Innovation and Automation Report: Volvo Cars - MGMT20132

This report analyzes the operational challenges faced by Volvo Cars, specifically the rising costs and declining margins. It identifies the core problem and explores various alternatives, including Artificial Intelligence (AI), robotics, augmented reality, and big data analytics. The report selects AI as the preferred solution, detailing its suitability, affordability, and feasibility. It then outlines a novel value proposition, targeting business executives with a focus on luxury, safety, and AI-driven features. The report also discusses the competitive advantage and strategic fit of AI implementation, as well as potential issues and recommendations for overcoming them. Ultimately, the report aims to provide insights on how organizations can make decisions when implementing innovations, using Volvo Cars as a case study. The analysis includes the selection of AI implementation to improve the value proposition of the business through the exclusion of human-related errors and increase the scope of the target customers.

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Executive summary
The report aimed at identifying the concern that is being encountered by the concerned
organization Volvo Cars. It has been observed that the rising cost of operations and degrading
margins annually posed a serious threat to the organizational sustenance. In this connection, the
report enumerated a list of innovations that might be considered by the organization. The report
analyzed the suitability, affordability and feasibility of the innovations while choosing the most
preferred activity. The research also enumerated the different challenges that might be
encountered by the organization and suggested recommendations for the same. Therefore, the
overall purpose of the research is to develop cognition on the manner in which an organization
might take decisions while implementing an innovation.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Problem to be solved and insight on the core problems..............................................................3
3. Alternatives..................................................................................................................................4
4. Selection of proposed solution out of the alternatives.................................................................5
4.1 Solution selection analysis.....................................................................................................5
4.2 Novel value proposition.........................................................................................................8
4.3 Targeted customers................................................................................................................9
4.4 Competitive advantage and strategic fit..............................................................................10
5. Issues that might be faced while implementing the proposed solution.....................................11
6. Recommendation for overcoming issues...................................................................................12
7. Conclusion.................................................................................................................................12
References......................................................................................................................................14
Appendix........................................................................................................................................17

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1. Introduction
Volvo Cars is a Swedish luxury vehicles brand which was established in the year 1927
and is headquartered in Gothenburg, Sweden (Volvocars.com., 2020). The company markets its
vehicles being safe, solidly built and reliable. The cars are luxurious and the distinctive value
proposition that is made by the organization enabled the same in improving their operations in
the different markets over the years (Volvocars.com., 2020). However, the organization has been
facing significant issues due to the increased operating expenses and declining margins.
Therefore, the report will aim towards identifying the specific aspects of the concerns that are
being faced by the concerned organization and proposed a solution after reviewing the
alternatives. The report will also enumerate the challenges that the organization might face while
implementing the proposed solution and thereby suggest recommended activities for overcoming
the challenges.
2. Problem to be solved and insight on the core problems
The concerned organization faced a significant issue relating to the growing rate of
operational expenses and minimized annual earnings (Peiró-Signes & Segarra-Oña, 2018). It has
been observed that the organization focused towards developing fuel efficient models that
required the organization to facilitate increased investments on the operations. Again, the
specific human related errors might affect the capability of the organization in maintaining the
efficiency of the business operations as per the common goals of the venture. Ahmad and
Ramzan (2018) stated that the major challenges that are absence of innovative practices in an
organization restricts the capability of the same in improving the efficiency of the business
earnings. In this connection, the absence of technological measures being implemented by the

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organization has affected the capability of the same in realizing increased earnings while
reducing the operational expenses. On the other hand, the organization aimed at providing the
customers with valued luxury cars. However, the increased human intervention and common
errors in practices have affected the capability of the organization in retaining the trust and
commitment of the target audience. The absence of automated systems has affected the
capability of the organization in improving the overall efficiency while catering to the changing
needs of the customers (Dingler & Enkel, 2016). It has been observed that the human related
errors have worked as a restrictive force while the organization focused towards the development
of the energy efficient vehicles (Cano-Kollmann, Hannigan & Mudambi, 2018). The errors in
assembling the auto- parts and the paint jobs have affected the capability of the organization in
keeping up to the promised luxury of the brand.
3. Alternatives
The alternatives that might be considered by the organization with the purpose of
minimizing the impact of the challenges while providing the customers with the expected value
proposition and minimizing the operational costs are being discussed in this section.
 Alternative 1
: Artificial intelligence: The use of Artificial Intelligence or AI would
allow the organization in minimizing the errors in the assembling or other processes that
are undertaken by the humans (Dodge et al., 2017). Moreover, the utilization of AI
technologies would allow the organization in minimizing the wastes, in complex projects,
while guiding the operations in a sustainable manner which would significantly support
in reducing the operational expenses for the business.
 Alternative 2:
Robots: The use of robotics in the manufacturing, assembling or the other
processes would allow the organization in minimizing their dependence on the human

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workforce while reducing the human intervention. However, the complete dependence on
the robots might restrict the organization in customizing the operations and enable an
organization in continuing with the operations in system failures.
 Alternative 3:
Augmented, mixed and virtual reality: The use of AR, VR or Mixed
reality can significantly improve the operational process of an organization (Yu & Lee,
2017). However, the implementation of the AR, VR and MR would not eradicate all of
the concerns that are being encountered by the business. Moreover, it would contribute to
the increase in operational costs without significant changes in the operational activities
of the organization.
 Alternative 4:
Big data Analytics: Big Data analytics would assist an organization in
identifying the different technological changes that are being undertaken by the other
companies in the industry (Zhou & Wang, 2019). The knowledge on the use of
technologies that are being made in the industry would assist the concerned organization
in developing their capabilities towards the improving the operational activities.
4. Selection of proposed solution out of the alternatives
4.1 Solution selection analysis
Alternatives
Suitability
(customer
desirability)
Rating between 1-
5 (1- low, 5- high)
Affordability
(financial viability)
Rating between 1-5
(1- low, 5- high)
Feasibility
(technical
feasibility)
Rating between 1-5
(1- low, 5- high)
Total
Artificial 5 4 5 14/15

