Whether you made it to CES this year and heard Mary Barra’s keynote, or you have been following up with the latest in automotive news – one thing is clear; the auto industry is going through some radical shifts in focus and strategy. Partnerships like Google and Ford, Lyft and GM, Apple’s “Eyes Free” initiative, and Google’s Open Automotive Alliance, are just the tip of the iceberg driving the shift from the traditional car company, to the new software led car company. And although these changes are great for us as consumers, they will create some serious new challenges for us as businesses owners in the area.
The issues stem from that fact that the automotive industry is not alone in their transformation. The vast majority of us are going through a similar shift in focus and strategy. Technology advancements over the last decade have given birth to completely new business models. Startup businesses employing the new models are popping up all around us, and traditional businesses are working hard to figure out how to make the transition. With the majority of the efforts revolving around new technology education and adoption, companies are bringing in engineers and software developers to help lead the charge. Herein lies a number of new challenges SMB’s now need to address.
One of the bigger challenges is the fact that most traditional small businesses do not have an in-house knowledge base of advanced IT or software development. This makes it extremely difficult to build the right hiring programs to ensure they are hiring the right people. This also means onboarding, training, and career development programs are almost non-existent for the new employees. Adding to the problem is the fact that most techies speak an entirely different language than the executives. The result can be extended time-frames and unexpected delays when launching new programs.
Not enough people
With companies like GM hiring thousands of engineers and software developers over the past few years, as well as the high probability that existing tech giants will open new offices in S.E Michigan to enhance their partnerships with the automotive companies, we are right in the middle of a huge brain drain for the very employees needed to make the transition. This encompasses not only the senior level resources, but also entry level ones. There is a light at the end of the tunnel though; the large enterprises will spend the time and money to train new employees and a percentage of them will inevitably prefer to work in small businesses. Realistically though, we are 3-5 years from seeing any benefit, and unfortunately, that might be a little too late.
Large companies are inflating the salaries
Another side effect of enterprise businesses fighting for the same resources is salary inflation. Large companies have the ability to solve problems with dollars. When there is a limited market of potential employees, they raise salary and benefits to corner the market. S.E Michigan has experienced this from early on with Henry Ford and the 5$ work day. In one swift move, he created amazing incentive to attract highly sought after employees, as well as drastically reduced his employee churn. Large companies of today are still using similar models for strategic employees. Unfortunately, small businesses don’t really have the wherewithal to compete at this level. Technology resources are already expensive, but paying 1.5x – 2x the salary per employee is unrealistic for the majority of companies.
New internal structure is needed to shift focus
Even if it were easy for small businesses to locate, hire, and retain the new type of tech employee, there is another huge challenge crippling their transitions. The business models of the future are completely different than the business models of the past. Whereas, in a traditional company, a technology department was usually located under the finance department. The goal of the department was to keep the critical systems running, so people could do their jobs. The new model is completely different. The new technology department is directly under the CEO, and their goal is to spend as little time as possible keeping things running, and as much time as possible helping the organization scale with technology, create profit margin with technology, evolve products and services with technology, and enhance customer experiences with technology. This new role of the technology team requires engineers and software developers that work like business analysts. Identifying issues and barriers holding the company back and presenting solutions to eliminate the barriers. There is no longer a role for the “computer guy”. This in itself is a completely uncharted territory for most small businesses, which again, adds to the problem.
The road from old to new isn’t always easy. There are always lessons to be learned, mistakes to be made, and unexpected variables to overcome. But, unfortunately, for small businesses in Detroit, our challenge may be a little more difficult than most. The auto companies will continue to drive up demand and costs, and small businesses will be the ones left struggling.