key: cord-0064572-tzqlrp2d
authors: Hoeft, Fabian
title: The case of sales in the automotive industry during the COVID‐19 pandemic
date: 2021-03-10
journal: nan
DOI: 10.1002/jsc.2395
sha: 137ceacb27c2f897a1d4afb4c00ec1fcf14886b3
doc_id: 64572
cord_uid: tzqlrp2d

Agile methods can be used as a strategy tool by incumbents to explore and exploit market opportunities through times of unprecedented industry transformation. Drawing on 18 interviews with managers at a premium manufacturer based in Asia, the case of sales in the automotive industry during the COVID‐19 crisis provides in‐depth insights into the crisis management, focusing on but looking beyond sales. Six fundamental principles are identified as strategic tools to leverage resources and improve business outcomes while using agile‐work methods.

, research and development (Pearson, Costley, Phaal, & Nuttall, 2020) , and operations management, especially in the production and supply chain management context (Srinivasan, Srivastava, & Iyer, 2020; Tavani, Sharifi, & Ismail, 2014) .

Although some publications addressed agile ways of working as a strategy tool, they lack empirical underpinning and do not cover firms experiencing unprecedented industry transformation. This paper refers to the term strategy tool as a vehicle to identify and explore market opportunities (Rengarajan, Moser, & Narayanamurthy, 2021) . Prior papers referring to agile approaches as a strategy tool are conceptual (Denning, 2018a; Holbeche, 2019; Ivory & Brooks, 2018; Srinivasan et al., 2020; Thrassou, Vrontis, & Bresciani, 2018) , provide some examples but lack the depths a single case study can offer and do not explain how firms implemented agile in the strategy context (Annosi et al., 2020; Denning, 2017a Denning, , 2017b Denning, , 2019 Doz & Kosonen, 2010) , or focus on niche aspects of agility in the strategy context, like cultural barriers that constrain managers' agile decision-making (Hodgkinson, Ravishankar, & Fischer, 2017) or evaluation of innovative ideas (Dziallas, 2020 ). The conceptual studies mainly rephrase the well-established dynamic capabilities literature, heavily influenced by Teece, Pisano, and Shuen (1997) .

Beyond, scholars introduce terminologies and theorise about "organisational agility" (Walter, 2020) and "strategic agility" (Denning, 2017a; Doz & Kosonen, 2010; Xing et al., 2020) , or more exotic terms, like "international marketing agility" (Gomes et al., 2020) and "strategic marketing multicultural agility pendulum" (Thrassou et al., 2018) .

Neither surprising nor novel, some papers suggest a positive correlation of adaptability and business performance (Ivory & Brooks, 2018; Srinivasan et al., 2020) the core argument of the dynamic capabilities literature (D. J. Teece, 2020; D. J. Teece et al., 1997) .

How firms implement agile approaches as a strategy tool in the face of unprecedented industry transformation remains unexplored.

As detailed earlier, this paper does not refer to unprecedented industry transformation as upgrading of products, but to fundamentally changing business ways (Pearson et al., 2020) . It is essential to investigate this issue as adaptability is at the core of agile (Conboy, 2009; Holweg, 2005) . It is pressing to examine this issue now as agility is arguably more important for businesses' survival than ever given the unprecedented pace and magnitude of change (Buzzao & Rizzi, 2020; Kaviani, Tavana, Kowsari, & Rezapour, 2020; Teece, 2020) . The current external dynamic provides an unparalleled opportunity to explore the concept of agile in the strategy context further. This paper explores how agile methods can be used as a strategy tool to manage incumbents through times of unprecedented industry transformation. Thereby, it goes beyond conceptualizations and prior attempts to improve empirical evidence of how firms use agile to explore and exploit market opportunities. The research question "How can agile ways of working be used as a strategy tool to respond to unprecedented industry transformation?" guides the present study.

