When Ford unveiled its re-engineered Explorer in July, the buzz focused on its new options: an engine promising 30 percent better fuel economy, a touchscreen multimedia system, intelligent four-wheel drive, in-vehicle WiFi and inflatable seat belts.
But what's missing may make all the difference to the automaker's survival. Two years ago, a shopper could purchase Ford's full-size SUV in any one of 76,000 configurations. This year, Ford will offer just 1,500. It's not exactly Model T simplicity. ("Any customer can have a car painted any colour that he wants so long as it is black," founder Henry Ford once wrote of the Tin Lizzie.) But it is a step back to basics for the 107-year-old company and, according to its senior leadership, the key to its future.
When CEO Alan Mulally took over Ford in the midst of a turnaround four years ago, he brought a singular focus to its headquarters: creating one Ford worldwide. For a company in which each brand, each region, each business unit ran independently for decades, Mulally's "One Ford" plan is an extreme makeover. Even more challenging, the company has had to retool itself amid an auto industry depression and a broad economic meltdown.
"All the car companies dug themselves into such a hole that they face a humongous challenge," says John Kotter, chief research officer with consultancy Kotter International and author of the bestselling book Leading Change. "But Ford is doing more smart things than the other American car manufacturers, and that seems to coincide with their new leadership."
Since 2005, Ford has cut costs by more than $10 billion and shed nearly half its brands. It offers 45 models this year compared to 97 in 2006. By 2012, the company plans to center its manufacturing efforts on 15 vehicle platforms, down from 27 three years ago. The goal: design cars globally for global consumption.
IT is at the heart of the corporate u-turn. Nick Smither, who became Ford's CIO five months before Mulally arrived, has mirrored the CEO's strategy with a plan for "One IT." To cut operational costs by more than 30 percent, IT eradicated duplicate applications, eliminated excess infrastructure capacity, united autonomous IT shops and trimmed its staff. The slimmed-down team of 3,400 is reinvesting those savings, plus more, in new technology such as collaboration tools for designing and building its revamped fleet, and in-vehicle IT that attracts buyers and generates revenue. "
The importance of technology to Ford's 180 is reflected in IT's elevated profile. Smither reports to the CEO and is part of the executive team that meets weekly to lead the transformation. Senior IT leaders are integrated into every new global function at the company.
IT has evolved from order taker to integrated business partner and innovator, says Smither. As Ford, perennially the number two US automaker, attempts to move ahead of the competition and stay there, the tech team is critical. "Every vehicle manufacturer understands the importance of technology, not just for business operations but for its products, whether it's digital convergence, environmental sustainability, even how you communicate with customers," says Thilo Koslowski, Gartner vice president of automotive and vehicle information and communication technologies. "Ford is moving in that direction quicker than any other vehicle manufacturer."
Eliminating excess capacity and inefficiency within the IT organization and the company is supposed to enable Ford to return to and sustain profitable growth. Last year, even as American auto sales slumped to their lowest level in decades, Ford surprised the industry with a $2.6 billion profit and gained US market share for the first time since 1995. General Motors and Chrysler, meanwhile, filed for bankruptcy and federal bailouts.
"It was a significant change management challenge, but two things helped us," Smither says. "We were aligned to the One Ford plan, so as we were integrating IT operations, business operations were doing the exact same thing. And a year in, the economic meltdown hit, which became a motivator in enabling the change."
Image courtesy of David Parker