acumen1
• A balanced approach for the traits “change & learning orientation” as well as
“strategic business & tech acumen” is essential
• Business Agility is built on those traits and likewise enables a CIO to live up to this
aspired role
Running at the forefront of digital transformation, the CIO is predestined to transform the IT department and act as a
role model for the entire organization
The CIO as Enabler and Key Role of Business Agility
Digital changes the role of IT – from Service Provider to Business co-creator1
Change instigators
take the lead on technology-enabled business transformation. They also focus on
delivering emerging technologies and supporting business strategy.
Business co-creators
spend most of their time driving business strategy and enabling change within their
businesses to ensure effective execution of the strategy.
CIO across the three patterns stay put while business demands rapidly change1
Our following case (slide 8 ff.) illustrates a strong focus on the translation of the tech &
business acumen into developing a “purple” organization combining “blue” IT
experts with “red” Business Experts
Which implications has business agility on the CIOs role
Change
instigators
Business
Co-creator
Trusted
operator
2016 2018 2020 Ideal
34%
55%
36%
55%
13%
31%
56%
20%
59%
21%
11% 9%
Trusted operators
deliver operational discipline by focusing on efficiency, reliability, and cost. They
provide enabling technologies and align with business strategy.
Further Reading:
Tech Leadership
Study 2020
The role of IT – and focus of the CIO – is changing. Effective delivery and
management of applications and infrastructure is no longer enough.
Leading IT organizations must get in front of disruptions to the technology
landscape and take an outside-in perspective on delivering business value.
1Deloitte Global Tech Leadership Study 2020 2Leading Change, John P. Kotter

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• Technology is rapidly changing the car industry and the rules of engagement. The modern tech-
infused business requires organizations to radically shift towards customers and value
• 97% of global technology leaders indicate that they have recently undertaken a technology-
enabled transformation, or are considering one1
• In order to truly benefit from these transformations, automotive companies should shift their
current operating models and mindsets. The product shift can allow organizations to deliver value
rapidly and consistently, directly targeting customer needs. They can innovate at market speed,
across the entire enterprise, and deliver sustainable results at scale2
Business Agility requires a radical operating model shift from project to product orientation. SAFe as a scaled agile
methodology has proven itself as a framework to guide this process
Applying Business Agility in the Automotive Industry
Focus
From To
Scope
Existing platforms and
capabilities
Business outcomes
Decisions Hierarchical Empowered teams
Value Project goals Customer focus
Teams Hierarchical Cross-functional
Change
Mgmt.
Standardized, sequential,
and linear
Continuous, adaptive, and
aligned
Leadership
Role
On-time, on-budget
delivery
Clarity of purpose and
removing roadblocks
Take an economic view
Apply system thinking
Assume variability, preserve options
Build incrementally with fast, integrated learning cycles
Base milestones on objective evaluation of working systems
Visualize and limit WIP, reduce batch sizes, and manage queue lengths
Unlock the intrinsic motivation of knowledge workers
Decentralize decision-making
Apply cadence, synchronizes with cross-domain planning
• The Scaled Agile Framework (SAFe) is a methodology that helps the delivery organization to translate this
into action and to organize around products and value resulting in increased speed of innovation
• The capability model in the line organization is the stabilization needed to incite the transformation as it
ensures efficiency and stability. Together, process and line organization form the dual operating model
• Why SAFe is a go-to-methodology – especially in the automotive industry – is made clear by having a
closer look to the 10 SAFe principles (see the illustration below, right side) and how they support the
major dimensions of of a product-centric organization (illustrative links). The following case proved the
applicability in the automotive industry.
SAFe Principles3
1
2
3
4
5
6
7
8
9
10
The Product Shift requires fundamental changes1 Why SAFe is the go-to-methodology
Performance
against plan
Value delivered
Organize around value
1Deloitte Global Tech Leadership Study 2020 2Deloitte CIO Insider: The Product Shift 2020 3Scaled Agile Inc.

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The transformation in the Business and IT department of the OEM was build on six essential building blocks with an
operational approach to define, setup and train the new operating model
Approach: The Core Building Blocks of the Transformation
Effective & efficient Operations
Drive automation of processes to
assure reliable and efficient handling
of operational business.
Value Driven
Create measurable business
value with focus on sustainable
products in close collaboration
with business partners
Purple Culture & Working Model
Pioneer lean agile working and create
a purple mindset, skillset and
collaboration model
Single Source of Truth
Establish consistency by standardizing
the solution and technology portfolio
and reducing complexity
Data Driven
Generate consistent data flow and
leverage big data technology to
facilitate data driven and actionable
insights
Innovation
Create room for innovation and
continuous improvement to exhaust
the potential of innovative technology
• Design future integrated Business and IT
collaboration model with joint strategic priorities,
determine responsibility split and operationalize it
to transform into a product-centric organization
• Establish dual operating system by ensuring
product and value focus through value stream
orientation and restructure line organization by
skills and capabilities
• Set up and coach leadership as part of guiding
coalition to resolve transformation impediments
• Conduct capability sessions with top management
in order to setup, prepare and kick-off the new line
organization (capabilities)
• Coach and train employees from ART launch to
complete implementation process with experienced
SPCs and Scrum Masters to improve the process
organization
Operational Approach
Core Building Blocks of the Transformation

