Latest / Lab to Market Leadership with Chris Reichhelm / Doing Business with the Automotive Industry | Dr Andy Palmer, CMG

Transcript

Doing Business with the Automotive Industry | Dr Andy Palmer, CMG · Lab to Market Leadership with Chris Reichhelm

• 0:00
  Andy Palmer: Typically, a takt time of a new car might be, might be 60 seconds.
• 0:08
  Andy Palmer: So you're building a new car every 60 seconds on a moving line.
• 0:14
  Andy Palmer: You've got to get your bit, and there are 10, 000 discrete bits, 100, 000 parts, but as they get pre assembled, 10, 000 bits that have to hit that moving line in a one minute window.
• 0:34
  Andy Palmer: If you want to be a supplier for car companies, That's what you have to be able to do reliably day in, day out.
• 0:41
  Chris Reichhelm: Welcome to the Lab to Market Leadership podcast.
• 0:45
  Chris Reichhelm: Too many advanced science and engineering companies fail to deliver their innovations from the lab to the market.
• 0:51
  Chris Reichhelm: We are on a mission to change that.
• 0:53
  Chris Reichhelm: My name is Chris Reichhelm and I'm the founder and CEO of Deep Tech leaders.
• 0:58
  Chris Reichhelm: Each week we speak with some of the world's leading entrepreneurs, investors, corporates, and policymakers about what it takes to succeed on the lab to market journey.
• 1:09
  Chris Reichhelm: Join us..
• 1:11
  Chris Reichhelm: If you are an advanced technology or engineering company looking to impact the automotive industry, you need to listen to this week's podcast.
• 1:27
  Chris Reichhelm: I'm talking to Dr.
• 1:29
  Chris Reichhelm: Andy Palmer, who is the godfather of EVs in the UK and Europe and probably elsewhere too.
• 1:40
  Chris Reichhelm: Andy has had a long career in the automotive industry.
• 1:44
  Chris Reichhelm: He served as the number two, the COO for the Nissan Corporation.
• 1:50
  Chris Reichhelm: He was also the CEO and president of Aston Martin.
• 1:54
  Chris Reichhelm: And since then, he's gone on to have numerous Chair roles and non executive roles and advisory roles and I know that he's, he's developed even his own business to advise young advanced technology and engineering companies that are looking to get into the automotive industry.
• 2:13
  Chris Reichhelm: There are very few people in the world that I think know as much about new technology adoption within the automotive industry as Andy.
• 2:24
  Chris Reichhelm: And we're delighted to have him on the show this week.
• 2:28
  Chris Reichhelm: I want to talk to him about how a young company makes an impact in the automotive industry.
• 2:35
  Chris Reichhelm: What do they need to know when they start engaging with OEMs?
• 2:40
  Chris Reichhelm: How do automotive OEMs think and make decisions?
• 2:44
  Chris Reichhelm: Uh, and a lot of other things too.
• 2:47
  Chris Reichhelm: So without further ado, let's get into it.
• 2:50
  Chris Reichhelm: Andy Palmer, for joining me.
• 2:52
  Chris Reichhelm: Great to be here.
• 2:54
  Chris Reichhelm: You've operated at the top of the automotive industry.
• 3:07
  Chris Reichhelm: Uh, and more recently you've been serving on the boards of young advanced technology companies too.
• 3:17
  Chris Reichhelm: What is, in your view, the, the realistic opportunity for these young companies that are looking to impact markets like automotive?
• 3:36
  Andy Palmer: Patience is a, is a, a key facet.
• 3:42
  Andy Palmer: of reaching an automotive company.
• 3:44
  Andy Palmer: Automotive companies by nature, of course, are technology companies, but they move relatively slowly.
• 3:50
  Andy Palmer: And they, they move in product cycles.
• 3:53
  Andy Palmer: So the development of a new platform, which perhaps happens every seven, seven to even 10 years.
• 4:00
  Andy Palmer: So making sure your technology is Incorporated into those platforms is a key part of that integration.
• 4:09
  Andy Palmer: Now, the opportunity for a lot of these young startup companies is, is the agility that they bring.
• 4:16
  Andy Palmer: They can do things that big car companies can't do.
• 4:21
  Andy Palmer: They can move much more quickly and in sync with, with consumer requirements.
• 4:28
  Andy Palmer: And in some cases they can do things better.
• 4:32
  Andy Palmer: I think about the way that young companies tend to develop software in an agile form, which big car companies are really only just getting their heads around how to do that.
• 4:45
  Andy Palmer: Uh, and, uh, and that leads to better quality of software development, for example.
• 4:50
  Andy Palmer: Um, so, so there is, there is a room within the eco structure of developing motorcars.
• 4:58
  Andy Palmer: There is a, there is a position which startups can take, and that might ultimately mean that they're a supplier to the car companies, or their technology is licensed.
• 5:11
  Andy Palmer: Or of course, so they can get absorbed by the car makers.
• 5:13
  Andy Palmer: But that's just how the, the system, the system consumes that, uh, that, that idea, idea, idea.
• 5:22
  Andy Palmer: Now, at the end, You've got to start with a really good idea, that's the key, uh, and then how you bring it to market and how you see it through that seed round, that series A, B, C, in scale and ultimately how it might find its way into an OEM.
• 5:41
  Chris Reichhelm: There are lots of advanced technology companies with lots of different platforms trying to pursue opportunities in automotive.
• 5:52
  Chris Reichhelm: Why don't we, it would be really helpful, I think, to start out and understand the, how automotive OEMs see new technology adoption.
• 6:02
  Chris Reichhelm: You mentioned the product cycles.
