Over a century ago Henry Ford revolutionized mobility for the masses, bringing the moving assembly line to the business of making cars. Fast forward to today, and his great-grandson Bill Ford Jr. and new Ford CEO Jim Hackett are racing to reinvent the company for the future, driven by the new age of digitalization and connectivity. The automotive industry as we know it is poised for a major upheaval, from “mobility-as-a-service” and autonomous vehicles to connected supply chains and smart factories (Fig. 1), and Ford is pushing on all fronts to stay relevant. The urgency is clear, as one analyst noted that Ford is “running 18-24 months behind GM when it comes to cost efficiency and implementing a technology/mobility strategy” , and Ford’s share price has dropped from a peak of $18.12 in July 2014 to $12.09 at the beginning of October 2017  in large part due to not having a clearly articulated long-term strategy for success. The question remains: How can Ford can best position itself to win in the future of mobility?
Figure 1: The automotive supply chain and effects of digitalization
Building Vehicles in a Digital World
Vehicles are rapidly becoming smarter, more connected, and more complex, which is forcing companies like Ford to rethink their business model and value chain as new competitive threats and opportunities arise .
Digital as a Differentiator
As the major differentiating inputs shift from mechanical to digital components, Ford has been investing in integrating the supply chain to drive faster innovation. In February 2017, Ford announced it acquired a majority stake in start-up firm Argo AI , which is focused on developing artificial intelligence technology for autonomous vehicles, and plans to invest $1B in the company. Additionally, Ford recently purchased Princeton Lightwave, following up a $75M investment a year prior in Velodyne, both makers of lidar sensing devices, and made an investment in SAIPS, a visual detection software maker [5, 6]. It seems Ford sees this as an opportunity to control the value chain and reduce risks of relying on suppliers to deliver on innovation, timing, and costs. This is an important strategy for Ford to keep any one supplier from having too much power while striving to deliver a smartphone-like experience for the customer.
Leveraging Connected Supply Chains
Ford has found that digital and connected supply chains give rise to benefits throughout the ecosystem, enabling better responsiveness to demand, increased productivity, and better quality. In one example, Ford has partnered with software firm Kinaxis to implement a rapid response supply chain system in order to efficiently manage their global network with minimum inventory levels . Ford is also experimenting with 3D printing to see where it can add value in the supply chain, but in the near term it will likely be limited to prototype and aftermarket parts .
A New Way of Delivering Mobility to the Masses
According to a report by RMI, “peak ownership in the United States will occur around 2020 and will drop quickly after that” . As Ford is in the business of selling cars, this presents a clear threat to Ford’s long-term viability without a strategic shift in how it supplies products and services to the end customer. In order to understand better where they can win in this space, Ford has been running mobility experiments around the world over the past few years, but it is yet to be seen which will come to fruition .
In September 2016, Ford purchased Chariot, a “crowd-sourced shuttle service” that now uses Ford Transit vans along with smart routing algorithms to provide an Uber-like shuttle service . In doing so, they found one way to get customers into Ford vehicles and introduce them to Ford as a mobility provider.
Fate of Dealerships
Another stakeholder in the supply chain facing disruption from the digital revolution is the dealership. Ford currently leverages its massive dealer network of over 11,000 dealerships worldwide through which the majority of Ford vehicles, parts, and accessories are sold . As the need for retail services fade, dealerships may become less relevant . Instead, Ford could study pivoting them to provide value in managing shared fleets and maintenance.
Time for Transformation
Ford needs radical transformation – a change in mindset to drive digitalization throughout the value chain from connected supply networks to mobility solutions – in order to create a competitive advantage for the future. This should start by creating agile digital-focused teams to identify gaps in current processes and create system solutions. The challenge in the short term will be investing in these new technologies when the current profit machine is the core business of making incrementally better vehicles. How should Ford manage to blend the traditional and emerging business models? Transformational times create opportunity for great wealth, but will Ford be a winner or just produce a ‘faster horse’?
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Cover Photo: “Ford Service And MOT | Ford Service And Maintenance With Dealerships In Omagh And Strabane”. 2017. Patkirk.Com. https://www.patkirk.com/ford/ford-pass/.
Chariot Photo: “Simple Search | Ford Media Center”. 2017. Media.Ford.Com. https://media.ford.com/content/fordmedia/fna/us/en/search/results.searchresults.image.chariot.0.20.ford-geo_fna~us.contains-all.html.