The development and transformation of Škoda Auto into an agile and knowledge-based company

Historical development
At the beginning of the historical data, there is probably an insignificant record for a company which is going to be called Škoda auto a.s. one day. Ferdinand Porsche who became famous as a car constructer and the designer of the Volkswagen car was born in the town of Vratislavice nad Nisou, in a house at Tanvaldská Str. 38 in 1875. The house in which he was born was utilized also as business premises of Ferdinand’s farther Anton Porsche, who had a prosperous plumbing workshop there.
In 1925, Laurin & Klement merged with the engineering company ŠKODA Plzeň, formerly Škodovy závody in Pilsen, achieving its first breakthrough success with ŠKODA Populár. In 1938, the construction of a people’s car plant began in Wolfsburg, Germany, now the parent company of Volkswagen, which was founded also by Ferdinand Porsche.
After the war, the company became independent under a new name Automobilové závody, národní podnik (AZNP) in the course of reorganization and the nationalization of industry. After the fall of the communism’s centrally planned economy, the company came back to its historical name and therefore since 1990, the car factory has been known as Automobilový koncern ŠKODA a.s., and finally since 1991, after having merged with Volkswagen Group, as ŠKODA, auto a.s., this current name has been used since 1997. Shortly after the acquisition of Škoda by Volkswagen, Ferdinand Piëch, the grandson of Ferdinand Porsche was a member of the Board of Directors of Volkswagen Group in the years 1993 - 2002. And so two destinies of small starting tiny companies were interwoven, on one hand, a tinsmith’s workshop and on the other hand, a small bicycle production plant. Nowadays, this is a relatively large part of the Volkswagen Group.
Today’s Škoda Auto in Mladá Boleslav is one of the most successful car manufacturers of the present time and the most successful car manufacturer of the entire post-communist Europe. This thriving story of one of the leaders of the current Czech economy is unique throughout the post-communist world, distinguishing itself from the other car manufacturers of the surrounding region by the fact that despite all efforts it has remained to be a full- fledged branch with a very strong position on world markets.
In addition to the increase of production and the extension of model lines, the car manufacturer has been financing its own development base, has built up strong and high-quality human capital along with the modern technologies and investments and has established and owns even an own higher education institution, within its development and evolution.
This all shows its independent strong position within the VW Group. It is significant also for the economy of the surrounding region, the connection of Škoda to a number of domestic suppliers of small components, forming more and more a wide industrial base both in the Czech Republic, but partially also in the surrounding European countries.
An attempt to sell in America
Nowadays, Škoda Auto sells its cars besides Europe also in Asia, Africa and Australia. However, up until now, it has been missing in the US market and entire North American continent, where the Škoda management directly headed with a marketing purpose in 2016.
Hardly anybody knows today that there were attempts to sell Škoda cars in a large number in the US already in the 50th and 60th years of the last century , Felicia and the then Octavia. Of course, it was no blockbuster and the brand has withdrawn from the American market. America is a specific big-car market, it is therefore no wonder that the cars have been withdrawn, moreover big eight-cylinder cars were popular on the American roads at that time, Corvette came on the market and similar cars in quick succession“.

Gasoline was at a very low price at that time and an unknown brand until then from a totalitarian Eastern Europe had practically no chance. What it could have offered- a little bit lower price, anemic engines and for North America relatively small dimensions that along with the fluctuating production and service quality discouraged even the small number of interested persons. A bit better sale information occurred in Canada a few years later where Škoda 120, even in the “luxurious” export version was in the offer. And in the 1980s, the export Škoda 130 was on that market, but also these models suffered by a total lack of people interested in purchasing them as well as eternal technical problems. Poor quality, bad reputation and insufficient variety of models offer. And therefore Škoda has withdrawn from the American continent and the prospects from a long-term, as well as current point of view don’t look good.

