Prange: Thank you for your time to talk about agility and the challenges companies are facing today. I would very much like to tap your knowledge on the technology industry in particular. So maybe we can start by recounting your experiences, what you consider as the most important challenges that have occurred over the last few years for the companies you’ve been working for, and your observations of the current competitive landscape.

Krubasik: There are a few things that everyone talks about, like digitization. But also the restructuring of all energy-related sectors, including the automobile industries. And as a third overarching theme, we find an acceleration of innovation due to omnipresent abundant computing power. It is not only people like Ray Kurzweil² who argue that innovation is exponentially accelerating, and who says that since 2000 we have had as much innovation as we had in the 100 years before. Stemming from the fact that many different science fields and technology developments grow together – for example, biotech and electronics feeding each other, partly via computing power in analysis, modeling and simulation, partly via actually connecting to each other on chips. So we are in an age where many surprises can happen, and where this skill of agility becomes very important due to those many possible surprises.

Prange: If you’re talking about innovations and speed, what are the most significant innovations in the last few years, let’s say in terms of disruptive, radical, or very significant impact?

Krubasik: I suppose most of those innovations that we are talking about are driven by the fact that computing power has increased significantly at affordable cost and has penetrated all other fields. The fact that we can today have autonomous driving is a mixture of powerful sensors, computing power, and algorithms. So much computing power at our hands allows so many applications that we have been dreaming of earlier, like artificial intelligence, which was a dream of the ‘70s, and can be realized today, or controllable artificial limbs.

Prange: And these times may require new concepts or new thinking – and agility might be one of those new ideas. Have you come across the notion of agility before, and if yes, what does it actually mean to you?

Krubasik: The word agility has not been used so much but the word flexibility always has. And the concept of managing uncertainty is also related to this discussion, which is a new discussion that in fact is very old.

Prange: When did you first observe the need for flexibility or managing uncertainty, and why do you think it is so important today? If you look back ten years ago, we also had tremendous challenges, but it seems that the quality of these challenges has changed.

Krubasik: If we think of the ‘70s and ‘80s, we were talking about shortening development times to absorb electronic technology more easily into mechanical and electrical systems. If you had seven-year development cycles, electronics didn’t fit with that. You wanted to upgrade the system including new electronic technology not every seven years, but every three years. So development time has been shortening from year to year, and today we are facing challenges not only from the accelerated electronics cycle. We find that many adjacent technologies are influencing each other and we get more innovation “in between” the original technology fields. Also, significantly more developers globally have powerful tools at hand to surprise us with unforeseen innovations.

Prange: You’re talking as an expert in high technology. Do you think the need for agility, or as you say, flexibility is different across different industries?

Krubasik: Yes. I think there are infrastructures or products that have to absorb technology while providing continuity for existing users. I think it’s very simple. Consider a system like Windows. They have tried for the last 20 years to continuously upgrade it, including new technology and still staying compatible with earlier systems. At the same time, they have to counter surprises by Google, Apple, Asian competitors, and successful start-ups.

Prange: Does that mean there is no agility without stability? That you need some sort of structure?

Krubasik: Actually, I think we will have both environments running in parallel. We will have industries that will try to stay compatible with past technology. That is in particular true for infrastructures. Network infrastructures are so hard to change that they will always try to change incrementally and only switch from generation to generation in leaps of seven to ten years.

There are other environments where you are very much more independent: Stand-alone products or systems for instance, in consumer goods you can very often be very independently launching a new product on the market. In many of the software application products, the famous apps, you can enter with something new anytime, and we are getting surprises left and right every other year or even every other month. The more we innovate via software on an existing hardware base, the more freedom has the innovator.

Third, I see something totally different, and that’s software apps invading and partly replacing old hardware systems and their embedded software: All of a sudden, you have a new traffic information and guidance system “Waze” as an app providing similar value as the existing costly infrastructure hardware. And these are often very small companies.

Fourth, totally new applications are replacing historical approaches, like maps. You have a new map system as an app which provides you with all the hiking trails around the world in one app. Other start-ups surprise us with medical assistance systems – not far from the digital doctor. Many of these applications are purely software based, use existing internet databases and come up rather suddenly when somebody sees a need, an opportunity and puts new software technology to work.

Prange: It seems like agility or flexibility is seen as a recipe to solve many different problems and to increase performance. How do you see that? Is agility or is innovation directly leading to higher competitiveness and performance?

Krubasik: Well, innovation is inherently “change” to increase value to the customer – often not only change in technology, very often also change in the businesses system. That means innovation very often leads to more effective and more productive businesses. Therefore, innovation is a value driver for customers, but also a growth and productivity driver for the innovative supplier. Agility then is the skill to quickly react to new technology and market trends – a very valuable skill.

Prange: If you consider agility, flexibility, innovation, these concepts have very often been associated with speed and adaptation, but maybe too much … what about the inverse – sitting back and reflecting – just do nothing for a moment, is that equally important to be successful?

Krubasik: I see this whenever we get into the field of ethics of innovation, where we have to hold back and think of the impact of new unfinished technologies, where it is hard to understand what the technology leads to. That, today, is a consideration for example in genetic engineering, nuclear waste, in robot weapon systems. Also, we need to take time to exclude all safety risks to the user and the environment.

But overall, I think speed and agility is a very high quality in successfully managing the future of businesses. Most of all, we are looking for concepts to manage uncertainty better, to not be caught on the wrong foot by a new development, whether this is a technological development, a societal trend, or a political development. In management, you always have to think about the many options which are embedded in this uncertainty.

Prange: Does that mean it’s the end of strategic management? The end of strategic planning?

Krubasik: No, not at all. This is a very important aspect in strategic management. It’s not the end of it, maybe the contrary. It’s a challenge to strategic planning to manage uncertainty.

Strategic planning has many tools to manage uncertainties. Risk management and options planning and scenario techniques are part of strategic planning. Licensing and buying technology alternatives from the outside are all helpful strategies.

On the other hand, uncertainty provides many options or many threats. I don’t even differentiate because threats immediately lead to options. The awkward part is that we seem to have too many options. You almost have to go into a financial concept to assess risk and manage options. What is the cost and value of certain options? And how much do you need in order to explore all of those options?

Prange: That brings me to the level of the organization. If you talk about agile organizations, that implies changes in systems, cultures, and as you say, in strategic planning as well as in leadership. How can all of these changes work together to be better prepared for “managing” uncertainty?

Krubasik: Structural solutions help to become more flexible and agile, e.g. separating upstream development of new technological alternatives from downstream product development (so that product developers can pick ready technologies “from the shelf and do not run into chaos with untested technological solutions”).

Most companies do not have the means to explore all options in house. As a consequence, several options will always have to be externally acquired. That means you require a powerful radar to understand all the options coming towards you, or all the threats challenging you, and then develop in-house strategies for changes, be they radical, disruptive, or incremental. And then you need acquisition strategies. You will look for acquiring certain technology options, or certain companies that give you a new business system if, for example, marketing business system changes.

Prange: If you look at the companies you’ve met in your business life, which of those companies have been dealing well with uncertainty, being agile in their cultures, or their people, or their systems? Are there any “typical” companies? Are these rather younger companies or older companies, smaller or larger ones?

Krubasik: I see that companies with a lot of cash to be deployed, like Google, try to cover their options by acquiring young companies in many different fields in order to enlarge their options or to gain further options. Many companies who follow this strategy to acquire technologies or business systems by acquiring small new companies keep these companies independent and do develop them as independent business units.

Another choice, of course, is to incrementally integrate acquired new concepts into some of their existing businesses.

For example, in automation – factory automation or process automation – companies always try to add new elements to their offering, almost completing a mosaic. Today this is often the case with software. Where it was manufacturing automation in the past, it is now more design software, integrating design, manufacturing, and service in Industry 4.0 systems.

Earlier you were buying factory automation competitors, then you were buying “manufacturing execution software.” Now you are buying design companies to integrate the full chain from product design to manufacturing to service. So we see that the new visions of automation are gradually, step-by-step, expanded. And innovation – even destructive innovation – is absorbed there. Industry 4.0 in many cases will be a gradual, step-by-step-by-step continuous expansion of digital technologies in the whole supply chain.

Prange: What are the companies that come to your mind that are very well prepared, that are very agile?

Krubasik: I hesitate to name the usual. I mentioned Google because I know that Google is throwing money at so many different options. I’m not really sure whether one could still mention Apple in this context.

I don’t think the typical large companies are the first ones that one would mention because very often they are stuck with their past successes, heavy investment in mature technology, and management full of the heroes of the victories of the past.

Some have gone through complete transformations like IBM from a hardware developer to a solutions and software and services company. Also IBM has always applied the tool of Independent Business Units. That, I would say, counts as agility. But such culture change needed a revolution from the top.

Historically, also Siemens has provided good examples, building a large empire on 150 years of innovation – most flexibly expanding their technology applications from telecoms, to electrical motors to medical technologies, lighting and semiconductors. The last twenty years agility has more been shown in portfolio focusing, IPOs, and spin-offs. But in parallel a new wave of technology accelerators, Technology-to-Business Joint Ventures with University Laboratories and now a new innovation initiative called “Next 47” (named after the founding year 1847). This stimulates a wave of new ventures internally and investments externally.

Siemens as innovator is also good in gradual absorption of new technologies from outside, continuous expansion of the horizon of technology. If you look closely, you might find that the company is doing a lot of this step-by-step expansion of their mosaic in automation. And we find similar strategy for the entire digital world, be it in the hospital, the factory, or buildings and infrastructures. We might call it agile. Of course, adding a new piece of technology from the newest trend around the world is less visible than revolutionary anti-iPhone concepts from consumer goods suppliers or a robot dog from Boston Dynamics.

Prange: We’ve been elaborating on technology before as being a driver of agility. What about people and leadership – how far are these important for a company to be agile and competitive?

Krubasik: Let me add a bit to your previous question regarding forms of organization systems, cultures, and leadership. I think there will be a disadvantage for very hierarchical organizations, with many decision levels, where changes are difficult due to the many hurdles as you go through the pyramidal structure.

Larger companies are very often clearly positioned in the market, and they don’t want to disturb their customers with seemingly strange experiments that are contrary to the existing system.

Agile companies are often small. Small is very fast in decision-making. Seeing an opportunity and implementing it, and going to the market very quickly. No existing customer base and technical installed base to protect.

So the larger ones will have to find a way to counter these attacks from the very small and agile companies. One way is indeed to copy the structure and to add a wing of small business units that are left rather independent and that may even attack the core company with different concepts. Both – old and new units – will see future opportunities but they will go after them with different tactics. The existing core businesses will do this incremental adding while the new business units will address new customers or existing customers from a totally different side, and this may even be in conflict with the existing businesses. The winners of the existing technologies will have to learn to cannibalize themselves, to avoid newcomers doing it to them.

Prange: So this means implementing the idea of corporate-, or intra-preneurship, to make sure that you have internal innovation in large conglomerate companies, rather than only in the small start-ups?

Krubasik: Yes, and it is very important that it is not the winners of the old technology having the say over the young companies. The winners of the old technologies will always think about the massive investment they have made in their carriers, in factories and customers. And they will challenge their new young technologists until disruption is almost destroying their company. But this is generally too late.

Instead, you want some aggressive independent units in the corporate conglomerate that can develop totally new technologies and new approaches with new (and old) customers.

Prange: So, how do you make sure that these two units or layers within the company communicate and mutually benefit from each other? Or do you really want to keep them separate?

Krubasik: Now, there is one thing that is organization and decision-making, the other is innovation networks. You don’t want to have corporate decision-making dominating these small new units. You want to give them as much freedom as possible, almost as an independent company.

On the other hand, you want to share as much technology as possible, in the sense that you want to diffuse it through the corporate network. And this is a difficult bridge but I think the digital age may provide part of the solution. We will have a technology innovation network, that means, an information network that allows participants in the corporation to understand where which skill or technology is available, and what experiences have been acquired. Not only one company is begging “if we only knew what we know!”

Prange: To be able to tap experiences in all different places of the organization may be a key element in an agile company. You seem to imply that there also needs to be a certain culture for sharing information?

Krubasik: Yes, I think, networking is important – communicating via IT networks, but also in the form of innovation forums, prize-giving ceremonies, internal technology conferences. This is all the more needed between central research and product divisions: transfer projects and jointly staffed transfer teams can help there.

A flatter organization helps. You could call it a network organization, but more so it is an information network and not so much a network of central control.

Prange: You have worked as a top manager for many years. Do you think that leadership qualities are all about change in these very uncertain times? And will different leadership skills be required in the future?

Krubasik: We need leaders with a very open perspective; scouts at the top, always wanting more for the customer, always looking out for new stuff, always looking out for danger …

You may have heard about the book, The Attacker’s Advantage by Richard Foster. The core idea behind this book is that the established market leaders and winners in a certain technology have to watch out not to be their own enemies by underestimating the newcomers and new technologies’ potential by trusting so much in their own strengths. The defender does not only have strengths, but also shackles around his legs and hands due to all the investments he has made – investment in factories, in customers, and in skills.

