Tuesday, August 21, 2007

Henry Ford: If I had asked people what they wanted, they would have said faster horses.

My earlier post about Southwest Airlines reminded that Henry Ford famously said,
If I had asked people what they wanted, they would have said faster horses.
While true, Ford almost certainly had conversations with prospective customers who were clear about the frustrations of their daily experiences getting to and from where they wanted to go.

Henry Ford didn’t invent automobiles. In 1902, at least 50 US firms manufactured and sold cars mostly to wealthy customers as high end luxuries, which were generally expensive to purchase and difficult to maintain. That year, the Detroit Automobile Co. went bankrupt after selling fewer than half a dozen cars in two years, and Chief Engineer Henry Ford was fired. The Ford Motor Company was founded in 1903, but it was 1908 before the Model T was introduced.

Prior to the Model T, Ford had been up and down in the nascent automotive industry for a long time, from which he had developed a deep base of informed intuition. He had a clear insight into the needs of an emerging market of low end customers for simpler, cheaper, more reliable transportation. Ford understood that many people wanted faster horses to do practical jobs like getting to and from town quicker so more work could be done on the farm. He identified a job the car could perform for non-consumers which was fundamentally different than the job for which most early cars were being built. Rather than competing with the market leaders in automobiles, Ford was led by customers to develop a simpler, cheaper, more reliable productivity tool.

With that insight, Ford looked around for how to create a product that completely satisfied his customers’ needs using existing components and processes where possible. Ford intuitively understood that his focus needed to be on what was difficult in delivering what the customer wanted, which was assembling car components as efficiently and reliably as possible. The famous innovation for which Ford is given credit, the assembly line, had actually been around for a century since Eli Whitney’s cotton gin. The relatively recent broad scale commercialization of electricity made small electric motors possible, which significantly enhanced the potential scale of the assembly line process.

Ford surrounded himself with talented people who were as passionate about the business as he was. It was William Klann, not Ford, who brought the assembly line into Ford Motor Company after viewing the "disassembly line" of a Chicago slaughterhouse where animals were butchered as they moved along a conveyor. Ford was disciplined in meeting his customer’s demand with a laser like focus, but remained open to diverse ideas from other industries about how to best develop a solution for his customers.

What was most innovative about Henry Ford was not a new technology or even a new process, but a new insight into the needs of an emerging market of customers for which he created a powerful, new business model.

Ford is also famous for saying,
They can have it in any color, as long as it is black.
Early in a new market, what is usually not good enough is efficiently reconfiguring mostly existing components into a simple, reliable solution that completely satisfies the customers.

Once that is mastered, markets inevitably begin to climb up the S-curve of innovation. What Ford failed to grasp, at least as the market initially began to mature, is that discontinuous innovations create new markets, and then sustaining innovations create great companies. That the car market was ready to branch into segments contiguous to the early mainstream market beachhead that had been established was the insight grasped by Albert Sloan, the legendary CEO of General Motors.

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