SFTW Convo: Bringing Iron & Tech together with Sona Raziabeegum
Fusion approach for a legacy OEM (CNH)
Welcome to another edition of “SFTW Convo.”
Today’s SFTW Convo features Sona Raziabeegum of CNH. Sona is the VP Strategic Program Delivery & Int. Validation at CNH Industrial. This edition is available for free to all subscribers.
In this R&D-focused position, she drives enhanced coordination between CNH’s iron and technology teams, overseeing the company's most critical precision technology delivery projects. Additionally, she leads key engineering services, including simulation, VR/AR, materials, and validation teams. Sona has previously worked at Apeel, John Deere, and Daimler Chrysler.
When I talk with executives of large agribusiness, I am always wary about them only coloring inside the lines. They do a great job of sticking to broad generalizations.
Sona didn’t do that. She was honest and upfront about her work, what CNH is good at and what it needs to work on, challenges facing the industry, and had a measured take on technologies like autonomy. She went to the “other” business school in Chicago, but she didn’t hold that against me!
I hope you enjoy this SFTW Convo.
Note: This conversation happened in mid November.
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Conversation Summary
In this conversation, Sona discusses the challenges and strategies involved in transforming legacy industries, particularly in the context of CNH's integration of technology and equipment. She highlights the importance of aligning traditional processes with agile methodologies, the significance of customer needs in shaping product development, and the role of dealers in delivering effective support to farmers.
The conversation also touches on the automation of agricultural tasks and the investment priorities within the ag equipment industry. In this conversation, Sona discusses the evolving landscape of agriculture and technology at CNH.
She emphasizes the importance of enhancing the value proposition in sales, adapting business models to customer needs, and the significance of customer segmentation in pricing strategies. The discussion also covers the integration of technology with equipment, the impact of economic cycles on agricultural practices, and the focus on aftermarket services during downturns.
Sona highlights the need for a balanced approach to autonomy in agriculture, advocating for incremental changes that align with customer realities.
Line drawing by Eeshan Inamdar based on image provided by Sona Raziabeegum
SFTW Convo
Introduction
Rhishi Pethe (RP): Sona, thank you for joining. Let's talk about your work. You are in an R&D focused role. And if I look at your resume, you've had roles in BD or strategy. So how do you compare your new role with your previous work?
Sona Raziabeegum (SR):
I am in the CTO organization focused on R&D. I would term myself leading a team that supports both the equipment side of the house as well as the technology side of the house. The role is to be in the middle coordinating the efforts. Because left to our own devices, equipment will focus on their waterfall plans and technology will focus on their agile plans.
This is the new era where technology and iron are becoming so integrated. We are a group which focuses on driving that alignment. The reason why my role exists is because we are in early stages of maturity of aligning the two. And you need some, artificial or over the top effort to bring those plans together.
In the past, I've been mostly strategy focused, BD focused. In the course of my career at CNH, I was given a chance to support a few near term execution projects. So it kind of came in with me stepping into some of these roles to fill a gap, as the company was maturing.
This role is an acknowledgement of the fact I can do that well, so why don't we try it as a permanent role? I was on a special assignment previously on another technology integration project. And there was recognition that there's value in having this role be a permanent role for some other projects that we anticipate in the course of the next three to four years.
In the past, I spent a lot of time putting big plans on paper. This role gives me a chance to really play it out and deliver. The accountability, the ownership, there's an adrenaline rush that I said, hey, this is something I think I can do. And I've been rewarded with the opportunity to do it more.
Fusion strategy for a legacy company
RP: I've been exploring lately as to how do legacy industries go through a process of transformation, especially when a lot of new technology is coming along? What are some of the challenges of transforming a legacy company like CNH?
SR: The main challenges, I would say, are in a couple of regards. One is around processes. When you think about an OEM like CNH, we are releasing equipment, at a set schedule. Every couple of years, we launch a new sprayer, a new tractor, a new combine. There is a set process by which we introduce new features into those new launches.
And it goes through a very traditional milestone-based waterfall approach. Whereas as soon as you think about technology integration, we have a different way of operating, which is agile, with sprints and much more frequent cadence of releases.
The challenge for us is to ensure that we have these software releases or technology releases aligned with agile and waterfall intersecting. And how do we do that in a way that doesn't disrupt each group's traditional way of operating and bring together more of a cohesive approach. We're still figuring it out because it is a challenging aspect of how we do things.
