Thinking like a visionary, tackling challenges head-on, turning plans into reality and making Silicon Valley-style innovations come true – such as the dream of traveling from London to Rome and back on just one liter of gas [1]
Thinking like a visionary, tackling challenges head-on, turning plans into reality and making Silicon Valley-style innovations come true – such as the dream of traveling from London to Rome and back on just one liter of gas [1]
( Source: gemeinfrei / Unsplash)

testing at speed A racing circuit that acts as a testing ground for SME 4.0

Author / Editor: Marco Schmid* / Jochen Schwab

Technology SMEs (small and medium-sized enterprises) often struggle to keep up with major trends and developments such as the internet of things, cloud computing and machine learning. How can they succeed? This article highlights case studies and potential solutions, some of which may surprise you.

The solutions presented in this article were developed over the past three years in the context of the Shell Eco Marathon [1], which revolves around green engineering, pioneering technology and international teamwork. They are all based on one key factor, a kind of time machine-cum-learning platform: strategy periods that would normally last three years are condensed into six months, while a business year or project cycle takes place in a single week. The races are technology-driven and focus on humans and their emotions.

What Wile E. Coyote has to do with transformation

A phenomenon dubbed the “sailing ship effect” suggests that companies that ignore or reject technological progress tend to face the steepest uphill struggle in the competitive market. Why invest unnecessary time and energy in innovation when everything is going well and the potential ROI is hard to estimate? Nokia and Kodak are good examples of this approach.

But these stragglers all share a problem: they only see how far behind they are when it is too late. Like Wile E. Coyote, they find themselves hovering above the abyss when they finally realize that something has gone terribly wrong. But they have no idea what it was or why it happened.

At the other end of the spectrum, we have established, long-standing companies that spotted the problem early on and immediately started marching towards innovation at full speed. Unfortunately, their deep-rooted organizational structures, highly specialized employees and loyal customer base often end up hampering their progress. Conway’s law, which describes this issue, applies doubly to industry contexts. It obstructs innovation and has the power to paralyze or even destroy a company. This has also been dubbed the “innovator's dilemma.”

Start-ups do not suffer from any of those problems or challenges. They can be excellent role models for SMEs and even major corporations, as they know exactly how to tap into new markets with agile, disruptive methods. Existing markets frequently collapse as a result. When it comes to change, the strengths of corporations can turn into weaknesses. Remember the saber-toothed tiger in Ice Age telling off the annoying sloth? His exclamation perfectly illustrates the attitude of large corporations towards start-ups: “You’re a little low on the food chain to be mouthing off, aren’t you?” The question is not whether or not your company should undergo a transformation. The real question is: when? After all, the most important resource in such a process is always time.

From engines and cockpits to the tablet screen

Much like other European SMEs, Schmid Elektronik finally kick-started its own transformation during the global financial crisis of 2009. Its revenue stagnated, even collapsed; price erosion intensified, and nothing was as it had been. Everyone seemed to be looking for their own way out of the situation.

Schmid put its stakes on Geoffrey A. Moore’s theory of “crossing the chasm” and decided to target a niche market. Inspired further by Gartner’s hype cycle method, the company started preparing for groundbreaking technologies such as cloud computing, IoT and predictive maintenance. But the required organizational structures were still lacking. So we merged an engineering firm that specialized in embedded systems with a production plant for industrial electronics. The result was the new Schmid Elektronik, a provider of solutions that offered engineering and production services and a digital platform to a forward-looking niche market.

In late 2015, we received the phone call that changed everything. “We are planning a new show element for our Shell Eco Marathon. We want it to appeal to the emotions of the audience, sweep them off their feet. It is a telemetric system for our racing cars (Image 2). The system will record the energy consumption of the cars and upload it to a cloud in real time, alongside other information and GPS data, using the IoT.

Image 2: A telemetric system connects with the cockpit and drive system of racing cars to send operating data and GPS information to the IoT.
Image 2: A telemetric system connects with the cockpit and drive system of racing cars to send operating data and GPS information to the IoT.
(Source: Schmid Elektronik AG)

The data is then sent to a cinematic screen and the visitors’ smartphones to reach a global audience through social media. We’ve done our research and found that Schmid seems to have a technological platform capable of realizing complex projects like this one in record time. You see, we only have eight weeks left!” Wow.

Getting off the beaten track and breaking boundaries

Our curiosity was piqued at once, and the technology seemed fascinating. But the immense complexity and tight deadline scared us. We did know plenty about embedded hardware and software, and our in-house development and production facilities enabled us to make decisions quickly. In theory, we had all heard about the IoT and its technology but we lacked hands-on experience. Our first steps into the world of cloud computing had only happened very recently. So we had to learn – and quickly!