A newcomer doesn’t have anything to protect. So he can come in with a new story. And he doesn’t have to explain to the customer why he is talking differently today from yesterday, because he’s only giving a new story. He’s betting everything on that new story, the new technology, or the totally new network concept, or whatever. So, the defenders have to learn to expand the existing business and, at the same time, attack it. It is a split-mindedness that is needed if you’re top of several competing technologies. You have to feed the cannibal and feed the defender too.

Prange: You already mentioned that the network organization has become important. Can you think of any other changes that organizational structure will be subject to? And will there be any organizations in the traditional sense in the future?

Krubasik: Obviously, to react fast, many people are now uncoupling some of their businesses from a central control, giving them more independence as independently listed subsidiaries. Often a central board cannot be as tough with an internally embedded division, as the market, investment analysts, and competition are towards an independent company. As soon as this division is free and to a large part controlled by independent shareholders, it may be able to act much faster than if it is subject to a benevolent internal executive board.

To find the right combination of the two concepts is a skill. You want to give your units more independence, maybe even partly introduce new shareholders and only keep 60 percent to allow more influence of new shareholders. You also want to give them more independence to address certain markets. You might accept to have internal competition, even out at the customer site. That’s what I call cannibalizing: if someone comes with a totally new concept against an established concept, involving the same customers of the corporation.

Prange: If you mirror this against the current environmental conditions – and I am in particular talking about the legal and governmental situation in Germany – is this sensitive enough to meet these changes?

Krubasik: Now, governments are of course always slower than the market and regulation is also always slow. Slow means it comes after some of those changes have been having very high impact, have damaged some of the old regulated companies, and only then the uproar is big enough to change laws, legislation, regulation.

I feel that government today influences companies in all types of regulation taxation, be it safety regulation, how many parking spaces you need and whether garages have to have windows, things like that. All of that can be done to large corporations more easily, because they can absorb this more easily.

Small companies have a harder time with all these regulations, not only because they aren’t so well equipped to have all the admin staff in the company, but also because they want to move fast without the shackles of this regulation. If governments really want to foster start-ups in this new agile industry, they will have to revoke some of the regulations that have been originally invented over the last 100 years. That means some more developed countries, particularly some European countries with more regulations, have a handicap versus emerging nations. Some of it will probably have to change or be thrown overboard.

Prange: Also if you talk about the German concept of “Betriebsrat” (work council),³ which is an important one …

Krubasik: Talking about the Betriebsrat, it has two very different levels. One is at the level of the factory or business unit. There the Betriebsrat is a very close to the business needs and cooperates productively to grow the business profitably, at least in the form that we have developed in Germany. It is something that many countries are envious of. We don’t have so many strikes. People talk about problems and improved options to each other. They find agreements if there’s a conflict. If there is much more representation of the workers, there is also more motivation of the workers this way.

Then there is a different level, which is in the supervisory boards. To have Unions and Betriebsrat 50:50 represented on supervisory boards is a model we have never been able to export. So I could imagine that, what we call, equal representation of capital and labor at the board level is generally contributing to the heaviness of the big ships (so to speak) that we have. It protects outdated structures for too long and will make companies less agile.

Prange: Considering your experiences in different countries, do you see that some countries are more likely to deal with uncertainty? And is there anything like an intrinsic cultural trait?

Krubasik: My first tendency would be to say no, this is a corporation’s culture characteristic. There are some companies that are continually renovating themselves. And I see GE as well as Siemens, for example, as two such more-than-160-year-old companies that have survived so many turbulences and changes in technology, and in markets, and in politics because they have been able to adapt, and to absorb new things.

So many 100-year-old German companies are represented in China, in the US, in many countries around the world, and are taking in new local and global trends and new influences and are trying to adapt to them. So I suppose many of those companies have proven to have almost some built-in gene to adapt to change and absorb new trends.

On the other hand, there is always a revolution at the bottom of the competitive pyramid; there are so many new start-ups trying to find their way up and fight the established ones. So we will have a revolution coming from the bottom from many of those newer companies from time to time. Some will fail, but others will survive, and we have a continuous renovation of industry that way. Which also means that the 100-year-olds never have a guarantee for the next 100 years, that they aren’t going to be replaced, which does happen. Sometimes, like Kodak for example, they are rapidly replaced by newcomers that were not visible 30 years ago.

Prange: You were talking about the reputation of Germany. Do you think that Germany will be able to maintain this positive reputation abroad?

Krubasik: Yes, I believe so. I’m not necessarily talking only about products, but also factories and service abroad first; the attitude to produce high quality and to drive a technology to perfection. That, I think, is built into the German industrial ethic, and that will always transfer to other countries. Just recently, when I was in Shanghai, I had a chance to visit one of my earlier factories in Suzhou, which is one of the best automated, with all the production management systems installed, like our factory that is close to Regensburg here in Germany, and the two are basically competing. Who is more advanced than the other?

So, typical German companies are translating or transferring their management system abroad. And I have seen this many times, that in a global productivity initiative you cannot have a totally different factory in Guadalajara in Mexico or somewhere near Rio in Brazil, or in China or in Japan. You will always have a corporate style, a management style for innovation leading to similar productivity. I’m saying this also because some of our German unions at times think that all these foreign plants will have a disadvantage because they’re so far away and in different cultures, but that is not true. Most of the European companies that are working abroad have managed to transfer their management style and their quality abroad and make a plant in Indonesia just as productive as a plant in France or Germany.

Prange: So these are the qualities that people admire in German leadership and quality. However, I guess that most countries also have some advantages that the Germans can learn from. If you look at this more holistically in terms of, for instance, an agility or uncertainty management index, where do you think different countries would score? And are there countries that are better than the others in some aspects, and we can learn from them?

Krubasik: Obviously, younger countries that are less bound by existing infrastructures have an opportunity to surprise the rest of the world. Spain has now the longest high-speed train network and China will have to be the first to do away with fuel burning cars in megacities. They do not have shackles of established structures and beliefs. Which is also a reason why I’m telling all of our German companies, “Do not hesitate; go to the hottest competitive countries. Learn to survive there, and to be able to compete there like a local company.” If markets were open, this could help local and foreign companies.

By being present in the most disputed and most hectic environments, we will not only learn to be competitive in such environments, but also to bring knowledge back to the developers at home and react fast to trends that come from these parts of the world. In exchange, we bring management methods and technology to these markets.

Prange: What are those hottest countries you’re talking about?

Krubasik: I consider coastal China, Japan, and Korea definitely some of them, but also California or Massachusetts. Faster changes that European companies should be part of. The car industry is definitely one such industry that is subject to environmental changes and changes that are obligatory in China’s megacities. Also, consumer goods industries are moving fast there. In Japan and Korea, new technologies are being picked up by the population very fast. Asian consumers seem to be more curious, more ready to test new things than people in more saturated and developed consumer markets.

In California and Massachusetts, you can see many very small companies that are now springing up in the field of robotics, autonomous machines, and artificial intelligence. Whether this is all the internet companies or Tesla in Silicon Valley or Boston companies like Rethink Robotics⁴ that are in this field.

Prange: That brings me to my last block of questions. Do you see any changes, any challenges in training future managers? Do we need different types of education or universities than we have today in order to meet these challenges?

Krubasik: Where in the past we have had universities that were doing more theory and conceptual thinking, today we have complemented them with some very practical courses – in particular in business management. So case studies and industry experience brought into university become more natural. What we trying to do today is – that we don’t teach our students not only the way businesses are run successfully, but help them to understand that they will be hired for change; to change it for the better; to start with the assumption that whatever they find in their job environment will not be perfect, and there are world-class benchmarks to be found. In management processes and technological innovation!

So, encourage people to not take anything for granted and as perfect. Learn fast what world-class means in a certain sector or function, and learn from others very fast. And change the business for the better. So we are training people as active change agents, not to execute a fixed scheme that they have learned at university.

Prange: All right, this brings us to the end of the interview. Thank you very much!

Heracleous: Thank you for making the time to speak with us about JSC’s and NASA’s journey towards agility.

Terrier: One thing that I wanted to talk about that’s been on my mind, and this is from the chief technologist perspective; the idea that for most of the period since the industrial revolution, the time frame between the refresh rate on any technology has been around a decade, or a couple of decades. Our time frame of our NASA processes, certification, all that, is also about a decade. Unfortunately, we’ve now found ourselves in a period where the refresh rate on certainly anything that has to do with computers or artificial intelligence, all the things that are going to be pivotal to the new space technology, is completely out of phase with our own processes. So I think this is a forcing function that we’re not really paying attention to. Our processes, by definition, produce products that are out of phase with the rapid pace of technology. So it’s out of our control that this 18-month doubling [Moore’s law] is a reality in many industries, and it’s not just in computers. In advanced manufacturing, certainly in biomedicine, anything to do with synthetic DNA, all this stuff. These are all the things that are going to have huge impact on the way we conduct every industry, including ours. And yet our systems, all of our certification, all of our design reviews, all these, they’re fairly fixed – phase A, phase B, so on, and so on. And there is no way they can possibly take advantage of this new technology, the speed of technology.

Heracleous: Will this be one of your goals in your new role? [referring to Terrier’s impending move to Washington to take on the Acting Chief Technology Officer role agency-wide].

Terrier: I think this is one of the things that I have to push on, because we have a whole institution that is not only just invested in the traditional program management model, but it is a cornerstone in policy, hard-coded into how we do business. And it spells out the phases that you necessarily have to go through to get anything into flight, safety being the paramount concern. But given today’s accelerating pace of technology it’s a recipe for being obsolescent. Because of the traditional way we conduct these gated milestones; preliminary design review, CDR (Critical Design Review), all the regular things that we do; there is no fuzz, you have to follow this process, if you’re a vendor doing business with NASA. Let’s say you start with design requirements and so on. Now, the technology that you base-lined is upgraded. It’s a 386 processor on station problem, right? We also don’t have an efficient way for the design to incorporate that refresh. So, again, you don’t have the right time-phasing to really keep up with the technology, and you don’t have a mechanism for introducing the technology as it modifies.

So this JSC 2.0 idea of being agile and adaptive, I think, there’s of course cultural and organizational things, but if you even look at just the engineering systems, engineering process, it tends to preclude that agility and is a fundamental limitation. So we say we’re going to incorporate more private sector, right? But a condition of doing business with the government or NASA – DoD (Department of Defence), same thing – is you’re required to follow this process, right? You’re required to follow these steps and go through these gates. And so, by definition, that, again, doesn’t really allow you to really take full advantage of technology. So I think, bottom line is – we can talk about our process and our culture needed to become more agile, but I think talking about that, sort of in the mindset of 20th century technology is not very helpful. And you know, we can go, we can extrapolate that and talk about singularity and when machines are designing machines so that refresh rate becomes exponentially more rapid. So how do you make the process agile enough to accommodate this? I think that’s, to me, that is the biggest opportunity-cost, if you want to call it that.

Heracleous: We can take the discussion wherever you would like. What I was thinking was maybe we can start with JSC 2.0 and what does agility mean for JSC? What have been the challenges up to now? And then move maybe to your role in the whole agency, and maybe do you have any thoughts about how you might approach helping NASA become more agile? In our workshop today we talked about dimensions of agility. So we said one is leadership, being able to sense the environment outside – not only sense but engage, think about what it means, and take action. Then we talked about agility at the organization level, experimenting, reallocating resources, and actively looking at outdated processes and saying, “this doesn’t serve us anymore” and changing it. And then finally, the strategic dimension where we say, “do you need to change your business model, the way you do things?” Do you engage with networks, and do you balance speed and stability?

Terrier: I’ll give you my view of it, I have to start at the beginning since we’re talking about JSC 2.0. So you’ve got an organization that is absolutely invested in cultural beliefs, norms, that what we do in human space flight is unique, and that it is completely different from what the rest of the world does – going back to Apollo. These things don’t exist anywhere, these challenges, so we have to invent everything. We have to do everything internally because we’re facing extreme requirements that haven’t been faced before. And that was true, actually. I think one of the hardest things about – any cultural norms – is that when they’re based on reality, it becomes very hard to change them. However, over time the reality has changed. So you’ve got an organization that very much values that internal reliance on doing everything, self-inventiveness, based on the premise that there’s nobody outside that’s doing this, and you get that embedded in the organization. And you find that that’s been a very successful model, actually. And then you bring that all the way forward through Apollo and Shuttle and the International Space Station, and largely that model remains effective.

And now you come to today. And what we have is many of the same cultural biases, I will call it, in the organization. When in fact, the premise, the assumption, that people outside aren’t dealing with some of these challenges is just no longer true, because of the Dot Com revolution, because of everything that’s going on in Silicon Valley, in some cases far more innovative. Also, now you have a commercial space industry that’s operating without the same constraints. So they have a different speed of invention and agility. Because they’re not constrained by these processes that worked so well for decades. That self-reliant culture made sense, but now we have an organization that’s really, by nature of its very culture, not that curious about outside, because it’s convinced that it’s not that relevant; it’s different out there. They’re doing oil and gas, they’re doing different things. We’re doing space.

Heracleous: Is this still the case?