The way we are approaching it today as a company is having a very clear view of the waterfall milestones for all the platforms, and then identifying the feature releases that we have to align for each of the technology milestones and essentially give each other enough of a view to what's coming so we can plan accordingly.
And then we still have to budget almost a year's worth of validation work before we can go to an “OK to ship the equipment”. So it only happens when there is strong collaboration and coordination between the teams. It's a daily alignment conversation because new content may be added to the equipment as an example. And we have to test the technology on a steady equipment base.
If the equipment is changing and technology is changing, the validation process and the complexity extends even longer. In the past, at CNH, we used to outsource our technology to many different companies. And that added another level of complexity to coordinate. With the acquisition of Raven, we've actually been able to bring a lot of our technology in-house. So it's all one team within CNH. Collaboration and alignment are happening more organically. Still more work to do, but that's how we've been approaching the rollouts between technology and iron.
RP: One interesting thing you're saying is that your iron and the precision tech teams operate as separate teams. If I think about examples of other companies like Apple, they talk about how software and hardware have to work very closely together. Do you think this will evolve further as right now it seems like iron and tech are still separate?
SR: That goes back to the maturity of where we are. If you think about our journey, lots of outsourced precision tech companies are now in-house, but now we are learning how to work together in-house, precision tech plus iron. And so the best outcome that I can do is to work myself out of a job. Because over time, they shouldn't feel separated.
There should be processes and people and structures and orgs that support more collaboration. My role today is more around driving that collaboration and defining those processes, methods and tools, so that we don't need to have this artificial over-coordination. We need this help at this early stage. But as we mature, this becomes business as usual, in how we collaborate. And that's where we're headed, but we're not there yet.
Artist representation of integration of “iron” and “technology” (artwork by Eeshan Inamdar)
RP: If I'm a customer, I really shouldn't have to care how you organize your teams. So if we talk about your customers, what are some of the top challenges and use cases your customers are facing where they're looking to a CNH or other OEMs? How do you prioritize those? It's a very good forcing function for a company to align based on customer expectations and needs.
SR: The customer shouldn't care how we organize, but you know about Conway's law. The customer experience reflects how we are organized, and we have been talking about that internally for quite some time now. There's been some meaningful strides made to ensure there's better alignment within the precision tech space, between our cloud groups as well as our onboard groups. Now with the precision tech group and the iron groups.
So all of that's kind of in an evolution mode. From a customer standpoint, pain points are very consistent and there's not a big shift in what they've been asking for.
They truly like easy to use technology. Technology that is of reliable quality, technology that works across all of CNH's fleet, but also mixed fleets, things of that nature and of course interoperability of data.
We've talked about this a lot in the past. So ease of use is very much on top of the list. And so keeping some of those things in mind, our focus is very much on quality across the board. It's the quality of equipment and quality of technology and how well they integrate together.
As farmers have very short windows of time to do their best work and mother nature is their business partner and she's very finicky. And so then when the opportunity presents, they absolutely rely on the equipment being ready and operational.
We understand that sense of urgency. We understand that window of time that they have open. And we have to be good partners with our farmer customers. Both equipment and technology are a big part of their ability to be productive, efficient, and sustainable.
So that's the directive. And of course, making sure that between our cloud and our onboard and our equipment, we are not adding more complexity to their world.
The unfortunate truth is there is complexity because of the nature of how we've evolved as companies, especially in the traditional manufacturing space.. There's a lot of inherited complexity. The priority is to work to deliver much more simpler solutions for the customer.
Customer Experience and Investment Areas
RP: Ease of use almost seems like table stakes to me, right? So what are they looking for beyond that? What are some of those use cases?
SR: If you sit in a tractor cab and look at all the different controls, it's not any less complex than an airplane's cockpit. So ease of use is something that we always keep on top of mind.
But keeping that aside, it's really about automating key tasks in the farming cycle. You have your guidance path, your ability to navigate through the field in a very precise manner. There's so much automation. We have Soil Command, which ensures that the pressure points in the tillage system and the tillage implement automatically adjust to the terrain., It reduces operator fatigue, as an example. You don't have the operator manually changing 15 odd settings to calibrate to the terrain.
