Monday, June 4, 2012

Ford: A Strategic U-Turn?


This week’s reading on leveraging global trends and the five crucibles of future innovation made me think back to our in-class discussion of the disparity in company vision statements from their early years and today. Ford, in particular, stood out as an example of a vision statement that has gone from simple and compelling to meandering and forgettable. In the early 1900s Ford’s vision was to ‘Democratize the automobile,’ now they strive to ‘Become the world’s leading consumer company for automotive products and services.’ (Prof. Zak’s Week #1 lecture notes).  While this shift in strategy sounds much less ambitious, according to this week’s readings, Ford is perhaps making a smart strategic move to align itself with some significant global trends. 

According to the McKinsey report on ‘What Happens Next: Five Crucibles of Innovation,’ the “pricing the planet” trends of growing demand for finite supplies and increased scrutiny from consumers and regulatory bodies is already forcing leaders to rethink their core business strategies: 
“For CEOs, understanding their true exposure to energy and environmental risk will require more sophistication than ever and will emerge for many as a – if not the – decisive factor determining the long-term viability of their companies.” (McKinsey 2010, page 18)

The increasing relevance of sustainability principles and consumer and regulatory pressure presents an interesting paradox for auto-makers like Ford. How to acknowledge these necessary global challenges and even contribute to the solutions without hurting one’s own business and shirking fiduciary responsibilities to shareholders?  Do and should automakers have a place in this societal change? Can they afford not to?

Ford is surprisingly forthright in its open acknowledgment of the need for smart growth, including a vision without 100% market penetration as a goal. In the past, Sustainable Mobility is has been the traditional multi-pronged approach to minimize the negative impacts that car manufacturing and cars themselves have on the environment. The limits of sustainable mobility are openly acknowledged in Ford’s 2009 Sustainability Report
But there are other important pieces as well [beyond Sustainable Mobility]. Consider this: today, there are 6.7 billion people in the world. By 2050, there will be 9 billion, 75 percent of whom will live in urban areas. Putting 9 billion people into private automobiles is neither practical nor desirable.”

Ford has instead joined the fast train of the ‘New Mobility’ industry, a systems approach to integrate various urban transportation options using technology and creative collaborations across sectors. The 2009 Report provides a general definition:   
Key features of New Mobility systems include the innovative use of technology to link diverse transportation systems such as rail, bus and subway with car sharing, bike sharing and other options, to provide flexible, seamless, door-to-door trips. Technologies can also enable distance working, learning, medicine and shopping, thereby reducing the need for some trips altogether. And still other information technologies support the sustainable and efficient movement of goods in urban regions, a growing area of concern and opportunity for innovation.”

The five key principles of New Mobility are reliability, affordability, accessibility, innovation and integration/flexibility. In 2006, Ford’s Sustainability Business Strategies Office introduced the idea of Ford breaking into the New Mobility market as a ‘mobility integrator.’ Since then the company has partnered with researchers from University of Michigan to explore the untapped market potential of New Mobility products and services, especially within developing economies. Ford has explored market potential in cities within China, India, Brazil, & Turkey and seems to be in the process of using these case studies to form a more concrete strategy to break into the New Mobility market. 

This is far from an altruistic strategy. It is based on key foresight about where the world is heading and how to fit in and even profit. With several case studies, partnerships and small-scale projects underway, Ford’s strategic ‘U-turn’ into New Mobility may prove to be a critical element of its growth and its major contribution to sustainability in the future. 



Sources:

Bisson, Peter et al. "What Happens Next: Five Crucibles of Innovation that will shape the coming Decade," McKinsey & Company Special Report, 2010.
“Mobility,” Ford Sustainability Report, 2009: http://corporate.ford.com/microsites/sustainability-report-2009-10/issues-mobility
 “Strategic Transformation of Ford Motor Company” Ford Motor Company & University of Michigan, December 2006: http://deepblue.lib.umich.edu/bitstream/2027.42/48792/1/FMFinal_121306.pdf

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