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intelligence (The use of AI
would allow the
organization in
improving their
proposition values
which is highly
desirable by the
customers)
(The financial
resources of the
organization would
enable the
affordability towards
the AI systems in the
business)
(The
implementation of
AI would assist the
organization in
reducing wastes
from different
complex projects
and curb out
expenses)
(Chosen
alternative)
Robots 4
(Robots would
support in
improving the
value proposition
of the business
through exclusion
of human related
errors)
4
(The increased
funding and the
revenue streams of
the organization
would allow the
same in affording the
robotics )
3
(The absence of
empathy among the
robots and the
absence of
judgmental
capability might
restrict the
capability of the
organization in
improving process
efficacy)
11/15
(Rejected)
Augmented,
mixed and
5
(The use of AR,
3
(The utilization of a
4
(The absence of
12/15
(Rejected)

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virtual reality VR and MR would
not only allow the
organization in
improving the
experience of the
customers but also
the efficiency of
the operations)
combination of AR,
VR and MR would
increase the
investments of the
organization without
particular benefits
which might affect
the capability of the
organization)
adequate
knowledge on the
AR, VR and MR
technologies might
affect the capability
of the organization
in making safe
utilization)
Big data
Analytics
5
(Big Data would
allow the
organization in
gaining
information on the
preferences of the
customers while
developing the
propositions which
would contribute
to the
improvement of
customer
4
(The organization’s
large revenue
streams would allow
in affording the
technology in the
operational
processes)
2
(Big Data would
contribute little to
the improvement of
the operational
processes of the
organization)
11/15
(Rejected)

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experience)
4.2 Novel value proposition
The organization aimed at proposing the customers with vehicles that are both luxurious
and safe. The uniqueness of the value proposition is specifically based on the design of the
vehicles and the material that is used, while aiming at securing the well being and comfort of the
users. The implementation of AI technology supports an organization in reducing the wasters in
the operational process and thereby improve the quality of the propositions (Fathali, 2016).
Again, most of the customers prefer an AI based self drive automobile. In this connection, the
application of the AI programming in the organizational operations would allow the venture in
improving their skills of improving the experience of the customers. The superior quality of the
vehicles and the efficient customer services that are provided by the concerned organization are
aimed towards mitigating the concerns that are being faced by the customers (Haleem, Kumar
& Luthra, 2018). The organization developed a range of non-electric and non-hybrid cars from
sport utility vehicles (SUVs), station wagons, sedans and compact executive sedans with the
purpose of meeting the elegance, style and utility driven needs of the customers.

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Fig: Part of the Value Proposition Canvas
(Source: Pandher, Mutlu & Samnani, 2017)
4.3 Targeted customers
The primary target customers of the concerned organization, Volvo cars, are business
executives and individuals between the age group of 35- 50 years and belonging to high income
groups. Moreover, the organization also targets the customers who are more concerned with the
safety and security of the vehicles. In this connection, the organization aimed at proposing
secured vehicles and better mileage with the purpose of improving the experience of the
customers (Ouyang & He, 2018). Moreover, the level of luxury that might be afforded by the
customers is an important consideration that is made by the organization while positioning the
propositions.

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Fig: Part of the Value Proposition Canvas
(Source: Kwarteng, Sarpong & Acheampong, 2019)
4.4 Competitive advantage and strategic fit
The competitive advantage of the organization is based on the security and safety that the
business promises to the customers along with the vehicles. Moreover, the design of the vehicles
and the implementation and integration of the AI systems in the operational processes and the
programming of the automobiles would allow the business in improving the overall market
position through retaining the commitment of the customers. The technological innovation would
allow the organization in increasing the scope of the target customers. Therefore, the
implementation of the AI would support the organization in adding up to its design and comfort
for the consumers while providing the same with improved quality of proposition and safe car
driving options.

11INNOVATION AND AUTOMATION
5. Issues that might be faced while implementing the proposed solution
The concerns that might be encountered by the concerned organization while working
towards the innovation in the processes are being enumerated in this section of the analysis.

Lack of adequate experience on the innovation: The absence of adequate experience of
the business stakeholders and employees might affect the capability of the business in
improving their innovativeness. It has been observed that the experienced and
knowledgeable employees contribute to the overall innovation based processes of an
organization (Preskill & Banerjee, 2017). The absence of adequate resources might
affect the capability of the organization in maintaining the efficiency of the
organizational operations while facilitating uninterrupted practices. Again, it has been
observed that the lower skill development opportunity for the employees in the
organization would affect the capability of the business in improving the engagement of
the employees in the different innovative processes (Sharma, G Singhi & Mittal, 2019).
The lower skill development opportunities might incapacitate the organization in
maintaining the effectiveness of the business operations as per the common goals of the
venture.

Conflict between the core business management and innovation teams: The absence
of collaboration between the core business management and innovation teams might
incapacitate the business in improving the innovativeness of the same (Potti & Saurav,
2020). The absence of collaboration and integration among the management and the
innovation department might affect the capability of the organization in allocating
resources efficiently in acc0ordance to the innovation based needs.