Image 3: Schmid has standardized the knowledge gained during the past two decades in the form of a platform consisting of graphically programmable embedded hardware, function modules for IoT and predictive maintenance, and software components.
Image 3: Schmid has standardized the knowledge gained during the past two decades in the form of a platform consisting of graphically programmable embedded hardware, function modules for IoT and predictive maintenance, and software components.
(Source: Schmid Elektronik AG)

We had a similar situation 10 years ago, where an energy project forced us to be brave, move boundaries and get off the beaten track. It was the catalyst that launched Schmid Elektronik forward in a niche market [2] (Image 3) and eventually turned out to open many doors.

We found out that the races in question involve three energy categories: traditional combustion engines, hydrogen vehicles and electromobility. The best entries cover the distance from London to Rome and back with a single liter of gasoline! We could not help but support the idea and movement enthusiastically. So we agreed – despite the seemingly impossible project parameters. To quote Sir Richard Branson: screw it, let’s do it [3].

It was not until much later that Schmid Elektronik even became aware of the transformational process it underwent over the course of the following three years. As an entrepreneur myself, I learned that there are three ways of transforming a company. The first one is to start turning things around as a last resort. In most cases, this takes place when you already have your back to the wall, and your chances of success are slim – see Wile E. Coyote. The second way is to set off a transformation because you want to. Common stumbling blocks in this scenario are a lack of discipline, resources (10,000-hour rule) and the innovator’s dilemma. Finally, companies can transform through a technology-driven, non-negotiable, major project carried out in an innovative community. This takes plenty of courage, but it is a risk worth taking if you have a competent, committed team and a lot of passion.

From the test lab to day-to-day business

After the first eight weeks, Schmid delivered the prototype of its telemetric system to the client. It was the first step in an odyssey that continues to this day. What began as a project-based business in 2016 became a fully-fledged business model in 2017. Today, a team of six dedicated experts offers its clients all-round TaaS (technology as a service) solutions. These range from the distribution and installation of telemetric services to the technical inspection of vehicles, race monitoring and the collection and scientific preparation of racing data (data science).

During the first half of the year, the team took three seven-day trips (the duration of each race) in a row to Singapore, California and London. Over time, we started noticing similarities between the races we supported and our own business and project rhythms. Each racing week (business year) starts with a budget and clear goals, and reviews are carried out every evening (month). Towards the end of the week (business year), the tension and excitement rise until they culminate in the final at the weekend (end of the year), and the visitors enthusiastically cheer on the winner.

Afterwards, we learn from our mistakes so we can be even better prepared when we start the next race a few weeks later. Once the season (strategy period) is over in July, we run an autumn workshop during which we strategically evaluate our vision and mission and adjust them for the next racing season. What could be more obvious than to transfer the expertise we had gained on the circuit to our everyday business and project routines? To questions such as: How can we solve problems between different cultures and personalities? How can the young and the old gain the greatest possible benefit from each other? How do you include people who feel overwhelmed by complexity? How does a team deal with intensifying pressure as the nights get later, everyone is exhausted and irritable, and errors find their way into the work?

Year after year, the Shell Eco Marathon was our testing ground for new technologies, unconventional methods, more efficient processes and management systems, alternative leadership models and the development of a culture of helpfulness. As soon as an idea was mature, which never took long thanks to our “time machine”, we transposed it from the circuit into our everyday work. Straight after the first season, we explored the concept of the “silent” holacracy. Back at our workplace, we eliminated a host of roles: CEO, managing director, plant manager, department manager. This leveled our previously unnecessarily hierarchical organizational structures and accelerated our chain of command. Now, our lead team of seven manage according to their roles rather than ranks.

Culture trumps strategy

Every company’s culture is shaped by the way in which its members deal with mistakes, conflicts and competition. These are everyday issues for the Shell Eco Marathon, as you are constantly breaking fresh ground. The technologies and processes are inherently complex. Towards the end of the week, fatigue abounds. And you can probably imagine the cultural differences between an American, a European and an Asian racing team. In this emotionally charged melting pot, everyone has the same goal: to win races. At the same time, however, everyone looks after one another – because there is another, overarching goal that everyone shares: to find feasible solutions that will allow us to use our energy resources sparingly.

