Interface Magazine talks to Lutz Beck, CIO of Daimler Trucks North America, regarding its massive digital transformation into a totally…

Interface Magazine talks to Lutz Beck, CIO of Daimler Trucks North America, regarding its massive digital transformation into a totally connected company…

Data is the beating heart of virtually every business across every sector right now. The race is on to rebuild companies that can successfully extricate themselves from traditional, siloed structures to become smart, or intelligent, operations that truly harness the insights data provides. The transportation industry is no exception, as digital disruption and an increasing demand for sustainability and automation continues to send shockwaves through the sector.

Now, at the forefront of massive, seismic change, truck manufacturers are seeing a dramatic acceleration of change with autonomous, smart ‘connected’ and sustainable vehicles leading the charge. In this pursuit, companies are having to reconfigure their operations to be able to fully develop, manufacture and support their products.  CIO at Daimler Trucks North America is Lutz Beck, a man who spearheaded massive transformational change for Daimler Trucks in Asia. Beck heads up IT and all the connectivity, autonomous, and electric-related IT aspects for Daimler Trucks North America.

“I was years in consulting, and joined Daimler early 2000,” says the Stuttgart native, speaking from Daimler Trucks North America’s Portland Headquarters. “I was there for about nine years working in Germany in different roles at Daimler IT. Then, in 2012, I became CIO at Daimler Trucks Asia, based in Japan.”  Beck transformed Daimler Trucks Asia – with its brands Mitsubishi Fuso and BharatBenz – into a truly connected company, moving the IT function front and center of its operations. This work paved the way for Beck’s move to head up transformational change in the US. Daimler Trucks North America sees its main volume coming from heavy duty trucks and has three times the headcount of Daimler Trucks Asia with a comparatively massive output.

“I was given an open field to do a lot of these innovations here within the Daimler Trucks North America Group because they had started certain elements but there were still a few things lacking. That’s the reason why there is a clear task: to push innovation and transform IT into a value-adding and future oriented organisation.” 

Beck is a devotee to the notion that IT is the driving force behind operational change. “Look, the IT role is significantly changing due to technological disruption. Everything we’re doing today is based on technology, right? And, of course, this is our main field: technologies. So, from my point of view, the IT role in companies is changing significantly, and is more and more taking the lead in driving change. In former times, IT was often seen as a supplier, whereas now it is key to developing new business models, processes and innovation.

“For me, IT is now as important as engineering. Look at some of the automotive companies, which don’t have the traditional or historical background we do, and you will see that a big portion of the people working for these companies are actually in IT. Because everything is driven more and more by technology, right? Now we need to use technology to disrupt and ensure success in the future. There are a lot of opportunities to develop new business models and revenue streams based on that. But you need to go outside of your comfort zone. Companies that are positioning IT as their driver are having a lot more opportunities. Look at the traditional cost model of IT; seeing IT as costs will give you one on one, right? This means you save $1 in IT, it’s $1 for the company. But what we see is if you look at IT or technology-managed efficiency, you already have a factor of 10. And, if you look at technology-driven disruption, you have a factor of 100.

“The importance of IT is increasing and the companies that acknowledge that are currently leading the way and using their savings in operations to reinvest into the strategic building blocks for the future.”

Daimler Trucks North America LLC is the leading heavy-duty truck manufacturer in the US and produces and markets commercial vehicles under the Freightliner, Western Star and Thomas Built Buses nameplates. Daimler Trucks North America is a Daimler company, the world’s leading commercial vehicle manufacturer and on the face of it, DTNA has a very traditional business model, which is essentially building and selling trucks.

However, Beck sees that notion changing. Even the perception of a truck is morphing as disruption, in the form of autonomous driving and smart and electrical mobility, starts to hit home.

“We have come to the point where, in the future, we will see the truck as a device, which we basically sell with surrounding services to our customers,” Beck explains. “And these surrounding services are all based on technology, and this is exactly where IT comes in. We need to establish ourselves more as a thought leader in innovations in the company. We need to try certain things to disrupt company processes, as well the organization of the company itself.”

Beck is currently turning Daimler Trucks North America into what he describes as an ‘intelligent company’. But what exactly is an intelligent company? “An intelligent company is, for me, one which aims at utilizing data as a key asset to facilitate data-driven decision making as well as drive business optimization and innovation through data, in a way they are permanently disrupting themselves.”

Beck explains, “If you look at successful companies nowadays, they know exactly how to work with data. So, we need to use this huge amount of data for business decisions, for driving efficiencies and creating new business models and revenue streams. There are a lot of opportunities and the more data you gain or bring into the company, the more you can do. You are able to work faster, and you are more efficient. This will result in time needed to think about new disruption or business models based on technology. An intelligent company is at the end a data-driven company.”

The Intelligent Company strategy positions IT as the technological enabler for all digitalization efforts at DTNA and focuses on six strategic building blocks:

Connected and Electrified Vehicles: Driving the development towards trucks as smart and clean digital assets

Autonomous Vehicles: Developing the technological capabilities for autonomous trucks and associated new business models

Customer Experience: Elevating customer interaction into the digital and data-driven age

Smart Factories and Logistics: Developing smart factories to enable DTNA to build smart trucks

Data Driven: Using data in all decision-making processes throughout

DTNA Cyber Security: Safeguarding IoT and connectivity

This strategic focus positions DTNA to lead by proactively embracing technology opportunities not only in IT, but also in the overall business model.

