Embrace Electrification using a Modular Product Architecture
Electrification and business model transformation are two hot topics creating sleepless nights for leaders in many industrial companies today. Electrification of vehicles both for consumers and for business applications is going faster and faster in response to the strategic shift to reduce emissions. Different customer behavior and new ways of solving transportation problems are shifting transactions from buying or leasing the equipment to subscribing to the service of transportation.
For many companies, this is a challenge that means their product offering is becoming more complex. In the short term, they must force on delivering the “old” technology with combustion engines and, at the same time, adding electric or hybrid technology vehicles. For other companies that have been providing electrically driven products for a long time, it means a change in battery technology and voltage to what is becoming readily available with the overall growth in electrical vehicles. To double the difficulty, some companies have started to challenge the traditional business models, being inspired by the software industry. Subscription business models are increasing the value to the customers without the hassle of ownership along with creating recurring revenue streams for the companies. This is forcing companies to have a much better control of their installed base, securing customer value as well as profitability.
For more examples read this post on great industry subscription models by GaryFox.
In the blog “When the product is a system of modular systems” Tobias Martin discusses how your company can work with modular product architecture to manage a wide and complex product range. Having a fully developed system of modular systems simplifies the transition to new and changing technologies and to changing customer needs. SCANIA show case an example of this in the release of their first generation electrical distribution trucks.
Two different approaches to successful electrification depending on your business model
Let’s assume that you have a modular approach to your vehicle product range. For example, you have an existing system of modular systems that you use to realize configurable products to your customers, and you have two alternatives to develop next generation, electrified vehicles.
- You can use your existing modular product architectures. When evaluating new technical concepts to support your drive towards electrification, you need to select concepts that allow you to adjust the existing product architectures by developing new module variants. This would enable you to provide new electrical vehicles relatively quickly to your customers.
- You can create a new system of modular product architectures that is optimized for the opportunities you get with electrically driven vehicles. This optimization could be related to where to position motors and batteries to improve usability and how to maximize the value from the new technology. This would also be the preferred route to take when you foresee a major change in how the vehicles will be used and controlled – going to autonomous vehicles gives you completely new opportunities when you can ignore space required for the driver. Kia/Hyundai is one example of a company taking this route for the second generation of electrical vehicles.
Let’s look at this in some more detail in each case using below 5 step approach. We can in essence use the same 5 steps in both cases but with different focus and different implementation effort and risks.
Please note that you often need to iterate between the steps as you learn things in the following step that forces changes in a previous step.
Case 1: Use your Existing Modular Product Architectures
Let’s take a closer look on how the company in case 1 could be thinking and acting in order to realize a product range with electrical vehicles. Their market feasibility study shows that they will have to live with multiple energy sources to drive their vehicles for the coming 10-15 years, so it pays off for them to invest in the existing architectures. They also have very high variance and want to maximize the scale benefits on parts of the vehicle that have limited impact from electrification across the full portfolio. On top of this they see benefit for their long-term service and support business in building on the existing architectures. Using the 5-step approach you can see the focus they need to have in each step:
Case 2: Create a New System of Modular Product Architectures
In the same manner, let’s look at the company taking the route to create a completely new modular product architecture to optimize their platform for electrification (potentially being prepared for both battery storage of energy and hydrogen storage of energy). The conclusion from their feasibility study is that to maximize the value and benefits from electrification they need to develop a new system of modular product architectures. Their ambition is to optimize for the future technologies as much as possible and prepare the architecture for the coming innovations they can anticipate and let the old architectures support the current technologies if they are needed in the marketplace.
Using the 5-step approach you can see the focus they need to have in each step:
Pros and Cons with the two alternatives:
Depending on your situation and circumstances you should choose case 1 or case 2. Below table gives you a quick overview of the pros and cons.
How will you succeed in selecting the right approach for your company and your customers?
In the two cases above, you see that there are benefits with both alternatives, and what you choose will depend on your situation and market outlook. Start the process with a proper feasibility study where you outline the scenarios that you want to evaluate. You can get some inspiration from this blog about future studies to support innovation.
The feasibility study will give you insight in your future market requirements and help you define how your products must evolve in order to meet these requirements. The new requirements could drive technology changes (like electrification and automation), or they could drive new technologies that will give you new opportunities.
With an agile product architecture, you will have a good and robust basis for developing your product offering, including the lowest effort and risk as you maximize the reuse of existing sub module systems. You only develop the sub module systems that need renewal. (case 1 above)
Recommended further reading: What is a Good Modular System?
Curious to understand what status your product architectures are in? Take our 5min evaluation to get an indication of your product architecture maturity and request a personal evaluation and recommendation.
Based on your feasibility study, matureness of the modular system(s), capabilities within the company and supply chain matureness the decision can be fairly easy. Most companies start with building on their existing platforms as much as possible but at some point in time they move to an electrical platform only due to the reduced complexity that it offers, one example is Volkswagen while some other automotive companies still are adapting their older architectures to electrification. Successful companies always have strategies and controls for how to manage and develop their modular product architectures over time to secure that they meet their internal and external targets.
Tomas Berg
Senior Consultant
