Contents1. Changed Conditions Ahead: Executive Summary
2. Automotive Executives: From Car Guy to Mobility Leader
3. Chief Executive Officer: Gearing Up for Transformation
4. Chief R&D/Technology Officer: Engineering the Future of Mobility
5. Chief Marketing Officer: A Multi-platform Strategy
Changed Conditions Ahead: Executive Summary
The automotive industry is entering an age of digital disruption: From the nature of the product itself to the process by which it is engineered, sourced and produced, dramatic changes are afoot. Even the players in the market and the way these products reach the end consumer are changing.
To better understand the impact of this shift on the industry’s leadership talent, Russell Reynolds Associates studied the profiles of senior executives from leading automotive companies around the world, including a psychometric analysis of the group’s supporting and hindering traits in the face of the anticipated challenges. We focused on three leading roles, analyzing the current profiles and future requirements for the chief executive officer (CEO); the chief technology, or research and development, officer (CTO or R&DO); and the chief marketing officer (CMO).
We found a very homogeneous group of executives and surprisingly little change in the typical profile over the past few years despite the pending transformation. We also found that the psychometric traits common to this group of executives as a whole are clearly differentiated from the rest of the general senior-leadership population—both for good and for bad. While relatively innovative and open to change, for example, these executives tend to lack the collaborative and risk-taking predisposition generally required to make disruptive changes.
As a result, we see a legitimate need to boost the diversity of skill sets, competencies and perspectives found within these executive ranks. As the industry shifts, auto executives as a whole will need to excel in vision and strategy setting and have the courage to take well-calculated risks. CEOs, for their part, must be astute in forging strategic partnerships of equals, building teams with diverse skills and perspectives to lead the company’s innovation efforts.
CTOs/R&DOs, in turn, face a dual challenge: acting now to develop digital, mobile and native software solutions to ensure the medium-term success of their products and making the strategic decisions necessary to lay the groundwork for success in the long term.
The CMO role has seen the greatest increase in diversity by gender, industry and functional experience in recent years. Companies can capitalize on this unique aspect of the role, equipping CMOs and their teams to spearhead the organization’s transformation toward greater customer centricity and truly digital capabilities.
Automotive Executives: From Car Guy to Mobility Leader
The modern car is the product of decades of interlinked improvements in power, safety and even connectivity. These improvements have been driven by an unyielding emphasis on innovation. Even so, the change has been gradual and incremental. In contrast, the industry today faces a true paradigm shift due to changing models of automotive ownership, new mobility solutions and the proliferation of digital technology. At the same time, competitors are encroaching on the market from entirely different industries with novel and contrasting approaches to meeting customer wants.
This shift presents a very real challenge to the way things have always been done and begs the questions: How will the industry adjust? What will it mean for the leaders who must guide the industry through the disruption?
A DISTINCTIVE PROFILE
To answer these questions, Russell Reynolds Associates looked at 185 senior leaders who sit on the executive management board of the world’s top carmakers (original equipment manufacturers, or OEMs) and their Tier 1 automotive suppliers. We analyzed and mapped out the profile changes taking place for these executives as disruption approaches, dividing them into two groups: those appointed before 2013 and those appointed in 2013 or later.
Perhaps unsurprisingly, our study of the demographic profile and educational and career experience of these executives reveals an overwhelmingly homogeneous group at the top of the industry. The similarities begin with the demographics of the population, which is almost entirely male (92 percent), although there have been slightly more senior female executive appointments since 2013 (Exhibit 1).
Most executives (75 percent) are nationals of the country in which their employer is headquartered and have had no significant residential work experience in other countries (Exhibit 2).
There is deep camaraderie as well: It would not be an understatement to describe the industry as tightly knit, given that 74 percent of all executives prior to 2013 were internally promoted or appointed from within the group of top carmakers and suppliers. There even has been an increase in internal appointments since 2013 at the expense of hiring from the group as a whole (Exhibit 3).
In addition, 67 percent of the executives appointed before 2013 have only automotive industry experience, and this ratiohas increased to 93 percent for those appointed since 2013 (Exhibit 4).
Finally, tenure appears to be a rigid requirement for success in the industry since the average executive, at the time of appointment into his or her current role, had spent 13 years with that same employer—although the trend is moving toward less heavily tenured executives, with a median tenure of 10 years for those hired after 2013.
Given these findings, we believe that the existing makeup of the typical executive population has the effect of filtering out diverse and potentially valuable perspectives, limiting the scope of leadership views on the opportunities and threats that lie ahead.
PRAGMATIC AND INNOVATIVE,
BUT IS THAT ENOUGH?