You can find the true spirit of the Shell Eco Marathon in this enthusiasm for green engineering and the way it connects people. In this community, we meet inspiring visionaries and people who think out of the box, who have the power to break open entrenched thought patterns and inspire us to reshape our company culture now and in the future. Sir Richard Branson’s recently released autobiography Finding My Virginity [3] is currently doing the rounds and is recommended reading for everyone who has a passion for leadership and puts their employees first.

Tom Peters’ The Excellence Dividend [4] is similarly popular. Unlike Branson, Peter puts concrete performance in everyday business above vision and mission. His motto: “Vision without execution is a daydream.” In an interview [5], Scott Adams, the creator of Dilbert, offers up an incredibly simple piece of advice on how employees can empower themselves from within.

Image 4: Companies that have lost their DNA as a result of a change of ownership or a merger can use the “golden circle” method (left) to reclaim it. Agile but fragile start-ups turn into increasingly well-organized, stable companies that struggle to change. Why not combine the best of both worlds?
Image 4: Companies that have lost their DNA as a result of a change of ownership or a merger can use the “golden circle” method (left) to reclaim it. Agile but fragile start-ups turn into increasingly well-organized, stable companies that struggle to change. Why not combine the best of both worlds?
(Source: Schmid Elektronik AG)

Finally, more and more people subscribe to the “golden circle” method (Image 4) outlined by Simon Sinek in Find Your Why [6]. It helps companies rediscover their DNA and their bite. Sinek’s method drills down to the core. Who are we as a company? What do we stand for? Why do we do what we do? Suddenly, your vision, mission and guiding principles become concrete and vivid concepts.

Disruption à la Silicon Valley: when the technicians take charge

In April 2018, the Shell Eco Marathon took us to Sonoma in California, right around the corner from Silicon Valley. We used another book [7] to prepare a trip through the Valley, hoping to understand its spirit. Here’s what we learned:

1. A lot of things happened because the people who live and work there were able to seize opportunities as they arose.

2. Some achievements are owed to their unbridled curiosity and appetite for risks. Their guiding principle is: let's give it a go and see what happens.

3.Silicon Valley entrepreneurs have a concise recipe for success: do what you love, do it well and do it with passion. Success will follow.

They appear to merge the lateral thinking of an artist with the audacity of a rebel. Add to that a generous dose of courage, the ability to think big and an enormous wealth of raw specialist knowledge. In Silicon Valley, it is not the managers and businesspeople who pull the strings. It’s the technicians. Small start-ups are launched with little more than some garage space and a brilliant idea that has the potential to turn a traditional market upside down. A team of technicians gets to work: they design, program, disrupt and displace. Most of the funding comes from business angels who buy stakes in new start-ups early on and speculate on their success. Everyone values open, uncomplicated communication. This includes talking shop and engaging in “liquid networking” with the competition: technology is key, (company) politics is secondary.

What does that mean for us Europeans?

We should not copy the Valley or those who inhabit it. But it cannot hurt to have a closer look at the successful strategies of individual companies. How do they innovate? How do they penetrate markets? How can we Europeans rediscover what we may have lost? How much passion and hunger do we have left? How lean is our bureaucracy? How about putting in some “Google hours” to prepare ourselves? Why don’t we take a thin leaf out of the Valley’s book and become “refreshingly different” ourselves?

You might think: “Impossible! That only works in the US!” But that’s not necessarily true. There are certain similarities between Silicon Valley and Europe. We have always offered fertile soil for inventiveness, innovation and engineering, and the rest of the world looks up to us in that respect. The successful European participants in the Shell Eco Marathon are living proof. At the moment, a French team holds the record in the category for combustion engines, while a Swiss team is at the top of the hydrogen-powered category. They cover the distance from London to Rome and back with a single liter of gasoline. Outside of the marathon rules, a German team even managed 11,000 km on a single liter. The team that holds the record for the fresh, new category of autonomous driving is neither Asian nor American: they are from Denmark.

Software can show us the way: reconciling change and stability

On its return from Silicon Valley, the Schmid team put a lot of thought into the amount of structure, organization and quality assurance it allows into its races. Our company has come to question the benefits and effects of ISO 9001. We prefer to opt for a simple formula: as much as necessary, as little as possible.

On many issues, the ideology of an agile manifesto can get us further than a static construct from the 1990s. When we first entered the world of racing in 2016, we felt as though we had been transported back to that carefree time when we were an energetic start-up: everything was new, everything was possible, everyone had a new role to fill, and chaos often reigned supreme. A year later, the doubled effort of running an international team and other factors showed us that clear roles, responsibilities and processes can help us reconcile our changeable everyday work with a general sense of stability.

