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Portfolio Management | Industry Insights

Reduce Complexity in Your Automotive Technology Portfolio

The automotive industry is undergoing a profound transformation, driven by technological advancements and shifts in consumer expectations. The future of mobility is likely to see cars as continuously updating platforms, similar to smartphones. This will mean new demands in terms of connectivity, electrification, autonomous vehicles, and car-sharing services. 

The resulting complexity of technology portfolios in the future poses a challenge for automakers. In a recent study by PwC, 57% of executives expect a linear increase in the complexity of R&D operations and technology portfolios within the next five years, 21% even expect an exponential increase. At the same time, only 20.5% of companies have implemented a systematic approach for systematically evaluating and handling such complexity. In this article, we’ll shed light on this critical issue and examine ways that automotive companies can reduce complexity and stay focused. 

Shifts in the automotive industry increasing complexity

In the 20th century, complexity in automotive engineering was about mechanical hardware. Today, the majority of innovations at OEMs and first-tier suppliers are tied to software. No other industry is undergoing as rapid technological change as mobility, says Professor Zoran Filipi, Chair of the Automotive Engineering Department at Clemson University in South Carolina.

Automakers now have to manage the complexity of software interconnected with mechanical parts, including advanced driver-assistance systems and energy management. Development costs have surged for makers of electric and connected vehicles: R&D spending has outpaced sales growth in Europe and North America. While this increased complexity likely benefits the public, it does put additional strain on automakers. Expanding your technology portfolio increases costs throughout the organization. 

Managing your innovation portfolio in the automotive industry

The complexity of your innovation portfolio has an impact on performance. When a company struggles to manage an extensive tech portfolio, overhead and administration costs increase. That means that technology portfolio managers need to make the right trade-offs between the value of flexibility and the cost of complexity.

One way to do this is Complexity Reduction, a method companies use to strengthen core capabilities and align technology with business objectives. In the context of automotive technology,  you would streamline operations by eliminating components that increase complexity and do not add significant value. Automakers are now using modularization and standardization to create product variants from a limited number of components. By aiming for simplicity, it’s possible to deliver on customer experience while reducing the amount of physical components. Consider the way Apple did away with a physical keyboard on the first iPhone and how Tesla has simplified the car cockpit by replacing almost all physical buttons with one touchscreen. 

We recommend understanding the sources of complexity in your tech portfolio and identifying opportunities to simplify products. Using ITONICS software for technology management makes it easier to prioritize the most lucrative technology investments. Assess your technology portfolio with an increased customer focus by connecting technologies with consumer trends. Plot technologies and suppliers on the ITONICS Matrix view to determine the best strategic fit. 

ITONICS Matrix displaying an Automotive Technology Portfolio

Evaluate automotive components on a collaborative platform

As automotive companies grow, there’s an initial increase in productivity. However, as the company expands geographically and hires more staff, it often leads to the decentralization of R&D efforts across multiple locations. This can result in duplicated efforts and scattered resources, ultimately diminishing the return on innovation investment. Without a single source of truth to support innovation efforts across various locations, companies will experience misalignment and inefficiencies. 

One solution to centralize innovation intelligence is the ITONICS Innovation OS, which offers a collaborative environment to connect insights and initiatives. It equips you with the tools to reduce redundancy and complexity in your technology portfolio. Gain better oversight and manage your technology investments by mapping them out on the ITONICS platform.

The next step in managing complexity is collective evaluation of your technology portfolio. By involving stakeholders from various departments—including R&D, engineering, and supply chain management—companies can gain a holistic understanding of current technology assets and identify gaps in the portfolio. This collaborative approach ensures decisions are based on a comprehensive assessment, not just one department’s opinion. Collective evaluation not only aids in identifying problem areas but also promotes transparency and internal stakeholder buy-in, which is essential when difficult decisions need to be made about disinvestment. 

You want to establish clear evaluation criteria beforehand that align with the company’s strategic goals, market needs, technical requirements, and resource constraints. This preparatory step guides the decision-making process, ensuring that the technologies the company proceeds with are well-suited to advance the company’s objectives and capabilities. A useful resource to inform your evaluation criteria is our downloadable “How to rate technologies” cheat sheet. This process can help automotive companies identify duplication in their technology portfolio and maximize the return on investment from existing assets.

Align to three strategic focus fields

Developing a strategy requires leaders to make a choice about what company strengths to prioritize. An example of this is Toyota’s strategic approach to inventory planning. The Toyota Production System aims to eliminate waste,  inconsistencies, and unreasonable requirements. This resulted in a production line that is low-cost, flexible, and easy to maintain. In contrast, we’ve seen big banks fall into the trap of often having too broad a strategic focus, which dilutes efforts and resources. Despite facing disruption from digital technologies, some traditional banks have scattered their innovation efforts across various departments without a unified strategy, leading to underfunded and unsuccessful initiatives.

Resources are finite, so you need to make the most of them. That is why we recommend deciding on three strategic focus fields, and making sure all the technologies in your portfolio contribute to at least one of those three areas. Many companies find it difficult to focus in this way, but it is necessary. By limiting their focus, they ensure that all innovation efforts directly support core business goals, and not just legacy projects and technologies.

The road ahead: agile and interconnected 

Ultimately, reducing complexity in your technology portfolio involves simplifying products while focusing on the company’s core strengths. It isn’t just about cutting costs—it’s about making strategic choices that sharpen the company’s focus. Set up a single source of truth to map out your portfolio and get input from various departments. Slow innovation and lacking agility are often consequences of a disconnected innovation process. Using an end-to-end innovation software solution like ours supports an agile process where it’s necessary to regularly re-allocate finite resources to opportunity areas in the ever-evolving automotive industry. To see how ITONICS can help you innovate to meet future customer expectations, book a demo with our experts. 



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