• 6:04
  Chris Reichhelm: And making sure you're timing your entry in line with their cycles.
• 6:08
  Chris Reichhelm: Can you kind of outline that for us?
• 6:11
  Chris Reichhelm: How does that system work?
• 6:13
  Chris Reichhelm: Um, you know, what are the parameters and dynamics of that?
• 6:17
  Andy Palmer: Conventionally, um, typically a platform, which is, if you will, the underbody of a car, will last two cycles of an upper body.
• 6:31
  Andy Palmer: So, if you think about, um, uh, let's say a Micra, for example, you'll develop a platform, the first, the first iteration of upper body, the style of a car, would typically last six, seven years, and then get a big facelift.
• 6:52
  Andy Palmer: A second generation of the vehicle and so the platform will typically last, let's say, 14 years maximum, 12 to 14 years.
• 7:03
  Andy Palmer: Um, there is adoption of technology within that platform cycle, but generally the big radical stuff gets done in the new platform.
• 7:13
  Andy Palmer: Now, that whole cycle has been shook up a little in the, in recent years.
• 7:19
  Andy Palmer: Mainly, as you move from an internal combustion engine to an EV, and so what you've seen is very heavy expenditure, CAPEX.
• 7:27
  Andy Palmer: Going into the car companies as they deliver new platforms in the various, um, A, B, C, D type of vehicle configurations.
• 7:37
  Andy Palmer: And so there's been an opportunity of late to introduce technology somewhat more quickly than has been done in the past, but that also comes with a penalty and you've seen some of those big car companies suffer with the quality of their software as a result almost of, of trying to do too, too, too many things too quickly.
• 7:57
  Andy Palmer: But it, it, it's, it's really important as that settles down, as EVs become more the norm, that the, that the cycle will return to that typically.
• 8:08
  Andy Palmer: Um, 6 plus 6 or 7 plus 7 years of, of development.
• 8:15
  Andy Palmer: Um, so once you know that, obviously you need to know the number of platforms that a car company has.
• 8:23
  Andy Palmer: Typically, 3, 4, 5, uh, and normally they're synced so that you're not developing all platforms at the same time.
• 8:31
  Andy Palmer: So, uh, the company needs to understand where it's aiming its technology.
• 8:35
  Andy Palmer: For example, if it's particularly expensive technology, you probably want to be looking at the luxury platforms, the, the D, the D segment and the SUV platforms.
• 8:45
  Andy Palmer: Because there's more of a, an ability to absorb the cost of the technology on those, those higher priced vehicles.
• 8:54
  Andy Palmer: Um, if you've got more affordable technology, then maybe you're, you're open to, to democratizing it somehow by getting it into the A, B and C segments.
• 9:02
  Andy Palmer: So, being cognizant of that.
• 9:04
  Andy Palmer: Being in close coordination with the OEMs, understanding not only the purchasing channel into the OEM, but also the technology channel into the OEM, trying to find a sponsor inside of the OEM.
• 9:21
  Andy Palmer: I always say if you can, try and find an executive on the board to be your sponsor, but don't expect him or her to do everything for you.
• 9:29
  Andy Palmer: You've got to garner relationships.
• 9:32
  Andy Palmer: With the, uh, with the technology side, the engineer that's the champion of your technology, and the purchasing side, because ultimately, purchasing will be making essentially the decision to source you or not.
• 9:45
  Andy Palmer: And then think about the risk.
• 9:47
  Andy Palmer: You've got to manage the risk of your technology on behalf of the OEM.
• 9:52
  Andy Palmer: You've got to demonstrate how risk is being mitigated through your pre development and before you put it onto the, the start of the platform development.
• 10:03
  Andy Palmer: Um, and talking that language to OEMs is really, really important in terms of getting a foot in the door.
• 10:11
  Chris Reichhelm: Do you need to demonstrate you can operate Your development processes and the way you're going about developing your platform in general is going to align with the way they work.
• 10:23
  Andy Palmer: Look, it's slightly different OEM by OEM, but if I think about the Asian OEMs that have got very strong processes, the German OEMs are the same.
• 10:35
  Andy Palmer: Yep.
• 10:35
  Andy Palmer: Then you have to talk their language.
• 10:37
  Andy Palmer: You have to understand the nomenclature of their development cycle.
• 10:43
  Andy Palmer: You've got to demonstrate how you sync into that, how your product development is matching with their product developments, normally at least one cycle ahead, uh, and you need to be able to talk that language to both the technical side and the commercial side.
• 10:58
  Andy Palmer: So, other OEMs, some of the French, British, American, are less formal perhaps with the product development, may be prepared to take a little more risk, but you need to know your customer.
• 11:17
  Andy Palmer: Uh, and you need to talk the language of that customer and it's not rigid, it's different.
• 11:21
  Andy Palmer: When you talk to VW, it'll be different to talking to BYD, different to talking to Toyota and different to talking to, let's say, Ford.
• 11:30
  Andy Palmer: So you need to adapt your, your descriptive way of presenting your technology, how you're going to develop the technology, you need to modify it according to the customer.
• 11:44
  Chris Reichhelm: You mention in, and there's so much to unpack and what you've just gone through, it's hugely helpful, but you mentioned something about developing a cycle ahead.
• 11:53
  Chris Reichhelm: Can you expand on that?
• 11:55
  Chris Reichhelm: What is developing a cycle ahead?
• 11:58
  Andy Palmer: Um, it basically means that the maturation of your technology is one step ahead.
• 12:05
  Andy Palmer: of the OEMs maturation.
• 12:07
  Andy Palmer: So for example, when, when you go to what some, some manufacturers might call, um, PT2, which is the final trial before start of production, they don't want to be developing the product's quality anymore.