Similarly,for spraying , we want better calibration to where you need to spray and where you don't. We call it coverage maps, making sure two sprayers are sharing data so they're not over-spraying in one location.
There's also Harvest Command. It's the most popular combine feature in the industry. Adjusting the header height, ground speed-, fan speed, it improves the quality of the yield, but also reduces debris in the grain bin. Automation is in all steps of the production, if you think about tilling, planting, spraying, harvesting.
There's automation being built into our equipment with supporting technology, whether that be RGB cameras in the combine bin, or sensors to calibrate to terrain. There's a lot of automation that's being added. But the challenge, and I go back to ease of use, as skilled labor is hard to get.
So you want to automate, but you also want to make sure a non-skilled user operator getting into the cab can quickly pick up or have oversight from a supervisor that's remote that can help with setting these features for the equipment and helps up-skill operators through technology.
RP: So some of the automation is being driven based on the labor challenges. But then when you do the automation, the system should not be so difficult that you create a different type of labor challenge. You still want it easy to use.
In terms of the investments that CNH is making or the overall ag equipment industry is making, are there certain areas where more investment should go in and they're being under-invested in?
SR: I don't think there's any specific group that's under-invested, but if I think about prioritization from a farming cycle standpoint, tillage is the preparation of the land. It's not the most exciting of the cycle because you're just a person in the cab driving through and preparing the soil. It is also not a high risk, in terms of complexity or riskiness. It's something that's done at the beginning of the season and you really are not too reliant on weather conditions. Tilling is typically what we use as one of the steps to test most of our leading technologies.
Also there's not a lot of logistics involved in tillage. You're not tendering, you're not bringing seeds to a planter or grains out of a combine or you're not refilling your sprayer tanks. So from an OEM standpoint, it's a low risk to start with tillage. And that's why you see autonomy first show up in tillage before anything else, because it's just less complex, less risky.
If something goes wrong, it doesn't really disrupt the farmer's life. So in that sense, it's kind of the starting point for testing things. I don't think it's been under invested as much as understanding the profile of that particular production step.
But when you get into planting things get incrementally more important. Planting is the first step of a good season. You need to do that well, you need to do that with efficiency. Also inputs are super expensive. We need to be more precise in the use of scarce and expensive resources. That's where the focus shifts from when you get to planting, not doubling up, not skipping seeds, things of that nature that drive a much more efficient crop throughout the cycle.
Spraying is all about nurturing and protecting, either fertilizing or applying herbicides to enable nurturing the plant to be the best version of itself it can be. And then harvesting, in my view, is the final report card of the whole season's effort. That's when you know if you've really delivered.
Yes, I know you have to wait for your full crop season to understand all the steps that it took throughout. What is the result? So I think harvest gets a lot of attention for that reason from the funding, the type of automation that we put in. So I don't know if there's any particular spot that's under-invested, to be honest. I feel like all four hang together.
I'm specifically talking about large scale agriculture. You go to a specialty that's unique.They are typically hard to fund because they don't scale. It's very unique and it's also very regional and localized. So any input, any investment you do there, you don't immediately get the scale benefits, but you are working in a high-valuecrop from a margin standpoint, but it is more complex
Enabling the Dealer Network
RP: And when you think about your customers (growers), they get access to your products and services through a dealer network or some other mechanism. What are you doing in your role or CNH is doing to enable these dealers and other participants so that they can provide the best possible service and products to the end customer?
SR: Dealers are such an important part of our business model. We call them our last mile, boots on the ground, because when a farmer has a problem, whatever it is related to the equipment, their first call is the dealer. That's the person that they know. It's not CNH. So dealers are an extension of us in that regard.
As we are pushing through this technology journey for ourselves as a company, if the dealers are not educated or they haven't bought into the solution, the journey for adoption becomes that much harder because they are a trusted advisor of the farmer. So it's a high priority for us to ensure that the dealers' voices are heard in our planning, but also make sure they're fully trained and fully competent to support the farmers in their time of need when there's a machine down or technology support.
We've intentionally kept the dealer in the middle of our delivery, whether that be equipment or technology. And so they are an accessible, local resource for our farmers.
Even as we design our digital portals, that gives customers access to their farm operations, as applied maps, yield maps, whatever, all the digital layers that they need. We ensure that the dealer is also looking at the same information as part of their portal and supporting them in their day-to-day needs. And all our equipment, we don't directly sell. All goes through our dealers.