“We’re working on the autonomous piece, which is certainly a game-changer in terms of mobility for the future. Then we’re also working on connected vehicles. We have 250,000 connected trucks on the road, and this is of course a brilliant service for our customers because we have real-time services based on that, which we can provide to our customers. Of course, there is electric; we have already handed over pilot electric trucks to customers. If you look at distributional logistics, this is a game-changer and will certainly help the environment.”

As well as keeping one eye on cybersecurity with regards to connected vehicles, Beck and his team are also focusing on the actual manufacturing and how to develop what is commonly known as the ‘smart factory’.

“I refer to factory automation here and learning with data. Then you’re not just looking internally into the company. You are also looking at your connected supply chain, especially if you have situations where you need to ramp up or down, at speed. We are making our plants more efficient and intelligent, based on the data we have, by looking at all the sensors we use on our robots. All technological changes are an investment, yes, but this is also a new business model.

“It’s easy to create a business case for that as well. Everything you do in terms of a smart factory, in terms of data-driven strategies or big data, is not difficult from an investment point of view. We have a lot of examples in the big data space where, with a very, very small investment, you can gain a lot of benefits.”

The transformational strategy at DTNA is simple according to Beck. In short, Beck wants to work on the company’s digital foundation by preparing DTNA’s backend for the future.

“You find a lot of complexity in your backend and so we’re trying to simplify it by taking the complexity out. Just placing innovation on top of a very complex backend doesn’t work.”

In preparing the digital foundation, DTNA is focused on modernizing IT legacy systems and infrastructures as the underlying foundation, driving operational excellence and developing DTNA-wide comprehensive data storage, management and analysis capabilities. DTNA is also moving towards an open enterprise platform strategy with aligned technology roadmaps.

“Because, there are topics which we cannot solve by ourselves,” Beck admits. “We need to have basically more partners, and authorities in there to help us solve our problems.”

Coming into an environment already steeped into a certain step of innovations while dealing with a very complex foundation throws up challenges, but Beck reiterates the importance of simplifying the back end.

“It’s difficult, because all these strategic building blocks are running and everybody wants to jump on that, and so we established this strategy of Building the Intelligent Company. We have one block working on the fundamentals and modernizing our foundation, while we work on the strategic building blocks. I now have both topics running in parallel. In order to get a bit more hold on what is happening, specifically on the more innovative topics. We are also setting up a Digital Transformation Office to steer the direction we are heading in, while looking at all the innovative topics, such as blockchain, virtual reality, augmented reality and big data, because everybody wants to be part of these.

“We needed to bring some structure into place, because as much as we want to try everything, there is so much we need to learn. Some of these things are not yet ready for us, or the technology is not yet at a point where we can really use it, or it just doesn’t make sense just for the industry at the moment. This process needs to be steered in a certain sense and that’s what we are doing with the digital transformation office, to get a full visibility about all the topics which are running in these areas. We might want to do a POC or an MVP, but let’s fail fast in the approach. If we notice it doesn’t make sense, then let’s just stop it, right? Because if it doesn’t bring business value to the company, then we shouldn’t do it.”

Undertaking a transformation of this magnitude nearly always disrupts the workplace and its incumbents, which can be the biggest challenge of all.

“Everybody thinks that digital transformation is a technology transformation,” says Beck. “But digital transformation is actually a cultural shift and a mindset transformation. This is the biggest challenge. Technology is just an enabler and will never be the limiting factor anymore. Because if you look at the cycles of the development of technology, we will not be able to apply all these technologies as fast as things are evolving. We need to work on this cultural shift and the understanding of digital transformation.

“What is it about? It’s more about new ways of working, new business models, new revenue streams, new jobs for people. You can easily be blocked by resistance coming from the people, because they fear change. So, we are doing a lot of communication to help people understand. We recently held a Digital Inspiration Day, just to bring our people up to speed with what we are doing. I brought in people who were running successful transformations from outside of our company to explain to my leadership team how things are going.

“I’m trying also to bring top management into discussion with leaders from other companies, in order to understand how they deliver transformation.” As DTNA develops as an innovative intelligent company, it is constantly working with young, fearless start-ups and leading innovators. A recent hackathon in Austin, Texas was conducted to find fresh new ways of problem-solving.

Daimler Trucks North America is trying to think like a start-up by constantly engaging with new talent.

“It is good for us to learn how start-ups are acting and it’s good for them to see what the industry doing,” Beck explains. “We have lots of discussions with start-ups to leverage different points of view. We need to be able to decide what can we give outside and what to keep inside. Because, that’s a potential new business model for us. If you look at the truck, it’s a device, nothing else. Now, if you look at the phones, there is not much difference anymore, nowadays. Yes, maybe one has a better camera or whatever. But at the end of the day, what is attracting people is the service around the device; the services you have on your phone. And this will be, in a certain way, the same for our trucks; the services you build around them and how convenient it is for our dealers and customers to use them. And that’s exactly what we need to work towards.”

A majority stake in Torc Robotics was acquired recently, to help bolster Daimler’s work on the autonomous front. This September saw the start of testing of Daimler Trucks’ SAE Level 4-intent heavy-duty trucks on Virginia highways; a major step in Daimler Trucks’ plan to release the trucks in 10 years’ time. The next decade certainly represents a revolution for companies like Daimler Trucks North America and Beck is certainly comfortable to be at the forefront of such massive change. “You need to go out of your comfort zone every single day. You need to create new things. You need to establish relationships and new organizational ways of working. Daimler Trucks North America has a very big history of building trucks, but it’s also our duty to do something different.”

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