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Igniting innovation: how hot companies fuel growth from within - Ford puts no brakes on innovation - EY - Global

Igniting innovation: how hot companies fuel growth from withinFord puts no brakes on innovation

Henry Ford is a hard act to follow. Yet his great-grandson William Clay Ford, Jr., Executive Chairman of Ford Motor Company, has nurtured the automaker’s legacy of innovation and is credited with reinventing the company for the 21st century.

In a recent conversation, EY Chairman and CEO James Turley asked Bill Ford to describe how the automotive giant remains a creative leader in a fiercely competitive market.

James Turley: Where is innovation occurring in the auto industry today?

Bill Ford: Innovation is happening at a much faster pace today than at any time probably since my great-grandfather’s time. And it’s happening on all fronts.

It’s happening with alternative propulsion systems such as biofuels, electric vehicles, plug-in hybrids, and more conventional engines such as clean diesel and the tremendous fuel economy advances that we’ve pioneered at Ford on gasoline engines. On the in-vehicle communications front, we are seeing equally exciting advances.

With driver connect technologies such as Ford SYNC® and MyFord Touch, we are bringing an iPod-like experience into the car but in an interface that works for drivers and minimizes distraction. With safety, we really are reaching a new frontier in technology that can save lives. We are introducing the world’s first inflatable seat belt in the new Ford Explorer.

This acts like an air bag within a seat belt in the rear seats and can reduce injuries, particularly with younger and elderly passengers. On the road today, we have radar-based technologies that can sense other vehicles and objects and warn drivers to take action before an accident happens.

So, innovation is really happening on all fronts and happening at an unprecedented pace.

James Turley: You recently said closer collaboration internally has sped the pace of innovation at Ford. Can you elaborate?

Bill Ford: I think the biggest enabler for innovation within Ford Motor Company has been the globalization of our product development system, because if you think of it, we had distinct product development groups for many years in Europe, North America, South America and Asia, and each group would develop its own products with its own set of innovations.

This is not only very expensive, but also very time-consuming. And the fact that we’ve now gone to global products has enabled us to have a much faster cadence of innovation introduction into our vehicles. That one element of collaboration across the company has really let loose a lot of terrific ideas that are now coming into the marketplace.

James Turley: What about collaboration with companies outside of Ford?

Bill Ford: We have a terrific R&D capability at Ford, and one of the things I’m most proud of is that during the dark days that our industry went through, we continued to heavily invest in R&D and new products. So we have great internal capability, but that alone will never be enough.

We work extensively with universities across the globe on specific projects and we’ve gained a lot of knowledge from those partnerships. We also are working with non-traditional suppliers to Ford like Microsoft, Google and other software and hardware providers that have never really been in the automotive field.

So as the information age really starts to merge with the automobile, it is bringing us into collaboration with some of the best and brightest minds in the technology world.

James Turley: Are there methods and approaches used by other car manufacturing nations such as Germany and Japan that US companies can learn from to create a more entrepreneurial culture?

Bill Ford: I think we have a very strong entrepreneurial culture here at Ford. That’s not to say we are so arrogant that we don’t believe we can learn from what other companies are doing. We do all the time and we have some fantastic global competitors. I’m simply saying that it’s not correct to assume another nation introduces innovation more rapidly than we do. That may have been true in the past, but it’s not true today.

James Turley: Much of the manufacturing in the auto and auto parts industry has moved overseas to take advantage of lower costs. You have been quoted as saying that innovation is one of the key ways to preserve American manufacturing; can you talk about that a little bit and how that has played out for Ford?

Bill Ford: If the game is only to be the lowest-cost producer of every component and thereby turn every component into a commodity, that’s not a game the United States is particularly well positioned to compete in.

We need to bring knowledge, expertise and real value creation to the table in the US. A perfect example of what I’m talking about is that we just moved the focus of our electric vehicle activity from various parts of the world to Michigan because of the tremendous knowledge here in Michigan, both in our workforce and in our universities. For us, Michigan is the right place to pursue this very new technology, which is filled with innovation.

James Turley: Ford shares were up more than 50% in the past year. How much of this rise can be attributed to innovation?

Bill Ford: After 53 years of being intensely interested in the fortunes of Ford stock, I’ve come to realize that it is impossible to attribute any short-term gain or loss to any rational behavior.

Having said that, there is no question that Ford is being recognized across the globe as an innovation leader. And to the extent that’s true, I suspect some of that is being played out in our stock price. But perhaps a more direct measurement of how innovation is affecting Ford Motor Company is the rise in our corporate reputation.

It’s something we measure on a regular basis, and over the last couple of years we’ve seen a meteoric rise in our reputation just as our products are winning awards and accolades for their degree of innovation.

James Turley: Ford is a giant company. To what extent has it given its people the freedom to act in an entrepreneurial fashion?

Bill Ford: I think our people have always wanted to be entrepreneurial, but ironically, one impediment was our own system. For instance, it used to be that any time an innovation was proposed, the vehicle program manager that was first to take it had to bear the cost of that innovation, which made it challenging for the team to achieve financial goals.

As a result, program managers always wanted to be the second or third to adopt the innovation because they didn’t have to bear that initial cost. We’ve been working to change our system to take away that penalty so the first program manager to adopt MyFord Touch, for example, doesn’t have to eat all the development costs.

Now we have program managers that are really pushing to make sure their vehicles have the latest innovations.


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