Once upon a time, not so long ago actually, Faurecia only supplied automobile manufacturers with parts. Recently, it made a new deal making it the seventh largest automotive supplier globally, with an highly-advanced technology portfolio addressing all industry megatrends. This creates a company with some 150,000 employees and annual sales of about 23 billion euros – forecast by Faurecia to exceed their very ambitious growth targets: 30 billion in revenue by 2025 (from roughly 18 billion in 2018), representing a Compound annual growth rate of above 8% vs. 2020!
How did Faurecia get there?
In the case we published with The Case Centre, we explain how this modern automotive component manufacturer has evolved from a supplier of hardware to an electronics supplier, and is ultimately embarked on a journey to become a software supplier.
Faurecia’s digital transformation started in earnest in 2015 with a programme called the “Digital Enterprise.” Its objective was to explore how digital technologies might disrupt Faurecia and challenge traditional ways of working. This involved over 200 individual initiatives and 42 proof of concepts (POCs).
The company’s efforts were then accelerated by René Deist (now with ZF), who joined Faurecia in April 2017 as the new, Global Chief Information Officer (CIO) and a member of the management board. Within his first 100 days at the company, he launched several initiatives, most importantly a cost-cutting program called “Fit4Future,” the creation of a company-wide data lake as well as the “workplace of the future” and the “Digital transformation” (an evolution of the Digital Enterprise programme) initiatives.
Exploring ’new value spaces’
But as the focus of the company was increasingly shifting from manufacturing hardware to software, one of the main drivers of growth was expected to come from “New Value Spaces.” At roughly 7 billion euros, and therefore contributing about half of the expected growth, these would primarily be driven by opportunities provided by digital technologies, particularly those concerned with increased connectivity, intelligence capability, and the digitalisation of customer experiences.
René Deist was concerned that the company would not be able to develop a significant number of new and successful business models, and to scale them by itself fast enough. But it was not only speed that mattered. Over the years, he had learned that successful digital innovations were often created by combining already existing products or services from various companies with potentially new services from start-ups and internal ideas.
It was, therefore, important to create an ecosystem with both established large companies as well as smaller niche players, potentially even with start-ups. René had seen it many times before, that in an increasingly digital world, a healthcare company could easily partner with an automotive supplier and perhaps even a bank to offer a new service to end customers.
So speed, and the ability to work in an ecosystem by bridging business interests, were two primary reasons to look for strong partners that could potentially help Faurecia in creating new digital products, services, and business models.
A best-in-class, consumer-centered ecosystem to accelerate digital transformation
In order to accelerate time to market and to integrate key competences for its systems for Sustainable Mobility and the Cockpit of the Future, Faurecia centered its strategy of innovation on a strong ecosystem of external partners like universities, research labs, start-ups and think-tanks across the globe.
“Having identified consumer needs and matched this with customer benefit, we need to bring new solutions to market quickly. For a systems integrator like Faurecia, that means working collaboratively as part of an ecosystem with partners who contribute knowledge and expertise to enable us to offer new technology bricks,” explained Faurecia CEO Patrick Koller.
“By keeping consumer needs top of mind, we are on the right track to go beyond products to experiences and develop technology that really drives the mobility of tomorrow.”
Patrick Koller
“This technology ecosystem allows us to progress fast but step by step, developing smarter solutions that are already going into serial production to enhance user experiences and provide cleaner mobility,” Patrick Koller adds. “By keeping consumer needs top of mind, we are on the right track to go beyond products to experiences and develop technology that really drives the mobility of tomorrow. We call this ‘technology with a purpose’.”
A telling partnership with Accenture
Among the many strategic and technology partnerships Faurecia has developed (Mahle, Aptoide, Xuyang Group, Immersion Corporation, ZF, Stelia, Devialet, Michelin, Palantir, Schneider Electric, Microsoft, Guard Knox, Allwinner, etc.), its partnership with Accenture stands out. The decision to partner with Accenture was driven by two main reasons:
- First, Accenture was itself on a kind of digital transformation journey, moving from more traditional consulting and outsourcing services towards designing and creating digital services.
