Volvo exec shares technology hits and misses; outlines next big steps

Longtime Volvo executive Lex Kerssemakers is now strategic advisor at the Swedish automaker after new CEO Jim Rowan hand-picked him for the role. Rowan is the 10th chief executive Kerssemakers, 62, has worked for at the company. The Dutch national has a deep understanding of Volvo’s product, purchasing, sales and marketing arms. That gives him an enviable perspective on how Volvo will use technology to continue its digital evolution. Kerssemakers outlined key lessons Volvo has learned as it strives to boost online sales, to offer autonomous driving and to provide even more in-car features without sacrificing on safety. He recently spoke with Automotive News Europe Managing Editor Douglas A. Bolduc.

How has Volvo balanced its desire to pack cars with technology with its commitment to safety?

When we launched the current XC90 in 2015, we made a big thing out of there being one touchscreen, which should be relatively easy to operate. We could have loaded it with all kinds of different features, but we decided in 2011-12 against this. People would have had so much to deal with, which would undermine the safety of the car. We knew we needed to have a certain level of features because people expected it, but we had to determine how to distribute that in a way that it's still safe and people are not overwhelmed. When I look now at new cars in general, and I think we can proud of what we achieved with our system. The amount of information in a car should be easy to handle. That's what we will continue to do also in the next generation of cars.

The pressure to impress has only increased since that generation of XC90 arrived. How will your new flagship SUV showcase your advancements without overtaxing the driver?

The question we have had to ask is: What aren't you bringing? You always tend to show everything you can do. It's a risk everyone in the automotive industry faces. Yes, people are often thrilled at the first moment with all the new features, but then the questions are: How often do you use it? How much does it distract you? Do you really need it to have a safe, comfortable drive? And where do you stop? Those are difficult discussions.

What has Volvo decided?

It comes down to this: How do you want to be perceived? At Volvo, we go back to our values, which are safety and having integrity. It's been that way during my 38 years with the company. The driver has to be able to operate all those features in a responsible way. As more technology enters the car, those decision are not getting easier.

How will over-the-air updates change things?

That's going to be a challenge for the automotive industry. The first few times it happens it will be very cool and very interesting, and the customer will get a lot of new features. But if the update disturbs their settings or takes place at an inconvenient time, such as when they are about to leave for work and they can't start the car for 10 minutes because the car is updating, that won’t work. If that happens the coolness will be replaced by irritation. We have to manage this in a proper way. We also need to find the right balance of how often we do the updates. Right now, updates are happening every six to eight months on certain cars. And in all fairness, there will be a learning curve for everyone in the industry that is just starting with this.

What have you learned so far?

We are still collecting data so it's a bit too early to answer that question.

Stellantis plans to generate about 4 billion euros in additional annual revenue by 2026 from software-enabled product offerings and subscriptions. Has Volvo also set a target number for this new business area?

No, not yet, but it's all part of our online journey. We know people are used to subscriptions and ordering things online. If people want to, for instance, order autonomous driving capability for a limited period of time, that is what we need to offer. In addition to the requirement that it works in the car, the system that takes the orders and collects the payments also has to function seamlessly -- and it will. We are absolutely convinced that these kinds of services will provide a new revenue stream for us.

Was Volvo’s decision to take a stake in digital car retailer carwow an indication it needs help getting to its goal of having half its global sales transacted online by 2025?

No, that is not the case. We have great insights on the total value chain within the automotive industry. And after more than three years of doing online transactions via our Care by Volvo car subscription scheme, we are very comfortable and confident that we now have enough knowledge to start to listen to other parties that come at this from a different angle to see if we can benefit from this. Carwow has great experience on the digital side and the aim is to gain some of this knowledge.

What are some of the bumps Volvo has hit as it has become more digitally savvy, and what solutions have already been found?

If the customer needs to take 10 to 15 steps to complete the order, that doesn't fly. So, one of the biggest early lessons from the move to online sales was that our products and the specification were too complex. Also, whenever you ordered something like heated seats in the past you lost something else from your list. We immediately simplify our product offer for Care by Volvo, and we have extended this to our new product lines. You can still put your own car together to the smallest detail if you want, but the people who are buying online are very happy to have four or five variants with predefined packages to choose from. Another learning was internal. When you have a long history like Volvo, your digital system is rather fragmented, so it’s very difficult to get the systems to work together. We spent a lot of time getting those systems to work in unison. So, for example, when an order is made it is fed into the manufacturing system to start the production process and the finance system to make sure an invoice gets sent out. If you want to create a seamless customer journey, you need to make sure all the systems behind the scenes operate in a flawless way. That was another huge eye-opener for us.

In which countries does Volvo offer online sales?

We started online sales in Germany, then we went to the Netherlands. We also offer this in the UK, Norway, Sweden and the U.S. The U.S. is one block and the other is the main European countries. It's a step-by-step process because everything needs to work, which isn't a given because despite the fact we have a European Union, there are still different legislations, different tax systems and different business structures in the countries. We have dealt with these challenges and now we have a very strong blueprint, so my prediction is that the wider rollout will go smoothly as we add other countries.  

What about China?