We support our dealers to have a data footprint of our customers' machines so they can predict a machine down before it even happens and have parts shipped to preempt a down situation for the customer. So there's a lot of things that are happening in the back end with our dealers in driving and giving them that transparency of the data of their customers to ensure that there's better support.
We call it Universal Control Room and it's a dealer facing tool that we build internally., It's mostly to support the customer's machine. We have our customer facing mobile app called FieldOps, with the same backend. But customers have a more customer centric view of their own operations, while dealers have their dealer centric view of all the machines that they're supporting for the customers. So it's the same back end, but different views to help with each of the stakeholders, different needs.
RP: And dealers themselves run their own business and they also compete with other equipment dealers? So what are they telling you to say, give this to us so that we can compete more effectively with other non-CNH brand dealers?
SR: Well, there's competition on two fronts on the iron itself, so it goes mostly to spec in the iron, like horsepower, the different features of the iron. So they go head to head on the iron side for sure. And it definitely goes down to quality, total cost of ownership. But on the digital side too, there is a huge reliance on providing the best digital environment. And that becomes a differentiator in the selling process.
And we are fully acknowledging that that's an area that we need to keep the pressure on ourselves to deliver more features there, especially as we think about competing for the same business. And then it's really about the aftermarket support, quality, digital enablers and how competent we are in supporting their needs.
This probably is not something that gets talked about a lot, but customers usually do not make purchase decisions based on the brand, but based on the dealer.
That's what makes their decision because they are always looking at if something happens, who will come to my support in the fastest time.
RP: I went and talked to a couple of dealers in preparation for this conversation because they are an important part of the whole ecosystem and value chain. They said that other companies have done a lot more for dealers compared to CNH. (this might be biased based on who I talked with). So what are the things that you hear from your dealers to help them compete effectively?
SR: It's primarily the technology pieces where I feel that we get the most feedback on supporting more - education, training, responsiveness. As a corporate entity, they are looking at us to say we need to learn a little more about every aspect of the technology so we can be better spokespeople to our farmers.
So that aspect is definitely top of mind. And like I said, the inherited complexity of the technology, especially with two brands with a lot of twists and turns in our journey. We haven't helped our dealers really follow along or understand the landscape better. And that's a huge priority for us to simplify our offering, to provide a clear understanding of the value proposition, give them the talking points to make technology a differentiator in the sales process.
There's room for improvement in our world. And to that extent, we have a lot of touch points, whether that be at the dealer principal level or training that we put out. But again, at CNH, it's a maturity conversation. Bringing it all together and then putting in the processes and reimagining our world to support not only our dealers, but also ourselves.
Those are the destination points, but it's one step at a time. So I can understand the frustration of the dealers as they watch others may be doing slightly better, but I don't think that will exist for too long. We are very much on the path to resolving that.
Evolving Business Model
RP: How do you see the business model of how CNH goes to market evolving over the next couple of years?
SR: We have a clear plan regarding our pricing for our equipment. And it has to be tied to the value proposition and what we're delivering. We're not trying to be the cheapest option, but we want to make sure we have a total cost of ownership mindset when we put our equipment forward. So that aspect is going to be consistent in terms of how we do our businesses, making sure when we do put out a new machine and the pricing and it's tied to value. So that part is pretty standard in how everybody operates.
From a technology standpoint, we've heard a lot of feedback. Much like you've been out there talking to dealers, we've been out there talking to farmers and we heard a lot of feedback around their lack of interest in a subscription model. The comment that I heard is “everybody's trying to take a piece of us per acre” and “they feel nickel and dimed”.
For most large-ag, big-size operations, charging anything in a variable is actually problematic because they would prefer us to increase the price of the equipment, and build it into the price of the one-time charge because they can capitalize that investment. They have financing options on a machine. But as soon as you make it per acre, per hour, per anything, you move it from a fixed cost or a capex to an operational expense. And that is harder for them to justify because it takes away the benefits of scale for them. When you charge by “per something”, the bigger their operations are, the more they are getting charged.
Let's look at each opportunity and each customer, and say, for which customers would a model like that actually support their business viability and where would it be punitive. We have always said, we'll put customers first in this regard for business models. We're not going to take a hard line, even though it plays out really well on Wall Street and in boardrooms. It does not play very well on Main Street. So we have been very, very sensitive to that issue as CNH. We're going to listen to our customers and do what's best for them and work our way slowly into what is a good model.
