Think beyond the box

From the February 2019 issue.

Having realised that the tools that make start-ups so nimble and disruptive are not limited to an elusive Silicon Valley elite, long-standing industry incumbents are now proactively ‘re-programming’ internal innovation processes.

The age of electrification arrived in the guise of an unassuming press release. During the first week of December, German logistics giant, DHL Group, formally advised shareholders that it was granted EC type approval for the final model in the StreetScooter range of electric delivery vans – allowing it to move from small-batch production to mass manufacturing.

Overlooked by most, the brief notification not only reconfirmed the industry’s commitment to deploying electric mobility solutions at scale – prompting the International Energy Agency (IEA) to revise a previous estimate of 23 million electric vehicles on the road by 2030 to 127 million – but also put the final nail in the coffin of traditional supply chain innovation processes.

Flashback: The StreetScooter project started out in 2010 as a university spin-off before being taken over by DHL in response to a lack of electric mobility solutions in the budding EV market. The move not only turned one of the largest commercial vehicle buyers in the world into a veritable OEM, but also showcased just how quickly traditional supply chains can collapse if innovation pressure is too high and response times to long.

Seemingly overnight, the start-up community’s ‘build-measure-learn’ mantra – itself grounded in a nimble, frictionless business model geared towards the notion of productive failure – had outmanoeuvred incumbent names like Volkswagen in one of the most promising growth markets in the history of commercial road transport.

Fast-forward to 2018 and Silicon Valley’s ‘rapid prototyping’ and ‘fast failing’ maxim is now also shaking up trailer and component manufacturing. The working assumption: If transport businesses can manage supply chains from point of origin all the way through to last mile delivery – including the design and manufacture of the hard- and software required along the way – why can’t trailer and component manufacturing also take on a more holistic perspective? Can modern trailing equipment be more than just a box on wheels, especially now that the notion of electric mobility has been supercharged by the vision of a fully digitised supply chain?

One company that has accepted the challenge head on is German transport component specialist, BPW. In 2017, the 120-year-old company set up a dedicated InnovationLab in the western German town of Siegburg – a quick 40-minute drive from the company’s head office in Wiehl and close to the regional hub of Cologne – allowing some of the firm’s brightest minds to roam free and reflect on the technical and structural challenges that will affect commercial road transport in the future.

According to BPW, the move has been a direct response to a rapidly changing business environment in which the lines between customers and suppliers, even those between truck and trailer design, become increasingly blurred – a development prominently demonstrated by DHL’s successful foray into commercial vehicle manufacturing.

Instead of waiting for a start-up to emerge that may be able to complement the axle and suspension expert the same way StreetScooter added value to the DHL operation, however, BPW opted for a more pragmatic approach and turned the process upside down – launching an in-house innovation hub with a mandate to think outside the box.

“Traditionally, vehicle manufacturers and hauliers have been the core target groups for BPW,” the company explained the concept back in mid-2017. “The InnovationLab is [now] exploring the digital networking possibilities for the entire logistics chain.”

Expanding the BPW’s traditional field of vision by replicating a Silicon Valley-esque start-up mentality in-house quickly paid off: At the 2018 IAA Commercial Vehicles Show in autumn, the company was able to present the first InnovationLab-derived product, the CargoTracer freight tracking system.

Developed in collaboration with software giant SAP, it is based on cloud-powered freight sensors capable of tracking the position and status of freight and transmitting information directly to ERP and inventory management systems. Because the sensors use a new type of data transmission technology based on ultra-narrowband radio waves instead of a SIM card, the system is expected to make delivery tracking “significantly more affordable”.

“We have succeeded in transferring ideas and methodological approaches from the InnovationLab to the entire company very quickly,” Michael Pfeiffer, Managing Partner at BPW, comments on the IAA milestone. “Agile methods such as design thinking and business model canvas have now become established across many departments…and the InnovationLab is supplying a great deal of new momentum.”

Pfeiffer adds that creating “overlap” between start-up mentality and traditional industrial culture would also benefit the customer relationship because it allowed the company to view transport and logistics as a system-within-a-system that is “perfect for digital innovation”.

The same, systemic view prompted German OEM Krone, to invest in last mile start-up Rytle, which is hoping to disrupt urban logistics by replacing conventional rigid trucks and vans with electrically driven cargo bicycles that transport specially designed transport boxes the size of a standard pallet. The boxes will be pre-packed and stored in centrally located ‘city hubs’ about the size of two car parking spaces.

According to Joint Managing Director, Ingo Lübs, Rytle’s concept is a “logical continuation” of the city hub model currently being trialled across Europe, where transport businesses install peripheral hubs and then use local courier services to navigate the final leg to the client.

Complementing the hardware is a complex IT solution designed to connect all stakeholders in real-time, he adds – saying the goal must be to fundamentally reinvent metropolitan logistics and courier services, not just add a new alternative to the industry’s traditional toolbox.

“We believe cargo bicycles have long been underestimated,” explains Lübs, who is adamant to have taken a page out of Silicon Valley’s productisation playbook.  “Many ideas are born from a tradition of tinkering,” the Krone-trained executive recently told a German news outlet. “We are different. We want a product that is able to hold its own in a complex network of industrial processes.”

By investing in future-oriented business ideas that extend beyond the traditional realm of freight transportation, taking over promising start-ups outright or launching innovation hubs in-house, household names like Krone, DHL and BPW have found ways to tap into the Silicon Valley toolbox and proactively reprogram traditional innovation processes – all without diluting the companies’ century-old core values in the process.

What’s more, they nurture a direct linkage between innovation drivers and long-serving productisation experts, ensuring the focus will remain firmly on delivering marketable outcomes. DHL’s December press release demonstrated just how successful such a connection can be – the company has already started fast-tracking StreetScooter production in Germany in order to meet growing demand across Europe, and is partnering with global powerhouse Ford for the production of an XL version.

Editorial Opinion
If there is one lesson to take away from 2018, it’s that to remain relevant in an exceedingly fluid business environment, reframing the notion of commercial road transport as we know it must be the industry’s first priority – not just in a product innovation context, but also with view to business strategy, marketing and even financing. In an age of technological experimentation, political instability and – in turn – financial volatility, adaptability and organisational elasticity are indispensable to business survival. Especially in a highly specialised, asset-heavy market like trailer and trailer component manufacturing. If the Global Financial Crisis (GFC) taught us to rethink – and ultimately reinvent – traditional production planning and stock-holding models, Elon Musk prompted us to explore the potential of electric propulsion and the advent of 4G and cloud computing ushered in a new age of data transparency, now is the time to re-evaluate how we organise and fund the businesses of the future. Not just to appreciate how new business models may affect time-honoured market dynamics – read: to avoid being out-innovated – but also to understand how to position ourselves in the coming contest for talent. The start-up community may not hold all the answers, but it does know how to think outside the box, attract capital from non-traditional sources and bridge the gap between mind and market. Leadership has always been a question of probing tradition and introducing the old to the new. Now it’s also a question of stretching our collective imagination and engaging with ideas that go beyond the realm of what is considered relevant – or even possible.

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