This paper uses the case of sales in the automotive industry during the COVID-19 crisis. The case is particularly well suited to study agile ways of working as a strategy tool since it is an established industry in terms of operations that did not disrupt to the degree of the recent COVID-19 crisis before (Venter, Aunan, Chowdhury, & Lelieveld, 2020; Wang & Wells, 2020) . The business area of sales is appropriate since it is most affected by the COVID-19 pandemic, received utmost management attention and required fundamental transformation (Gersdorf, Hertzke, Schaufuss, & Schenk, 2020; Hausler et al., 2020; Poberschnigg, Pimenta, & Hilletofth, 2020) . Specifically, this paper draws on 18 interviews with managers at a premium manufacturer based in Asia, providing in-depth insights into the management of the recent COVID-19 crisis, focusing on but looking beyond sales.

The contribution of this study is twofold. Theoretically, this paper contributes to our understanding of incumbents' adoption to unprecedented industry transformation by providing a rich narrative that details how a car manufacturer implemented agile ways of working as a strategy tool. It specifies the organizational design, leadership structures, goal setting, top management team (TMT) time allocation, and the iterative strategy approach. Although earlier studies emphasized specific roles and agile management processes, this study finds that these frameworks are somewhat less important. Specifically, the case study highlights that it is crucial to focus on six fundamental principles. Empirically, this paper contributes to our knowledge of car manufacturers' responses to the recent COVID-19 crisis, focusing on but not limited to sales. Thereby, it might help business leaders to understand the crisis's implications for their business and inspire approaches to respond to it. Besides, regulators might benefit from the study as it indicates how the regulatory framework might benefit from adaptation.

The remainder of this study is organized as follows. The theoretical background and context of this study are provided in the subsequent section. Section 3 details the methodology, specifying the research design and automotive case. Section 4 entails the findings, which are discussed in the section after that. Finally, Section 6 covers the conclusion and outlines avenues for future research.

Agility refers to the ability to adapt to dynamically changing environments (Conboy, 2009) . Working in an agile way implies learning from recent experiences while applying knowledge acquired previously to deliver results that best meet customer needs, given time and budget constraints (Denning, 2018b) . Hence, volatility, flexibility, learning, and adaption are characteristic of agile approaches (Shams et al., 2020) . This section reviews the emergence and key characteristics of agile to lay the foundation for understanding the strategic context concept, covering agile software development and business research.

Agile found first widespread adoption in software development. Agile development refers to a range of agility-facilitating practices for improving software development. They are characterized by customercentricity (i.e., focusing actions on adding value to customers), continuous delivery and improvement, and collaboration within and across teams (Sambamurthy, Bharadwaj, & Grover, 2003) . Agile software development is frequently used in combination with other methods, such as Kanban, Scrum, and Lean (Wolff, Brönner, Held, & Lienkamp, 2020) . Although these methods are considered distinct, they share attributes, like "leanness," that is, maximizing business outcomes while minimizing waste, such as underutilized resources and unnecessarily complicated processes (Kumar Singh & Modgil, 2020) .

Agile software development methods share an underlying philosophy, which covers four principles and values: (a) individuals and interaction, (b) working software, (c) customer collaboration, and (d) responding to change (Campanelli & Parreiras, 2015) . Although these principles and values are abstract, they have been specified in today's widely used agile software development (Ramesh et al., 2012) .

The widely adopted methods are characterized by discovering customer needs and developing solutions through collaborative efforts of self-organizing and cross-functional teams, engaging with end customers (Collier, 2011) . Minimal upfront planning and maximal customer involvement in the development lifecycle are critical in agile software development (Overby, Bharadwaj, & Sambamurthy, 2006) .

Agile software development is associated with potential challenges.

Some studies report that ambiguous benefits, lack of predictability, ownership and accountability, and deployment difficulties are among the potential shortcomings (Annosi et al., 2020; Conboy, 2009 ). However, these potential challenges might stem from implementation errors (e.g., lack of individualization of agile guidelines) and are not agile methodology inherent (Campanelli & Parreiras, 2015) .