• 12:25
  Andy Palmer: So they want to make sure that the suppliers are essentially developed, essentially got a part, which is as starter production quality is already demonstrated as capable of running at scale, has essentially eliminated its risks.
• 12:43
  Andy Palmer: In other words, doing what the OEM is doing, but one cycle ahead.
• 12:49
  Andy Palmer: And by doing that, of course, you're, you're helping the OEM mitigate their risks.
• 12:53
  Andy Palmer: Their risks are the way that they put the car together.
• 12:57
  Andy Palmer: What they don't want to be doing is, is managing the risk of, of your development not being ready.
• 13:02
  Andy Palmer: So that's why I would say you always need to be at least one cycle ahead.
• 13:07
  Andy Palmer: That's difficult by the way, because that also means that you're ready to go into production probably three months before the OEM is ready to go into production.
• 13:17
  Andy Palmer: And that means you're sitting on a process that is ready on a product that is ready, but you're not earning any revenue on that product for at least three months because the car company hasn't ramped up.
• 13:32
  Andy Palmer: And that means that you need to build that into your cash flow calculations because you're going to be sat idle for a while.
• 13:40
  Chris Reichhelm: Yeah.
• 13:40
  Chris Reichhelm: And You know, that begs all kinds of questions around timing and in particular, timing of when, when a, a young innovative company should be making contact with OEMs, tier one, tier two suppliers, whatever.
• 14:01
  Chris Reichhelm: But when they should be initiating that contact, is it when they're still developing an idea or when they're kind of lower down the TRL development cycle is when they've got something as you've just mentioned.
• 14:14
  Chris Reichhelm: That's much more fully developed.
• 14:15
  Chris Reichhelm: When would you advise that they start to get serious in their outreach?
• 14:20
  Andy Palmer: Well, to use the TRL nomenclature, probably you need to be heavily discussing with the OEMs around TRL 3.
• 14:28
  Andy Palmer: So you've got a good, mature
• 14:31
  Chris Reichhelm: Your TRL 3, if I'm a young company approaching an OEM, when I've got TRL 3 on my platform, that's when I start to reach out.
• 14:41
  Andy Palmer: Yeah.
• 14:42
  Andy Palmer: Because it's going to take you a lot longer to, uh, to, uh, develop with the, uh, the with the OEM than you think.
• 14:55
  Andy Palmer: I've sat in board meetings of startup companies that assume that they're going to get an order for their great idea, you know, three months down the line when you're going to write the, uh, when you're going to write the purchase order.
• 15:06
  Andy Palmer: Two years later, they're still not got an order.
• 15:09
  Andy Palmer: And that's normal.
• 15:10
  Andy Palmer: That's just normal.
• 15:11
  Andy Palmer: It takes that, that kind of period of time.
• 15:14
  Andy Palmer: So, you need to start easing the OEM Uh, into the, into feeling comfortable with you as a company, comfortable with your technology, and you're going to take them on a journey.
• 15:26
  Andy Palmer: But you're not there to take them on a journey that is, you know, transactional.
• 15:31
  Andy Palmer: It's on a growth trajectory, learning together so that they know what they're getting.
• 15:37
  Andy Palmer: Uh, and, and, and that ongoing relationship is, is really, really important.
• 15:42
  Andy Palmer: But don't expect a car company to write you a purchase order three months after you met them.
• 15:46
  Andy Palmer: They won't do it.
• 15:47
  Andy Palmer: They won't do it.
• 15:48
  Chris Reichhelm: No, yeah.
• 15:51
  Chris Reichhelm: So with that, what are the kinds of talents and skills and kind of capabilities that need to be in place in a young advanced technology company with hopes and ambitions to engage the automotive industry.
• 16:10
  Chris Reichhelm: What needs to be in place, even at that very early age, TRL3 is still, you know, we're, you know, we're completing research.
• 16:16
  Andy Palmer: Yeah.
• 16:17
  Chris Reichhelm: So what are the things that need to be there, even at that young stage?
• 16:22
  Andy Palmer: So I think there are, I'll put it into probably three buckets.
• 16:29
  Chris Reichhelm: Yeah.
• 16:29
  Andy Palmer: First bucket is the easy one, which is whatever the technology is that you're developing, you need to be really good at it.
• 16:36
  Andy Palmer: Um, and, and so, you know, from your probably drawing from your research environment, maybe it's a spin out of a university, wherever it's coming from, obviously you need to, to, to know what you're doing and be really good at it.
• 16:53
  Andy Palmer: And also cognizant of the unique selling point that you're developing, cognizant of the story.
• 17:02
  Andy Palmer: Storytelling is really, really important in any startup.
• 17:06
  Andy Palmer: It needs to be compelling.
• 17:08
  Andy Palmer: And you need to be able to present it almost as if it was a, fabulous novel, um, that has a beginning, a middle, and an end.
• 17:17
  Andy Palmer: You need to be able to tell the customer what you're going to tell them, tell them, and then tell them what you've told them.
• 17:24
  Andy Palmer: It's really important that that story flows.
• 17:26
  Andy Palmer: So developing whatever you want to call it, let's call it a CIM, a CIM, uh, or a teaser.
• 17:33
  Andy Palmer: You start doing that from day one because.
• 17:35
  Andy Palmer: If you, if you've got an idea that isn't matching with consumer need, that isn't uniquely positioning yourself, then you probably haven't got a product.
• 17:44
  Andy Palmer: So that's kind of bucket number one.
• 17:49
  Andy Palmer: Bucket number two, um, is something that can start really, really small, but learn about your potential customers process.