To gain a deeper understanding of the typical leadership profile, Russell Reynolds Associates next analyzed proprietary psychometric data for 160 automotive executives at the C-suite and vice president levels. We did this across 60 different criteria and compared the results against an average executive profile calculated from more than 5,000 data points gathered from the top ranks of corporations across all sectors worldwide.
Psychometric attributes are neither good nor bad but reflect an individual’s or a population’s predispositions, which may be advantages or hindering factors relative to specific circumstances. In the face of a disruptive change such as digital transformation, automotive executives exhibit competencies that should help them but also possess a number of predispositions that may hinder them (Exhibit 5).
For example, automotive executives tend to be pragmatic (19 percent more so than the average executive). They are often forward thinking, open to change and innovative. In addition, they typically are resilient and action and achievement oriented. Where they see a need for improvement, these executives will move quickly and efficiently to fix the issue.
At the same time, these executives are perfectionists, are frequently assertive in their communication style, and have a direct and utilitarian approach to others. They tend to hold a preference for working solo and for implementing linear processes and have a strong sense of conviction and confidence in their own thinking. As a result, they can be poor at collaborative communication.
These competencies all form part of a long-established auto executive profile. However, we believe the emphasis on extreme operational excellence and perfected processes and the lack of natural collaborative skills will hurt, rather than help, in an age in which competitors are often agile and collaborative in their approach to work, with a willingness to challenge pre-existing modes of thinking and to demolish and rebuild ideas from scratch. In response, automotive companies should work to cultivate more entrepreneurial attributes among senior executives and their teams, promoting a “startup like” culture that tolerates failure as a necessary step on the road to innovation and change.
REDESIGNING THE SPECIFICATIONS
Given these findings, we believe the coming paradigm shift is likely to stretch the industry’s current leaders. To build new skills and perspectives quickly, we recommend hiring from industries that already have undergone a significant disruption, such as the mobile phone industry, and are looking for competencies and leadership attributes that are in short supply in the automotive industry today but could be required in a transformation.
Consumer sector executives, for example, have a higher-than-average predisposition toward fresh thinking, risk taking, rule bending, and the ability to anticipate change and convince others of their opinions, making these professionals potentially well-suited for tackling the challenges of disruptive change (Exhibit 6).
At the same time, automotive leaders must be aware that there will be major cultural barriers for those executives brought in from outside to challenge the current thinking. In response, a common understanding must be established within a company of the need for change and a plan and willingness to properly integrate new hires in a way that allows them to have an impact on the existing culture.
Given that a substantial proportion of automotive executives is internally grown, companies hoping to effect fundamental change must also review internal promotion processes for possible latent and unintended biases. Affirmative action may be needed in order to better promote those who have unique perspectives on markets or trends that should be heard at the senior management level.
Chief Executive Officer: Gearing Up for Transformation
ROOTED IN OPERATIONS AND FINANCE
Much as in the larger automotive executive population, there are quite a number of similarities across the ranks of automotive CEOs. As we analyzed chief executives across the world’s major carmakers and suppliers, we found that they, on average, are white, male and 60 years old, slightly older than the average Fortune 250 (F250) CEO (Exhibit 7).
They are likely to have no experience outside of automotive, as 57 percent of automakers’ CEOs and 63 percent of automotive suppliers’ CEOs have spent their entire career in the industry (Exhibit 8).
CEOs are often internal appointments as well, with 73% of CEO appointments before 2013 offered to employees of the company itself, increasing to 78% in more recent years (Exhibit 9).
Beyond these demographic similarities, differences do emerge between the CEOs of OEMs and their Tier 1 suppliers, owing to the approach these companies have taken to growth in recent years. For example, among OEMs, CEOs most commonly held head of production, supply chain or sales roles immediately preceding their current appointment, while Tier 1 CEOs are most likely to have come from a chief financial officer or divisional head role (Exhibit 10).
We also find a stronger emphasis on R&D experience among OEMs than in the population of Tier 1 CEOs, among whom there is an emphasis on merger and acquisition-related skills such as finance (Exhibit 11).
Despite the variation in automotive background between the CEOs of OEMs and suppliers, the similarity of these executives once again speaks to the lack of diversity of both experience and perspective. We believe boards and the CEOs themselves must take this into account, reviewing their preparedness for new challenges to the industry and, consequently, to their role.
TRAILBLAZING IS NOT "GOING IT ALONE"
Where previously the industry was focused on the future car, it is now entering an era of mobility solutions, in which manufacturing capabilities are less of a barrier to entry than previously thought. People are not buying as many cars as they once did, not least due to the sharing economy, and manufacturing cars may no longer be the sole domain of automotive companies.