Firms widely agree that the benefits of agile software development outweigh potential drawbacks in most use cases. Among the reported benefits are faster product delivery (Gomes et al., 2020) , cost savings (Pearson et al., 2020) , improved customer satisfaction (Comella-Dorda et al., 2017) , and improved employee satisfaction (Denning, 2018b; Hodgkinson et al., 2017) . As a result, agile ways of working are the status quo in software development today.

Beyond software development, agile ways of working found their way into the domain of business research, including operations, organizations, and strategy research (e.g., Ghezzi & Cavallo, 2020; Holweg, 2005; Moi & Cabiddu, 2020; Tavani et al., 2014; Uludag et al., 2019) . However, the idea that adaption to changing business environments is critical for long-term survival is not new and, among others, core to the dynamic capabilities concept (Helfat et al., 2007; Teece et al., 1997) . Dynamic capabilities are defined as "firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments" (Teece et al., 1997:516) . Earlier studies conceptualize strategic agility as a combination of different dynamic capabilities, such as strategic sensitivity and resource fluidity (Doz & Kosonen, 2010; Ivory & Brooks, 2018) . Others highlight the blurred conceptual boundaries further and describe agility to be also "known as dynamic capability" (Gurkov, Goldberg, & Saidov, 2017:18) .

Although the key message remains the same (agile firms are more successful than others), recently, agility has been specified in the context of organizational adaption and responding to changing customer needs.

Organizational agility has been coined as companies' ability to adapt organizational structures flexibly and quickly to changes in the business environment (Teece, Peteraf, & Leih, 2016; Walter, 2020) . Associated challenges include managing the tension of running the core business while setting-up the organization for exploring potential future profit pools (O'Reilly & Tushman, 2008) . Customer agility has been defined as the "degree to which a firm is able to sense and respond quickly to customer-base opportunities for innovation and competitive action" (Roberts & Grover, 2012:580) . These two and other specific conceptualizations of agility in business research highlight the importance of continuous adaption for innovating successfully and long-term firm survival (Björkdahl, 2020; Gordon, Ramic, Rohrbeck, & Spaniol, 2020) .

The exploration of agile ways of working in the strategy context remains conceptual and lacks empirical underpinning. Earlier studies provide some examples but do not detail how firms implemented agile in the strategy context (Annosi et al., 2020; Denning, 2017a Denning, , 2017b Denning, , 2019 Doz & Kosonen, 2010) , or focus on niche elements in the context of strategy research, such as cultural barriers that constrain managers' agile decision-making (Hodgkinson et al., 2017) and evaluation of innovative ideas (Dziallas, 2020) . Conceptual studies mainly rephrase the literature on dynamic capabilities. They do not add to our understanding of how firms use agile ways of working to improve strategy development and implementation iteratively. Particularly firms experiencing unprecedented external dynamism might be insightful to learn more about the concept as the adaption to change is at the core of agility; a quest this study has taken on.

To explore how agile has been and can be used as a strategy tool in the face of unprecedented industry transformation, an in-depth, inductive single-firm case study has been conducted. Case studies allow the observation of complex relational processes and are well suited for discovering new insights in theoretically novel phenomena (Eisenhardt, 1989; Eisenhardt & Graebner, 2007; Miles & Huberman, 1994) , such as agile ways of working as a strategy tool. The methodology allows exploring the phenomenon from a practical perspective, involving informants from a range of organizational hierarchies and functions.

Purposeful sampling has been used to identify a suitable case study that is informative about the phenomenon of interest (Strauss, 1987) .

The case study had to reflect certain characteristics. First, it had to be in a global industry not to be subject to local or regional specificities (e.g., regulation or unique consumer preferences) and embedded in global flows of goods and information to provide meaningful insights beyond the specific context. Second, the industry had to be wellestablished and relevant to many people (e.g., employees and customers) to provide rich insights that might hold for other industries. 