• 17:59
  Andy Palmer: Learn about how your potential customers work.
• 18:03
  Andy Palmer: Start working on the key contact list.
• 18:07
  Andy Palmer: Start teasing those individuals, start meeting those individuals at conferences, uh, um, but, but start the relationship.
• 18:18
  Andy Palmer: You'd call it marketing, but it's not overt marketing.
• 18:21
  Andy Palmer: It's, it's about teasing the network and making people aware of you and also be aware, of course, uh, there's quite a high turnover of senior executives in car companies.
• 18:31
  Andy Palmer: So you need to keep on top of, of what's happening inside your target organization.
• 18:37
  Chris Reichhelm: Yeah,
• 18:38
  Andy Palmer: Third and last bucket, financial discipline.
• 18:42
  Andy Palmer: Most startups don't make it because they run out of cash.
• 18:48
  Andy Palmer: And, uh, it's really easy to find yourself in, in financial strife and it's always cash flow related.
• 18:56
  Andy Palmer: So whenever I go into a startup company, um, or indeed any company that is not at a level of mass production, uh, I always insist on having the discipline of a 13 week cash flow.
• 19:11
  Andy Palmer: 13 week is, is obviously a quarter plus a week, um, and, uh, basically you, you look at all the money that you anticipate coming in, all the bills you anticipate going out, And you look to make sure that you, your liquid in both from a balance sheet test point of view, and just from a pure cashflow point of view, and you instill that discipline on a week by week basis.
• 19:35
  Andy Palmer: That discipline done at a very early stage will serve you well for the rest of the rest of the company's life.
• 19:42
  Chris Reichhelm: Yeah.
• 19:42
  Chris Reichhelm: That's, that's, that's, uh, That's a lesson that needs to be adopted much more.
• 19:49
  Andy Palmer: Yeah.
• 19:50
  Andy Palmer: It will make, as you, as you go through your, your seed round, as you go through your C, A, B, C, being able to demonstrate that, uh, well, in fact, being able to demonstrate that you've got good stuff in those three buckets, in the content of the product, um, in, in your understanding of your customer and in the discipline of your finances, being able to demonstrate that will help you.
• 20:17
  Andy Palmer: We'll help you raise that, those, the, that, the money that you need at each of those rounds.
• 20:24
  Chris Reichhelm: Can I take you back to bucket one for a second?
• 20:26
  Andy Palmer: Yeah.
• 20:26
  Chris Reichhelm: Um, you mentioned the storytelling piece and
• 20:30
  Andy Palmer: Yeah.
• 20:31
  Andy Palmer: Michael
• 20:31
  Chris Reichhelm: How do you, how do you, if you're at TRL three or even you're at TRL four or you don't know all of the dimensions of your solution yet.
• 20:44
  Chris Reichhelm: Yeah.
• 20:44
  Chris Reichhelm: And in some cases.
• 20:45
  Chris Reichhelm: You've got a hunch, uh, that, and it's a provable hunch.
• 20:49
  Chris Reichhelm: It's a, it's an increasingly provable hunch, uh, a hypothesis that you're, you know, that, um, that you're working on, but you don't have that story complete yet.
• 21:01
  Chris Reichhelm: So I imagine there must be a balance, a balancing act
• 21:07
  Andy Palmer: There is
• 21:07
  Chris Reichhelm: between how much you draw someone in and, uh, and you know, and the, and the claims you're prepared to make versus making sure not to misset expectations or give false hope.
• 21:18
  Chris Reichhelm: How do you manage that?
• 21:21
  Andy Palmer: I would argue that your, your, your, your pitch at that stage, you're really creating a pitch deck, call it what you want.
• 21:30
  Andy Palmer: I call it generally a CIM.
• 21:33
  Andy Palmer: I would say it's a live document and it makes hypotheses.
• 21:37
  Andy Palmer: But it has to be there.
• 21:39
  Andy Palmer: The story has, as you see it today, has to be there.
• 21:43
  Andy Palmer: Perhaps the story says there may be some junctions where we need to make decisions, but it needs to be a compelling story.
• 21:51
  Andy Palmer: Even if it says at some moment we may choose to go left or right, It still needs to be a compelling story.
• 22:01
  Andy Palmer: Just taking an idea and you look at it, for example, as you know, I am Chairman at a company called Brill Power, which makes complex electronics for managing batteries.
• 22:14
  Andy Palmer: Most investors want to understand the language of the, of the, of the technology, because we're talking, we're talking in terms of electronics and, uh, uh, electronic circuits and software.
• 22:27
  Andy Palmer: And so what you've got to do is you've got to turn what is a very, for them, a very, very clever battery management solution.
• 22:36
  Andy Palmer: You've got to turn that into real world English.
• 22:39
  Andy Palmer: that that investors and customers can understand.
• 22:43
  Andy Palmer: And so if you think about your story, whatever your story is in the middle, that basically there are different customers of that story.
• 22:53
  Andy Palmer: There's your customer, the person that you're trying to sell to.
• 22:57
  Andy Palmer: There's the investment story.
• 23:00
  Andy Palmer: So ultimately that will become your IR department, uh, if you get as far as, as, as floating the company.
• 23:06
  Andy Palmer: There's the marketing department.
• 23:09
  Andy Palmer: There's the internal communications department.
• 23:13
  Andy Palmer: Um, there's the investor, direct investor community.
• 23:17
  Andy Palmer: What you're trying to do is you're trying to make.
• 23:19
  Andy Palmer: Uh, a singular story that's adapted to those various, uh, customer, customers that you have as a, as a, as a company, whether you're asking them for money or whether you're trying to sell to them.
