Layoffs at Cariad: What went wrong?
First of all, all the people I know at Cariad put their heart and soul into their work. In this respect, I am particularly sorry for these people that Cariad now has to announce redundancies. Up to 2000 employees are to go, that's around 30% of the workforce.
The vision was grand: Cariad was to develop a software platform for vehicles that would be used by all VW Group brands. The completion of version 1.2, planned for 2022, has been delayed and now comes the wave of redundancies. What went wrong?
Quickly created from the ground up
Cariad was initially set up within VW in 2019. Cariad has been an independent business unit since 2020. The name Cariad has also only existed since 2021 and stands for "CAR, I Am Digital". According to VDI-Nachrichten the Management Board has now decided to make redundancies.
Cariad's ambitions were enormous right from the start: in a very short time, an organization of 6000 employees was set up to provide a highly complex software platform. Christian Müller recalled Brooks Law on LinkedIn:.
According to Brooks Law, the more people are involved, the slower projects become. Cariad has grown to 6,000 employees in a very short space of time. Scaling to this extent creates a level of complexity that is almost impossible to manage. Inefficiencies and delays are inevitable.
Christian Müller
Is that systems engineering?
The idea of setting up an organization outside the VW Group is understandable. The classic architectures for vehicles differ drastically from what is needed today (keyword Software-Defined Vehicle). So it seems obvious to move away from these architectures and set up new and clean "on a greenfield site".
But this kind of thinking neglects the fact that we are ultimately interested in the overall system, i.e. the vehicle. Such an approach lacks the integrative approach of systems engineering. If the path to the overall system is too long, then things will go wrong in the integration phase. Here is another quote from the LinkedIn discussion, this time from Stephan Roth:
Transdisciplinary means that the boundaries (silos) between the engineering disciplines (design and mechanics, electrical engineering, software, etc.) are dissolved and all engineering activities must be understood as merged, collaborative and integrative activities. Basically, INCOSE thus suggests the opposite of the classic, Taylorist organization with hierarchical structures
Stephan Roth
Against this background, the outsourcing of software development in the form of CARIAD is and was an organizational anti-pattern.
How do the others do it?
When investigating new approaches, it is often Tesla rightly so. Even if the company (and its eccentric boss) has a habit of exaggerating excessively, Tesla is still delivering concrete results. In particular, Tesla has introduced new paradigms that follow the idea of the software-defined vehicle.
This approach is now being copied by many companies, especially in China. A well-known face in this regard is Joe Justice, who introduced the concept of Extreme Manufacturing and today advises Mercedes-Benz.
Beautifully formulated Sylvius Gerber on LinkedIn about what Tesla does differently:
[How did Tesla and others do it?] Green field and hardware built around the software. The German carmakers do it the other way around and have all the things from the past and the interest groups that prevent them from making real progress.
Sylvius Gerber
What now?
On LinkedIn Carsten Pitz has his say with the wish that the redundancies at Cariad will affect the "right" 30%. But neither the other panelists nor I believe that this will be enough. Or is even the right way to go.
VW must have the courage! Developing a software platform is half-hearted on the one hand and (as Stephan Roth said) an anti-pattern on the other. Instead, the vehicle should be broken down into a few large components with clearly defined interfaces, as Joe Justice did with Wikispeed has set an example. However, this also means that each of these component groups has autonomy, including for the software.
Companies like Ree understand this and focus on one such component and only produce the chassis.
Another issue is the core IP of a company. VW wrongly assumed that this was the software. But here, too, it helps to look at other companies. In a software-defined product, the microchips are part of it. This is why Apple, Tesla and many other companies are now developing their own SoCs (system-on-a-chip).
What is happening here is a drama, because VW is an important company for Germany. But the Group has a centuries-old engineering culture. Of course, this refers to mechanical engineering, not software development. You can't just change a culture, not even with a separate location.
I would be delighted if Cariad and VW manage to turn things around. That would be a win for the people there and for Germany as a business location.
Image source: Cariad press kit