RP: Maybe let me ask in a different way. I did a similar interview with Jake from Bushel. And yes, they do a completely different product and are not in the equipment space. But one interesting thing he said is that a lot of the consumer trends transition over to ag. Maybe it's like a couple of years behind.
And that's what I think about the subscription model. So why is that so different here? Is there a particular segment of customers which you think might be more open to this and what would be the characteristics of that segment of that customer?
SR: So scale cuts both ways, right? If it's a small scale customer, they would rather not have a huge burden of cost upfront. They would like to meter it out. And because they are all charging per acre or per whatever variable denominator you want, they can actually more effectively manage their cash flow.
That's the group that potentially is maybe more accepting of this model. The moment you move to a large ag customer, and there's a 10,000 acre farmer and start charging per acre, it's much more. And then that's a recurring cost that they have to plan for over the years. It becomes a non-starter for them. And the difference, if you think about an iPhone or Adobe licenses, anything like that. That is something you're using for your personal use as an example. And it's almost like a discretionary spend. Whereas for farmers, this is their livelihood, it is B2B in that sense. They are providing a good to other people. And so this is not a discretion. This is their op-ex.
So the mentality in which they approach this is very different from the consumer market mentality. So I think to use it as an analogue is probably doing a disservice. Tech adoption curves in other consumer products are so much faster. With farmers in the ag communities, it's a much differently calibrated adoption curve. And that comes from the risk and the disruption.
They have only one chance a year to do something. How willing are you to take a risk on something that hasn't been proven out or try something different? So that's some of the elements of why the parallels don't work. And we should be listening to our customers because it's not copy-paste. We want to have a different stance.
If all of us, all of our competitors go to this model, we're essentially holding our customers hostage as a strategy. We're only giving them one option to do this. And that, I think, is probably the worst way to keep customers. So I want to make sure there's optionality. There could be a company that does that. If that works, go with them. But we should give customers options. And it could be a differentiator for each company on how they manage their customers' needs.
RP: As the iron and the technology, as you call it, becomes one and the same, the iron is probably going to stay stable for a couple of years because it's difficult to change. You could upgrade software and unlock a new capability in the equipment.
And that could be a way to segment. So I buy the same hardware. But depending on what I unlock on my software, now the value prop of my equipment changes. And you mentioned you were pricing to the value proposition. So if and when that world becomes true, how would you think about your pricing at that point of time?
SR: It all starts from architecting your tech stock in a way that you can unlock things. We see if there is that opportunity. Again, it's a conversation of maturity. You can start unlocking and you have to start priming the pumps for that way early, understanding what could come in a later stage.
So again, from CNH, it's a bit of a maturity conversation, to be honest. We are right now reimagining our tech stack to help with that foundational element and deliver on the initial promise. But to your point, as we get more into that world, as the maturity sets in, we will think more towards the unlock.
Every option, whether that’s digital or onboard, you can have the free version or the base version, and then you have the premium, the advanced version, etc. So it's an opportunity for us to think about, but maybe not in the immediate term. But those models exist, and we can leverage the existing paradigms there.
I feel like first we have to own the trust of our farmer base. And they have to feel comfortable enough in the foundation and then see the value in the unlock. So you're postponing the decision point to the point where you can unlock. And so I don't see that as an if, it's a when, but it's when in terms of how much further into the future when we are ready to do that. .
Managing in the down-cycle
RP: Everybody's quarterly earnings have been challenging. It's not specific to a company. When these down cycles happen, are there any changes in how you operate during a down cycle versus a non down cycle?
On the tech side, people talk about a wartime CEO vs. a peacetime CEO.
SR: I know it's a reality. But what's interesting is that agriculture has always been cyclical. And if I look back 20 years, 30 years, however long we have data on this, you'll see there's always the traditional highs that come from grain prices going up. Then everybody spends, farmers spend, everybody around the chain spends a lot because they're seeing the cash flow situation improve based on grain prices. You overproduce, oversupply, and then you force a downturn because now supply and demand are not matching and the grain prices go down.