Ten years ago, for example, it would have been unthinkable for technology and software specialists such as Tesla, Google and Apple to present a significant threat to the automotive industry; yet this is the industry’s potential future. Software specialists may even hold an advantage over traditional manufacturers, as the car—which already contains as many as 100 million lines of code—s becoming an increasingly digital product.
Industry leaders must, therefore, look to innovate, reframing their efforts from being carmakers populated by car guys to being mobility solutions providers led by mobility leaders. Automotive CEOs, for their part, must balance their current focus on producing automobiles or parts with an emphasis on shaping the market and pre-empting customers’ emerging demands for a solution beyond the traditional car.
Doing so will require the CEO to be a strategist, as well as a visionary, with an aptitude for risk taking. Perhaps more importantly, successful CEOs will need to be excellent listeners, surrounding themselves with digitally savvy executives who can comprehend the scale of the disruption and take the actions required to meet it.
The executives will come from diverse backgrounds, markets and experiences, offering new perspectives and ideas to the automotive-entrenched CEO. Women, for example, have a growing impact on car-buying decisions, and their input will help steer future growth in the right direction. Innovation is taking place around the world, and executives with international experience and a multicultural background will contribute a greater awareness and understanding of these shifts.
Mergers, acquisitions and partnering will also play an important role in shaping the future of the automotive industry, as they present opportunities to leapfrog competitors by acquiring new technology skills, as well as providing opportunities to innovate.
Tier 1 CEOs as a group are well-equipped to evaluate potential deals and typically have the skills to close those deals; however, the true challenge may come in realizing the full value of these partnerships. Doing so will require the ability to work as equals with partner organizations, making the most of each other’s strengths. In addition, these acquisitions and partnerships are likely to take place with non-automotive companies; in such circumstances, the CEO must be able to preempt possible challenges of cultural fit with a rigorous calibration of both companies’ culture.
We believe the absolutely crucial characteristics for the automotive CEO of the future, therefore, boil down to three simple but definitive competencies: engaging in calculated risk taking, involving other voices and opinions in the decision-making process, and being able to evaluate and work within new partnerships as equals in a clear and focused way. While the ideal CEO may appear difficult to find, the primary solution to managing change will be the ability to partner, both internally and externally, giving voice to a variety of perspectives and building a deep bench of truly diverse future leaders.
Chief R&D/Technology Officer: Engineering the Future of Mobility
TODAY'S CTO/R&DO PROFILE
Russell Reynolds Associates took a close look at the individuals who are responsible for the cutting-edge research, engineering, technical application, and development of cars and components at the highest levels of the world’s major automotive OEMs and Tier 1 suppliers: the CTOs and the R&DOs.
Our research found that tenure appears to be an important component of the CTO/R&DO profile, as executives in these positions hold the longest tenure among the automotive executives we analyzed. The majority—63 percent—have been with their current employer for more than 25 years, while close to 30 percent have spent more than 35 years with the same company (Exhibit 12).
Not surprisingly then, CTOs/R&DOs as a group are relatively mature: A third are over 60 years old, another third are between ages 51 and 60, and a meager 5 percent are under the age of 45 (Exhibit 13).
In addition, CTOs/R&DOs are frequently internal appointments—92 percent come from inside either the company or the corporate group (Exhibit 14)—and are 100 percent male.
They are unlikely to have had any work experience outside the automotive industry, although this statistic has shifted slightly since 2013 (Exhibit 15). Among the 16 percent of CTOs/R&DOs who have had some out-of-industry experience, it often was an earlycareer experience prior to committing decades to the car industry.
This narrowness of focus goes even deeper as CTOs/R&DOs seldom hold experience in functions outside their traditional domains—engineering, R&D, technology and product development. There has even been an increase in the representation of pure engineering experience in CTOs appointed since 2013, from 67 percent to 82 percent, although there has also been a slight rise in the wider range of functional experience outside the traditional domain (Exhibit 16).
These executives are highly educated, with approximately 10 percent holding a Ph.D. CTOs/R&DOs are also increasingly educated in business: Forty percent of those appointed in 2013 or after hold an M.B.A. degree compared with 14 percent among those appointed prior to 2013 (Exhibit 17). However, their formal training is still concentrated in the realm of automotive and mechanical engineering rather than software engineering. Given their relative maturity, they are also not likely to be digital natives—those whose careers were shaped in the era of digital technology. Our experience in recruiting digitally transformative leaders in other industries suggests that such leaders generally are in their 40s or under.
