To achieve digital innovation, company executives realized
they had to cross-fertilize the company’s existing innovation
environments and break away from its conventional product
development practices. Although this transformation was
necessary to leverage the new opportunities afforded by digital
technology, it would require shifts in the company’s capabilities,
routines, and structures in fundamental ways that would affect
Volvo Cars’ identity and culture.
To manage those competing concerns, the executive team
mandated a new initiative known as the Connectivity Hub, a
cross-functional team tasked with developing new innovation
capabilities for connected cars. The Connectivity Hub director,
Mikael Gustavsson, noted, “The main job was to establish a new
network that didn’t reflect the existing organization. The Connectivity Hub was an opportunity to bring different parts of the
firm to the same table. We didn’t have an integrated forum where
we could discuss those things.” The Connectivity Hub orchestrated
a broad internal debate about digital innovation and spearheaded
efforts to prepare the organization for it.
The Connectivity Hub was set up as a temporary initiative so
that it would not be perceived as a threat to existing organizational
procedures. Nonetheless, the initiative at first generated substantial
pushback. Resistance to the initiative occurred most intensely
among middle managers, who felt torn between long-term visions
requiring new capabilities and short-term commitments involving
existing practices. This resistance was not unfounded: New product
development at Volvo Cars customarily required product details
to be frozen years in advance so that they could be implemented
in production. However, making decisions about car connectivity
features three years ahead would be impossible. These features
could not be designed that far in advance; instead, they had to be
generated through ongoing developments involving automakers,
external developers, end users, and regulatory authorities. The
Connectivity Hub had to figure out how Volvo Cars could foster
such continuously ongoing innovation processes without compromising its ability to produce cars.
2. Balancing Process and Product Focus
At Volvo Cars, process innovation was traditionally associated
with production efficiency and incremental product improve-
ments. But now the company faced a very different challenge in
that its digital features were not necessarily defined up front.
Yet Volvo Cars’ executive team did not believe its connected car
vision would come to fruition unless digital features could be
integrated with the physical car environment. New innovation
processes had to be developed while still benefiting from the
company’s current strengths in building cars.
To manage these competing concerns, Volvo Cars explored
how to develop generic digital resources, rather than simply focus
on addressing specific end-user problems. Such generic resources
offered prefabricated digital building blocks that could be
utilized, combined, and built upon to resolve new innovation
problems in the future. To legitimize such efforts in an environ-
ment inherently focused on specific functions, Volvo Cars built
a portfolio of different platforms, each with a limited scope and
distinct focus. These platforms were gradually developed to
cover a broader range of applications. This approach allowed
the automaker to shift its current focus on product platforms for
cost-efficient implementation of predefined products to digital
platforms that enabled new, often unforeseen, digital services.
As an example, Volvo On Call was originally a telematics service with specific features for remote car unlocking and safety
monitoring. Volvo Cars realized this technology could be developed to issue generic digital keys that would enable retailers to
deliver groceries to a specific vehicle. This service was later expanded, and the digital key is now a centerpiece in a commercial
platform called In-Car Delivery, connecting car owners, logistics
organizations, and a whole range of retailers in different niches.
3. Balancing External and Internal Collaboration
When Volvo Cars started to conceptualize its digital capabilities
as generic functions, questions were soon raised about who
would use the different platforms to develop new services. The
company had long controlled the internal collaboration required
to leverage the scale advantages that its investments in modular
product designs afforded through specialization and effective
division of labor.
Not surprisingly, it became clear that this approach would not
be able to release the potential of digital technology to produce
increased variation and novelty of digital services for connected
cars. The availability of digital platforms made the automaker
realize the importance of also engaging external stakeholders as
cocreators of value for the connected car aftermarket. Volvo Cars
therefore launched a new software environment, called Volvo
Cloud, to host in-car services based on software in back-end servers.
This successful initiative opened up possibilities for external
collaboration with third-party app developers, such as Pandora
internet radio and Spotify’s digital music services, to secure a
steady flow of new digital services to Volvo Cars’ customers.
; F. Svahn, L. Mathiassen, and R. Lindgren, “Embracing
Digital Innovation in Incumbent Firms: How Volvo Cars
Managed Competing Concerns,” MIS Quarterly 41, no. 1
(March 2017): 239-253.