Terrier: I would say you can find it broadly, not just inside NASA. You can look in the broad culture and people say, “It’s not rocket science.” Which means it’s not hard, so why would I ask them? We’re doing the hard stuff. We know the hard stuff, right? It’s an interesting thing. People don’t walk around with that consciously, but subconsciously the implication is, I’m doing the rocket science. Why would I ask somebody who’s not doing rocket science? So I think it’s entirely across the whole culture. The corollary is that people outside would say, “I never knew I was invited to participate, because I’m not a rocket scientist. That’s hard stuff, man, I don’t know what I could contribute,” which is not true anymore. So in response our leadership have taken a bold step by saying, “I’m going to have a JSC 2.0 initiative. I’m going to reinvent the culture. I’m going to draw the control volume around the human space community,” including headquarters, the contractor community, so on, “and I’m going to reinvent that community, move the pieces around within that chess board.” But we’re still not challenging ourselves enough to look outside, right? Because all the rocket scientists are inside this control volume. So why would we even ask outside?

Heracleous: Was this explicit, or…?

Terrier: No, not at all, but it gets back to our cultural biases. If you look at the implementation, we read the words and you say, “I want to be more agile. I’m going to be responsive to change.” We should say “responsive to change” means we’ve got to look outside to see what the change is, but that’s not what is happening in practice in many cases – a lot of our effort is concentrated internally. So I would say, to come to the question, when you look at the challenges – or the difficulty we’ve had with really realizing the full potential of JSC 2.0 – it’s fundamentally that, on that point, that you can’t actually be agile and be responsive if you don’t fully understand the change outside. And the change is the new space companies, the public–private partnership opportunities with other industries, with people like yourself. People are doing good work all around us, and if you don’t know what that is – and we’re very sincere by the way about wanting to embrace change. We’re very sincere, but we haven’t yet fully understood the changes outside our own ecosystem here.

Heracleous: Because of the embedded culture?

Terrier: Because of the embedded bias around that. And also remember that the people that were told 20 years ago, “Look, you don’t want to be distracted by going to the opera, or going to the art show, or other industries, because we have hard work to do. It’s hard engineering. It’s rocket science,” they grew up reinforced, and they came up and got certified in a very rigorous process. These people are at the top of their game. They are very invested in this path that they’ve taken, a path that has largely proved to be very effective. So they’ve learned for 20 years not to look outside. Whether they meant to or not, that entire certification process was totally internal. None of that certification asked, “How good are you at looking at trends around you? How good are you at organizationally responding to them?” None of that was asked in their roles, and they’ve been very effective at the most challenging environment and rewarded for that. So of course they’re going to perpetuate that, right?

Heracleous: And when you tried to raise these points, what happened? Because you’re very elaborate about them, and you can explain them…

Terrier: So I have the very good fortune to be on the senior council here. And again, I’m sort of the one voice on the extreme. I’m the progressive voice in the conservative room. Everybody is very respectful and very willing to listen, but what happens is you tend to have one person saying, “Hey, this environment around us is changing very fast.” And you have ten very credible, very valued voices, saying, “No, no, no. That’s just PowerPoint engineering. They’re making that up. They have overly optimistic views. They haven’t been at this for 40 years and don’t know how hard it is, how dangerous it is. They don’t know how much rocket science this is.”

And at JSC we find ourselves – not intentionally, but because of our paradigm, in the camp that will defend the traditional model, for good reasons because we believe it’s safer, it’s well understood. We know the process. We’re following all the lengthy process through all the gates. “I don’t know what’s going on over here, but it doesn’t look like this thing that I know produces safe, reliable results. I don’t trust it, it is unproven so I’m going to defend this.” It may be difficult to be completely objective, because we’re fully involved and invested in the model we know and understand. The contractor community I’m used to is involved, my friends, my relatives, jobs are involved. This is big. And if you wake up one morning and make radical changes, it’s not just a matter of academically saying, “Oh, this is a better model.” You’re talking about laying people off. You’re talking about families losing their homes. It’s a big deal. You’re talking about congressional support that’s invested in these jobs and these districts and so on. This is a big thing. And so, it would be naive of us to say, “nobody wants to listen to a different voice,” because it has huge implications and we have to make balanced decisions. You’re well aware of this, it’s a big thing. So I don’t think it would be fair to be too critical of people that are very cautious to look at a different model.

Heracleous: Any other challenges that come to mind? From our discussion, I could see that, the sensing of environmental signals, evaluating them and taking initiative, driving forward, has been a big challenge. One is maybe people don’t actively sense what’s happening outside or even if they do, they don’t really critically evaluate and say, “So what does it mean for us?” And even less taking initiative and driving forward. And I also guess from our discussion that unless the leadership bit happens, the reallocating of resources, experimenting and actively removing inertia and bureaucracy may not take place because it depends on leaders taking action. Is this also what you find?

Terrier: Yeah, and we’re trying to do those things. But I think this is one of those classic challenges, the Kodak case study is a good one, right? This idea of paradigms and I’m going to double down on film and all this. But you have the same forces at work, if 90 percent of my revenue is coming from film processing and kiosks in every country, you go on vacation, you take your film, that’s the revenue of the company, right? So fine to say digital is the way of the future, but now the entire revenue model of the corporation and the work, the decades of infrastructure, the people staffing the kiosk and the processing, they’re at risk. Inside our organization is a somewhat similar case. It’s fine to say there may be a different model that may be more public–private, but remember, this process, that’s very rigorous, involves civil servants and NASA people every step of the way holding your hand through each gate to assure safety. If I say let me let go of that, and I’m going to let people outside have more of a role with less oversight, what are these people doing? All of a sudden you question the value of this oversight. So you realize that each of the people in the decision making roles owns part of those processes. Literally their staff is part of this process. How do you objectively evaluate a different model? Do we just give a contract to SpaceX for example and accept the product once it is demonstrated? And then we have to understand how we have the visibility to assure safety in these new models. What does that mean for the leader who’s responsible for the hundreds of talented people whose job is rooted in the traditional model, in assuring all these steps? So I think this also involves the human nature, loyalty thing even more. That’s at a personal level, it makes objectivity very challenging.

Heracleous: And with Kodak, I think the most interesting part of that story is that Kodak invented the digital camera. It came from them. And we see also with NASA a lot of the technologies that are used in commercial space come from here.

Terrier: Yes. I think that’s to me the most interesting. And the second interesting aspect is that in the late 1990s the Kodak board made a conscious decision to invest…they actually had a choice between digital and film, and, even though they saw the trends, they took a conscious decision to invest in professional film, a new formulation. Because they thought they could persuade the market to come back, buy a better product. This is what’s going on. We see the trend, but we think if we just do the traditional model better we can bring the whole market forces back. A lot of people don’t realize they had the money to invest in digital. They made a conscious decision that, “Yeah, I see the market’s going there, but man if I come out with a better formulation.” Why? Because everybody on the board grew up as chemists, grew up in chemistry. They weren’t electronics people. This is their passion, and so on, and they personally believed that everybody would see that in fact it’s a better product. Our people really believe that if I just do my traditional model better, everybody will see it’s a better product, and their opinions will be changed. Our value proposition is based predominantly on maybe .999 safety posture. It’s not balanced on cost, reusability, supply chain, things that drive decisions.

Heracleous: Which are all the things that I think the government is interested in, to make the public sector more efficient.

Terrier: Exactly. And there again we are calibrated by the value proposition in the ‘70s, which is “the government, my boss, is interested in beating the Russians, no matter the cost. So if I just do the technical part well I’m good.” We haven’t fully embraced the new paradigm that the government’s interested in operating more like the private sector and its efficiencies, right? But we have few people who are fully fluent in those values. Most of our leadership are not fluent in business terms, because we’ve never had to be.

So what we do, which is true for a lot of industries, is we take the best rocket designer, and make them managers. We are not trained as CEOs. We often have little business training. We’re not fluent with this language. We’re very fluent with the technical language, and we can make a very good case why this 99.999 solution is better than a commercial company’s 99.99 solution, because we have one more nine behind it. We can make a very good case for it, and we often believe that that’s the entirety of the trade.

Heracleous: Do you feel lonely having this understanding, when not many other people view it that way?

Terrier: There are others in the organization who are championing change. And you only have to step out to talk to people like you, or you only have to step out to talk to people in OSTP (Office of Science and Technology Policy), OMB (Office of Management and Budget). You don’t have to look very far to find a lot of resonance with these ideas.

Heracleous: And just to look at the strategic aspect, that is, changing the business model. As you mentioned, from inward looking to kind of a network model working with industry, getting value through networks et cetera, so what’s interesting is that JSC has been experimenting with open innovation. It has had industry collaborations. So if some of these things have been happening, why is it still so difficult to say we are going to take this model and sort of expand it and slowly change the agency?

Terrier: I think that that speaks to the culture we have, which is a culture that is tolerant of different views, but it’s not the same as saying I hold that new opinion on the same level as the traditional views that have been demonstrated to work. So we can tolerate both, experiment with new ideas provided this does not interfere with the traditional role.

Heracleous: Okay, so it’s a bit like I’m doing a small experiment that shouldn’t threaten the way we do things?

Terrier: Exactly. And the moment you start to threaten this, you’ll find that you’ll get a different response. First rule – first, do no harm. And by the way, just to be clear, the thought behind that is routed in hard earned experience. Nobody comes right out and says it, but it’s implied. Look, these lofty new ideas are great. That’s fine. But we’re not a research center that has the luxury of trying untested ideas. We’re an operational center. We have six crew on orbit right now. We’re flying spacecraft. Our paramount principle has to be safety. Any mistake, the slightest mistake, can cost lives. And oh by the way, as people are fond of saying, if JSC gets a cold, the agency gets pneumonia. If JSC and human space flight has a problem, the agency’s done. That’s actually true.

Heracleous: Because of the human involvement…

Terrier: Because of the human aspect, and the public interest. So you can fly a probe and crash it into Mars all day long. That’s a bad day, but, it’s not in the papers, we can recover. If you lose a national hero, that’s a very big problem. Now, with that in mind, people say, “Look, this is my job, and if I am distracted in any way, somebody may get hurt.” I’m a pilot, and there’s a lot of truth to this. This is very, very critical stuff. Steven was a flight director. You are making split-second decisions. So I will tolerate you exploring new ideas, but the moment you interfere and get my eye off the ball, I’m done playing. Because now you’re going to put people at risk. And that’s how we tend to frame these questions. There’s a compelling argument there, right? So the question is, how can you find a way to have an absolutely bulletproof operational scenario that can continue while you concurrently make gradual change that’s not disruptive? There’s a lot of fear that change will be disruptive.

I think this is a case where you have to show people with small, unthreatening examples where this can work. And when they see that model, they’re smart, they will see that. I think we’re actually doing that very well with the Commercial Crew Program. If you go talk to people in the Commercial Crew Program they won’t say, “This is PowerPoint. This is just nonsense, it’s just media hype.” They’ll say, “This is great. And I’m absolutely invested in this being successful.”

So, out of necessity frankly, because the shuttle’s retired, now we have to say, “Man, we gotta find another way.” By the way, the assumption was, “there’s a community that wants to adopt a new model. Let me give that a shot. Okay, lets start with the flights to station, a near Earth flight. We’ll continue in our traditional way to attack the very hard problem of going to Mars and the Moon and so on. But we’ll let try this new model on this lower risk mission.” We said: “We believe you can manage that. We’ll help you to manage that, it’s fairly well understood, Low Earth Orbit.” As we’re executing that, as you see on TV, you’re starting to see, that doesn’t look like a joke. That looked like these guys are really operating a spacecraft, right? And the people who are in that community, who are the part of NASA supporting them, are now very much embracing and invested and this does work very well. We like this model. We still have some concerns about too many shortcuts from the model that we’re used to, but now our attitude isn’t, “Oh, that’s never going to work. It’s nonsense.” Our attitude is “how can we help that more agile model be more safe and work?” “Maybe there’s something in-between, right?” So how can we bring our knowledge to make it even safer, but take advantage of that agility and that cost saving? And the reusability and all those things. So now you’re seeing a lot of the agency invested, the people involved in that.

Now, you go one step out from that and look at the International Space Station (ISS) – also a traditional model. But we can’t continue to operate the International Space Station unless we have the transportation for the crews. So now we are depending on this commercial model being successful, and now you get the International Space Station going, “hold on, slow down everybody at the table. No, we need that to be successful; that’s not PowerPoint engineering, because if that’s PowerPoint engineering, we can’t support and resupply this $billion space station program, because we don’t have any other way to make it work, right?” Now the ISS program is invested. So here, the Space Station program is now starting to change its voice, right? So, I think that’s a good example of where you have to introduce new ideas in a way that’s non-threatening. It’s the lower risk, low Earth Orbit solution and we’re still using the proven traditional approach in the high risk game. But we will, through experience, get more comfortable with the new model as it proves itself over time and we learn how to safely incorporate it.

Heracleous: So it’s kind of an incremental change?

