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When economies of scale backfire

⚡When economies of scale backfire

In the most recent "Manager Magazin" I read an article on VW and their software efforts.

Since many years VW is trying to build a new unified software architecture for their different brands and models.

And since many years they are struggling, not really getting anywhere.

Cariad, the 6.500 people big software organisation is currently being re-organised again and expected to deliver their software by end of the decade instead of last year. Plus the software architecture will probably already be outdated by then.

What do economies of scale have to do with that?

Normally big corporations try to leverage economies of scale in order to drive cost down.

So it makes sense to unify as many brands under one roof and try to build shared production systems and technology for all of them to use.

VW naturally faces a lot of problems doing this: they have to unify company cultures, unite actual different European cultures under one roof, orchestrate hundreds of different suppliers, keep some management decentralized, and make some central, all while managing all the historical stakeholders.

Probably an impossible task?

My hypotheses: the cost to unify all these aspects in order to actually leverage economies of scale far outweighs the potential cost savings by economies of scale lateron.

So what should VW do?

Go small. Build an Electric Vehicle from scratch in Wolfsburg. Build the software from scratch. Act super customer centric. Make that fast and make it successful with the customer. Then switch the brands over to the new architecture step by step. Be bold!

Make the other brands want it, instead of trying to push the Porsches and Audis to use the architecture.

Just my 2 cents.

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