Building required gigafactory capacity will require cross-value chain partnerships
Good read on gigafactories here as usual from McKinsey & Co. At Surrey Hills Strategy, we foresee up to 50% of planned and announced European battery gigafactory projects will fail. This won't be random, the winners will combine bulletproof strategies (with secure partnerships up and down the value-chain) with experienced, practical delivery capability. They will be hard-wired to drive value across functions, up and down the organisation, through every stage of development and every step of their projects.
Helping industrial clients transform themselves in this way is our bread and butter, but in this fast-moving sector I wouldn't say any of those things are givens - the challenge and the stakes are high.
Our take on what it will take to succeed in this space is quite simple - excellence on each of the key dimensions of challenge faced by battery scale-ups…
Getting the scale-up pathway right. It isn’t easy to select the right scale and decision points (spec-freezes if you like) as projects move along the technology readiness scale. What scale, when to freeze spec, how to align investment and scale-up with gradually strengthening customer testing and ultimately commitment - balancing risk and speed with product optimisation is tricky
Building the right thing, at the required pace. We are firm believers in modularising and ‘shrink-to’fit’ designs, having seen plenty of examples of just-in-case and gold-plated engineering
Keeping the programme under control. Both costs and schedule tend to slip inexorably in the wrong direction, exacerbated in a time of rising inflation and supply chain and skills surprises and shortages. Programme controls can’t stop geopolitical upheavals, but you shouldn’t be surprised by 6-monthly project reviews that show things have got way out of hand. Getting daily/weekly/monthly reporting and control right is key
Securing supply. Not signing vague memoranda of understanding with unknown and unproven suppliers. Increasingly in the critical minerals space, large scale battery ventures (and their ultimate auto OEM customers) need to know the detail of the what/when/where/how much has been secured, on what terms. This means figuring out early how to share risks and partner up across the value chain, and understanding which parts of the business model or strategy may need to flex in order to maintain those commitments
Setting up your organisation to win. How many scale-ups fall apart as recruitment happens, and the behaviours and processes needed to bootstrap a VC-backed idea off the ground are no longer fit for an aspiring PLC enterprise? How do you keep the management team working as one rather than pursuing narrow functional interests? Drive rigorous programme management while allowing the required entrepreneurial flair? Will all the initial team make the cut for the full scale venture? (hint - the answer is highly likely to be ‘no’!)
These things are difficult, but not impossible. The important thing is to diagnose where the enterprise is on each dimension, and then prioritise rigorously a plan of very specific actions to improve where most needed.
