Bill Ford in the Hot Seat
Since I took a shot at the US automakers in yesterday’s posting, I thought I’d finish the job today. My thoughts were prompted by a Wall Street Journal article: “Is Ford Rolling Backward with ‘Way Forward’?” by Jeffrey McCracken, B1.
I’ve spent more time than I’d like to admit in the auto industry. And, don’t tell anybody, but I love it. I’m excited and energized by the boundless opportunity in the aftermarket, while I’m drawn to the automakers in much the same way as I can’t take my eyes off a train wreck. I believe deeply in the merits of capitalism and the Invisible Hand, and I want to believe that companies are rational. All I have to do is take a look at the NA auto industry to be reminded that rational is relative.
We could spend months – maybe even years – debating the merits and follies that led us to where we are today, but I find it more interesting to speculate on where we’re headed. Our friend Bill Ford has his work cut out for him, and I’m not sure that he’s up to the task. Not because I question his capability – I’ve never met the man, so I certainly can’t comment on that. Simply because I’m not sure he really, truly understands the magnitude of the challenge before him. And, due to the nature of the corporate world, it’s highly unlikely that he’s got a team of direct reports who are all brutally honest and 100% committed (or that their direct reports are honest and committed, and so on).
There are countless challenges that Ford will encounter as he navigates the company’s “Way Forward”; however I believe the most important will emerge with respect to Structure and Execution. Sure, it’s important that they define a viable Strategy – the hardest parts here will be zeroing in on target consumer groups and implementing a business model that will enable them to actually make money. But, in the end, it’s the Structure and Execution that will determine success or failure.
Four of the biggest challenges that Ford faces with respect to Structure and Execution are:
Immense complexity – Ford has indicated that they need to reduce their reliance on a few vehicles (namely high volume SUVs and F-series pickups) by selling lower volumes of a greater variety of vehicles. This from a company that historically built a single plant to make a single vehicle. The requisite changes in behavior and approach are sweeping – from purchasing to the plant floor to engineering to the dealerships and beyond – and you can bet that employees will fight change ooth and nail, on all fronts.
Extensive innovation – The only way to increase the number and variety of vehicles is to increase the number in the pipeline. And, they’ll need a healthy dose of process and technology innovation to support the added complexity. It’s not like Ford has been a bastion of innovation in the past. They have to be willing to heavily invest in innovation and relentlessly manage the pipeline. Most large companies balk at the investment and discipline required to actually make this work.
Head to head competition – The bottom is falling out of SUV and pickup sales, Ford’s long-time strong suit, so they’ve finally decided to care about car sales. In recent history the only winners in the US car market have been the Japanese automakers. Ford has largely neglected this segment, and now is desperate to rebuild its reputation. Even if Ford can muster attractive options for consumers, don’t expect Toyota, Nissan or Honda to give up without a fight.
Elimination of incentives – In order to actually make money on auto sales, Ford has to quit paying customers to buy their products. The only way to do this is to make products that consumers actually want – more than they want competitive offerings. Establishing a portfolio of products that consumers covet will take time (if it happens at all) and eliminating the incentive mindset internally will be even harder. Everyone can agree, intellectually, that auto incentives have passed the point of diminishing returns, but actually eliminating their use is a completely separate matter.
Clearly, these aren’t the only things that Ford should be worried about, but they should be at the top of the list. And, while changing any one of these is an impressive feat, Ford must be firing on all cylinders to survive. I didn’t even touch on legacy costs, outsourcing, dealer relationships, the credit division and the myriad of other issues that abound.
Wall Street analysts are speculating as to whether or not the company will turn a profit this year. Here’s my prediction: no way, no chance, no how. The bigger question is: Will they position themselves for profitability in 2007 and beyond? I hope Bill Ford’s trusted advisors are doing their job because the emperor’s all dressed up and headed for the parade...
I’ve spent more time than I’d like to admit in the auto industry. And, don’t tell anybody, but I love it. I’m excited and energized by the boundless opportunity in the aftermarket, while I’m drawn to the automakers in much the same way as I can’t take my eyes off a train wreck. I believe deeply in the merits of capitalism and the Invisible Hand, and I want to believe that companies are rational. All I have to do is take a look at the NA auto industry to be reminded that rational is relative.
We could spend months – maybe even years – debating the merits and follies that led us to where we are today, but I find it more interesting to speculate on where we’re headed. Our friend Bill Ford has his work cut out for him, and I’m not sure that he’s up to the task. Not because I question his capability – I’ve never met the man, so I certainly can’t comment on that. Simply because I’m not sure he really, truly understands the magnitude of the challenge before him. And, due to the nature of the corporate world, it’s highly unlikely that he’s got a team of direct reports who are all brutally honest and 100% committed (or that their direct reports are honest and committed, and so on).
There are countless challenges that Ford will encounter as he navigates the company’s “Way Forward”; however I believe the most important will emerge with respect to Structure and Execution. Sure, it’s important that they define a viable Strategy – the hardest parts here will be zeroing in on target consumer groups and implementing a business model that will enable them to actually make money. But, in the end, it’s the Structure and Execution that will determine success or failure.
Four of the biggest challenges that Ford faces with respect to Structure and Execution are:
Immense complexity – Ford has indicated that they need to reduce their reliance on a few vehicles (namely high volume SUVs and F-series pickups) by selling lower volumes of a greater variety of vehicles. This from a company that historically built a single plant to make a single vehicle. The requisite changes in behavior and approach are sweeping – from purchasing to the plant floor to engineering to the dealerships and beyond – and you can bet that employees will fight change ooth and nail, on all fronts.
Extensive innovation – The only way to increase the number and variety of vehicles is to increase the number in the pipeline. And, they’ll need a healthy dose of process and technology innovation to support the added complexity. It’s not like Ford has been a bastion of innovation in the past. They have to be willing to heavily invest in innovation and relentlessly manage the pipeline. Most large companies balk at the investment and discipline required to actually make this work.
Head to head competition – The bottom is falling out of SUV and pickup sales, Ford’s long-time strong suit, so they’ve finally decided to care about car sales. In recent history the only winners in the US car market have been the Japanese automakers. Ford has largely neglected this segment, and now is desperate to rebuild its reputation. Even if Ford can muster attractive options for consumers, don’t expect Toyota, Nissan or Honda to give up without a fight.
Elimination of incentives – In order to actually make money on auto sales, Ford has to quit paying customers to buy their products. The only way to do this is to make products that consumers actually want – more than they want competitive offerings. Establishing a portfolio of products that consumers covet will take time (if it happens at all) and eliminating the incentive mindset internally will be even harder. Everyone can agree, intellectually, that auto incentives have passed the point of diminishing returns, but actually eliminating their use is a completely separate matter.
Clearly, these aren’t the only things that Ford should be worried about, but they should be at the top of the list. And, while changing any one of these is an impressive feat, Ford must be firing on all cylinders to survive. I didn’t even touch on legacy costs, outsourcing, dealer relationships, the credit division and the myriad of other issues that abound.
Wall Street analysts are speculating as to whether or not the company will turn a profit this year. Here’s my prediction: no way, no chance, no how. The bigger question is: Will they position themselves for profitability in 2007 and beyond? I hope Bill Ford’s trusted advisors are doing their job because the emperor’s all dressed up and headed for the parade...
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