As a result, while the current tranche of engineers has added a number of successful digital offerings to the manufacturing process, we believe many will need to become more digitally savvy in their approach and processes. Rather than acquiring software to fit existing hardware, for example, they will need to develop native software specifically for the car and build the hardware around the software as a core offering. While today’s car manufacturing processes are already technologically advanced and data driven, these executives need to dig deeper into opportunities for digital transformation at every stage of the product value chain.
THE CHIEF ENGINEERS OF THE FUTURE
To meet these challenges, tomorrow’s CTOs/R&DOs will need to surround themselves with diverse teams of digitally savvy executives recruited from Internet-based businesses and beyond, gathering everyone into the same room—whether physically or virtually—to work collaboratively. As with the successful CEO, an open mind to other voices and perspectives will be essential. Even the CTO/R&DO himself or herself may well emerge from the digital community, bringing a crucial technical skill set quite far from powertrain engineering.
In addition, these executives will need to become more customer centric—better connected to the end customer—developing the strong commercial acumen necessary to understand not only the best technical products but also the most appropriate solutions. Doing so will require deeper thought and investment into studying and addressing consumer needs. It will mean realizing that a car is a set of systems—perhaps even just a set of systems—to solve consumers’ mobility needs and wants. Recognizing it will mean more fully leveraging consumer data analytics and creating a continuum between research and product development as new data reveal changing consumer trends and desires.
We note that as cars become ever more intelligent, with millions of lines of software code providing cuttingedge technology and connectivity, there is a growing security threat that must be managed. Already, auto manufacturers are using expert hackers to expose weaknesses in their systems, particularly following some unfortunate incidents in which companies have been forced to recall millions of cars due to software security issues.
This threat will not rest purely in the domain of the chief information security officer, as in many other industries; rather, CTOs/R&DOs will be the ones responsible for hiring cybersecurity experts for their teams and creating new roles such as chief safety officer, responsible for safeguarding the modern vehicle—or mobility solution—from hackers.
With the right team in place and a renewed focus on the consumer, CTOs/R&DOs will also need strong organizational and priority-setting skills to get their ideas across. They will need to be in a position to articulate, and pursue, calculated risk taking. They will also need to have strong relationships across the firm, and influence across the organization’s many functions and businesses.
We note that the sheer number and complexity of possible future automotive solutions may force CTOs/R&DOs and their teams to reorganize areas of responsibility. In the past, the work of R&D has been divided into two time horizons: short to midterm and long term. Going forward, the split could take the shape of a focus, on the one hand, on hardware and software integration for new products and services and, on the other hand, on the company’s digital strategy and its associated ecosystem and partnership development.
Finally, while only 5 percent of CEOs come from this role today, we believe the CTOs’/R&DOs’ experience in making crucial, calculated judgments about the trajectory of the company’s future products and solutions make them strong potential candidates for the CEO role in the future in an industry that is increasingly characterized by constant and fast-paced change.
Chief Marketing Officer: A Multi-platform Strategy
THE MAKINGS OF AN AUTOMOTIVE CMO
Chief marketing officers, like the majority of the automotive executives we analyzed, have largely spent their career within the car industry (Exhibit 18).
This is a male-dominated role (Exhibit 19) often given to internal employees rather than those outside the company or group of companies, although there has been a significant increase in the proportion of outside appointments since 2013 (Exhibit 20).
Simultaneously, 77 percent of the CMOs in our sample have been with the company for less than 10 years and 66 percent for less than five, suggesting there could be relatively fresh talent and perspectives in this role compared with other key roles (Exhibit 21). This may also be attributable to a shift in the industry toward separation between the marketing and sales functions.
Among internal appointments, the industry appears to prefer candidates with general management experience and brand familiarity on top of traditional marketing skills. This finding is based on the observation that management experience is more widely represented in the sample than is sales and marketing experience when it comes to appointments from within, as opposed to a preference for pure marketing, branding or sales executives when hiring outside the company or group (Exhibit 22).
Over the years, this population has seen some increase in diversity through a growing number of external appointments, some timely improvement in gender diversity—possibly due to the growing influence of women on car buying—and diversity in functional experience, based on the differences between CMOs appointed before 2013 and those appointed in 2013 or later.
While changes in the CMO profile are taking place at a faster pace than for the CEO and CTO/R&DO profiles, the change may still be too modest and reflect a lack of urgency relative to the scale of the transformation taking place in the industry. This is particularly true given the changes in the field of digital marketing, as a rapidly growing share of automotive advertising is moving to online and mobile media, with manufacturers creating more and more ad campaigns designed primarily for digital consumption.
