In a Harvard Business Review interview in April, you said if Ford does not change itself, Ford, as we know it, won’t exist in another five years. Why did you say that?
Ford, as we want to know it, is probably the more accurate way of saying it. I see the 21st century as an incredibly fortunate time for almost all industries, and particularly those such as the automotive. So, we could sit back and reap past benefits, or we can work to make Ford even stronger so that we can pass it on to the next generation in an even better situation. We’d like to do just that. Also, every industry is facing global changes, the change of technology and what the Net is doing in terms of consumer power. We want to help shape trends in the early part of the 21st century, just as we did 100 years ago. If you stand still, or move at a moderate pace, you fall behind. Simple.
You talk of corporate DNA. What are the critical components of Ford’s DNA?
First, Ford’s strengths: global, diverse, very strong culture of technical and functional competence, a product-led company with manufacturing strengths and financial discipline. To that we’ve recently added business acumen, shareholder value focus and consumer focus. So, we have a lot of strengths and I see that in Ford’s blood-stream. We’re trying to fortify it even more.
Do you look at the organisation as some sort of an organism?
It’s a good way to look at it because whether you’re talking about brain power, strength, or stamina or robustness, or blood-stream or heart of emotion, all are part of an organisation. When you get down to it, what’s a company? It’s the sum of all of the people.
The whole is larger than the sum of the parts...
I’d certainly hope so because a great company is greater than the sum of the parts. You get the vitality, the energy, the ideas, the creation of the environment that people bounce off each other. It’s important you start with the vision to be the world’s leading consumer company for automotive products and services. Then you start to peel back what it means. What it means to a person building Ford Ikons in Chennai. How does that connect to the total corporation?
How do you define leadership? In terms of turnover?
The Best. As measured by different forms. The highest is customer satisfaction. As the most respected company with high corporate image, whose employees feel good about what they are doing. One that’s highly attractive for new recruits. Respected for its development of leaders, for its technical and research capabilities. One that understands where consumers are heading and creates demand with new products. If the end result of doing all of these really well is that you end up with the highest revenues in the world and highest PE multiples, then that’s great. But that’s the end result.
You’re into organisational changes. Is it too much? There’s a lot of anxiety within Ford about change...
Concern about change is a normal human behaviour. You need to turn that concern into positive energy because change is going to happen. You either embrace it and have it work for you, or resist it and let a competitor take over. That’s not our plan. When you have 4,00,000 employees the world over, you’ll get some people who would say: I like the status quo, give me stability. There is no such thing as stability any more. The only thing that is predictable today is that the world is unpredictable. That velocity of change is only going to accelerate.
In the 11 months that you have been president and CEO, what changes do you think you’ve brought?
I’m always frustrated that we can’t do things more quickly. But that’s me. I’ve got a little bit of impatience about our ability to change, though we are probably, for our size, one of the more nimble companies. I’d like to see us go somewhat faster. I also think that in terms of some of our operations, Europe and South America in particular, we’ve delayed some actions that we knew were necessary. For good reasons probably, but we did delay. I’d like to move faster in those two areas.
Which will be the growth areas?
In the after-markets parts. Also, in after-service, that’s Kwik-Fit. Hertz is another growth area through expansion of what the definition of a rental vehicle is. In the US, we’re experimenting with what’s known as the concierge program. Let’s say you are interested in personal transportation but not really in one particular product. You live in Delhi and your work requirement is for a very small car. On weekends, you want a bigger family car. Once or twice a year, you take a vacation and you want someone to look after your vacation needs with a different car. That’s going to be a strong growth area. Financial services as it relates to financing, leasing and insurance is going to be another area of growth.
Longer term, one of the biggest growth areas will be telematics. For the vehicle is going to become the cradle of communication for an individual. I’m talking about navigation systems, security systems, communication systems, e-mail. There’s no reason why what you have in your office or your home can’t be duplicated in your vehicle. It’ll be big business for it’s a business of communication dedicated to the car.
How big will e-commerce get?
Huge. It’ll touch every part of our business. I’ll give you just two examples. CarPoint, the joint venture with Microsoft, is a connection with consumers. If you are a consumer, you can go to the website and order a vehicle. It’ll tell you whether that vehicle is in any dealership, in transit to one or in the production schedule. It’ll give you a price and arrange finance for you. And refer to a vehicle that’s the best match for your specification. The beauty is we know right from the customer what she wants.
CarPoint tells us what the revenue per vehicle is around the US. Also, the revenue per car depending on the colour. And guess what? In certain parts of the US, we know a silver car is worth $600 more than a red one. So, we don’t send red cars there since the region doesn’t like red cars. In the past, we’d send red cars there for dealers to sell. To do that, they had to discount the price. Automatically, the price of the silver car also came down.
The other one, Auto Exchange. The $300-billion of supply chain between our manufacturing processes, down to tier-three suppliers. Today, no one in that chain knows what’s happening in other levels. I might be buying steel for $700 a tonne, my supplier at $770 and the tier-three supplier at $800. We don’t talk to each other. But with the Net it’s clear. I can give you 30 examples of how the Net is going to change our business.
Will the buyer finally get a fully customised car with all the bells and whistles she wants?
I like the way you say that because we’ve coined this term in the US which I hate, which is called mass customisation. A typical American manipulation of the language. To me, the future is going to be about personalisation of vehicles. My prediction is within the next five years, more than 50 per cent of our vehicles will be customised at the point of ordering, not after the car is built.You walk in to buy an Explorer. Immediately a profile will come up on the computer about those personalisation items that suit you. You like fishing and you are going towing. It gives you a specific profile of the vehicle. If your wife does pottery, it gives you another. These are the types of things that are good for customers because a car is a practical object that is also a very emotional subject and we want to be able to connect with the emotions along with the functionality of a vehicle.
(With Bharat Ahluwalia)