• 23:31
  Andy Palmer: But it should all be at the core.
• 23:34
  Andy Palmer: It should all basically be the same story in all being as you go through those TRL levels, an evolving story as you become more certain about what it is that the advantage of your technology.
• 23:50
  Chris Reichhelm: Is there an evaluation done by the car companies on their, on the capability or their perception of the capability of the team to deliver?
• 24:04
  Andy Palmer: Absolutely.
• 24:05
  Chris Reichhelm: And is that as much a part of the equation or their calculation as this story.
• 24:16
  Andy Palmer: Very clearly.
• 24:17
  Andy Palmer: At least let me speak for the company that I know inside out, which is Nissan.
• 24:22
  Andy Palmer: Nissan will, um, look at almost a graph of newness of the idea and call it innovation versus a perception of risk.
• 24:37
  Andy Palmer: And in the case of Nissan, at least while I was there, if you had stuff up in the top right hand corner, i.
• 24:44
  Andy Palmer: e.
• 24:44
  Andy Palmer: it was a brand new technology and it was highly risky, then you probably wouldn't go ahead.
• 24:49
  Andy Palmer: Or if you did, you'd only have one or two of that level of criteria.
• 24:54
  Andy Palmer: on any new development because you don't want to handle, you don't want to handle lots and lots of issues all at once.
• 25:00
  Andy Palmer: So there's an example of, of a company that's looking at that and saying, I'm not prepared to take that technology into this platform because it just has too high a risk.
• 25:10
  Andy Palmer: And risk is, uh, on, on a, on a variety of, of levels.
• 25:15
  Andy Palmer: Typically Nissan would have, would have looked at quality, cost delivery, development and management.
• 25:22
  Andy Palmer: So the management is, you know, looking at the management team and saying, does it have the experience to deliver this or not?
• 25:28
  Andy Palmer: The others are, are fairly at a quality cost delivery.
• 25:32
  Andy Palmer: Uh, it's, it's fairly easy to understand.
• 25:35
  Andy Palmer: Um, so, so all car companies will have some means of, of evaluating the idea and the idea particularly in startup companies will go way beyond simply looking at the product itself and look at the company and the risk of the company and the financial health of the company and the capability of the, of the management team to deliver.
• 25:55
  Andy Palmer: That's why it's so important, in my humble opinion, to, to make the connections a long time before you're gonna be selling the, the, the car company, something so that you, the, the team has had the opportunity to really know you.
• 26:10
  Andy Palmer: And the best thing that can happen is that if you can get the OEM to invest in you, because then there's a sense of ownership and stewardship of the product through the shareholding.
• 26:23
  Andy Palmer: So, you know, that's the win win if you can get to it.
• 26:25
  Andy Palmer: I'm not suggesting you will be able to get to it, but it's an example of if you can get to it, that, that helps a lot.
• 26:34
  Chris Reichhelm: Do you have a sense of thinking about these capabilities, thinking about that engagement, engagement, engagement?
• 26:42
  Chris Reichhelm: and building up that relationship with these, with the OEMs.
• 26:47
  Chris Reichhelm: Uh, there's an amount of trust that needs to be exchanged, that needs to be developed over time.
• 26:53
  Chris Reichhelm: There are expectations that need to be set and managed correctly.
• 26:57
  Chris Reichhelm: Um, things are going to go wrong because they always do, uh, in the development of platforms, but then that communication needs to be handled sensitively and clearly, uh, as well.
• 27:10
  Chris Reichhelm: And is there a, Are there a certain experience, are there a certain, or is there a certain level of experience that you would expect a young company to have on the team by a particular point?
• 27:30
  Chris Reichhelm: Or is it less about the experience and more about their ability to deliver?
• 27:37
  Andy Palmer: Well, this sounds a little bit like self promotion, I don't mean it like this, but the use of non executives and the use of advisors inside a small company is really useful.
• 27:47
  Andy Palmer: Try and get within your team, within your greater network, try and get someone with experience working with the car companies because that will help you make the introductions, but it will also give sounding board in terms of how you present certain solutions or certain problems.
• 28:06
  Andy Palmer: First point.
• 28:07
  Andy Palmer: Second point, uh, my experience is always be completely transparent with your OEM.
• 28:13
  Andy Palmer: Don't try and cover up something when something's gone wrong because the car company will find out.
• 28:19
  Andy Palmer: Uh, it's better to go with them, to them, with a problem that you've discovered than the other way around.
• 28:28
  Andy Palmer: It's nothing worse than being on the back foot.
• 28:31
  Andy Palmer: And when you go with a problem, go with a potential solution as well.
• 28:36
  Andy Palmer: That's why I say it's always better to be at least one step ahead.
• 28:39
  Andy Palmer: And also to the point really is setting expectations.
• 28:44
  Andy Palmer: As you go to each trial, as you go to each submission of whether it's design or parts, Go, let's setting a level of expectation so that you're not going to let them down.
• 28:56
  Andy Palmer: And it's, it's genuinely, it's often said, but, but often not done.
• 29:01
  Andy Palmer: Um, under promising and over delivering is always the mantra of, of approaching a car company.
• 29:08
  Andy Palmer: You never want to let them down because they, you lose trust.
• 29:11
  Andy Palmer: And once you lose trust, then you'll suddenly be up in that right hand corner.
• 29:15
  Andy Palmer: All that unison risk, that's not necessarily where you want to be.
• 29:19
  Andy Palmer: You want to be working your way down that risk curve as you go through the development cycle of your path into a new vehicle.
• 29:27
  Chris Reichhelm: Yeah.