Primary data was collected via semistructured interviews, involving different functions and organizational hierarchies, including the chief executive officer (CEO). The initial interview guide and focus of the interviews evolved iteratively with increasing knowledge about agile as a strategy tool at the car manufacturer (Eisenhardt, 1989; Miles & Huberman, 1994) . A combination of purposive and snowball sampling has been used to identify the interviewees most knowledgeable about the construct of interest (Eisenhardt & Graebner, 2007) . A total of 18 interviews was conducted. The interview duration averaged approximately 1 hr. All interviews were conducted via Zoom, recorded (audio and/or video), and transcribed verbatim (Bryman, 2012) .

The within-case analysis was used to iteratively gather and analyze data (Eisenhardt, 1989; Eisenhardt & Graebner, 2007) . Supported by the software NVivo, data coding and analysis of the transcripts followed the subsequent steps: (a) coding by identifying key terms and assigning interview sections to them (Miles & Huberman, 1994) , (b) identifying relationships between key terms and iteratively evolving the categorizations until data saturation is reached (Strauss & Corbin, 1994) , (c) using thematic analysis to identify common meanings and patterns (e.g., "leadership") in the themes emerged (Braun & Clarke, 2006) , and (d) reflecting on and cross-checking of findings with interviewees. Table 1 illustrates the NVivo code structure.

In the following, a section is devoted to each theme.

During the COVID-19 crisis, car manufacturers experienced disruption in various business areas. The crisis has accelerated online, and direct-toconsumer sales as people have become more comfortable working from home and buying remotely (Agrawal et al., 2020; Wang & Wells, 2020) .

This study's car manufacturer case acknowledged the need to transform its business fast. To transform its business, the company shifted to an agile management type system. The strategic direction ("where to change") was set by the TMT, and they still had the conventional vertical departments (e.g., marketing, sales, service, finance). However, horizontally they worked with transformational teams. These cross-functional teams created MVPs to understand the implications of recent developments by iteratively testing and learning in the market.

The TMT time allocation shifted from 10% on strategic issues pre-COVID-19 to about 60% on strategic issues during the crisis. In this respect, COVID-19 has been driving the transformation. Managers were sitting at home, had time to think about, talk about and clarify strategic issues. They run the cross-functional teams with MVPs and quarterly objectives and key results (OKRs). OKR is a goalsetting framework for defining and tracking goals and business outcomes (Zhou & He, 2018) . Thereby, the company uses Silicon Valley software development type tools to transform their business (Charan, Barton, & Carey, 2018) . The car manufacturer ran five MVPs in total.

This study looks deeper into two of them: "online sales" and "nohassle pricing." The five MVPs run in parallel to the core business.

Their first MVP was an early version of "online sales"-a button on their website that says "buy online." When customers pressed that button, they were connected to a dealership via phone or Skype, doing everything they would normally do (offline), just online. The car manufacturer trained their dealers and sales consultants on using video calls to build a relationship with their customers. Thereby, it was essential to acknowledge that this first MVP for selling cars online was not perfect, but an adapted and working version of the status quo. To implement their first MVP, the car manufacturer mapped out an entire customer journey regarding how this new system should work, using components they already have, instead of investing in new features (Deloitte, 2018) . After the second lockdown in T A B L E 1 NVivo code structure 

Another of the car manufacturer's MVPs is "no-hassle pricing," offering one fixed price per vehicle model, as Tesla has been from the beginning.

Conventionally, customers walk into the dealership and have to negotiate (Wesseling, Niesten, Faber, & Hekkert, 2015) . Most people seem to dislike it, but no one seems to be ever-changing it (Schmidt, 2020) . One key enabler of online sales is pricing since negotiations are no longer feasible, and customers appreciate price certainty.