Throughout history, up until now, the offer of the Czech brand has been somehow specific. It aims mainly at family and its needs and logical practicality arising from it. And Octavia a Fabia, the best-selling models today, belong in US to the categories that are practically unsalable. The combi vans popular until recently of which Škoda in Mladá Boleslav dispose in the Superb and Octavia models are pushed out by the trendy SUVs and crossovers and also the huge pick-ups are getting to the forefront due to the low gasoline prices.
However, the North American market is a huge opportunity and it cannot be disregarded. Currently, Škoda supplies approximately fifty percent of the world market and on the other hand, North America accounts for a quarter of the world car market. There is a possible increase at stake which constitutes the entry into the local market which might be needed for the development and future of the car manufacturer in Mladá Boleslav with a possibility to step over the shadow of the current German owner due to its SUV offensive with a possibility to help the VW Group on the North American market.
Velvet revolution, political changes and a breakpoint
Uncertainty, breakthrough, step to the unknown, hard business reality, competitive struggle, the change of the economic system and mainly the opening of the market with the possibility to purchase cars from the West, including the newly emerging phenomenon which was second hand car market. That was the end of 1989 for the Czech car manufacturer, bringing the Velvet revolution and the end of the socialist regime. The fall of the totalitarian regime and the Favorit car production start-up along with the changes of the enterprise management was accompanied by the arrival of new technologies, new processes, new methods and new approaches.
Although Škoda was still a state - owned enterprise in the first post-revolution years, funds for own development and for the product development as well as for keeping the very aging final products were running short. The declining sale and production got the enterprise to the most critical point of its history, in regard to the time we can refer to it as a breakpoint today. It was more than clear that maintaining Škoda without the entry of a foreign owner was virtually impossible.
The management of the car manufacturer and politicians were intensively looking for a suitable foreign partner, the then government lead by Petr Pithart decided on December 9, 1990 that the most suitable partner would be German Volkswagen Group, successful worldwide. Yet, the interest was great, the 22 candidates included companies, such as BMW, Fiat, General Motors and the second big bidder, in sport terminology the finalist, was Renault.
So Škoda Auto has become definitely a part of the Volkswagen Group, having not only survived its critical turning point but bounced back from it. It has bounced back to become a full-fledged member of the VW Group car manufacturers and it has been thriving so much that it has exceeded the limit of one million cars manufactured annually, doing business on large world’s markets and manufacturing in several states in the world, even in India and China.
Vocational corporate education and qualification development
In its history over 120 years, the car manufacturer has gone through many concepts of management and views of vocational education, putting an emphasis always on internal corporate education throughout its history, both in the then Czechoslovakia and in the Czech Republic.
At the inception and in the first years of life of Laurin & Klement, the company has gotten into a development stage in the industrial process which was characterized by productivity growth, simple components would be produced and vocational education would be performed directly at the workplace, without theory, directly through practise, by a transparent demonstration and handing over experiences. There were virtually no technology manuals and vocational education and qualification were proceeding directly at the workplace in a time framework from several minutes up to hours. And that was because of simple and very short production operations. It was actually a very simple method: look – try it – and work. From a company management point of view, it was a classical management theory of mechanistic conception of organisation management.
With the advent of industrial society in the 1920s, scientific management that should have achieved increase of work effectiveness gets into the awareness and practise of companies. This management is based on precise technological procedures, performance standards and work activities description. As opposed to the freedom and uncontrollability, when the employees improved in the field themselves, all employees were trained and developed on a scientific basis. More specifically, by setting a daily task where the worker knows how much and what to do. It was the organistic concept of management focused on humanistic approaches. They were, however, radically changed in the car manufacturer after 1948 when corporate education was subjected to normalization proceedings for many years.