Terrier: Incremental, exactly. And for this reason, I’m actually very optimistic, because I think we’re on an irreversible path. I worry about the speed of that progress, but I think – and this is really, really important, it’s about how do you accelerate that through the system? How do you increase the speed of that change? Right now, in that arena, because SpaceX is in that arena, because we, the government, have introduced a new model that allows them to compete. They wouldn’t follow the whole process, right? We’ve allowed a little deviation, essentially. Now you find that the Boeings and the Lockheeds, and so on of the world are saying, “Wow. If I want to be in that market, I have to find a way to also make my process more agile.” Today, we’re largely maintaining the old process in deep-space exploration – more challenging, more expensive missions. It’s like everything in the private sector, if there’s competition and I have to compete, then I figure it out if I want to stay in business, right? On the other hand, if there’s a government contract that continues to subsidize an old, expensive model, why would I ever change? And so, in my opinion, keeping the traditional model of contracting in place too long may actually slow the progress of the industry. Does that make sense?

Heracleous: Yes. Is that why the government has been tightening the budget?

Terrier: I think some people in the government are trying to force that discussion. That’s exactly right. What’s been happening over the past few years is that the White House tends to propose a very aggressive budget that seeks to encourage new models, and the Congress comes back with appropriation language that maintains much of the proven traditional model and moves more cautiously. I think it has been a healthy tension but each iteration is putting more and more pressure on the traditional model.

Heracleous: I wonder if some of these new initiatives – public–private partnerships – maybe remind people of this historical Faster, Better, Cheaper, which had mixed outcomes.

Terrier: I agree. Yes, I think that’s exactly right. And I think what we have to balance is there are a lot of very good stories – which everybody around here can tell you – of where those initiatives don’t work. However, those stories are based in 1970, 1980, whatever, and it turns out the capability outside the bubble is different today. I liked it, when people tell me that they don’t trust that, for example, Elon can take a couple thousand young kids and in so many years build a spacecraft that’s going to be safe. I like to point out that’s interesting because this place that we’re sitting in was built in 1963. And six years later with a bunch of 20-something-year-old kids, they were landing on the moon. So explain to me why that can’t be done? Oh by the way, they had no prior knowledge, no resources to call on. These guys have the entire database of NASA and experience of the last 60 years to call on. You sure they can’t do this in six years? Why is that PowerPoint engineering all of a sudden? So that’s a calibration that I keep in mind. Of course you could do that if you’re motivated. We have evidence. We have empirical evidence that it can be done.

Prange: Thank you very much for your time to talk about agility at Ford Motor Company/Ford China. Ford is obviously a company that is well versed in dealing with changes in the environment…I would like to take the opportunity to start with a few broader questions and then go into details of what you understand by agility…How do you currently see the competitive situation for Ford both here in China and globally? And do you think there have been many changes over the years?

Schoch: Certainly, the competitive environment has changed dramatically over the last several years. If you said to me, “Dave, 10 years ago, who was your competition?” I would have said GM, and Hyundai, and Honda, and Toyota. The traditional global manufacturers. But today, you’ve got not only those manufacturers trying to get into your space but also the tech companies, like Alibaba, and Baidu, and Tencent, and Microsoft, and Google.

And they are coming at it from a technology standpoint and are finding different revenue streams that they want to participate in. I have been privileged to serve with Ford for 39 years. The last two years have probably been the most dynamic in terms of disruption that I have seen for my entire career, primarily driven by technology. My view is that in the next five years there are going to be more exponential changes in terms of disruptions of what we traditionally do as the automobile industry.

Prange: Do you have any examples of how these changes manifest themselves in products or in business models?

Schoch: Sure. One, the pace of electrification is moving faster than most people thought, and I’ve been talking to my colleagues back in Dearborn [Ford’s global headquarters is in Dearborn, Michigan] and kind of ringing the bell here in China. Because the regulatory environment which is being driven by the government and their aspirations to be world leader in electrification, is accelerating the pace of electrified vehicles faster than other markets.

By the way, I find this all very exciting. I grew up with a core business of traditional OEMs [Original Equipment Manufacturers], but I find this new phase just really exciting and stimulating. So, we see electrification. Globally, there’s more sensitivity around electric vehicles, getting away from internal combustion engines since Dieselgate³ [the VW emissions scandal], which, over the last 18 months, has really put a black eye on diesel engines, and some OEMs. The other major emerging technology is autonomous vehicles.

Prange: Is Ford prepared for this?

Schoch: Ford announced about six months ago that by 2021, we would have autonomous cars on the road with no steering wheel or controls. Our plan is first to start with Ride Hailing fleets. Let’s just take Pudong [Pudong is a district of Shanghai, located east of the Huangpu River across from the historic city center in Puxi]. At some point, the government could very well say, “Look, I’m going to put a box around Pudong, and unless you’re electric, you can’t come in, or you pay a big fee.” Eventually, all these vehicles within this geographic zone would be autonomous, moving people and goods in this whole Pudong district.

Then you have a number of different megatrends that are happening around the globe today, that are converging. And by that I mean, first of all urbanization. You see it here, but over the next decade, more megacities are going to continue to develop. And not just here in China, although China is where we have the most, but you will see it elsewhere around the world. So, these megacities will draw more congestion and more environmental issues, as people come from the rural areas into the cities.

Then you have the Millennials [Millennials – also known as Generation Y – are the demographic cohort following Generation X. Typically the early 1980s are used as starting birth years]. There are two billion Millennials in the world today, and they are driving changes in consumer buying trends in the way they think about the automobile, which is completely different to when you and I were growing up. I try to meet fairly often with Millennials here, because they help keep my mind young. I try to figure out what’s on their mind. If I walk into a group of 10, and ask how many have licenses, maybe only half of their hands go up. When I was growing up, as soon as I was 16 I wanted to drive.

Prange: So you mean values and preferences have really changed?

Schoch: Yes. Cars always equal freedom. And it did matter whether you had a really nice car, or if you had a clunker or whatever. But you had that freedom. Today here, the freedom is the Didi-driver [Didi Chuxing is the largest ride sharing company providing transportation services, including drivers, in China]. And I can pay – it’s painless. I don’t have to find a parking spot. So, there’s lots of dynamics that are changing, and how the Millennials think about the automobile and mobility. We, the automobile companies, need to figure out how to serve them.

Then you’ve got the megatrend of the aging population. Roughly by 2030, the world will have about a billion people over 65. They might have different mobility needs than the Millennials do. Another phenomenon going on is the influence of the female buyer in the decision-making process.

So, the world is changing very, very quickly, and all that is impacting the automobile business.

Prange: Do all these changes impact the way a company is dealing with its competitive environment? I mean, in terms of agility or decision-making, have you changed the way you have been operating recently?

Schoch: Well, first of all, it is important to recognize how quickly the external, and sometimes the internal environment is changing. For a company of our size, and a company that is as old as we are, sometimes it is difficult to recognize these external changes, and then once you do recognize them, you say, “Oh, my gosh, I need to be doing something. How can I pivot the organization?”

So, we have used the infinity sign [the infinity symbol ∞ is a mathematical symbol representing the concept of infinity], with one foot in the present and one foot in the future, both mutually influencing each other. By that, we mean we need to keep growing the core business, because that’s our bread and butter, and that’s going to be what generates cash flow, so we can fund electrification and smart mobility initiatives. We try to get the organization to pay attention to the core, but also to be agile enough. But I really want to be careful to build for the future that the whole student body, so to speak, doesn’t shift to the smart mobility piece of it, and forget about the core.

Prange: How do you make sure people are interested in the core as well as in smart mobility?

Schoch: For our smart mobility, we have actually carved out a group, and made them fairly independent. Not totally independent, because they depend on the core business. But when we set it up, I wanted to break them out of our strategy group.

We hired some additional resources, Millennials that really understand. I put them on a different floor so they were somewhat away from the core, where they had more of the freedom to go out and do things. And I made sure that we didn’t encumber them with the heavy governance that we have on the core. However, this governance has served us well over 100 years. That’s who we are with very disciplined product development processes, manufacturing, and safety. That’s all good.

But I did not want to encumber this group with that governance, so I set up a separate governance with them. Every week for an hour and a half, I meet with them, and some of my other senior team to understand what help they need, and what projects they’re working on. And also to give them the safe environment to go out and make some bets. Not big bets, like 100 millions, but to make some bets as to where we think we can play. And who we’re going to be, because we’re not going to be an Alibaba. That’s not who we are, but we need to learn how to play with those tech companies that are trying to get into our space and there’s room for both of us.

Prange: That’s very interesting. Normally, if you talk about agility or flexibility, it means acting at high speed, but what you seem to be implying is that flexibility also needs stability, so to say, the core of an established company?

Schoch: Right. You have to keep your core business going strong. Now, some day, maybe in 20 years, that foot in the future becomes the core. So there’s a natural evolution there, but things are moving very, very fast in this space. And again, agility is how you pivot, how quickly you see the external environment changing and how you react to it. You’ve got to be able to operate in a very ambiguous scene, so to speak, because looking at the past, and saying, “Okay. I know what to do,” does not work in the future.

So it is having that ability to look around the corner. We will need to understand our customers. Where are they going? What are their needs? Okay. It used to be, “I need wheels, I want it to be flashy.” A car meant prestige. And now, for some it’s “I just want to get from point A to B,” so mobility needs are changing, and we need to understand how that impacts our business.

Prange: In my preparation for the interview, I’ve come across a couple of initiatives Ford has launched over the last two years or so: change in culture, human resource engineering, and I saw that people attended many conferences on HR management and agility. It seems to me that Ford is very operational, very practical when it comes to agility. How far has agility – as a strategic concept – also been used at the corporate level? And what does it mean to you, very precisely?

Schoch: Well, for me it’s again, recognizing how quickly the environment, particularly the external environment, sometimes internal, is changing. It comes with being flexible, being nimble. You need to make decisions fast. Most of our strategic initiatives were built around our product cycle plan. We brought in a couple of people from the outside that knew Ford very well and we plugged them into the senior positions in corporate strategy. They help us to think differently about the business of how we allocate our resources, which is very, very important. And strategy, in my mind, is about making choices.

Prange: What were the most important choices in the recent past?

Schoch: At Ford, we always thought until recently that we had to be everything to all people. We had to operate in every market. But we were coming to the conclusion that we can’t do that. We have to make choices where to play. In some markets the competition is either too tough or too entrenched, and I’d rather place my bet someplace else. Just as an example, we said a couple years ago that we need to close our manufacturing operations in Australia. There’s no future there. The market is 1.1 million units. One million of those units are bought in built up units from outside of Australia.

So you have three manufacturers [General Motors, Toyota Motor, and Ford], they are fighting for a hundred thousand units. I said, “But we’ve been there for 90 years manufacturing.” It was a challenging discussion with the board. They understood, but after 90 years to take the flag down is not easy. This will allow us to grow and compete more effectually in Australia.⁴

We looked at Japan and Indonesia, and concluded earlier this year that with operations in those countries, we couldn’t make any money. We lost a lot of money in the past five years, and going forward, we didn’t see a sustainable profitable path. So, taking the tough decision, we said, “We’re going to exit the market.” By the end of 2016, we had completed our exit. Again, it’s not something you’re really happy about because you’d love to be there. But it’s about making choices and putting your resources at play where you can really play and win.

Prange: If you say that strategy is basically about making choices, and at the same time you encounter uncertainty and ambiguity, how do you prepare your people to be able to make these choices if they have no way to know whether “A” or “B” is right?

Schoch: It is hard for our people. That’s where the leadership comes in. It takes a lot more talking through the issues and making it a safe environment for them to go out and take some risks, take some decisions, and try to move the business along in this area. The other thing that we’ve done centrally at the corporate level in the US is something similar to what we did here in China.

When I carved out the Ford Smart Mobility group, I physically moved them down so they were away from the rest of us, so to speak. In the US we just formed a separate legal entity called Ford Smart Mobility LLC. The intent there is to use that as the nucleus for our Ford Smart Mobility initiatives.

It could be mergers and acquisitions but what is important is team members out there looking for where we can play in the smart mobility space. We’ve brought them in from the outside. Now I’m hoping that they integrate more people from Ford that have had the more traditional growth experience, so they bring into that organization the understanding of the core business but get experience and exposure to that agility we need on that front end of where we’re going in the future. I hope that makes sense.

Prange: Absolutely. What about a culture for making mistakes, for exploring ideas? You now mention the US and specific capabilities for innovation, for development – do you think it is possible to transfer this behavior back to China, which is totally different in terms of culture and the propensity for decision-making?

Schoch: In Ford, we grew up, so to speak, not wanting to make mistakes. We tend to be a more conservative organization, so getting Ford people to know it’s a safe organization and go take risks is hard. I’m convinced that things are moving faster here in China than any place else around the world in electrification, in technology, and innovation. There’s a lot of innovation in Silicon Valley, no doubt. But they’re really innovating here. When I ask entrepreneurs here, “Well, have you made mistakes?” They say, “Yeah. For sure. It could be two, three, four times. But we pick ourselves up, we dust ourselves off.” It is almost like they wear a badge of pride that says, “I failed. But I learned.” And they moved on to the next thing. That’s the kind of mindset we need to have.

Prange: Where do you see your personal challenge as a top leader? How do you help people move ahead in this agile transformation process?

