Volkswagen Group’s January 31 announcement that is opening a specialized AI Lab to act as a globally networked competence center and incubator comes as no real surprise. Large companies across all sectors are struggling with how to best integrate AI into their businesses and keep up with the pace of change.
In 2023, business leaders faced an all-time-high rate of change and a majority expect change to accelerate further in 2024, according to Accenture’s Pulse of Change: 2024 Index, which identifies and ranks six factors of change affecting businesses—Technology, Talent, Economic, Geopolitical, Climate and Consumer & Social—using a range of key business indicators, such as labor productivity and IT spending.
The Index indicator analysis found that overall, across all six factors, the rate of change has risen steadily since 2019 :183% over the past four years and 33% in the past year alone. The C-suite survey reveals that a striking 88% anticipate an even faster rate of change in 2024. The No. 1 cause of business change in 2023? Technology. However, nearly half (47%) of more than 3,400 C-suite leaders surveyed say they are not fully prepared for the accelerating rate of technological change. Only 27% claim their organizations are ready to scale up Generative AI; 44% say it will take more than six months to do so and take advantage of the potential benefits.
In the case of Volkswagen Group, the objective of the AI Lab is to rapidly develop digital prototypes and transfer them to the Group brands for implementation. The AI Lab will not manufacture production models but will serve as an incubator for the Volkswagen Group, the company said in a press release. The AI Lab will identify new product ideas connected with artificial intelligence throughout the world. It will then develop what it considers to be highly promising concepts together with partners to produce early prototypes. It will have a team of AI experts and work closely with all the brands. High-ranking representative of the brand groups will form the Supervisory Board.
“By adopting this approach, the VW Group intends to simplify the potential and speed of the AI sector,” Oliver Blume, CEO of the Volkswagen Group and Porsche AG, said in a statement. “Collaboration with technology companies is crucially important for us. In future we intend to simplify cooperation in organizational and cultural terms.”
Tapping into the AI ecosystem to leverage the power of AI for specific use cases “is a smart move, however creating a specialized outside vehicle to speed up AI developments has its pros and cons”, Dr. Carsten Linz, the CEO of bluegain, a technology and professional service firm that helps leaders to transform established companies, and a member of the World Economic Forum’s Expert Network on Digital Economy and New Leadership, said in an interview with The Innovator.
While some companies have had success with implementing a “separate-then-integrate” approach for technology-led innovation – German Publisher Axel Springer successfully adopted this approach as part of its digitalization strategy – Linz says industrial players like the Italian electric utility Enel or the German Industrial group Siemens. usually have more success with an “embed-then-scale-out” approach.
Looking back, VW took already a similar approach to the AI Lab with its software development for the group, without much success. Its outside software unit Cariad, which has struggled with years of delays and overhauls, is currently developing a restructuring plan which reports say could involve cutting thousands of positions as the unit attempts to bring new software architectures onto the market.
“The transformation of automotive OEMs from hardware companies to producers of software-defined systems requires them to redefine what is core competence and what is context,” says Linz. “For AI this means to leverage the power of Large Language Models developed by others, deployed in a private Cloud and with a secure gateway then enrich the value with the car company’s proprietary data; its power lies not only in its possession, but in its strategic application. In this way you create a sustainable competitive advantage and avoid having your confidential information train the next model.”
Linz suggests companies that want to use the power of AI and other digital technologies and leverage their domain specific expertise to adhere to these five principles:
*Establish A Use Case Focus: Have new technologies assessed by people in lines of business, often mid-level managers in technical roles looking for ways to improve the efficiency of their existing operations or grow their business
*Create Mixed Teams: Ensure your pilots are constructed in a decentralized way by a small mixed frontline team of business, digital and IT people embedded within a business unit, preferably together with internal pilot clients.
*Embed And Scale-Out: Be close to domain-specific knowledge instead of taking a separate-then-integrate approach.
*Gradually Provide More Degrees Of Autonomy: This will help the scale-up finds the right growth path
*Secure Robust Sponsorship: Get buy-in from the top that is sensitive to the power bases within the firm.
To leverage the full value of AI for specific business cases, co-created with the organization’s experts and their domain-specific expertise, “the need to cleanse, correct and complete the data for the specific use cases cannot be overstated,” says Linz. “The good thing is that you can use AI to accomplish this task.”
IN OTHER NEWS THIS WEEK
Neurolink Plants Brain Chip In First Human
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