The story of Kotter [8] (Image 4), who has studied the transformation of start-ups into professional organizations closely, has helped us blend the best of both worlds. At the moment, we are once again using the races as a testing ground for the creative destruction of our conventional quality management system in favor of a fresh and new management system built from scratch. Afterwards, we will reduce and dispose of unnecessary ballast. Instead of bureaucracy, we want an easily comprehensible platform that actively supports us in our everyday lives and that accommodates everyone by assigning clear tasks, responsibilities and competences.

Lessons learned on the racing circuit

1. When you have an innovative idea, do not ask for permission. Just do it and ask for forgiveness later if it goes wrong. Create temporal and spatial leeway and “seeing tools” (Bret Victor).

2. “Plan the dive and dive the plan” sounds reasonable, but it does not always work. As Mike Tyson once said: “Everyone has a plan until they get punched in the mouth.” Combine anticipation and agility.

3.When you venture into the unknown, hope for the best but prepare for the worst. Risk cards stating the likelihood of something occurring and its effect are a very handy tool. Having a plan B is worth gold.

4.Never change your shoes just before you run a marathon. Changes during the crucial final stages of a project usually backfire.

5. Strike while the iron is hot. When something goes wrong, immediately look for the reason without attributing blame and learn from your findings.

6. Last but not least: actively manage your customers’ expectations. Underpromise and over-deliver.

7.Learn, forget, relearn. Be ready to throw experience out of the window every now and then. Be open to new ideas.

Be ready for disruption: leave your comfort zone every now and then

Up to 200 teams participate in the races, divided into three energy categories and two vehicle classes. That amounts to 200 vehicles which need to be put through their paces in terms of their roadworthiness and safety. Each vehicle is equipped with a telemetric system that connects to the drive and cockpit to stream data to the cloud in real time during the races. The engine bay is a rough environment, and the telemetric electronic have to withstand high temperatures, strong vibrations, dampness and harsh electromagnetic fields. Troubleshooting is common. All of these elements create enormous complexity, errors are inevitable and there are risks around every corner.

When the best of the best compete against each other on the final day of the race, the six members of the Schmid Elektronik team experience an emotional roller coaster. It starts with the adrenaline rush as the race gets going – the point of no return. We all hope that the telemetric system delivers correct, seamless data over the next 10 rounds. Thanks to social media, the audience is far larger than the crowd on site. The whole world is watching.

We simply cannot afford any mistakes during those critical 15 minutes before the end of the race. As always, the devil is in the detail: from cold soldering joints, faulty crimp contacts and crushed cables to EMC issues and 4G and wifi transmission problems caused by a poor signal. After every successful race, all that anxiety gives way to an overwhelming sense of relief and joy. Equally, unsuccessful races bring disappointment and frustration. If and when this happens, the team must work together to deal with the failure, learn from it and move on.

During these racing weeks, Schmid deliberately steps off the beaten track to explore the unknown. We shed old roles and organize ourselves as agile start-ups do in order to solve unexpected problems quickly and efficiently. The HR officer gives the racing teams their telemetric systems and explains how to use them, how to access the Wiki and how to use QR dates to get to the race data. The owner takes the role of inspection technician. Later, he will get his hands dirty while checking the telemetric systems in the racing cars. This role-playing exercise gets everyone out of their comfort zone and builds resilience. It is perfect training for our disruptive business.


[1] M. Schmid: “How to Get from London to Rome and Back With just 1 Liter of Gas”, keynote speech at the Embedded Software Engineering Congress 2017

[2] M. Schmid: “Entfesselte Kreativität”, elektronik informationen 2/2018, p. 8

[3] Richard Branson, Finding My Virginity, Penguin Books, 2017

[4] Tom Peters, The Excellence Dividend, Penguin Books, 2018

[5] “Dilbert Creator Scott Adams Reveals The Simple Formula That Will Double Your Odds Of Success”, Forbes, 2013

[6] Simon Sinek, Find Your Why, Penguin Books, 2017

[7] Christoph Keese, The Silicon Valley Challenge: A Wake-Up Call for Europe, Penguin Books, 2016

[8] David Kotter, That’s Not How We Do It Here!, Penguin Books, 2016

(This article was taken from the conference transcript of the 2018 Embedded Software Engineering Congress with the author’s permission.)

*About Marco Schmid:
Marco Schmid is a systems engineer who works with embedded systems on a daily basis. His main interest is embedded software. Through a wide range of projects, he has gained experience with cyber-physical systems, the internet of things, condition monitoring, predictive maintenance and cloud computing.

This article was first published in German by embedded-software-engineering.