Schoch: One is to help people recognize what’s happening in the external environment. How quickly things are moving. So, I have to be that voice that’s out there. Some of it is a rally cry, “Hey, we’ve got to get moving. And look what’s happening. Here’s what the competition’s doing. Here are these mega trends that are impacting our business, potentially.” Then, you get the whole political scene that’s between China and what’s happening in the US right now; you have to be that leader out there that paints the vision of where you want to go, where we think we should go as a company, and then make sure you get the right resources on it. And give them the space to go do some of these experiments.

Prange: Where do you see Ford in the future? The reason I’m asking is that agility is a big buzzword, and many companies have engaged in agile transformation, corporate revolution, or corporate change. So, is this something that is interesting for Ford, or is it, rather, a step-by-step gradual adaptation process?

Schoch: We’re going to have to make some step functional changes, or else we’re not going to be able to keep up. Ford has a history of reinventing itself. Henry Ford founded the company three times [He made two unsuccessful attempts to start a company to manufacture automobiles before 1903, CP]. And thank goodness the third one worked, because that’s why I’m here.

The company was also reinvented after the Second World War, when it was in dire straits and almost went bankrupt. Henry Ford brought in the so-called “whiz kids,” and they transformed the company. We also reinvented ourselves later in 2006, when we were going through some very difficult times.

That was before Lehman brothers fell and the financial crisis hit. Our backs were against the wall. We were close to bankruptcy. We were sitting right next to Chrysler and GM. We didn’t take the money because we thought we had a good plan. The government was very upset with us, because they wanted all three in the same boat. But we worked our way through that, and once again we reinvented ourselves to where we are today. So, the last decade has been about reinventing ourselves, our products, who we are. But now, when I think about the next 10 years, which are going to move even faster because of technology, this is another opportunity for us to think about how to reinvent ourselves. That becomes that pivot, or that agility, to move.

Prange: So where do you see Ford in let’s say, not only 10 years, but maybe 50 years?

Schoch: Well, I see us still being around. We may look differently. We may be more of an electric autonomous company. But I definitely see a role for us in the future of mobility. We have some great ideas. We have fantastic people in the US, but also around the world.

So, they will contribute to our success of work as we move forward, and I very much believe in this agility. Because, once again, it’s reinventing yourself, and the external environment is moving so quickly that to maintain some type of competitive advantage, you need to constantly be changing and reinventing yourself and being that agile and nimble company. That is our aspiration. But in a big company like Ford with several hundred thousand people, it takes a while to move that boat around.

Prange: Well, there’s nobody who says that a big company cannot move, so it’s a very nice last statement. Thank you very much for the interview.

Schoch: Sure. Thank you very much. It was good to get to know you. Thank you

Prange: Can you tell me a little more about your company? When was it founded? What is the purpose? What is special?

Weiher: We were founded in 2013 as a software-focused start-up inside Axel Springer. Having more internal know-how, we can focus on innovation and lean methods and by that we are supporting and driving the ongoing digitization of Axel Springer – this is our purpose and goal.

Prange: As a software company, I guess, you know about the original idea of agile?

Weiher: Absolutely. “Agile” became kind of a standard for software development and we’ve been using this since Day 1. Working “agile” for us means that we emphasize the self-organizing aspect for our teams and around the company; we focus on goals, iterate, and both give and receive feedback very often.

Prange: Why do you want to be an agile organization? It is a bit of a hype, don’t you think so?

Weiher: AS IDEAS was already founded with the idea of agile in mind. As there are many companies involved in software development, and we are very similar to large firms, we realized that we had to do something special in terms of quality and flexibility to remain competitive. Also cost pressure is high so we tried to develop products internally.

The original business idea was to provide Springer with IT-solutions. And we wanted to be more flexible, have more competitive solutions in the market and be innovative.

So that’s why we had “agile” already in the birth certificate – we wanted to have an agile company from the start. We didn’t have to think about how to engage in agile transformation; it was already the idea when founding the company, and this is how we selected people. We didn’t take any people over from Springer, that is, all people that work here were hired when AS IDEAS was founded. As a consequence, everybody knew about agile right from the beginning.

Prange: Agile software development, agile project management, and agile organizations…these are all different things. In how far do you manage to transfer insights from agile software development to other areas?

Weiher: That is both a difficult and an exciting question. The simplest thing obviously is to work in so-called Scrum-teams. We use Scrum as a method and we are quite advanced in this [Scrum is an iterative and incremental agile software development framework that challenges traditional step-by-step waterfall approaches, CP]. We use the typical roles in the Scrum-process, that is, Agile Coaches and Product Owners, who work together with the team; we also have stable teams so that everybody can identify with the product. That is a big advantage because people can really focus on what they are doing rather than shifting between four or five different projects.

But this is only one side of the coin. If we talk about agile project management, we are still experimenting with the new roles. The former project manager and the product owner of today are really different roles. If you are talking about agile, you have this nice picture with a triangle, where you find the team, the product owner, and the scrum master. The product owner is part of this team, but he is not being superior. We managed to have these roles really well, but then the question was, who is responsible? Ideally, you would say that everybody is responsible for everything, and everybody again is responsible for his/her own affairs. In reality it is different. You still have people trying to shift responsibility to someone else. So in the end, nobody is responsible for problems that emerge. This question of responsibility is an important one, and the idea behind agile is that you have small iterations and you observe what is working and what is not. If it doesn’t work – you have to change it. That is a mindset question…we use Scrum, we have Dailies [daily team meeting in the Scrum procedure, CP], we operate with two-week cycles [In the Scrum method of agile software development, work is confined to a regular, repeatable work cycle, known as a sprint or iteration], and this automatically leads to really living the idea of agile. We work in an agile way in that we take small steps, so we would still be able to write a product specification.

Prange: If you define “agile” in software development and project management, it’s more or less clear what you mean. But what do you understand by “agile” if you talk about management or organizations?

Weiher: I think “agile organization” means that you have few hierarchies and a lot of individual responsibility. You have to both give and take responsibility – for me that’s core in an agile organization. But this is a difficult process. When the company was founded, we had three levels of hierarchy, one C-level, one Head-of-level and then the Working level. Meanwhile, we only have two levels, C-level and working level. Flat hierarchies are important, but it becomes exciting afterwards when you allocate tasks and when people feel accountable. We currently experiment a lot with “Lateral Leadership” via Agile Coaches. For instance, I have 26 subordinates, that is, more or less all developers and all Agile Coaches. But with these 26 employees, traditional personnel leadership via one-on-ones doesn’t work anymore. Being close to every project and product is no longer possible. Therefore, we have changed leadership principles and now we have Agile Coaches that work directly with the teams, and do regular one-on-ones.

We just bet that there remains only a minor percentage of important issues – around 5 percent – that accounts for hard disciplinary involvement, such as salary increase, part-time work, parental leave, career changes, etc. There are a few topics where you still have line responsibility, but these are very rare. And all the rest like, “How does a project develop? What’s the vision? Are there any tensions? Do I feel well? Would I like to experiment in a particular direction?” These are all issues you can pretty well cover with lateral leadership. Today, everyone can ask for a meeting and we can talk whenever necessary.

Prange: Is there anything that doesn’t work well.

Weiher: Well, I would say the “pull principle.” It means that employees are proactively asking, or pulling dates for meetings. Unfortunately, this doesn’t work yet. You need to be patient. But we were very successful in using lateral leadership with forming new teams early last year.

From a management perspective, I told our employees how many teams we wanted and what the rough direction should be – so to say the framework. Afterwards, Agile Coaches took over and we pinned a poster with the team names on the wall. Everybody could put their name in the group they wanted to join: “This is where I would absolutely like to work, this one would be OK, that’s the team where I certainly don’t want to work.” And the Agile Coaches chaired this discussion. It worked extremely well and we implemented the new teams, including the reallocation of space. Very often, when you launch such a process top-down, you will have a lot of conflicts.

In sum, there are many examples of how agile works well in our company. We also changed the recruiting process; we introduced the so-called recruiting circle, in which the manager, in this case myself, is no longer the bottleneck for incoming applications. The only thing that we excluded is salary. All other issues associated with an incoming profile are resolved in this recruiting circle where senior developers or other interested developers come together to discuss. It depends on the team how they want to fill the vacancy, and most often someone from the team takes the lead and says, “Well, this profile is rather bad, we don’t even want to see this person,” or “I am not sure, let’s first talk on the phone,” or “We invite him for a developer day and talk a little.” With the last recruitments, the personnel department and myself were only included in the final interview. So this whole recruiting process has been working extremely well and it has also improved qualitatively.

Prange: Is it difficult to hand over responsibility?

Weiher: No, not at all. Actually, in this case, it was my own idea. But with the recruiting process, I realized that team responsibility should not stop on the day someone is employed but, rather, continue well into the probation period. What is really hard about self-organization is that, of course, people like the nice things associated with it, that is participation in decision-making, etc. Here you will always find people willing to join you. However, there are also drawbacks, things that are unpleasant, for instance if you have to fire someone who is still on probation, and then people are not so excited…This wasn’t clear in the beginning, but later on we realized.

Prange: If you are saying that the company has been working with agile principles right from the beginning, is there anything like an “agile profile” according to which you hire people? Or is there a certain “mindset” you are expecting?

Weiher: It would be nice to have a certificate or something that proves someone is agile, but as far as I know this doesn’t exist. But it certainly helps if someone had previous experience in an agile company. On the other hand, this could also mean he or she wasn’t successful and therefore had to leave this company. There are also people here who are really advanced with agile but have never actually used agile work principles before. They are just so interested in the topic that they read a couple of books and deeply emersed themselves in the subject. By looking at the CV, I couldn’t really say whether someone is agile or able to work in an agile way. But we take care that it is explicitly mentioned in the job description and that we include it in the recruiting process.

In the beginning, agile wasn’t on the radar screen for recruiting, but then we had some modifications and we included the Agile Coaches, so that we were not restricted to looking at technical skills only. Team spirit is clearly more important. Today, Agile Coaches take part in this and try to find out how people would like to work and whether they have already had previous experiences.

Prange: Do you support people in their journey towards becoming more agile? Or else, has it ever happened that people left the company because they said‚ “This doesn’t work for me, this is not my style, I’d rather leave the company while still on probation”?

Weiher: Yes, this happened. But it wasn’t so much because of agility but because of the technical requirements. I think that many people actually send in a job application because we work differently. Sometimes, you receive feedback that it isn’t quite the way they expected and they would like to go even further. So, it’s the opposite.

Prange: If we stick to Human Resources – you were talking about recruiting – are there other things like vacation planning, strategy, etc., where you have employees participate and take over responsibility?

Weiher: Yes, with home office and vacation we have developed some building blocks organized by employees. This works very well. As people work in teams, the most important thing is that the team organizes itself. It is useless to use the old principle of “who comes first, is first served with vacation.” People with children should come first, but there are a thousand other things that are important, and most of the time, the team finds its own solution. If it doesn’t work, it becomes a disciplinary activity, you have to act as a go-between or find a compromise, or in the worst case, you have to decide for the team. In the 1½ years we have been doing this, it has never happened. So I am really happy.

Prange: There are companies where employees even take fewer holidays or give themselves lower salaries than the management would have done.

Weiher: Several companies do this with vacation and say it is “unlimited.” But here we have a fixed amount of days. I don’t think they take fewer days. We actually take care of this. With salary, that is a topic where I am indecisive and we haven’t touched it yet. The good thing about agile is that you can experiment with many things, and if it doesn’t work, you can change or adapt it later. Transparent salary is something that just doesn’t work at the moment. If you release it once, it is done. You never have a second shot and, at the moment, we don’t have an ideal concept yet. Feedback from companies that have experience with it is also biased. It is not the case that everybody says it has become a lot better, or everything is now excellent. In short, we are not doing it now and I don’t have a precise idea how we could implement it.

Prange: Some companies that have tried it have experienced positive results, but in other companies, people left.

Weiher: Right, fluctuation is quite high and the question is whether it adds any value to say we have a transparent salary scheme. I currently don’t see this. For example, we have streamlined job descriptions. That is, we don’t have systems architects and java programmers, a backend-developer and a technical architect; here they are all software engineers with different specializations. We are trying to get away from thinking in silos and you see this if you look at job descriptions or levels of hierarchies.

Prange: If you take the idea of transparency to the strategic level of a company, how does it work then? If you include issues like, “Where do you want to be? How does your business model change?” Are these questions where you involve other people?

Weiher: That’s indeed Achilles’ heel. Should they or shouldn’t they? It depends on whether people work on a product. For example, if you consider Tesla, Paypal, or Ebay, then you have a product people can identify with, or you have an online auction company, or offer a payment system, or new car. But we are an IT-service provider. We have a lot of expertise and know-how, but we cannot say we only develop Apple applications for payment or for photography. We could do this, but if there is no market, we are very quickly in a dead-end street.

With regard to quality, implementation, and results, we can produce excellent products. What is important is that we get to know the right problems in the organization. That includes saying “no” to the customer. If someone wants to have something in two weeks, let’s say a platform or a technology, and we know it will not work, then we have to say it. Say “no” at the right time and do the things you do well. This is what we have to do, and this is more difficult if you don’t have a product. So this strategy or vision question has been asked quite frequently. You have to be careful if you have employees participating in it and later you say, “Oh no, it’s the management that is responsible because it is paid for this.”