By offering the MVP, they had to comply with regional price legislation. Specifically, they cannot dictate dealers for what price to sell the car (Bansal & Kockelman, 2017) . However, they can set up their margin system so that it does not help dealers to negotiate. Hence, they shifted to a paper activity model as opposed to a margin model for cars. Thereby, they paid dealers for offering services, like test drives and vehicle deliveries, instead of giving them margin. At the same time, they announced the final vehicle price on their website.

Changing the car manufacturer's contracts with the dealerships and the relationship to them tests their trust. It is a tough decision for the dealers because it affects their margin. They are scared and do not think "the car manufacturer wants the best for us," but rather "I hear that they want to sell cars direct to end consumers." Hence, the car manufacturer designed the system in collaboration with the dealers and started small with the rollout. Critical in the program setup was the communication and close engagement with the dealerships.

As a result of the new model, (a) dealers are making more money, (b) more cars are being sold, and (c) the customers are happier because they have price certainty. The broader aim was to learn how to execute pricing in a digital environment and remunerate dealers.

Every time the car manufacturer launches a new car, they introduce it with this new model. Then, they integrate it in the end-to-end process until they have the one price logic for all models and with the same remuneration model for all dealers.

The car manufacturer uses the MVPs to develop and improve their systems continuously. For example, they learned that they will introduce online car purchase, but will keep the option to talk to employees online since customers seem to like it. 

This study was designed to explore the use of agile ways of working as a strategy tool in the face of unprecedented industry transformation. The case of sales in the automotive industry provided rich empirical insights into how a car manufacturer used agile ways of working during the COVID-19 pandemic to identify and explore market opportunities. The main takeaway is that agile can be used as a strategy tool by involving capabilities across the organization in an iterative strategy process.

Theoretically, this study adds to our understanding of agile ways of working in the strategy context. Although prior studies introduced terms like "organizational agility" and "strategic agility" (Denning, 2017a; Walter, 2020; Xing et al., 2020) 

In terms of managerial implications, this study provides automotive man-

agers concrete examples of how to implement agile as a strategy tool, detailing the automotive industry's specificities (Jacobides, Macduffie, & Tae, 2016; MacDuffie & Fujimoto, 2010) . Hence, this study might be relevant for managers at car manufacturers and another automotive stakeholder, such as suppliers and regulators, by offering insights into nuances of the recent automotive developments during the COVID-19 crisis, focusing on automotive sales. Specifically, the paper might be useful for suppliers by inspiring ideas for positioning their companies well to transition towards online sales and fixed vehicle prices (Poberschnigg et al., 2020; Tordjman & Rehberg, 2019) . Regulators might benefit from the study by understanding car manufacturers' measures to implement these two developments and derive how the regulatory framework might benefit from adaptation (Harrison & Thiel, 2017) .

Managers from industries other than automotive might find this study relevant as well. The general principles identified might hold for industries of different size and structure (Sturgeon & Van Biesebroeck, 2011) . By adopting the principles and reflecting on the practical implementation examples provided, managers might identify meaningful use cases to leverage their resources. crisis (Shepherd, 2020; Wang & Wells, 2020) . This study emphasizes that particular attention might be paid to goal setting (e.g., via OKRs) and leadership behavior, which seems to be success-critical determinants (Klonek, Gerpott, & Parker, 2020; Zhou & He, 2018) .

Future studies might also look deeper into different roles across organizational hierarchies and functions involved in using agile in the strategy context. Specifically, the research could understand the causal relationships between different hierarchies and functions, and agile experiments' performance outcomes (Slade Shantz, Kistruck, Pacheco, & Webb, 2020) . Thereby, studies might identify best practices and derive critical success factors, improving conceptual understanding and providing guidance to managers.

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He is particularly interested in the capabilities of incumbent car manufacturers and shifts in automotive global value chains. How to cite this article: Hoeft F. The case of sales in the automotive industry during the COVID-19 pandemic