• 29:29
  Chris Reichhelm: Um, you know, it sounds like you need an awful lot of discipline, uh, in, in running a company that really wants to engage seriously with these, you know, with this industry.
• 29:43
  Andy Palmer: Yeah, you know, you know,
• 29:45
  Chris Reichhelm: that kind of emotional control, you know, that kind of control, that strict management discipline, these aren't qualities or features normally associated with young companies, with startups.
• 29:58
  Andy Palmer: Now, if I take you back about 10 years, you might have remember, uh, um, an argument, public argument between sort of car companies and the, the likes of Apple and Google and what have you, where, where the car companies were kind of accused by the software companies of moving too slow, the not being innovative enough.
• 30:22
  Andy Palmer: And, and the, you know, the time it takes to develop new platforms.
• 30:27
  Andy Palmer: And, you know, I distinctly remember one of the car companies responding by, well, you know, when you have a tire, you can't simply switch it off and switch it back on again.
• 30:37
  Andy Palmer: That's not something that's going to be acceptable by the consumer.
• 30:42
  Andy Palmer: But more Importantly, you've seen big companies, big companies like Apple and Google, Dyson, that have tried to develop cars and have failed.
• 30:58
  Andy Palmer: And that's because developing cars is hard work.
• 31:00
  Andy Palmer: You've seen a lot of startups try to develop vehicles, and they come up with really good concepts.
• 31:06
  Andy Palmer: But they don't get through to the manufacturing stages because developing a car for production is really hard.
• 31:13
  Andy Palmer: And once you get to production, you can't afford to have software issues where you have to continuously switch it off and switch it on.
• 31:21
  Andy Palmer: Over the air updates sounds fantastic, doesn't it?
• 31:23
  Andy Palmer: And it is fantastic, but it doesn't change the fact that fundamentally your electronics need to be reliable, your software needs to be reliable.
• 31:33
  Andy Palmer: And when you have bugs.
• 31:35
  Andy Palmer: As VW did with the development of their early EVs, it's very damaging to the product very quickly, even if you do have over the air updates.
• 31:44
  Andy Palmer: So yeah, there's a lot to unpack there, but, but, but, but basically
• 31:49
  Chris Reichhelm: But people trust their cars.
• 31:51
  Chris Reichhelm: They need to trust their cars are going to work.
• 31:53
  Chris Reichhelm: They need to trust they're in a safe place.
• 31:55
  Chris Reichhelm: Their babies are in safe spaces when they turn on those cars.
• 31:59
  Chris Reichhelm: And, and yeah.
• 32:00
  Andy Palmer: Car is not the same.
• 32:02
  Andy Palmer: Yeah.
• 32:02
  Andy Palmer: A car is not the same as a con a a con, a consumable device.
• 32:06
  Andy Palmer: It's not,
• 32:07
  Chris Reichhelm: yeah.
• 32:07
  Andy Palmer: As you say, basically you entrust your family to, to the car and it's, it's why in the early days of autonomous driving, for example, where a lot of the tech is going at the moment.
• 32:19
  Andy Palmer: You know, people talked about reaching level five within a, level five means fully autonomous, fully eyes off the road, no steering wheel, talked about reaching that level, um, you know, within five years.
• 32:33
  Andy Palmer: And I was always saying, we won't reach level five in, in my lifetime, and I still stand by that.
• 32:39
  Andy Palmer: We won't reach level five by my lifetime, and I'm not planning on dying tomorrow.
• 32:45
  Andy Palmer: It's a long, long way away.
• 32:47
  Andy Palmer: Now getting reasonably to level, to level three, perhaps even in, in geo fenced, um, uh, areas up to level four, which is level four is truly eyes off the road, uh, is, is possible.
• 33:02
  Andy Palmer: Eyes off the road, anytime, anywhere, any country, any circumstances, that's a long way away.
• 33:09
  Andy Palmer: And that comes down to this, this basically understanding.
• 33:13
  Andy Palmer: And I think generally speaking, there is a much greater understanding of it in, in the industry now, that you need to reach a level of technology and reliability before you can entrust people's family to your particular piece of software or hardware.
• 33:33
  Chris Reichhelm: You, um, at the top of the show, we're talking a little bit about the planning cycles and how some of the big OEMs were open, well, and in fact did change some of their planning cycles in order to accommodate some of the new renovations, particularly in the EV space.
• 33:48
  Chris Reichhelm: Has, are those changes permanently in place?
• 33:51
  Chris Reichhelm: Have they reverted back to the old planning cycles?
• 33:56
  Andy Palmer: I think generally speaking, car companies are still coming to terms with, with what it means to develop a vehicle, which is often now largely software related.
• 34:07
  Andy Palmer: People talk about software, software in power vehicles.
• 34:12
  Andy Palmer: Um, generally speaking, Car companies work on a hardware cycle, and you still have an awful lot of hardware in a car, don't get me wrong, um, which generally means that you've got a development cycle, uh, that you've got gateways that you can plan your manpower, um, four years in advance for the development of that vehicle, and you do things which are generally speaking taken on a month by month basis.
• 34:40
  Andy Palmer: Software is hard to work like that.
• 34:42
  Andy Palmer: So generally speaking, you're into an agile environment, an agile environment, which is basically, uh, looking at defining the problem in a scrum and then doing a two week sprint.
• 34:54
  Andy Palmer: Entirely different, uh, and, and takes an entirely different mindset.
• 34:59
  Andy Palmer: In how you develop it.
• 35:00
  Andy Palmer: Now, at the same time, some, some people will advocate you can do the hardware on a, on a, uh, Scrum and Sprint basis.
• 35:08
  Andy Palmer: I would argue that's probably not true either.
