Skip Digital Transformations: Start Fresh and Break from Legacy

5 Lessons from Volvo and Renault on creating a new company.

In an innovative collaboration, Volvo Group and Renault Group announced the creation of a new commercial electric vehicle company that offers a family of fully electric and software defined vans. Pending regulatory approval, Volvo and Renault will have equal stakes in the company; each seeding it with 300 million Euros (319 million USD). CMA CGM is also positioned to participate in this joint venture, having signed a non-binding agreement to seed it with 120 million Euros (127.5 million USD) through its PULSE Energy Fund.

Renault Group and Volvo Group aim to address the decarbonization of logistics by creating a company that will develop a new generation of electric vans. CMA CGM plans to join in this venture. (Image: Renault Group.)

Renault Group and Volvo Group aim to address the decarbonization of logistics by creating a company that will develop a new generation of electric vans. CMA CGM plans to join in this venture. (Image: Renault Group.)

Instead of embarking on a traditional digital transformation journey, these large automotive companies chose a bolder path: starting anew. This venture is not just about creating electric vehicles; it is also about reimagining the entire operating model from scratch. By establishing a startup, unencumbered by the limitations of legacy ways of working and enterprise systems, Volvo and Renault can explore uncharted territories, implement state-of-the-art technologies and foster a culture of innovation.

This post discusses the freedom startups get to innovate unencumbered by existing structures. It digs into how agility helps companies adapt swiftly to market demands, and how the ability to leverage modern product lifecycle management (PLM) practices improves performance. It will then cover five lessons as to why organizations might want to follow Volvo and Renault’s lead to start anew.

The Startup Advantage: Skip Digital Transformation and Start from Scratch

The heart of the newly announced Renault-Volvo partnership lies in the creation of an all-new generation of electric vans, set to start production in 2026. These vehicles will be built on a fully electric LCV skateboard platform and will be designed for high modularity and safety. What will set them apart is the integration of Software Defined Vehicle architecture helping to improve connectivity and performance. The vans’ software is not only expected to monitor delivery activity and user business performance. It will also reduce the global cost of usage, for logistics organizations, by 30 percent according to the release.

The new company will amalgamate the innovative spirit of a startup with the experience and wisdom of Renault, Volvo and CMA CGM. This will offer a unique blend of expertise and skills. With a strong focus on decarbonized urban logistics, this venture signifies a step towards a sustainable future. The company is scheduled to commence operations in early 2024.

In the realm of startups, agility is king. Unfettered by bureaucratic red tape, these nimble entities can pivot swiftly, adapting to market demands and integrating emerging technologies with unparalleled ease. Operating agility implies fit-for-purpose processes and systems. It also reduces the need to transform and integrate complex legacy landscapes of the parent organizations. From a PLM standpoint, it might translate into new data standards, collaborative R&D and manufacturing processes, supply chain operations and commercial models.

Working Around Legacy Systems of Business and Technology

One might wonder why an established corporation would choose to work around their legacy systems in favor of starting anew. The answer might lie in the realm of strategic advantage. Creating a new company offers the opportunity to craft a tailored approach to each product, align every component with the vision for the future and concurrently develop new business processes and data flows. While not every product innovation warrants the birth of a new entity, developing new business operations around new electric vehicles in a short timeframe demands a high level of freedom.

In a world where innovation is the heartbeat of resilience and sustainability, legacy systems can often feel like an anchor dragging down even the most sophisticated institution. Legacy systems act as a double-edged sword; while they represent stability and reliability, they can also be the chains that bind an organization’s innovation. For industry giants like Volvo and Renault, entrenched in their well-established processes and technologies, the move to create a new company suggests that the burden of legacy systems became increasingly evident. Thus, the idea of breaking free from these constraints and embracing a startup mentality was born.

In the intricate tapestry of business and technology, the tendrils of legacy PLM, ERP, CRM and MES systems often weave a complex web that organizations find themselves entangled in. Within this intricate matrix, the new partnership between Volvo and Renault brings new opportunities for innovation and strategic decision-making.

How Modern PLM Fosters Innovation, Value Creation and Agility

The collaboration between Volvo, Renault, and CMA CGM embodies the spirit of unity and diversity. Their joint venture, fueled by the innovative spirit of a startup and supported by the wisdom of industry champions, is nothing short of a collaborative symphony—leveraging a blend of expertise, vision and ambition.

In the echo of this endeavor, the message is clear: legacy thinking, processes and enterprise systems may shackle, but innovation fueled by the startup spirit can break those chains and set the wheels of progress in motion.

Established organizations need to embrace new approaches and technologies to disrupt their industry and stay competitive. Modern PLM plays a crucial role in this process by reducing complexity through flexible data models, ensuring trust in product data, promoting collaboration through cloud-enabled platforms and enhancing supply chain operations. Embracing the startup approach, however, offers a unique avenue for established institutions, allowing them to leverage agility, focus and strategic precision. Here are five key lessons from the new collaboration between Volvo and Renault and how it teaches us why established organizations might choose to skip the transformation and start fresh:

  1. Innovative freedom: Starting anew allows freedom from legacy constraints, fostering creativity and innovation without limitations.
  2. Agile decision-making: Startups adapt quickly, making swift decisions that keep them ahead in rapidly changing markets, a challenge for larger organizations.
  3. Focused strategy: Launching a new company makes it possible to focus resources, talent and expertise solely on specific high-impact products, ensuring a strategic approach.
  4. Niche market penetration: Startups tend to tailor their entire business model to niche markets, enhancing market penetration and customer satisfaction.
  5. Risk Management: A separate entity for innovative products allows controlled experimentation, minimizing risks without jeopardizing the entire organization.

As Luca de Meo, CEO of Renault Group, put it: “Electrification and digitalization are paving the way for a revolution in the LCV market. Renault Group intends to lead this transformation while ensuring a robust and effective value creation … All the ingredients are there to come up with something truly unique.”