Production technologies from 1920s to 1960s were represented by simple conventional machines and first simple NC machines, mostly single-purpose and simple semi-automatic machines in serial production with a high number of servicing staff and as far as piece production was concerned, these were classic conventional machines attended by one employee per working shift. Qualification of employees was carried out by a short training according to the equipment manual and by a practical, illustrative demonstration of activities to manage the required production operations, mostly directly at the workplace, directly at the technology, and after having proved the mastering of the technology for several days directly in practise. The apprentice training center was established in the Czech car manufacturer as an independent vocational education institution already in 1927. It was here where new young applicants were preparing for their profession, being placed one hundred percent in the parent’s company operations until the fall of the totalitarian regime.
As the processes and process management on the principle of integration were introduced in half of the 1980s, even Škoda started to function in the outlines of the first knowledge-based companies in a systemic approach to management. Also vocational education is being developed in this direction, following the accurate processes at the workplaces, a precisely set activity which is described in the job description of the profession, training. It was adjusted both to the technology and requalification in the form of an educational event and training directly at the workplace.
Vocational, corporate or company education has undergone a very various journey with an interesting development after the revolution in 1989. The main point in the post-revolution era is to break away from the central government control, break away from idealistic ideas and heading towards specification and expertise in different professions or groups of professions. Professional competencies representing today’s requirements on the employee’s profile, virtually for all employees today, point out to the development of the car manufacturer from 1989.
Nowadays, corporate education is heading in the direction of the development of vocational potential and skills of all enterprise workers’ categories. This creates preconditions for acquiring new knowledge, forming skills and the occurrence of new working habits. Knowledge gives an answer to the question what to do and they can be learned. Skills answer the question how to do it and they can be trained. Habits can be created by connecting the knowledge and skills and by repeating professional activities and workflows.
New technologies, new processes, changing customers’ needs, the challenges of emerging markets, the stagnation of the established markets and periodically recurring economic and political crises bringing about risks and demands for each employee, starting with the Board of Directors to the last worker. In this sense, vocational management, management strategies as well as the concept of management must be changed. The key to success for a today’s company is not its size but the speed, readiness and being able to adapt immediately to all changes in the entire range of activities related to the company.
Human resources lead to expertise
In terms of human resources, the priority of the Czech car manufacturer consist in the areas where the variability of the employees can be extended and production worker can be trained in such a manner so that he/she is able to work at any place within his/her team and becomes an expert/ specialist at his/her section. That’s why when recruiting new human capital and selecting new employees, it is necessary to pay more attention not only to the expertise and competence but also the personality traits of an individual, in the direction of the potential of personal development.
Organisations, such as Škoda auto a.s.. which plans regularly the possibilities of subsequent development of qualification and competence of its employees or plans to move employees to another job having higher demands on their competence that are assumed in near future. The company must expect already today that there are going to be fundamental changes to qualification and educational requirements for employees’ professional competence.
This is opposed by today’s mobility of young people, adaptability to the environment, working hours, technologies development, followed by personal fluctuation as well as the aging of experienced competent staff.
Therefore, in such large organisations as Škoda auto a.s, without a doubt, a new element is getting to the work with human resources and qualification development and this is the establishment of a company’s knowledge –based Academy for the development of professional skills in different professions. The company’s strategy and goal is to establish academies gradually in individual professional areas to set up a base for the comprehensive development of employees’ competencies and to aim at their competency. And thus, creating a functioning system for goal-oriented development and education of employees on the basis of standardized competency profiles and strengthening the professionalism through the identification of experts in the particular area and handing over their expert knowledge. The philosophy and significance of establishing academies consists in the adaptation of the corporate education to the current conditions where it turns out that the best teachers are directly company’s employees who know the best what their profession needs.
The importance of people’s learning in broader sense is more and more emphasised. Learning becomes a part of individual’s development, a part of his/her working and social integration. Škoda auto a.s. puts great emphasis on a long-term stabilisation of qualified employees in their company. A proven practise becomes the certainty of a permanent job; a balanced relationship of professional and private life, occupational health and support of all employees’ groups in accordance with current trends where maintaining key employees is more and more important. Due to the fact that the resources available are decreasing and each employer pressed for the same people.