China has started but they have a slightly different wholesale system and infrastructure. Initially, they are selling the full-electric XC40 and V60 plug-in hybrid online in certain areas such as big cities but not in all of China. To put that into perspective, Shanghai is bigger than the Netherlands.

Do you need to offer online sales in all your markets to reach your goal of having half your sales done that way by 2025?

You don't need to whole globe to get to 50 percent. If you have the biggest countries and you have a significant share in those biggest countries, you can get there quickly. But it's not essential that we are in all countries globally or 50 percent or 40 percent. We put a stake in the ground, saying that we want to have 50 percent online sales because we believe we can reach this together with our retailers by proving transparent prices and customer convenience.

Are your retailers more at ease about this move to online sales?

They were very nervous in the past but that is no longer the case. They see what is happening in markets such as the UK, where we are doing this in extremely close cooperation with the retailers. We have 65,000 ambassadors around the world selling our brand. That is of high value to us.

What technology that was given a lot of hype hasn't lived up to expectations?

Probably autonomous driving. There were a lot of bold pronouncements, including from Volvo, about the technology likely being ready by now. It is not. But if you look at the safety systems that Volvo and our competitors are launching that support the drive capability of individuals, those advancements are there because of all the R&D that people have put into autonomous drive. Also, at Volvo we have always connected autonomous driving to safety. We said that by 2020 no person should be killed or seriously injured in a Volvo. We did this because too many mistakes are made by human beings. We strongly believe that technology can take over big parts of that responsibility. We are going to use autonomous drive to facilitate this change.

Are there any success stories when it comes to how the industry adapted as a result of a trend?

In 2014-15, everybody got very nervous because SUVs were considered socially inappropriate. They were labeled as gas guzzlers. But the desire from customers to have a high-seating car with space to transport more than four people didn't diminish. The desire to move away from traditional sedans or hatchbacks remained strong. In response, many automakers, especially the European brands, compressed the size of their SUVs, making them very fuel efficient, without eliminating the ability to move multiple people. This challenge forced the automotive industry to rethink things so that we could fulfill consumer needs.

Are there other examples?

Yes, and this take me back to product simplification, which I mentioned was so important as we moved to online sales. Ten years ago, everybody wanted to be everywhere, so one segment after another was created. Today you see a big reduction of variants. Not every niche will be filled in the future. In five to 10 years, we will look back to the 1990s and 2000s and ask, How the heck could we have created so many variants? Who asked for it? Nobody. There was a belief that is what the customer wanted. It is very clear that is not what the customer wanted. We have come to a similar conclusion with our online sales. Customers will not buy that complexity anymore. The move to online sales has helped us with this because having that many variants is unmanageable. They are also unsustainable because they create a distribution footprint that is irresponsible.

As Volvo was transitioning from Ford ownership to Geely the XC90 stayed in production for longer than the typical seven-year life cycle. Tesla has been selling the same Model S generation since 2012. Are we going to see longer life cycles?

I would not like to go back to that situation at Volvo with the XC90, and I'm not going to give a verdict on Tesla. That being said, I'm not sure whether changing cars every four to five years is sustainable. When it comes to the exterior, the cars look so good nowadays I'm not so sure how many people can tell whether that's an old car or a new car after four years. I think the upgrades will be made to the interior, specifically through digitalization and software. Like with your phone, the design doesn't change but the functionality changes because of software updates. Volvo will focus on the interior, on the infotainment system and the user experience rather than spending a lot of money on a different bumper or headlights. From a sustainability perspective, which is of growing importance to the whole business equation, the question of the length of a car's life cycle will become a key discussion point.

How has to profile of an auto executive changed and how have you adapted to these new demands?

If you want to be relevant in the future, you have to adapt to consumer needs. That is what we have done. You wouldn't believe how many people have asked me at auto shows, "Why don't you go back to the boxy design of the 240?" The answer is: We can only generate 250,000 customers with that design because the audience is relatively limited. We needed to modernize our design without losing our identity. I considered the changes we have made as fantastic opportunities to keep life for me and every employee in the company more attractive. It's true that people do not like change, but they don't want to stand still either. Individuals are driven by new challenges. That's what has kept me going. I have enjoyed figuring out how to translate new technologies into consumer benefits and how that can help the company thrive. Volvo has always been very open to taking bold steps. That has inspired me. I'm thrilled by the growing importance of software in the car. I wish I was 10 to 15 years younger because I would love to be part of this ongoing transformation.

What is the core advice you're going to be called on to provide in your new role, and will your voice be heard?

I have just started the role this month so I can't answer the first part of your question. On the second part, I believe I will be heard because after 38 years within the company I hope I have built up some level of credibility. Most importantly [Volvo CEO] Jim [Rowan] asked me to do this. He could have easily said, "Thanks for your service. I'll find my own way." In return, I will do my utmost to share my knowledge. If there is no need for it. Great. That shows things will continue at a high rate of speed. I feel very privileged that they gave me this opportunity to share my knowledge with anybody who wants to listen before I close the door and start doing other things.

How long will you be in this role?

Up to 12 months.

And what will you do afterward?

I will probably help out some startups, particularly in the Netherlands, and I will restore vintage cars.

Could you just do nothing?

No. That's not me. I need to do something, but definitely not at the same speed as before. It will be relatively limited amount of work at that point, and the rest of my time will be spent on hobbies.