Digital pragmatism at Volvo means more control and less agile

Volvo Cars is undergoing a major transformation of both its business model and products. To cope, core systems are being replaced and standardized, while methods of working within the digital organization are tightened.

The automotive industry keeps accelerating into the technological switch to electric engines, and all efforts at Volvo Cars point to a clear ambition to be a clear frontrunner.

Such a seismic shift also creates a different dynamic in the market, with a fundamentally simpler technical platform compared to internal combustion engines. As a result, many new car companies are created and competition increases, says Tobias Altehed, who leads Volvo Cars’ digital organization and sits on the company’s extended management team.

The balance between software and hardware in cars is also changing dramatically since software is increasingly developed internally and built into the cars. And alongside these major changes, Volvo is also resetting its business model and switching to direct sales in that part of the network of global dealers broadens their roles where instead of just selling Volvo cars, they become distributors.

“Previously, we didn’t have access to all the data about our customers because we didn’t have the direct customer contact,” says Altehed. “But now we take it over, which enables us to have a relationship with our customers throughout their use of the car that they buy or subscribe to.”

How these sweeping transformations affect the digital organization stem from major changes to the system landscape in all areas of operation.

Altehed also says that Volvo’s systems span five decades, starting with mainframe environments from the 1970s and into modern technologies and tools recently launched.

“Our legacy will probably be six or seven decades old before we have time to modernize everything, but we balance it by modernizing in prioritized areas linked to the overall transformation of the company,” he says.

Much of the system heritage comes from the time before Volvo Cars became independent from the Volvo Group. When the company was bought out by Ford in 1999, a couple of big next-gen IT projects were done, and some core systems from there date to the beginning of the 2000s. And when Geely bought the company in 2010, it led to a geographical expansion, but until now there’s never been such a thorough and comprehensive effort to modernize the digital landscape, according to Altehed.

“We’ve been good at adding specific capabilities gradually to our landscape, but we’ve been worse at removing them, so now we have a huge range of technologies to deal with,” he says. “And when we now start the work of replacing core systems and modernizing, it’s not because what we have now is bad, unstable or expensive, but primarily because the development in our industry is so fast, and we can’t change as quickly as we want with the system landscape we have.”

Tough system change

Replacing core systems that comprise the backbone of the company is never easy. Business systems, PLM systems, manufacturing systems, and systems in purchasing, logistics, and HR all need to be addressed. Specifically, changing the PLM system, the system that manages the product life cycle, is one of the toughest.

“The system we have now was created in the 1970s and it contains all the product information, but not all the capabilities required for the products and services we’re working on launching in the future,” he says. “So now we’re implementing a standard system for the future.”

In addition, they integrate with multitudes of so many other systems that are connected point-to-point.

“What makes this tough is that the PLM system we have today integrates directly with approximately 500 other systems,” he adds.

Now that systems are being replaced, it’s also about creating a new architecture without those types of connections. But it’s extremely difficult to suddenly launch a successfully IT system. It’s more about gradual implementation. “Even when a new factory is built in Slovakia, for instance, you don’t start over from scratch with only new systems,” he says. “You might think we should take the chance for full greenfield, but we don’t want to risk implementing too much unproven technology. So there will be some legacy in combination with new solutions that have been tested in other factories first.”

The cloud journey completed

Even before the system landscape is changed, Volvo Cars has made its cloud journey — one of the big, ongoing programs when Altehed started his role in 2019. “We were going to leave our data centers, and we did,” he says. “In less than a year, we completed our cloud migration, and a large part of the environment where system changes take place are hosted in the cloud. It’s only things like the mainframe environment that aren’t there. We’ve experienced the benefits of increased stability and better security, but we also see that it simplifies the work we have ahead of us with system replacements.”

Now it’s largely standard systems going in and, unlike before, the strategy is to adapt them as little as possible.

“We’ve used standard systems in the past as well, but then we’ve adapted them to many of the requirements users have come up with,” he adds. “In some cases, the standard systems have been adapted to such an extent that we haven’t been able to take advantage of what they can provide. So even if you include users early on, it’s not so they write down their requirements, but more to understand how they should work with standard systems and not how you worked historically. They get to test how it’s supposed to work and it’s quite a big shift for the business and those in the digital organization. We need to take greater responsibility for the development of our digital products and not act as an internal supplier to our business.”

Paring down agile

Another change the digital organization has gone through recently is to start backing away from a pure agile approach.

Volvo Cars’ digital department started to work agilely according to the SAFe Framework in a product-oriented model in 2018. But even with great advantages came disadvantages.

The increased transparency and how the company worked with the backlog increased the pace of development, but in return, the lack of clear frameworks for the agile teams resulted in some of them not knowing exactly what is expected, and then the pace slowed while others pulled away in the wrong direction.

“We haven’t won by reducing governance and control, but by seeing that it’s important to set up frameworks, with clear principles and guidelines, so teams know what to do,” says Altehed. “We see our teams become autonomous and fast when they know what they can and can’t decide for themselves.”

The result, for example, is no more roles such as scrum master and release train engineer, while project managers and program managers have returned.

“So now we work a little more traditionally again, and a lot of that learning comes from new skills from new technology companies that have grown and scaled with agile development, but which have now helped us develop a better and more pragmatic model,” he says.

And Altehed believes the pendulum is about to swing back when it comes to agile working methods in several areas.

“We were early into agile and I think we’re early out with a more balanced approach, and I personally think that’s important — that we learn from our experience and adapt accordingly,” he says.

Make developers happy

In the last 10 years, Volvo Cars has moved toward becoming more of a software company, and today it works not only in the digital space but is also more closely linked to the products in the business. Plus, it’s chosen to outsource more, which means more developers are employed, and new demands are expected about how the internal culture measures against standards of being a good workplace that makes employees feel at home.

A smooth start is also one of the things that has been worked on – making sure that the time from being hired as a developer to getting a first code out is as short as possible. Then it’s about providing quick and orderly access to work tools.

“Our toolbox has expanded to meet the way they communicate and code,” he says. “In addition to the pure development tools, for example, Slack is strong in that community that fosters collaboration and communication, and they also use Teams with other parts of the business.”

It’s also about creating different types of career paths, whether becoming a manager or specializing as a software engineer. Altehed sees clear advantages to working in a company and industry undergoing major transformation.

“The business is changing, as is the need for digital solutions,” he says. “This means there’s no need to justify the transformation of the system landscape — it’s self-explanatory. And with us, it’s about changing internally by daring to change our agile framework, invest in competence development, and create an environment where developers thrive in a traditional company like ours.”

SUBSCRIBE TO OUR NEWSLETTER