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Ford Motor Company


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Ford Motor Company

  1. 1. Ford Motor Company “The only way Ford will outsell GM in the U.S. is for GM to sink below Ford’s market share (24%); Ford doesn’t have the capacity to grow to GM’s 29% or even get close. “If someone comes up with a beautiful design for a new product at Ford, there is no place to assemble it in the U.S. without killing some other product. And Ford does need to spend more on technology to improve its engines, transmissions, and suspensions. Ford’s managers are unwilling to write the check. That would be smart if lowering risk were what business is all about. But lowering risk is not what business is all about.” 1 James Yost — Ford’s chief information officer — winced as he read this bleak verdict in the most recent issue of Forbes magazine. Ford had amassed approximately $30 billion in cash and securities, and this author was arguing that Ford should spend some of the surplus to build factories. He pointed out that sales of the highly profitable Navigator had been lost due to a shortage of V-8 engines, and that “to put a new small off-roader into production, Ford had to kill production of its middle-size Contour car.” Business Week, too, had noted analysts’ concerns about Ford’s priorities. The stock was down 7.5% in the past 5 months as Wall Street worried about Ford’s ability to focus on “its bread-and- butter task of designing and building cars and trucks.” 2 Reinventing the Wheel As CIO, Yost was particularly disconcerted. Yost was new to this position at Ford, but his group was of central importance in carrying out a mission that had begun in 1993, known as the Ford 2000 plan. The plan, initiated by Alex Trotman, then Ford’s CEO, was to transform Ford from a car manufacturer to “a consumer company that offers automotive products and services.”3 To support this shift in vision and strategy, Ford began to centralize its systems worldwide as a means of synchronizing and speeding all of the company’s business processes, especially the sharing of information. This effort resulted in the hiring of Bernard (Bud) Mathaisel in 1996, Ford’s first CIO and executive director of process leadership (replaced three years later by Yost). 1 “No Guts, No Glory,” Forbes magazine, February 7, 2000. 2 “At Ford, E-Commerce Is Job 1,” Business Week, February 28, 2000. 3 “Alignment Check,” CIO Magazine, November 15, 1999. This paper is based on a short case written by Laurel Kayne, a candidate for the degree of Masters of Business Administration, Babson College, February, 2000. The case was modified by Robert Reck, faculty, Babson College. The case is intended as the basis for class discussion rather than to illustrate either effective or ineffective handling of an acquisition or a large consulting and systems integration project.
  2. 2. Since then Ford had received a lot of press — much of it quite favorable — on its aggressive deployment of new technologies, in particular the Internet, as a way to transform its business. “This is nothing short of reinventing the auto industry,” said Jacques Nasser, CEO.4 But not everyone was convinced that Ford would come through the process unharmed. Yost and many others had been working tirelessly, with full support at the highest levels, to make this mission a success. But were they moving too fast? Was the investment in IT and process transformation compromising Ford’s core business, which was undoubtedly still designing and manufacturing cars? Or were they just experiencing the glitches and growing pains inherent in any major strategic shift for a company of Ford’s size? Moving to the Internet Ford’s list of accomplishments since 1994 in the area of IT was impressive. Take the company’s investment in the Ford Intranet as an example. In March, 1996, a small group from Ford’s newly created Department of Enterprise Information Management returned from an Internet conference with an ambitious goal: “to move to the Ford Intranet as our way of doing business.” 5 Staggering under the weight of a forest’s worth of paper documentation, much of it outdated, Ford desperately needed a way to manage and share information effectively. The solution was the Ford Intranet. This program was carefully planned, developed, and rolled out to Ford employees around the world with the full support of top management. Just seventeen months after the initial two-page design document was drafted, 80,000 of Ford’s roughly 350,000 employees were connected to a vast, complex, yet streamlined and user- friendly Ford Intranet. A 1997 article in CIO Magazine attests to the power of this information revolution. “By allowing people to access images on an intranet from wherever they are in the world, Ford shaves weeks off design processes because project managers no longer have to physically mail masses of product documentation all over the globe.” 6 Recently, CEO Nasser created a business group called ConsumerDirect whose charter is to launch Ford’s multi-faceted e-business campaign. One of the group’s biggest initiatives is auto- xchange, a Web site that will link Ford’s 30,000 suppliers. With Oracle and Cisco each taking an ownership position in the new venture, expectations are high. According to Business Week, even Wall Street anticipates the site to be successful enough for Ford to take it public in 2001.7 The Ford Intranet and auto-xchange are just two examples of Ford’s comprehensive plan to reinvent its business, and perhaps the industry, using information technology. The company also plans to:8 • offer each of its 350,000 employees a computer, printer, and Internet access for just $5 per month • develop cars with satellite phone service and Internet access 4 “At Ford, E-Commerce Is Job 1,” Business Week, February 28, 2000. 5 “Under the Hood at Ford,” CIO Magazine, June, 1997. 6 Ibid. 7 “At Ford, E-Commerce Is Job 1,” Business Week, February 28, 2000. 8 Ibid. Page 2
  3. 3. • team up with several major Web sites to collect data on what consumers want and how they buy • offer customer service and financing via the Web • and perhaps most challenging, offer built-to-order cars over the Internet — the Burger King “have it your way” approach applied to the thousands of parts that make up a car. Planning and Integration Ford is undergoing a business transformation. Information technology is playing a key role in that transformation. What is less visible is the process Ford has used to integrate technology and strategy. According to Nasser, “You must integrate IT into the texture of a business.”9 This is easier said than done, and Ford has relied on three key elements to make good on its intentions. Strategy Alignment - Ford uses a four-part business model that describes the company’s mission, strategy, process, and infrastructure.10 The model is applied throughout the company at every level. The result is that all employees share a common framework for understanding the company’s goals and their role in achieving those goals. More importantly, technology is inseparable from strategy; IT is deployed for strategic business uses, and the company’s strategy is built on what leading-edge technology makes possible. Matrix Organization - To support all this change and innovation, and to keep strategy and technology joined at the hip, Ford has developed a centralized IT group whose members report jointly to IT supervisors and functional heads throughout the organization. 11 For example, Nick Smither, the director of product development systems within Process Leadership, reports directly to Yost and also to Neal Ressler, the company’s head of product development. By making IT an integral part of its organizational structure, Ford ensures that the use of IT is not an afterthought or an appendage, but a core part of all that it does. Buy-in from the Top - Another critical factor has been Nasser’s involvement. When a task force made a presentation to Nasser and his top managers on how the Internet could take Ford into the future, Nasser immediately and enthusiastically endorsed the vision.12 People at all levels of the organization support Ford’s technology initiatives and are eager to participate. For example, when Ford’s Intranet team went on the road to educate and energize people about their mission, they spoke to standing-room only crowds and had to turn people away. Nasser isn’t solely responsible for this climate, but his support, and that of his predecessor, have been critical to the changes underway at Ford. At What Cost Progress? Still, despite all the exciting and promising innovations, Yost worried that perhaps Ford was focusing too much energy on this technology revolution at the expense of turning out the cars and trucks that kept the company in business. Was the company investing too great a percentage of its budget in IT? Was it leaping too quickly into the virtual world and discounting the value of 9 “Alignment Check,” CIO Magazine, November 15, 1999. 10 Ibid. 11 Ibid 12 “At Ford, E-Commerce Is Job 1,” Business Week, February 28, 2000. Page 3
  4. 4. its traditional manufacturing business? Yost knew the Board of Directors would be asking him these questions in response to the Forbes article at their meeting next week, and he wasn’t sure how to respond. ### Page 4