Prange: What I have in mind is the following: IT is a rather dynamic area, that is, a lot more than high-reliability organizations, such as hospitals or airports, where absolute precision is key. Obviously, there are also critical areas, but nonetheless, there is probably less dynamics and speed. In IT, more is happening, that is new product development takes place at higher speed and you have to be close to the market.

Weiher: Yes, you would think so. But it is not a fast-telling item. AS IDEAS has been in existence for 3 ½ years, and since the beginning of 2016 we have had colleagues who are fully dedicated to working on innovations and new product development. Now, with these dedicated colleagues – we have four of them – who can exclusively work on innovation, we are on a good way. With small and speedy projects you don’t spend so much money on something that doesn’t work.

Prange: Somehow there must be an incentive. Do you have any incentives for employees to be more innovative? Like Google used to do in the past with 20 percent of employees’ time dedicated to their own projects?

Weiher: Well, that was a good thing, but you know that they are not doing it anymore. Still, everybody is talking about it. We are using an intermediate model. The question is whether you want targeted or untargeted innovation time. At the moment, we have around 10–20 percent time for innovation per team. In large platform teams where you have a strong focus on the product, the team agreed to have one day per sprint to work on ideas they have never had time for. In other areas, it is rather 20 percent and you discuss in planning meetings what it is you want to do. Well, and this can include things like a chewing gum machine, or anything else. There are very few guidelines. In parallel, we have several internal Hackathons where you can experiment. This includes an internal innovation platform that works like “Kickstarter” for projects. There is a budget and you can pitch ideas. For example, we are working on a cube with multiple sensors, then we put it in the meeting room and if oxygen is below x percent, a light pops up. Or we built an analogue screen for our business figures because it simply looked worn-out on the monitor. Or we work on a technical solution…etc., etc. And then everybody votes and the budget is allocated accordingly: The most exciting ideas will be chosen, and whoever can implement them receives both time and budget. What I think is really exciting is this innovation platform where you pitch ideas, and, based on the feedback, you continue to work on them.

Prange: I guess for many people it is probably challenging to realize this freedom that also implies a lot of responsibility?

Weiher: Right. The good thing about agility is this transparency, for example in review meetings, where teams show what they have been doing during the last two or three weeks. These meetings are open. You can take part if you want to inform yourself about your colleagues’ work. One meeting, one hour every two weeks, that’s not dramatic. However, we still observe that teams prefer to stay among themselves.

Prange: Apart from people, what makes an ideal agile company?

Weiher: In order to work in an agile way, you need to have people. I am actually flirting with “work without management.” There is another interesting approach introduced by Haufe Umantis who focuses on temporary leadership [Haufe Umantis is a service provider for talent management solutions that had its management elected on a temporary basis, CP].² I think this is extremely exciting. Hierarchies and positions are not God given for the next 30 years until you retire. Instead, you may take an annual cycle and start to work as a CFO, Head of something and experiment with roles and responsibilities. Thereby, you create a different awareness for career progression – away from the Peter Principle [the Peter Principle says that the selection of a candidate for a position is based on the candidate’s performance in their current role, rather than on abilities relevant to the intended role. Thus, employees only stop being promoted once they can no longer perform effectively, and “managers rise to the level of their incompetence”,³ CP]. You make sure that someone, once promoted to team leader, has a chance to go back to a technical career where he may be much happier. Promotion can be a lose–lose situation, if you cannot change it. Especially in large organizations, you find people in roles for which they are not suited. A leader for a limited time would be ideal, a really exciting role model, I believe. But I don’t think that within Springer or Springer companies traditional line management will be replaced by something like this in the near future.

Prange: But it is a great idea because many people are running after a career that may not be ideal for them. To be able to see and feel what it means being a manager for one year, and having responsibility could be a tremendous experience to realize “this is what I want, or this is what I don’t want.”

Weiher: Exactly, you are always learning. In employee talks, you are always being told to develop yourself in the role, or to update your qualifications to obtain this role. But the real question is whether we really talk about the role or about more money? Most of the time, it is about more money. If you disentangle role and money – with salary being a hygiene factor that just needs to be OK – then you may see that people who are unhappy will not stay if you give them more money. During recruitment talks, we always tell people that “if you are interested in having a career, in the sense of upgrading your profile on XING every half year or if you want have a new card with a new title, then this is not the right company for you. In turn, if you want to try out a lot of things, for example, you can do architecture for one project, business development for others, you can continuously develop yourself, then, definitely, it’s a great place to work.” But everybody needs to realize that new tasks or requirements do not automatically lead to a new job or an upgrade in salary, this would lead to a never-ending story.

Prange: Can you think of anything important beyond employees?

Weiher: Well, employees are the non-plus-ultra if you look at the values, the quality, and the responsibility and passion of people who work here. In addition, you have to be aware: the more your organization embraces self-organization and agility, the more important it gets to have a common goal and purpose to focus on and helps to align. It’s a little easier to achieve if your company does have an own product, but we’re trying to find our focus point as well. Of course there are hygiene factors like salaries, working conditions, management styles, or feedback.

There is an American company, Valve, that completely manages without managers [Valve is a video gaming company with around 400 employees and no bosses. It uses a system that is called anarcho-syndicalism. Valve manifests this after an endogenous process in which a self-organized committee hires a new employee that can freely move around any of the company’s myriad projects, CP]. They use peer reviews and some sort of ratings between employees. I think this is extremely exciting because it includes negative personal or technical feedback.

Prange: The more responsibility you assume for your own job and the more you work in temporary project organization and rely on your own competencies, the more attractive your job profile becomes.

Weiher: That is true. But this responsibility is also extremely difficult. And this is why leaderless organizations are really fascinating and I would like to try them out.

Prange: With how many people did you start originally and how many employees do you have today?

Weiher: In the beginning, we were 90 people; today, we are roughly 40. Not because we fired people but because there were teams working exclusively for DIE WELT, and they completely belong there. Nobody was fired. Today, we have five teams working on diverse topics. So we’ve changed from tanker to speedboat, where you can have results within two or three weeks.

Prange: With 40 people, you can still talk about a start-up culture. Do you think the number of employees will change again?

Weiher: I don’t think so. This number of people is ideal for experimenting. Imagine you have four hierarchical levels – you don’t have so much leeway then. Today, we have temporary leaders, we have a good platform to experiment with, and we also have a tool that measures employee satisfaction on a daily basis. We really care about our employees being satisfied.

Prange: Sounds like a great place to work.

Weiher: Yes, most of the time, it is. But there are still a few people who come to work and who would like to precisely know what is going to happen this week or in two weeks. Some people are stressed with too much freedom. When we created new teams this became obvious. We have an innovation team that permanently produces prototypes and experiments with new technologies and creates new spikes. Initially, we were afraid that most people wanted to be in this team and nobody would be available to work on other topics. But that was not at all the case. We did not even have to allocate a single person to another team because there are people who like the more routine jobs and standard working hours. Of course, there are peak hours where you have to work overtime. But if you work in a concrete project rather than in the innovation team, your schedule becomes more predictable.

Prange: I think this is really important. A start-up culture has many positive but also negative aspects. You need to decide what it really is you want. In addition, permanently running at high speed in the sense of permanently innovating can be quite exhausting.

Weiher: Absolutely. And most of all if innovation is essential for your company’s survival and you need to come up with three to four new ideas per day – that’s not for everybody. You need to have a good mix. Do you know the “Three-horizon model”? It provides a very useful approach to explaining innovation with regard to the time frame. The model shows that it is advisable to invest in innovation activities across three time horizons. Horizon one represents the company’s core businesses today, which tend to be fairly mature. The first horizon involves implementing innovations that improve current operations. Horizon two includes the rising stars of a company that over time will become core businesses. Horizon two innovations are those that extend current competencies into new, related markets. Horizon three consists of nascent business ideas and opportunities that could be future growth engines. Horizon three innovations are the ones that will change the nature of the industry.⁴

Everybody wants to be innovative. I even think that while we have the agility hype today, tomorrow it will be innovation. And you have these time horizons, the first one is today; the second one involves the next one to three years, and the third one will be in three to five years. If you really want to be innovative, what you should do is produce very many tiny little prototypes at low costs for the next three to five years. It is much better to develop 20/30 prototypes, and then two or three will fly as a product rather than try to improve the current portfolio. You see this with the iPhone. Originally, it was really new. The upgrade from iPhone 5 to iPhone 6 was simply an incremental improvement of an existing product. That is also important, but in the long run it will not be enough.

With the Three-horizon model in mind, you can ask yourself why you are doing something. Is it to make money today, or in the next year? Does it fit to the annual planning cycle that large companies adopt? It is something you need to plan, and you need to be able to financially support it. You need to generate the revenues to be able to afford projects for the future, to experiment with things that will eventually materialize. If you miss this cycle, you will find yourself in the position of Nokia or Kodak. Kodak was synonymous with photo. And where is Kodak today? They completely missed the digital change. And they can never cover up. Also Nokia, with formerly 80 percent world market share, didn’t make it with the smartphone trend. Now it is an also-ran.

Prange: In principle, you are talking about one part of the company that is generating revenues and that will be continued, and another part, that is very exploratory with researchers developing new ideas, even though these may be more expensive in the beginning. And it is the balance between these two parts or activities that will yield success in the long run.

Weiher: Exactly, and in this sense, innovation management is much more than agile. You need to have many ideas especially because there will be disruptive developments where something will simply disappear from the market. We can be sure of this and we should consider this as an opportunity because we know that we still have other things in the pipeline. Especially in large companies you tend to preserve the status quo. We as an agile organization, we try to be proactive. We try to anticipate trends to see connections, and to experiment. You will always be in a better position if you are proactive.

Prange: This again connects to the question of salaries and incentives.

Weiher: I think the real incentives are not related to salary and bonuses. This has to be fair and OK for both sides. The real motivators are exciting projects, the possibility to learn and become better every day and to be able to shape the company and have an impact. Less traditional incentives, more purpose, that’s what we’re trying.

Prange: Thank you very much for these really exciting insights.

Prange: Thank you very much for your time to talk about agility, agile leadership, and the challenges your industry faces. Can you elaborate a little on the major recent changes?

Doctoroff: Yes, bottom-up, media has consolidated. Media used to be part of the advertising agency and part of our service used to be figuring out where and when consumers will come into contact with our creative assets. But due to the importance of negotiating low prices, the role of holding companies has gotten much bigger in terms of control. They have consolidated all of the media. That has been very challenging, not just from a P&L standpoint but also because they have brought the planning as well. The planning tends to be much more conceptual…backing up a bit: Advertising can ultimately be divided into systematic thinking, which is scalable, and conceptual distillation, which is not. So advertising has always been a tension between the systematic people, who can think of new ways in which one can engage with something versus conceptual distillation. So what has happened is that the systematic thinkers have become much more powerful than conceptual distillers and recently this has become a legacy business because it is not scalable.

Ultimately the holy grail of marketers is to have scaled impact…so when you take a look at the digital continuum, there is a left side, which is all about platformization; it is all about touch points that facilitate e-commerce; it is engineering-driven. Media, programmatic buying is still on the left side of the continuum. And then there is the creative side of the continuum; which is conceptual; which relates to campaigns, digital campaigns. But basically the tension or the balance has greatly shifted and in the process, the role of the advertising industry has changed in the clients’ minds and has gone from here to there significantly.

The holding company consolidation of buying is one thing that started this whole thing happening. The rise of digital, that is another thing that is happening because it has turned communications from a top-down model to a model that requires an alignment from top-down to bottom-up, that is, people are being liberated and acknowledged to engage in technology whenever they want. And this process requires alignment between different senses of disciplines. So that is a big challenge of the industry.

Another big challenge in the industry, in Asia in particular, is the talent crisis. The talent crisis has always been a challenge. So ultimately, what you need to do in this industry right now, and nobody has done it well, is to think about assets not about companies. And assets need to be clustered; they need to have a P&L structure so that people are reinforced and incentivized to collaborate in a way that makes sense based on what a brand is. And this is the ultimate question for the industry: what is the role of holding companies in facilitating this? So far there has not been a real answer.

Prange: It sounds like the industry is very hierarchically organized, which seems to run counter to the idea of agility? What then is your intuitive understanding of agility in this industry?

Doctoroff: Obviously, the simple answer is adapting to change, becoming faster and faster. But one level below, it is not adapting to change in a revolutionary sense, but in an evolutionary sense. Everybody, in any company, regardless of whether it is a holding company or any other company…You have to have faith and confidence in what your ultimate center of gravity is; what your corporate DNA is. And what has happened is that a lot of companies in the industry have lost confidence in what their DNA is – their cultural DNA. If you evolve without that confidence, that courage of conviction, then you are just lost in space. And so I think agility is not simply about change. I just remember one of the advertisements of one of the agencies called Publicis [not the holding company, but the advertising agency, CP], there is something like ‘Lead the Change’. That begs the question of what change to where? Our industry needs to have a sense of direction, and advertising is piece of the sky, it needs to have a sense of what its true value proposition is.