• 35:11
  Andy Palmer: And somehow you need to integrate these two types of developments.
• 35:15
  Andy Palmer: Uh, into a common timescale.
• 35:17
  Andy Palmer: And I think generally speaking, car companies are still getting their arms around, around that particular concept.
• 35:24
  Andy Palmer: That's why working with startups is interesting because to some extent, uh, you can, you can buy that Scrum and Sprint, uh, Agile mentality by working with, um, uh, small startups that would by nature are more Agile.
• 35:43
  Chris Reichhelm: Yeah, I get that.
• 35:44
  Chris Reichhelm: And that.
• 35:45
  Chris Reichhelm: And that's the interest, you know, if you've got an, you know, if you've got a software company that wants to integrate their solution ultimately into the automotive industry, then yeah, then that makes a lot of sense.
• 35:55
  Chris Reichhelm: If you're building a multidisciplinary platform though, um, you know, that's going to involve a bit of hardware as a lot of deep tech companies.
• 36:03
  Chris Reichhelm: are, then, you know, then that's harder.
• 36:07
  Chris Reichhelm: But if I'm running a young company with hopes of getting into the automotive industry, I should continue to count on the traditional planning cycles?
• 36:17
  Andy Palmer: Absolutely.
• 36:18
  Andy Palmer: Car companies are, I'm not going to say not going to change, but they're going to be slow to change.
• 36:23
  Andy Palmer: They've taken 150 years to develop their know how of developing vehicles.
• 36:31
  Andy Palmer: Despite the distractors, car companies are really, really good at developing vehicles and launching new vehicles.
• 36:37
  Andy Palmer: So you can, you can argue they might be a bit dinosaurish in developing software, but they're really, really efficient at developing and delivering cars on time.
• 36:48
  Andy Palmer: I have never been in any car company that hasn't, uh, delivered its car to market more or less on time and certainly the latest I've ever been involved with a car launch that was late in six weeks.
• 37:04
  Andy Palmer: That's the latest that was considered utter disaster.
• 37:08
  Andy Palmer: Now, so, so, so basically, you know, that's a four year planning cycle and you, you, you get to, you get to pick the week in which you're going to launch four years in advance and you develop your products with a hundred million lines of software with a hundred thousand parts on the car and you deliver it in that week.
• 37:29
  Andy Palmer: That is what car companies do day in, day out.
• 37:35
  Andy Palmer: across the world.
• 37:36
  Andy Palmer: So, you know, they're really, really good at it.
• 37:38
  Andy Palmer: And what you've got to do as a startup company is you've got to integrate into that system, which goes all the way from product concept and product design, right the way through the sourcing cycle, the manufacturing cycle, and the supply chain cycle, and eventually arrives with your piece of something, be it hardware, software, or both, being line side, probably no more than 30 minutes before it's stuck on the vehicule
• 38:06
  Chris Reichhelm: just the sheer focus on delivery and delivery to the quality and to the economics and to the expectation that's required, um, at that level is, is, uh, is, is a serious effort.
• 38:25
  Chris Reichhelm: Where in your view, it is, it really is.
• 38:28
  Chris Reichhelm: If
• 38:29
  Andy Palmer: you think about it, typically a takt time of a new car might be, might be 60 seconds.
• 38:39
  Andy Palmer: So you're building a new car every 60 seconds on a moving line.
• 38:45
  Andy Palmer: You've got to get your bit, and there are 10, 000 discrete bits, 100, 000 parts, but as they get pre assembled, 10, 000 bits that have to hit that moving line in a one minute window.
• 39:05
  Andy Palmer: If you want to be a supplier for car companies, That's what you have to be able to do reliably, day in, day out.
• 39:15
  Chris Reichhelm: So, um, on that note, you've been advising, you've been advising Young advanced tech companies for a little while now as a board director, as a chair, not singling out any of them, but, um, I know you've advised a lot more that, uh, you know, compared to the number of board seats you've had, you've advised a lot of companies.
• 39:41
  Chris Reichhelm: In your view, standing back, where do most young companies go wrong?
• 39:48
  Chris Reichhelm: Where, you know, what are they failing to grasp?
• 39:50
  Chris Reichhelm: What skills or capabilities do they continue to lack?
• 39:54
  Chris Reichhelm: Where do they continue to go wrong in your view?
• 39:59
  Andy Palmer: Um, yes, I do advise a lot and I do advise a lot through my consulting company.
• 40:04
  Andy Palmer: Um, almost all of those startups, Um, misjudge the manufacturing maturity cycle.
• 40:18
  Andy Palmer: So developing any, any product, um, people look to the design freeze when the, basically when the development is finished and frozen from that point on.
• 40:33
  Andy Palmer: The car companies will be doing the manufacturing cycles.
• 40:36
  Andy Palmer: So they'll bring in, they'll, they'll be developing their supply chain.
• 40:40
  Andy Palmer: They'll be developing their ability to build the car reliably.
• 40:43
  Andy Palmer: And that typically is a one year, one year window.
• 40:46
  Andy Palmer: And so that's completely overlooked.
• 40:50
  Andy Palmer: It's overlooked not only by the way by startup companies, but it's been typically overlooked by a lot of the startup car companies that have come along and they find themselves with a product that they think is finished that they're not able to manufacture.
• 41:03
  Andy Palmer: And I remind you of, you know, Elon Musk's, um, comments about being in production hell.
• 41:11
  Andy Palmer: That production hell was basically how do you make the car?
• 41:16
  Andy Palmer: You've got a car, it's fully developed.
• 41:18
  Andy Palmer: But you now need to make it, you now need the supply chain to supply you, you need the takt times being refined so the stations need to be balanced and you need to have the training of the people.
