BMW uses a system with gears that adjusts the steering ratio mechanically, not disconnecting the steeringwheel from the wheels. The "failed" mode of the system just puts it back to the base non-variable ratio. Don't know exactly how it works, but it drives very very intuitively. Only time you notice is if you step in another car and realise parking takes more effort.

Edit: According to Wikipedia they've done so since the 2003 model 5-series already and this has a description on how it's done: https://en.m.wikipedia.org/wiki/Active_steering

It's pretty easy to visualize with rack and pinion.

https://www.autozine.org/technical_school/traction/VGRS_Hond...

https://ars.els-cdn.com/content/image/3-s2.0-B97807506513185...