RE-ENGINEERING VS. BOLTED-ON CHANGES
Automotive industry respondents to Russell Reynolds Associates’ Digital Pulse 2015 Survey identified marketing as the function with the highest potential for driving digital transformation for their company and industry, not least because it is the most immediately and radically affected by digital technology. However, our research yielded only five identifiable executives holding the title head of digital marketing across the 42 automakers surveyed in this study.
Though a digital marketing unit may exist in some shape or form in most or all of these automakers, this is a qualitative measure of the value—or lack thereof—being ascribed to the digital marketing role in the industry today.
In contrast, demand is increasing in the industry for search engine optimization and search engine marketing directors, heads of business analytics and platform specialists responsible for developing services native to web, mobile and other specialized digital interfaces. In fact, filling these positions is a challenge given the high demand and shortage of skilled talent.
For all five identified heads of digital marketing, their digital marketing skills are rooted in career experiences outside the automotive industry. The same is likely to be true for the rest of the industry’s digital marketing roles: They will need to come from outside of the industry. The chief marketing officer will then have the additional challenge of integrating these individuals, their skills and their valuable digital-native perspectives into the marketing function and the wider company.
MARKETING TO THE CUSTOMER AND TO THE BOARD
The modern CMO has two audiences—the customer and the organization—and there are important changes happening across both these populations. For the customer, CMOs must learn to do more by doing less if they are to cut through the massive data and media overload that consumers experience each day. Simultaneously, the CMO must work within the organization to make sure the product that the customer finds in the showroom is the best offering on the market for the customer’s needs and preferences at that time—an effort that will have begun five years earlier during the product development stage.
The CMO will be responsible for integrating innovative after-sales services into the company’s marketing platforms, first to monetize additional services (such as scheduled maintenance) and, second, to fortify existing customers’ loyalty and retain them for the succeeding purchase, say, 10 years down the road.
The automotive industry is not a digital marketing laggard; however, there are opportunities to leapfrog the competition, not least by clearly articulating CMOs’ changing responsibilities and ensuring that these executives are equipped for their new role. In addition, companies would do well to lend a more attentive ear to the CMO, who tends to be the voice of the customer and a digital evangelist on the executive team. The marketing function has evolved from one interested in selling the car to the customer to one that is increasingly also selling the customer’s ideas back to the organization
Sample and Methodology
For the purposes of our study, we selected our sample of companies as below:
- Car Brands: Top OEM brands by Brand Ranking and their relevant peers
- Carmakers: Top OEM groups (carmakers with multiple brands) by EBITDA
- Automotive Suppliers: The world’s top Tier 1 companies (i.e., immediate suppliers to automotive original equipment manufacturers) by EBITDA
CAR BRANDS AND CARMAKERS
TIER 1 SUPPLIERS
- Automotive executives include members of the executive management team or equivalent of the relevant companies, as displayed on each company’s official website. Profiles of 185 executives were included in this study
- In addition, we analyzed proprietary psychometric data for 160 automotive executives at the C-suite and vice president levels and compared that against an average executive profile calculated from more than 5,000 data points
- Chief executive officer or equivalent in the sample companies included 42 individuals representing 22 carmakers and 20 supplier CEOs
- Chief technology officer/research and development officer is defined as the role in charge of the development of new product technologies and their application to current and future products. This includes positions responsible for overall engineering and/or product development activities in the specific company or equivalent, and excludes Information Technology as a business support/shared services function. The profiles of 25 individuals were analyzed and included in the study
- Chief marketing officer is defined as the individual with fullest oversight of the car brand’s marketing activities. The profiles of 35 individuals were included in the study
- Information gathered on executives includes publicly available information about their demographics (age, gender, nationality), employment (current title, company/industry experience, tenure in company and in industry) and other information (highest educational degree, field of study, international work experience)
- Information on executives was sourced from a combination of official company publications and verified information on BoardEx and LinkedIn. Information on EBITDA was sourced from Standard & Poor’s Capital IQ platform
Walter Friederichs leads Russell Reynolds Associates’ global Automotive Practice and is a member of the firm’s Digital Transformation Practice. Walter is based in Frankfurt.
Juncal Garrido is a member of the firm’s Automotive and Digital Transformation practices and leads the Diversity and Inclusion Practice in Europe. Juncal is based in Barcelona.
Alan Renne is a member of the firm’s Industrial and Natural Resources Sector, focusing on manufacturing industries. Alan leads the work for CTO s and R&D officers globally and is based in Stamford.