• 41:30
  Andy Palmer: And it's really, really hard.
• 41:32
  Andy Palmer: It's perhaps the hardest part of developing a car.
• 41:35
  Andy Palmer: But it does mean that you've got a year where perhaps you hadn't planned for it.
• 41:41
  Andy Palmer: Perhaps you were expecting revenues during that year and you don't get them because you're only supplying trial parts, basically.
• 41:48
  Andy Palmer: And so what many, many young companies do is they misjudge the speed to revenue, and that impacts them directly in terms of that cash flow and it's that lack of cash flow that typically puts you out of business.
• 42:04
  Chris Reichhelm: But is there a, is there a failure, I don't know if you were hinting at this earlier, but is there a failure to appreciate just how difficult that, that window, that, that planning, that manufacturing planning cycle is?
• 42:20
  Chris Reichhelm: You know, if I've got a, if I'm,
• 42:25
  Andy Palmer: It's not sexy, right?
• 42:27
  Andy Palmer: So you look at it and you think, well, I, you know, once I've developed my bit, it goes into the car, the car is finished.
• 42:32
  Andy Palmer: Should be fairly easy.
• 42:34
  Andy Palmer: They're on.
• 42:35
  Andy Palmer: And it's much misunderstood that manufacturing maturation cycle, typically two trials, and a start of production with a gradual three month ramp up would be a typical type of maturation cycle.
• 42:49
  Andy Palmer: That is so often overlooked, but it genuinely is, I think, the hardest part of developing a car.
• 42:57
  Andy Palmer: And almost certainly during that cycle, you'll have the OEM asking you to modify something, because they'll find maybe your bit, they need to change the order of, of assembly, and therefore your bit suddenly doesn't fit anymore.
• 43:11
  Andy Palmer: Or, or perhaps there's a interference with a harness, or the multitude of things that happen that you hadn't considered as you go through that manufacturing maturation.
• 43:21
  Andy Palmer: So you suddenly find yourself on a back foot, because you thought you'd finished the development of your product, and suddenly you're asked to change something.
• 43:28
  Andy Palmer: Particularly if you've got a wiring harness associated with it, so often the harness is, maybe it wasn't the harness's fault, but it's the harness bit which is the easiest bit to change, so the electrical architecture gets changed, so quite often there are late cycle changes that you didn't expect.
• 43:44
  Andy Palmer: Um, but that's, normally that's completely overlooked in my experience of advising, let's say tens, if not hundreds of companies.
• 43:54
  Chris Reichhelm: Yeah, yeah, yeah, yeah, yeah.
• 43:56
  Chris Reichhelm: If you were, if you were setting up a new company.
• 44:04
  Chris Reichhelm: To support the automotive industry in some way, to supply a part, a service, well, it's not going to be a service, but a solution to the automotive industry.
• 44:11
  Chris Reichhelm: What are the lessons that spring to mind that you'd want to bring to bear as you're developing this young company?
• 44:19
  Andy Palmer: Uh, first and foremost, you need a fairy godmother, uh, you need, uh, a guardian, whatever you want to call it, but basically an OEM, a sponsor.
• 44:28
  Andy Palmer: Um, if, if you have a sponsor that will be with you through thick and thin, that ultimately gives you that first order so that you can demonstrate that you've got, uh, uh, an order booked, that, that will significantly change your chances of success.
• 44:49
  Andy Palmer: Stuff happens, stuff changes.
• 44:50
  Andy Palmer: But, but that, that's the key is that if you look at, for example, you know, I work with a number of battery companies, the battery companies that have been successful, the likes of Northvolt, um, basically start with having an order book with an OEM and an OEM, that's patient to develop them through, through the problems that they will have.
• 45:10
  Andy Palmer: So I, I would say above all, above all else, that's probably the, the, the best thing that you could do.
• 45:16
  Andy Palmer: Um, make sure that your funding cycles as you go out to those C, Series A, Series B, Series C, always make sure that they're where you can, not always easy, but where you can, that you have more money than you think you need.
• 45:31
  Andy Palmer: Um, you will run out of money much more quickly than you imagine, particularly as you start to scale.
• 45:37
  Andy Palmer: Um, and so take that into account and then the three buckets that I mentioned at the start that your product has a good story, has good technology, it has its own USP, um, really, really important that you understand the, the, the language of your customers.
• 45:55
  Andy Palmer: Your fairy Godmother is going to help you with that, but the way of speaking to VW is a little different to the way that you'd speak to Toyota, for example.
• 46:04
  Andy Palmer: So understand your, your customer, um, really important and then finally manage that cash flow.
• 46:11
  Chris Reichhelm: Yeah.
• 46:12
  Chris Reichhelm: Yeah, that's, that's, uh, that's super insightful.
• 46:18
  Chris Reichhelm: Andy, thank you so much.
• 46:20
  Chris Reichhelm: Um, you've, you know, there's an awful lot to unpack, which I'm going to try to do, but that was, you know, that was kind of a how to do business in Automotive 101.
• 46:30
  Chris Reichhelm: So thank you so much.
• 46:32
  Andy Palmer: My pleasure.
• 46:33
  Andy Palmer: Always a pleasure.
• 46:33
  Andy Palmer: Good to talk to you.
• 46:36
  Chris Reichhelm: You've been listening to the Lab to Market Leadership podcast, brought to you by Deep Tech Leaders.
• 46:42
  Chris Reichhelm: This podcast has been produced by Beauxhaus.
• 46:45
  Chris Reichhelm: You can find out more about us on LinkedIn, Spotify, Apple, or wherever you get your podcasts.