Prange: Many people today talk about agility as just running at fast speed, but I guess what you are saying is that there needs to be some resilience to counter-balance the speed around the core of the corporation.

Doctoroff: Absolutely, and actually I have been very much through this as a phase of transition in my life. But what happened to me is that I became known as old-fashioned because I believed in our core.

Prange: If we consider the holding structure, the role of the holding, how is the business organized?

Doctoroff: WPP is run for and by finance people. You would think that there was a strategic function to WPP. It is the world’s largest communications group. They got literally hundreds of companies that had been bought by them. But there is no strategy of how these companies work together. Martin Sorrell’s biggest relay is what he calls horizontality [Martin Sorrell is group chief executive of the holding company WPP Group, CP]. That is having people work together. And this is why we are in a building that is called WPP campus. But if you really think about what it takes to manage horizontality, it’s two things: one is a sense of how certain assets should be organically working together. And then putting in place the financial framework to encourage this sense of collaboration and the management structure. You would need to have a financial regime, which encourages what you would call agility.

But since 18 months, and this gets back to fear, I believe that Martin Sorrell has been fearing a black swan [The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight, CP]. I don’t know what this black swan is. I don’t know. Obviously, there has been margin pressure; there has been client procurement; there has been frequent media pitch turnovers and competition; there has been the fear of losing the rebates because they needed to be increasingly transparent. And then there is the client sphere with its need for digital salvation; there is Google and Facebook, which are threats in ways there weren’t before. But still, since about 18 months, WPP has gone from constructively giving us a framework in which to operate, to having an almost communistic urge to control. So you are completely handicapped. And one of the reasons, I don’t want to stay in a holding company is that I can’t do anything. And I feel, every time I want to have an experiment, it is impossible.

Prange: And this seems to run counter to the original intrinsic notion of agility. In terms of structure, many people talk about holacracy [Holacracy is a new way of running an organization that removes power from a management hierarchy and distributes it across clear roles. The work can then be executed autonomously, without micromanagement, CP], or self-organizing teams, or SCRUM [Scrum is an iterative and incremental agile software development framework that challenges traditional step-by-step waterfall approaches, CP], coming originally from software development. Do these terms ring a bell in your industry?

Doctoroff: Yes,…just here when you came in, you saw this pioneering process on the board? That’s supposed to be a proprietary framework for having collaboration at critical points. So people huddle, scatter a lot more and people come together at specific points during the conceptual and the execution phase. It is supposed to bringing together different types of people from different disciplines. Project management can just pull people in and out. But it sounds good, and conceptually we are trying to expand the role of a brand’s life through solving a business challenge, which expresses a human challenge in life. We are trying to find a pioneering solution, communications, the business model – all of this is good. But it needs a structure.

Prange: Agile has become somewhat of a hot topic recently, but it actually means different things to different people. In this structural environment, what does agile or agile leadership mean to you?

Doctoroff: Agile leadership has two dimensions to it. One is how you shift in orientation from Western to Eastern culture and build bridges of collaboration and openness in communication between people that don’t understand each other. That is the soft, high-touch element. And then there is also, still a high-touch element, but something that is more fundamental that is happening to our industry, that is happening to the center of gravity of the industry, and how we adapt to it.

Prange: Do you think there may be a gap between the structural organization and the leadership function, anything you need for this evolving agility to take place? And do you believe there is a specific leadership or communication style that could substantially drive agility in organizations?

Doctoroff: I believe this ultimately comes down to what is the role of a brand in consumers’ lives? And what is needed to sustain it? And if the holding company is going to be the controlling unit, then it needs to have a very strong point of view in this. A brand is a relationship between a consumer and some content that evolves over time while remaining consistent. The brand needs to have a life force and that life force needs to be the fundamental source of ongoing innovation. To deepen the relationship and to create the loyalty, to create the advertising…and all of this, you need to have leadership and communication.

Yes, the answer to all of what you are saying is yes. But the communication is on two levels. One is the appropriate amount of flexibility so that managers are trusted for making decisions and are incentivized positively or negatively based on their success as opposed to being put in a straight jacket ahead of the game, or so to say, a rigid structure. That’s one thing. The other is, what do we believe is a holding company? If we are going to emasculate the companies on the sub-group level, then there needs to be a vision at the holding company level. And that’s where you have the major crisis. Because none of the holding companies have a clear vision of what is happening in life today. So many people are thinking that the answer to everything is in programmatic buying, in platforms, in technology solutions, and nobody is talking about that in the context of what a brand is and what a brand relationship is.

If you go to Cannes [the Cannes Film Festival is an annual film festival held in Cannes, France, which previews new films of all genres, including documentaries, from around the world. Founded in 1946, the invitation-only festival is held annually, CP], you got all this experimentation, innovations, and digital cyber, and all this, but actually digital is an empty word. It’s bits and bytes, it is a fad word, digital, platformization, and you will find complete confusion. Then you have Martin Sorrell and the holding companies that are in a vigorous war to win in Cannes with creativity, but creativity of what? And there is an ultimate fear that creates this rigidity, and this non-agility is a hierarchical control impulse. I don’t believe that people are convinced in the value of holding companies. And I think this creates this undercurrent of timidity on the inside.

Prange: How would you then create a flexible agile organization for the future?

Doctoroff: I would basically cluster assets. I would make sure that all the advertising agencies are in one group. And I would also make sure that in those agencies it is very clear what digital we are going to develop and what digital we are not going to develop. Every agency would have a social peer agency fixed to it but still remaining independent. And I would be moving media buying back into the whole communications world as opposed to the media world. I would make sure that every company knows what it should do in their parameters for what it can and cannot do and still make sure that they are hiring enough people to have bridges of collaboration in and to other companies. And I would, at the same time, be minimizing as much as possible, profit centers and silos. I would do away with matrix reporting. But that’s just waving a magic wand. This matrix reporting makes all our issues ten times more complicated because people don’t know who to listen to and ultimately it is human. So I would make sure that each one of the people that are heads of these clusters are strategic communications people.

Prange: Do you think there are ‘Agile Leaders’ with a certain competence, or an intrinsic DNA?

Doctoroff: I think you need three things in this industry. One is you need to be a lateral thinker. Lateral thinking is not just about creating ideas and brand strategy; it is about seeing associations between pieces being put together. And the second thing is that these people have to be natural leaders. And I mean by natural leaders people that have the confidence to persuade. But they also have to encourage and drive themselves. So there has to be this confidence and if I humbly take a look at myself, I used to be known as “Tom TV” – my client at Microsoft called me that. I have made a strong effort to evolve into a new area of communications. I have always had faith in myself. And I also have faith in my X-factor of leadership charm that comes from a non-errant ability to evolve. The third thing you need is people around you that are different. For instance, I am lost when it comes to linear thinking. If you were to put me in a project management role, I would die. So, the whole talking about agility is about flexibility of resources. You need to know that these persons can be much better in these roles than you. You need to embrace that difference and not be fear-based. Ultimately, the more agile, the more human you get, the more you have to be known as a humanist. And that comes from non-ego centrism.

Prange: Leadership often means that you provide others with structure while agile leadership also implies to let go and share responsibility. Do you think this is difficult?

Doctoroff: I call this ‘Freedom in a Framework’. You do need to have a top-down defining framework of rules, or in the brand’s case, of message clarity. But you also need to empower people to play on that framework, to take risks, to express themselves. But there still needs to be a framework and we have to be very careful about falling into chaos. We can’t be reverting back to the Roman Empire; we need a governing conceptual framework and an operational one as well. As long as that is clear, things can go well, but if it is not clear, people get immobilized. And in Asia, where people are so much more risk-averse, and so much needing faith, and positive acknowledgement, and not wanting to lose their faith, this top-down framework is even more critical.

What you’ve got in Australia, what you’ve got in Europe, or in America is very different. Basically, they can take things and they can lead themselves. For instance, people don’t shut up because they have so much faith in what they can do. Here you have to create an environment of what I would call ‘safe self-expression’ or ‘dangerous silence’. Again, that’s one of the things that needs to be in a framework. Like negative reinforcement for non-self-expression and positive reinforcement for self-expression, but that is a different topic.

Prange: That’s very interesting. We have been talking about the DNA of a person, but maybe there is also a DNA of a country anchored in history? And would this DNA make it more difficult for an Asian country to adopt principles of flexibility or agility?

Doctoroff: All Asia is hierarchical, and by hierarchical I mean in a very secular sense. China is hierarchical, but it is also profoundly ambitious. Down to the farmers in the field, it is not like what we find in India or Taiwan. In China, there is a tension between protection of status and protection of self-interest. You have this dragon in the heart of most people. The amount of fear that comes from people’s inability to navigate this tension of the heart is dramatic. Even when it comes to the most basic level of flexible workspaces, for example, where you have non-permanent desks or lockers…I am so convinced that if we were to do that here, like for instance you do it in Australia, this would be a disaster.

People need their space of their own. They need some place to which they can hold on to, because they need to feel grounded. So yes, it puts more of an onus to have this framework defined. People feel like they are safe, hanging on to things. And so I would say that a leader in Asia needs to show where they are going, but then all of the ‘wheres’ have practically evolved and so its constant management.

And we are talking about the very bright and ambitious people, who ultimately are fearful of what they don’t know. And that’s why you have very little innovation here. That’s why you have incredible price competition. If you take a look at the Internet economy, it is very different from the West. We don’t have typical channel marketing here. We have four big digital portals [Tencent, Sina, Netease, and Sohu, CP] that control everything. We do have a field marketing campaign by the way – it’s gigantic. We managed 30.000 promoters, and the leader of this, we hired him in 2006, is still getting tears in his eyes when he starts talking about the beauty of his network. You know, it is the efficiency, this operational consistency, which we would consider soulless – but they consider absolutely filled with soul. And these are just different dimensions of how people need reassurance, at every level. So there’s never going to be a Google playground – ever. Agility here needs a very different framework than agility in America. And of course, there are different cultural imperatives.

Prange: Within this framework there seems to be a constant willingness to flexibly adjust and to better achieve objectives, and often the objective itself changes. Is this a fundamental trait of Chinese society?

Doctoroff: Right, Chinese use a word to describe this, Jing Li, the manager, who has the ability to execute tasks and control the risks. Jing Li is about clever resource management. It is about the ability to weave around barriers. But what people often misperceive is that there is very little mold-breaking value evolution or even value proposition change. It is always about doing more for less for more people, that is ‘Frugal Innovation.’ [Frugal innovation is the process of reducing the complexity and cost of a good and its production. Usually this refers to removing nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries; CP]. But in order to have the confidence to create a new idea, to challenge a convention, you have to give people the right to speak up to a hierarchy. And I saw this happen, where people used a lot of room inside their little boxes. But there are boxes. Even if you take a look at the whole Internet right now, it is still in boxes. It is government-endorsed and companies have been given a giant cage to operate in. But it is still a giant cage. If you consider the entertainment industry, it is not creating value yet. I think it is too bold to innovate. I don’t think that incremental innovation is the same thing as qualitatively innovating.

Prange: If you talk about this Chinese mindset being in a constant flux between traditional and modern values, do you think this phenomenon is different across industries, or is it a rather general trait?

Doctoroff: The answer to your question is ‘no’ by sector. However, there are variations. Advertising as a creative industry will be more inspired but there are still other limits to creativity due to people’s unwillingness to challenge existing conventions. I think that everything in strategic industries is different, where it ultimately reinforces the central government’s patriarchic right and responsibility to manage the lives of the masses; it is all about means to an end in communication. There are many structural constraints, which are bureaucratic or patriarchic reinforcement of style that keeps the strategic industries from being inspired. If you are going to entertainment, it is not such an issue because people want to see provocative things. Online portals like WeChat, and advertising in general, are not considered strategic in the same sense, and people are having a lot more freedom of experimentation. So I’d say strategic versus non-strategic, inspired versus means-to-an-end.

Prange: There are also many traditional, or conservative industries, like manufacturing, banking, nuclear industries …

Doctoroff: Well, anything like rebellion or individualism in traditional Chinese culture is intoxicatingly attractive, but ultimately if you get into it you turn into an outcast. People reach for or allured by it, but ultimately it is dangerous. By the nature of the social structure and hierarchy, we have to create environments with positive and negative reinforcements for non-intuitive behavior. But definitely, crossing the red line of rebellion, is weaving around the barriers of oppression and this is dangerous. That is forbidden, nobody wants to do it. The fact is that we Westerners think that there is truth in that we are all meant to be individualists. That’s not true. You know, that’s why Chinese don’t need psychologists because they don’t have this project of themselves. That’s for instance why gay people in America, in Europe, feel this obligation to be true to who they are, particularly after the sweeping changes. If I don’t bring my partner to a wedding, I am lying to society because I am not representing my true self. My parents have to love me for who I am. In China if you take a look at relationships of all kinds, they are highly compartmentalized, even the structural Confucian society is all about different types of relationships, and you have different types of identity with these different relationships, and at some point they give away their real needs, but they don’t really ask that. They don’t feel they are betraying some center of self. They are who they are with a different audience.

Prange: Coming back to your own definition of agility as evolving around a certain defined core. Is there a choice for Chinese companies not to be agile?

