{"id":15986,"date":"2016-11-17T16:24:00","date_gmt":"2016-11-17T21:24:00","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/ford-is-no-longer-just-an-auto-company\/"},"modified":"2016-11-17T16:24:00","modified_gmt":"2016-11-17T21:24:00","slug":"ford-is-no-longer-just-an-auto-company","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/ford-is-no-longer-just-an-auto-company\/","title":{"rendered":"Ford is no longer \u2018just an auto company\u2019"},"content":{"rendered":"

\u00a0\u201cThe auto industry is poised for more change in the next five to ten years than it\u2019s seen in the past 50.\u201d<\/em><\/p>\n

\u2013 Mary Barra, CEO, General Motors [1] <\/em><\/strong>(speaking in 2015)<\/em><\/p>\n

Digital transformation will fundamentally affect how automotive businesses create and capture value<\/strong><\/p>\n

The IBM Center for Applied Insights recognize that \u201cfor more than 100 years the automotive industry has created competitive advantage mainly through engineering excellence. Going forward, this will no longer be sufficient\u201d [2]<\/p>\n

The industry is now on the brink of significant change. This change is due in large part to the digital revolution brought about by a perfect storm of technological influences such as big data and analytics, cloud computing, the socialization of business through mobile devices, and at the eye of the storm, the Internet of Things (IoT).<\/p>\n

This digital progress will lead to four disruptive technology-driven trends in the automotive sector: 1) diverse mobility, 2) autonomous driving, 3) electrification, and 4) connectivity. \u201cMost industry players and experts agree that these four trends will reinforce and accelerate one another\u201d [3]<\/p>\n

The following infographic from IBM highlights a number of emerging digital services and their expected level of disruption to the auto industry:<\/p>\n

\"disruption-axis\"<\/a><\/p>\n

The most disruptive threat automakers face is to car ownership itself.\u00a0 Although car sharing (popularized by the likes of Zipcar) has been around for some time, it is becoming more widespread as automakers enter the market (examples include Daimler Car2Go and BMW DriveNow).\u00a0 One estimate suggests that each car available for sharing leads to 20 vehicle sales being deferred [4].<\/p>\n

Cars are an expensive asset (that depreciate significantly) and also highly inefficient; private vehicles spend roughly 95% of their time unutilized [5].\u00a0 \u00a0As innovative transport solutions become available from new players (such as Uber, Apple, Google, Tesla), the complexity of the competitive landscape will intensify.\u00a0 McKinsey believe that this will lead traditional automotive players, who are faced with myriad other challenges (such as improving fuel-efficiency, reducing emissions, deploying capital efficiently etc.) to respond with consolidation or new forms of partnerships amongst incumbents. [6]<\/p>\n

Ford is evolving its business model to stay relevant <\/strong><\/p>\n

This is exactly the approach adopted by Ford, who many would consider an embodiment of the \u201cold guard\u201d of the industry.\u00a0 Speaking at CES 2016<\/a> CEO Mark Fields acknowledged that Ford is \u201ctransitioning from an auto company, to an auto and a mobility company.\u201d [7] This evolution is outlined in the Ford Smart Mobility Plan [8] which is underpinned by 5 pillars (see figure below):<\/p>\n

\"ford-sm\"<\/a><\/p>\n

Examples of recent initiatives include the acquisition of Chariot, a private, crowdsourced shuttle service based in San Francisco, that uses algorithms to develop transit routes based on user demand. Using the app, customers can book a seat in one of the company\u2019s shuttle vans for around $4 a trip. Ford plans to expand the service to 5 additional cities over the next 18 months [9].<\/span><\/span><\/p>\n

The company also invested in Motivate, the largest operator of bike-share programs in the US.<\/span>\u00a0 <\/span>Ford will add 7,000 new \u201cFord GoBikes\u201d to San Francisco\u2019s bike-share infrastructure which will be available to users of the Ford Pass app.<\/span><\/span><\/p>\n

\"chariot-van-and-ford-go-bike\"<\/a><\/p>\n

This is all progress towards Mark Fields\u2019 goal of evolving Ford\u2019s business model; Ford Smart Mobility \u201cis not about moving from an old business to a new business. It\u2019s just moving to a bigger business as we expand the business model from number of units sold to number of units sold plus vehicle miles traveled.\u201d [10]<\/p>\n

This evolution in business model requires an overhaul of Ford\u2019s operating model <\/strong><\/p>\n

In order to allow these projects to thrive, Ford is pursuing its next-generation initiatives under a wholly-owned subsidiary, Ford Smart Mobility LLC, which is based in Silicon Valley (2.5k miles from Ford\u2019s HQ in Dearborn).\u00a0 The aim of this is to prevent these radical new projects from being \u201coverwhelmed by the Ford bureaucracy\u201d and \u201cgive them the flexibility and the operating structure to be able to be competitive with other technology and mobility services companies that move really fast.\u201d [11] Locating in the Valley gives Ford access to the talent and ecosystem of ideas it will require to compete with the likes of Apple, Google, Uber et al.<\/p>\n

To the future <\/strong><\/p>\n

Ford is educating consumers on the repositioning of its brand through the \u201cUnlearn Ford\u201d campaign<\/a>.\u00a0 It will be interesting to see if, through this campaign and the exciting work that is doing, whether one of the oldest names in the automotive business is able to convince both customers and collaborators that it holds the aces in the most high-stakes game of poker the industry has ever seen.<\/p>\n

Will one of the titans of physical transport be able to effectively re-position itself against young upstarts in the battle for digital dominance of the mobility industry?<\/p>\n

(words: 790)<\/p>\n","protected":false},"excerpt":{"rendered":"

Digital disruption has forced Ford to reconsider its core business model; the organization is moving from an \u201cauto company, to an auto and mobility company\u201d. To enable this, the Ford has created a wholly owned subsidiary, Ford Smart Mobility LLC, based in Silicon Valley, which is developing next-generation transport solutions<\/p>\n","protected":false},"author":2546,"featured_media":15987,"comment_status":"open","ping_status":"closed","template":"","categories":[2271,1572,1802,2270,1658,2272,2274,2273,2275],"class_list":["post-15986","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-auto-industry","category-automanufacturer","category-autonomous-vehicles","category-digital-disruption","category-ford","category-mobility","category-ride-sharing-uncategorized","category-smart-mobility","category-vehicle-ownership"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nFord is no longer \u2018just an auto company\u2019 - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/ford-is-no-longer-just-an-auto-company\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ford is no longer \u2018just an auto company\u2019 - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Digital disruption has forced Ford to reconsider its core business model; the organization is moving from an \u201cauto company, to an auto and mobility company\u201d. 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