And so it's been predictable since time immemorial that we have ups and downs. So at least in the ag industry, that's a constant, the change of the ups and downs. The only thing that's really maybe been brought to question is the length of the down cycle and the length of the up cycle. So in that regard, I do not think in the ag industry, we should have a wartime CEO because we really shouldn't be losing our heads when these things happen. We should be able to predict. Most of the companies in this space have been around for centuries. We should have a playbook of what we do when we are in a down cycle.
The things that we prioritize might change because technology is now in the forefront. So maybe we don't shortchange the technology project, but other things can be. So I personally am of the opinion that there's no reason to run around like headless chickens during the downturn because we know better. And we have had these conversations internally with our leadership groups as well. But of course, as that happens, we do focus on different things. Cost management becomes a big focus, but that's not out of normal.
When you have lower revenues and lower margins, cost is the lever. And so then things that we would have done more discretionally in our growth year, we don't do that. But the important part is not to starve critical programs. So don't lose your head, don't do stupid stuff during this phase, do not starve critical programs that are going to be foundational and set you up for when you are ready to take the upturn. So calibration by project priority, project impact, strategic projects, and some of the things that we can tighten our belt, which are more near term we should. So that's my two cents on that topic.
RP: You talked about Raven and your aftermarket business. And you have your mainline business. As a buyer, I have to make that decision. Do I buy an aftermarket upgrade kit, or do I spend the money on buying a new piece of equipment. Does that create tension internally in terms of these two lines of business and how do you manage that?
SR: I would say the aftermarket takes more prominence in down years because customers are looking to extend the life of their existing equipment. They're not purchasing new. And so the focus then is to make sure we have a really good aftermarket presence, service support, all of that. It's a calibration of understanding how farmers' mentalities change during that time frame.
Don't overproduce from the factory. Don't overstock the dealer inventory because then you're not making them viable. But then shift your focus to providing better aftermarket service, understanding the behavioral changes that we've seen cycle after cycle, and how customers behave in that format. That would be the other thing.
I'll also say this is maybe newer in terms of our understanding, when we go into down cycles, technology becomes even more important, especially precision technology, because that helps manage against scarce and expensive resources better.
So farmers are going to be focusing on using technology and really eking out every penny that they can out of their operation. So that's kind of a counterintuitive insight. They might spend more on technology during down years because they want to get most of those benefits. When they're flush with cash, they would be hiring that extra person or buying that extra machine.. I think precision technology gets a bump in those years as well as the aftermarket.
Peering in the future
RP: So based on all the technology trends that you're seeing, not just within CNH, but outside and in other companies, what are your thoughts on how commodity row crop agriculture will change in the next five, 10 years?
SR: There's such a huge focus on autonomy. The hard reality is we cannot push autonomy. It'll come when it'll come. Adoption will be based on, just like electric cars, the supporting infrastructure. That is, going to be super critical. As we think about what customers are asking for, it's more of an incremental step into Autonomy. So it's “automate as many aspects of the operations as you can and keep the human in the loop”, through all of those changes. When there's that trust and that comfort factor, then you step into autonomy.
I know we've all put goals for ourselves. By 2030, all production steps will be autonomous. I think that's a good goal to have in the broader horizon, but always listen to customers and calibrate the need. We shouldn't be pushing technology for technology's sake. If the infrastructure does not exist, the tendering, the logistics, the trust is going to take a much longer period of time, especially in Ag.
It's not just driving from point A to point B in a car. There's so many other elements. It's an operational element of how customers use all of this. I think we as OEMs and generally everybody in the ag industry, take a pause and calibrate to what is the cost, what's truly going to help the customer. And I think it's automation and digitization.
Getting the data interoperable, which is a hard problem in itself, but it would be so much more beneficial for customers. Not having to take data from five different digital platforms, put it in a spreadsheet and manage their organizations, which is the reality today. It's not the sexiest answer, but if we can focus on incrementally improving the near term challenges of the customer, I think they will be with us in that leap of faith for the next tier of technology adoption.
But if you try to force it on them, not really understanding their reality. I don't think any of us will be successful. So that's my five to 10 year view. Previously, I was “autonomy, let’s go get it”. As the conversations have matured and truly understanding the pain points of the farmer, I feel like a much more calibrated approach is what's needed.
Quick early wins, slowly bring them on, and then incrementally find our way into autonomy.
RP: Thank you so much.