Doctoroff: No, because no matter what, the competitive landscape is changing so dramatically and business models are so fundamentally new, except in the protected old industries, and even there they will change. For the private sector and even for the public sector, which is increasingly exposed to competition, I think you always have to evolve, but the question is to evolve from what? If you consider evolution into the area of freedom of expression and value-added innovation that commends a price premium versus Western brands, I don’t think that Chinese companies can be agile in that direction. But they certainly can be agile so that they encourage people in their framework to build on their strengths. But it’s got to be done in a different way.

Chinese have the five core beliefs [father and son (loving/reverential), elder brother and younger brother (gentle/respectful), husband and wife (good/listening), older friend and younger friend (considerate/deferential), ruler and subject (benevolent/loyal), CP] and then they have the different structures underneath them: vertical structure by discipline, by function, by industry. I think agility needs to be defined, but if we do define it as evolving from the core, then Chinese companies can do it.

Prange: What companies would you consider agile?

Doctoroff: WeChat, Tencent, again in a Chinese way. Thinking about Western companies…Oh, of course, Apple, agile. Nike, agile. Lego, agile. Other ones that I truly admire? Certain brands are agile.

Prange: What are the criteria you use to judge whether these companies are agile?

Doctoroff: Whether they have a vision. Whether their product evolves, every brand experience is reinforcing its vision. Google is agile – not the Alphabet Google. I think that Apple is agile. Apple is using technology to humanize the world. You know Google, it is interaction – it is bringing the world closer together. Nike’s Just Do IT, even when they have their batches, you know the Nike wearables, it still was deepening the relationship between the consumer and the brand. Disney is an agile company. Even though it has ups and downs. Again, it is all about a vision for a role in life.

Prange: We started by asking what is agile? Whom would you consider an agile person?

Doctoroff: I think Barack Obama came in to the presidency and he was beseeched by a crisis and circumstances that nobody could ever have predicted, both economic and I’d say also with the resistance of the Republican Party, partially driven by racism. But I think that this is a guy who had a few core beliefs in terms of private enterprises, individual rights. I think he had a very clear view of America and the world, and I think that although many people criticized him for not being ambitious, I tend to disagree. I think he did a very good job. He ruled from sanity, and this was based on a few principles of what America is and what its place in the world is. So I think that he did quite well as anybody could possibly think.

I just think people, and this also applies to myself, have to define their DNA, their brand. If people know themselves, I think they evolve, they become agile. But you can’t be intimidated. For instance, when I was given my good-bye party in Indonesia, we were talking about this pioneering process framework. We have this way of identifying the business challenges and a key component of the business challenge is your core brand motivation. And what they defined as my core brand motivation was ‘Tom is convinced that he is not a dinosaur in a dramatic manner.’ And I do think that people, who are afraid of being dinosaurs, get left behind. People that think they can evolve, because they have an inside motivation can evolve, and I have a very good conceptual mind and an empathetic management style. That can help you evolve. So I can evolve, too.

Prange: Are there any other points we haven’t touched upon?

Doctoroff: One of the challenges will be to define where Chinese companies can be agile and where they cannot. Where they want to be and where they could be. There is the government imperative from ‘Made in China’ to ‘Created in China.’ In reality, I don’t know whether or not Chinese companies understand their own limitations. For sure, they do better than they did before. But you don’t have many companies that are extending beyond their basic core; it’s still much about the basics. I am very curious to see where people will feel comfortable.

Prange: Thank you very much for sharing your experiences and interesting insights.

Oliver: Tell me a bit about your personal take on Leadership 2020.

Katrin: For me, Leadership 2020 – in itself as much as in terms of its results – is indicative of Daimler’s urge to renew itself in response to and anticipation of the challenges we face as a leading provider of mobility solutions. The reason this is deeply personal for me is because I, like many of my peers, feel that the company deserves to stay where it is – on top of the game – but might make itself vulnerable to adverse, volatile, conditions if it does not manage to build the muscle to respond in a more nimble and agile way to shifting requirements, market conditions, and competitive landscapes.

Oliver: What are your expectations for change at Daimler in the near future?

Katrin: Change in our industry will be significant. Some expect the transition to be as drastic as the change from horses to motorcars more than 130 years ago. Gottlieb Daimler and Karl Benz invented the automobile – which can’t have pleased Karl Benz’s father, who earned his living as a locomotive driver. The pioneering spirit of these gifted and visionary engineers is still part of our set-up and culture, but it equally requires constant nurturing. Connectivity, autonomous driving, shared ownership, and electric drive systems all have the potential to shake the foundations of our industry, and chances are that the changes that will be even more significant are the ones for which we don’t even have a name yet. And I haven’t even mentioned the potential impact of political and economic factors, which I believe could be significant. We do know things will change dramatically, we just don’t know how exactly. We live in an Age of Turbulence, not just in the financial sector.

Oliver: How well equipped is Daimler for this?

Katrin: It is a good time for us to invest in our strategic response capability, and there is every reason to be optimistic that we can contribute to what the future will look like, rather than just respond. Daimler is currently going from strength to strength by almost any measure, whether it is in terms of sales, revenues, or profitability. We lead the premium segment, and we are at the cutting edge of technology development in key areas. However, the very characteristics that have made us successful so far may not be the critical success factors for getting us to the next level, particularly in times of fast, non-linear, and unpredictable changes in technology and market conditions. For organizations that have long moved beyond the start-up stage, and in particular for an automotive company, structures, decision- making processes, and corporate cultures in general tend to reflect what it took to get where we are. Not everyone will find it easy to give this up in exchange for a future in which an increase in uncertainty is the one thing we can be sure of. But complacency is not an option, which is why investing in our future-readiness will be key.

Oliver: How optimistic are you about people’s willingness to change?

Katrin: I have faith in our employees’ and leaders’ willingness and ability to change. The industry – and the company – has seen some dramatic shifts in its history, and if the responses had not been adequate we wouldn’t be where we are today. However, what concerns me is how the vision of a desirable future is devised, communicated, and implemented, because this is linked to the big tacit assumptions of command and control, of wisdom exclusivity at the top, that we have held and nurtured over generations. For leaders who have become used to equating legitimacy, i.e. in this case problem-solving and decision-making authority, with hierarchical level, who enjoy the exclusivity of status, and who respond negatively to criticism, can find it difficult to work effectively with colleagues who are junior but, irrespective of rank, are closer to fast-moving changes in technology and customer behavior. Conversely, employees who are used to delegating responsibility for making decisions to their superiors may find the additional responsibility that comes with an increase in autonomy an unpleasant burden. If change is required, adjusting an organization’s immune system is key – and Leadership 2020 is our inoculation strategy – and we can already see the effects. We started with the 144, what Kotter¹¹ calls the “army of volunteers.” They know the company, are well networked, they are the first to see the threat and the opportunity, and they have the conviction that they can make Daimler even more successful than it is today.

Oliver: What role does agility play in this context?

Katrin: It’s absolutely central, on organizational, team, and on individual level. We are a large organisation that operates in an industry that optimizes quality, responsibility, and innovation, and leverages scale, and we have developed this to a point of perfection. Our values, collective mindsets, and our behaviors reflect this. While this is great news in many respects, there can be a price to pay in terms of willingness to experiment, and also the ability to fundamentally shift the focus of what we are about as a company. This is especially true in a turbulent, unpredictable, and rapidly changing environment. It is essential that we counter the risk of having our structures, and our identity, subdue the magnitude and rate of change that is required to maintain a high level of competitiveness. Having said this, it is equally important that we understand our starting position, capitalize on our strengths, and stay clear of the sometimes generic use of the term agility we see in some other contexts. It is hardly surprising that the Agile Manifesto from 2001 was proposed by software engineers. We as Daimler engage in a fairly comprehensive and complex range of activities, and we will have to break down what agility means to a higher level of granularity to make it relevant across all our areas of activities. Equally, learning agility will be essential. While it may have been appropriate in the past to respond to change by applying existing knowledge, changes in the environment mean that it is now much more important to “instinctively know what to do when you really don’t know what to do.” It can be tempting for us who work for an engineering company to respond to adaptive problems by providing a technical solution, but my sense is that we are making rapid progress in this area.

Oliver: How are you approaching agility in practical terms?

Katrin: On various levels. In terms of structure, we put a lot of effort into experimenting with new organizational forms. Part of this is a rigorous diagnosis whether what a team, or a larger group of employees, is asked to achieve lends itself to a structure that is more flexible, less hierarchical, and temporary. We would refer to this as a “swarm organization.” The primary requirements are that the solution must be new, and not merely an incremental improvement of what is already part of the portfolio, and whether conditions are relatively predictable. If both conditions apply, we provide support in building and maintaining these structures throughout its life cycle. In terms of learning, we have geared many of our offerings towards dealing with complexity and agility, usually combining conceptual with experiential elements.

Oliver: And how is this related to learning?

Katrin: Learning is at the heart of building strategic agility. And it’s far more than just offering training in Scrum and Design Thinking. As beneficial as these can be, they are just tools, working methods. Increasing the potential rate and magnitude of change, and diagnosing appropriately how much change is actually required in terms of customer demands and likely competitor behavior, is impossible without learning on multiple levels. Working in new organizational forms, with complex and sometimes rapidly changing reporting lines, and adjusting contractual obligations accordingly, requires learning. The set-up of our workforce, if leveraged appropriately, can be either asset or burden in this context. We at Daimler are proud of the loyalty of our employees, and we are delighted that we are still considered a very attractive employer. Many take a long-term perspective when accepting a position with us, and we take the same view when we hire new employees. This makes a strong economic argument for internal capability building. We trust our employees to turn newly acquired knowledge into productivity gains at Daimler, not elsewhere. While there is great advantage in this, it also means that we have to firmly keep our eyes on the horizon to anticipate the skills we will require to maintain our level of success, and we have to be very effective at delivering the right skill to the right people at the right time.

Oliver: This sounds all very good, but if people take a long-term view, doesn’t this mean they are less open to the opportunities of new positions that emerge? The reason I ask is that, given rapid changes in technology, roles in organizations seem to be increasingly fluent, have a shorter life cycle, and are less linked to hierarchy than they used to be.

Katrin: Yes, that’s right – and it’s another reason why Leadership 2020 is personal to me. Development will be less focused on hierarchy, and we will have to learn more quickly from the markets what talent can help us flourish, even if we don’t have a label yet that describes the role appropriately. Taking a long-term view will only work if rapid change, and a high degree of willingness to embrace role ambiguity as an opportunity, are part of the equation. Roles will continue to differ in responsibility, so I don’t expect hierarchies to disappear. But they will be flatter, “up” won’t be the only way, and development models will be more complex in order to integrate lateral and diagonal development options. At Daimler, we talk about this in terms of “multiple development paths.” As Head of HR Development for Daimler, I connect the need of the business for senior executives with the internal, and if required external talent market. This used to be more about brokering and bringing individuals up to speed with the requirements of a position, while it becomes increasingly important to work with the business on the skillset they may need in the foreseeable future, and then to work out a plan how this can be either built internally, or acquired on the market. It’s a notable power shift to the “talent supply” side, but note that this talent supply can be internal as well as external.

Oliver: This all sounds very different from where many organizations are. How much learning is required to make Leadership 2020 a success?

Katrin: “A lot, and more is to come,” is the honest truth, for everyone involved. As the project itself is a process of cultural change, tensions are as unavoidable as they are necessary. The sub-projects emerged from the discussions, and so were not set strategically to avoid duplication. As a result boundaries were sometimes unclear, and again clarification had to emerge from the group. Similarly, most contributors had to manage their group involvement in parallel to their line functions, which meant a considerable degree of role ambiguity. I firmly believe that an adaptive change process¹² like this can only work if we are willing to accept the fact that we gently encourage the organization to enter a zone of productive discomfort. It would be easier short term to avoid this, but it is much better to accept that building adaptive response capability, real learning, takes time and effort.

Oliver: Let’s take this back to where we started the conversation, to the key strategic challenges Daimler is likely to face, how agility can help the organization respond to the resulting challenges, and how this is a matter of leadership.

Katrin: If our strategic focus is strengthening our core business and further increasing our global footprint, but equally to invest in a leading position in electric vehicles, self-driving, and mobility initiatives, then we will be dealing with a more rapidly developing and more turbulent environment than ever before, in which potential competition should be expected from players that we currently may not even have on the radar. If our ambition is to take the lead in the future of mobility, then flexibility, adaptability, and speed will be essential. Operational agility will be an important part, not least because production is still a very important part of what we do. Portfolio agility will be significant, because re-assigning funds quickly and effectively will be essential as and when conditions change. Just as importantly, however, we will need to build leadership and, relatedly, learning agility. There is no contradiction between priding oneself on a long-standing tradition on the one hand, and unlearning the assumptions and habits that no longer apply. That’s why Leadership 2020, as a movement that has for the first time given the mandate to change the company not to the chosen few, but to a bottom-up process driven by young leaders determined to renew the company from within, will hopefully have a culture altering effect.

Oliver: Katrin, thank you for this insightful conversation. I look forward to seeing the consequences of Leadership 2020 take shape over the next years.