- Secondly, Accenture was willing to co-create and engage in mutual learning. Not least, Faurecia was an early customer for a new business line and would be a reference for the automotive industry. Accenture offered the digital skills needed, i.e. Design Thinking and UX by means of its Fjord agency, digital methods and solutions from Octo and Accenture Labs. And most importantly, they had the willingness to invest into something new and radical.
Co-innovation through the Digital Services Factory
The partnership between Faurecia and Accenture saw the creation of a Digital Services Factory (DSF), a joint venture between the two companies that would run for an initial five-year period. The DSF would become the company’s central competence center for artificial intelligence (AI) and big data, and would start with working on the underlying technologies and ideas for the Cockpit of the Future, as well as exploring new business models.
“This is where the cool stuff happens.”
Grégoire Ferré
Beginning with a small team located in downtown Paris, and not at Faurecia’s headquarters on the outskirts of the French capital, it quickly grew to over 100 people by 2020 with the goal to triple the size in the coming years. “The Digital Service Factory (…) is helping our Product Development teams embrace new technologies and new ways of working. A multi-disciplinary team consisting of designers, developers, data scientists and business analysts is working together to develop great product innovation tools like the Connected Car Lab (with MIT Media Lab spin-off Affectiva, editor’s note),” commented Faurecia Chief Digital Officer Grégoire Ferré, who was put in charge of building the DSF. “This is where the cool stuff happens.”
The DSF had twin aims. It would focus on using data and AI to improve internal Faurecia processes and overall company productivity and agility. For example, exploring the potential of image processing and AI-driven visual inspection, building use cases and pilots, and then rolling out viable applications across plants.
The second aim was developing opportunities in New Value Spaces. The basic idea was that while today the company might be providing a seat to an OEM (Original Equipment Manufacturer), tomorrow it would be the ‘experience’ of the seat. For example, improving the well-being of the driver.
The company’s experiments with AIVI (AI-driven Visual Inspection) are a good example of a typical DSF project: Thousands of pictures of products at the end of a production line are generated, and an AI system is trained to understand quality issues from features of the product. For quality assessment purposes, it is important to distinguish between a “wrinkle” and a “sewing line” on a leather seat. On recognizing a wrinkle, an automatic steaming robot steams the imperfection away.
Through automating this process, the project team was able to reduce an average of two quality control engineers at the end of a production line to only one. Examples such as this make AIVI highly effective, with a positive return on investment.
A unique funding model
One major difference in how the DSF is run compared to the rest of Faurecia, is the funding model: Essentially, the DSF is treated almost like a start-up. While he was allocated some seed capital, Grégoire Ferré has to “sell” projects and ideas to the group’s business units.
These are pitched to the business unit seeking funding for further development. However, even if he gets an idea funded for exploration, the decision can still be made not to deploy any prototype; ultimately, the business units or plant leadership team has P&L (Profit and Loss) responsibility. If they decide against progressing the project further, it is discontinued.
Agility at its core
This means that although the DSF is aiming at truly innovative projects, it has to take into account the fact that the solutions it develops need to show a positive return. But this also had upsides. As Faurecia is looking for projects that are fast to deploy, they can also quickly be replaced with the next project/idea.
When the DSF started out, the team worked on a small number of ideas, but this number quickly expanded. “Greg” quickly learned that ideas in typical PowerPoint presentations would not cut it, as they were often too abstract. So he focused on building small and cheap proof of concepts (POCs) and taking them directly to the plants’ management. He then recovers the investment in cases when the plant decides to “license” the solution.
Martin Kupp is an associate professor for entrepreneurship and strategy at ESCP Business School, Paris. His area of expertise lies in entrepreneurship, strategic innovation, competitive strategy and organizational creativity. He also co-founded Renaissance Fusion, the first fusion start-up in continental Europe.
Joe Peppard researches, teaches and consults in the domains of IT leadership, digital strategy and innovation, the execution of digital transformation programs, the creation of value from IT investments, and in the role, structure and capabilities of the IT unit in contemporary organizations.