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• Dual operating model with product and capability organization.
• Process organization represents product delivery and is organized around
value streams and with cross-functional teams. (ARTs)
• Line organization represents capabilities (departments) and integrates
resources with the same skills and competences.
• Historically grown, separate department structures
• Long workchains, many handovers and long projects - unaligned roles &
working models
• IT as cost positions service provider
• Time and budget focus
The client decided to implement a dual operating model based on the SAFe methodology to shift from a
demand to a value driven setup with agile release trains and capabilities
Approach: Implication for Target Operating Model (TOM)
VALUE driven setup
Projects
Functional
driven hierarchy
Unit A Unit B Unit C
DEMAND driven setup
Initial Situation Target Scenario
Capabilities
Agile Release Train
Agile Release Train
Products
Governance
Governance
Agile Release Train

8. Automotive IT Strategy 2022
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The dual operating system ensures product and value focus through agile release trains while the
line organization develops people and skills in capabilities
Approach: The Design of the Dual Operating Model
ART 2
Agile
Experts
Business
Experts
Technology
Experts
Capability
…
Focus:
End-2-End Product
Responsibility
Full dedication on people development and standard setting
Full dedication
on valuable
products
holistically
Allow real cross-functional teams, enhancing fast adoption
and innovation cycles
Enable knowledge exchange and standard setting within capability Ensure staffing flexibility towards product teams
Stable line org without redundancies
for functional governance and coherence in capabilities
ART 1
ART 3

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Shared Responsibilities
To ensure a shared understanding of the responsibility split between delivery and line organization, an overview
was developed which evolved during the transformation. In areas with high overlap, we developed example processes
Approach: Responsibility Split Delivery vs. Line Organization
Delivery Organization (ARTs)
Primary focus: Functional (product) directive
Line Organization (Hierarchy)
Primary focus: Disciplinary people management
Reduced Reduced
Increased
Need to detail exact responsibilities
Responsibilities Responsibilities
Customer Handling
Demand & Backlog Mgmt.
Product Delivery & Ownership
Solution Design
Operative Supplier Steering
Product Budgets & Costs
Toolchain
Compliance
Strategic Sourcing
Training & Competence
Procedures & Methods
Standards Setting
Customer &
Value
Products Services
& Solutions
Speed &
Flexibility
Standardization &
Governance
People
Development
Long Term
Stability
Lean Portfolio Management Audit & Quality Assurance
Staffing Processes
Performance Management
Resource Planning
Time Split Dual Ops. System
Technical Architecture
Communication

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Considering the previously shown case and leveraging our extensive automotive experience, we can synthesize key
takeaways of scaled agile transformations with automotive specifics
Key Takeaways
Our Findings Our Solutions
Focus on optimizing the overall value stream
leading to business values and start small at the beginning
Optimization is being done in distinguished departments
or teams without the larger context
Start small,
think big
OEMs shift away from the traditional hardware-defined
cars towards software-defined cars
Propell automotive software capabilities as a key enabler and differen-
tiator and connect architecture, data and people agile transformations
Software is the
determinant factor
To be successful in the software-dominated market the
company needs to radically shift towards business agility
Running at the forefront of digital transformation, the CIO is predestined
to transform his area to act as a role model for the entire organization
CIO needs to lead
Business Agility
A lot of time is spent on developing individual company
specific scaled agile models
Start with the proven SAFe framework, then adapt to needs based on
practical experience and above all emphasize change management
SAFe is the go-to
framework
Implementing the dual operating model requires an early involvement
of HR and works council next to the affected departments
German automotive OEMs have strong works councils
with power to propel or slow down transformations
Consider Works
Councils
To really propel the agile transformation a “80/20” approach is
considered helpful
The German automotive “engineering art” with love for
details is deeply embedded in the whole organization
Don’t get lost in
details

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Reach out to us and find out how to refocus your IT organization and strategic agenda – in a way that best addresses
today’s macro technological forces and automotive challenges
Contacts
Authors
Contacts
David Haslach
SeniorConsultant
Tech Strategy& Transformation
Christian Pfeifer
SeniorConsultant
Tech Strategy& Transformation
Xander Seerden
SeniorConsultant
Tech Strategy& Transformation
Yannick Unterlauf
SeniorConsultant
Tech Strategy& Transformation
Uwe Strauss
Partner
Tech Strategy& Transformation
ustrauss@deloitte.de
Markus Schmidthuysen
Director
Tech Strategy& Transformation
mschmidthuysen@deloitte.de

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