The presence of Škoda auto a.s. and future prospects
Currently, Škoda has been basking in the glory of all Volkswagen Group brands, after the problems upon the entry to the Group at the beginning of 1990s and the crises at the beginning of the third century.
Škoda auto a.s., for the fifth time in a row, has achieved a new sale record. Worldwide car deliveries to the customers of the Czech car manufacturer have increased by 4.4% in 2018 The chairman of the Board of Directors of ŠKODA AUTO Bernhard Maier says: “In 2018, we have delivered again more cars to our customers than ever before. It turns out that our Strategy 2025 is working; the product offensive has been showing its power worldwide. ŠKODA is growing steadily and in a controlled manner, despite the year 2018 has prepared new challenges to the entire automotive industry. We are going to continue consistently in product offensive with new models in 2019. At the same time, by the production start-up of our first electrically powered car, the Škoda brand will enter the era of electromobility and that is an absolutely exceptional moment in the 124 years history of our enterprise.“
Nowadays, Škoda is being accepted very positively both at home and in the word, being perceived as a developing company. Škoda is preparing for the future through the 2025 corporate strategy, the most important aspects of which include e.g. electromobility and the extension of the model offer. Along with other important areas, such as the digitalisation of products and processes, entry to new markets and extension of the classical car production by many other services related to mobility.
Today’s Škoda Auto operates three production plants in the Czech Republic, where approximately 33,000 people are employed, over 20,0000 of them works in Mladá Boleslav. Škoda manufactures and produces its cars among others also in China, Russia, Slovakia, India, Ukraine and Kazakhstan. In 2018, Škoda Auto has delivered to customers over 1, 253. 700 cars which constitute over one million cars produced in the fifth consecutive year.

Innovative, knowledge-based and agile organisation

If we want to characterise the current Škoda auto a.s. in one sentence. It is a modern knowledge-based organisation set up to innovate in each of its processes, a company which monitors the modern trends, the global market developments as well as technologies, everything aiming at the satisfaction of the customer and maintaining and strengthening the position on the market with the application of own knowledge. Today, it is not enough to have only a clear vision and strategy of an enterprise, but it is also necessary to be able to clarify it, communicate it and get the entire enterprise to fulfil it. If the strategy is to be successful, it must be well understood and linked with the goals of all parts of the enterprise, up to each individual.
The car manufacturer has brought a pro-innovative mood and culture by applying its corporate strategy by 2025, setting up everything in order, in addition to innovative thinking, to implement gradually applications of innovation in the field of digitalisation, robotisation and autonomous production to its processes. From a practical point of view, it is informedness with a possibility of feedback where the maximum number of own employees will be involved. If a feedback to the change of one technology is repeated, the acquired knowledge is utilized and along with the employees’ qualification employment makes Škodovka a knowledge-based organisation heading to agility.
Agility is a very interesting development tendency where individual enterprises and companies cannot respond to changes affecting them from all influencing directions and to abandon them a few times per year and keep holding on the long-term set strategic direction. Agile approaches must be used in order to keep the pace with rapid development and changes, including new clients’ needs. Agile enterprise management represents such management which is characterized by readiness and the capability of fast response with an inventive and adaptation approach. Its principle is to effectively keep the pace with time and to maintain stability in enterprise management.
This new element in a company’s environment and organisation management represents a self-assertive, zealous, innovatory, exemplary, hardworking, active, agile approach. Škoda tries to implement agility so that it becomes a firm part of its corporate culture and builds it to the everyday people’s management and manager’s personal work. The aim is therefore to support employees in these activities So that the agility of individuals and thereby the agility of the whole company is strengthened and at the same time its development for future years is enabled.
Currently, Škoda auto is self-assertive, hardworking, exemplary, innovative, active and zealous which means it is an agile organisation, to which extent these attributes will be fulfilled will be shown in short future.

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