Dr. Christopher Long
APPLICATION OF
OPPORTUNITY LENSES:FORD
The automotive industry has seen numerous disruptive innovations, with Ford often at the forefront. However, the company must now adapt to rapidly changing market conditions and a consumer base that demands more sustainable products with enhanced capabilities (Thai-Tang & Schwartz, 2019). To meet these demands, Ford needs to employ the nine opportunity lenses to analyze the market, evaluating the associated risks and, importantly, the potential gains. This strategic approach can pave the way for a promising future for Ford in the automotive industry.
Ford Motor Company
The Ford Motor Company is a major auto manufacturer based out of North America and has business operations worldwide (MarketLine Company Profile: Ford Motor Company, 2019). The company consists of two business segments: its primary automotive manufacturing segments and Ford Motor Credit, which provides financial services (MarketLine Company Profile: Ford Motor Company, 2019). Ford's reported revenue for 2018 was $160,388 million, an increase of 2.3% over the previous year (MarketLine Company Profile: Ford Motor Company, 2019). Ford's key strength is its massive engineering and R&D program, whose budget exceeded $8 billion in 2017 (MarketLine Company Profile: Ford Motor Company, 2019). The company also enjoys a sizeable market share of 7% while maintaining a leading share of 14.9% in Canada (MarketLine Company Profile: Ford Motor Company, 2019). Due to increasing awareness of climate change and public pressure for stricter environmental regulations, demand for Hybrid and Electric cars has drastically increased (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019). The company aims to increase production in this industry to meet this new demand; the company's research teams project an 11% growth from 2016 to 2020 (MarketLine Company Profile: Ford Motor Company, 2019). A global industry report projects a 22.9% growth rate through 2023; current global revenues are $134.2 billion for 2018 (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019). They are expected to reach as high as $359 billion (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019). Major auto manufacturers have pledged to switch their primary lineup from traditional to hybrid and electric offerings over the next ten years to seize a sizeable market share (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019).
Analysis
Amidst the transformative shifts in the automotive industry, Ford finds itself in a distinctive position. The past decade has seen the emergence of new opportunities, with the electric car sector projected to grow by 22% through 2023. The rise of a new middle class in China also presents a myriad of opportunities for auto manufacturers (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019; Schultz, 2019). In response to this, several car manufacturers have announced plans to transition to an all-electric lineup over the next decade to meet the burgeoning demand (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019). This new consumer base is seeking more affordable and environmentally sustainable car options (MarketLine Industry Profile: Hybrid & Electric Cars in Global, 2019). As a dominant global competitor within this market, Ford is uniquely positioned to respond to these industry-changing disruptions. This makes Ford an ideal candidate to explore the use of innovative models and lenses.
Nine Lenses
When it comes to innovation, there are numerous avenues to explore, whether it's through product enhancement or the creation of a new business model. Ford, in its quest to better compete in the automotive manufacturing industry, can leverage nine lenses to identify potential innovation opportunities. These lenses can be instrumental in forming a network of strategic partners, which in turn can assist the company in launching new offerings and thriving in emerging markets.
Product and Service Innovation
Organizations can take a few different routes with product and service innovation. One route is using a product imitation strategy, which has a higher success rate than developing a new product(Mangelsdorf & Posner, 2017). Organizations developing an entirely new product have a 47% failure rate compared to early market leaders that enter after the new product has been developed (Mangelsdorf & Posner, 2017). Another route is for organizations to focus on small innovations geared toward product improvement instead of trying to find the next game-changing innovation (Corstjens, Carpenter, & Hasan, 2019). These small innovations yield better results and cost less, especially when the innovation process incorporates customer engagement (Corstjens et al., 2019). Tesla has dominated the electric car market by producing top-of-the-line, high-performance luxury vehicles (Schultz, 2019). Ford will attempt to counter Tesla's lineup with a new version of its Mustang, the "Mach-E" (Schultz, 2019). Mach-E is part of an imitation strategy that incorporates several product improvements related to performance and sustainability, and it could help Ford close the market share gap within this niche (Schultz, 2019).
Customer Interaction
Customer involvement in innovation practices can help companies both design innovative products and cut back on the associated cost of R&D (Wang, Hsiao, & Hajili, 2016). Social media can help in this task by providing a variety of ways in which to reach out to customers; social media platforms can attract outside professionals and enhance co-innovation efforts using social influence (Wang et al., 2016). The millennial generation highly relies on social media; 33% percent of millennials surveyed admitted they consult an online blog before purchasing. Meanwhile, 62% stated they were likelier to become loyal customers if a significant brand interacted with them (Cauley, 2018). Despite the substantially increasing growth rate of the electric car industry, it only accounts for 2% of total vehicle sales in the US, with Ford only selling 9,787 units (Schultz, 2019). In order to capitalize on this growing niche, Ford should incorporate customer feedback and engagement in its product innovation regarding electric cars to better design products for its customers while increasing brand loyalty gained through this level of customer engagement.
Disruptive Innovation
Disruptive innovation has several definitions and can be interpreted differently from company to company. It is often defined as a type of innovation that targets low-end markets, particularly less-demanding and non-consumers (Christensen, Raynor, & McDonald, 2019). These innovations tend to be more profitable when they are developed internally than acquisitions or outsourced innovation (Cross, Arena, Sims, & Uhl-Bien, 2017). One of the top barriers to consumer purchase of an electric vehicle is the high purchase price; consumers would be more willing to buy these types of vehicles if the price were more in line with the average cost of traditional vehicles (Larson, Viáfara, Parsons, & Elias, 2014). High fuel costs are among the top motivators for consumers purchasing an electric vehicle (Larson et al., 2014). However, current prices for electric vehicles are out of reach for the average consumer, which was initially designed to cut the costs associated with traditional vehicles (Larson et al., 2014). Creating an affordable mass-produced electric vehicle could be a potential market disruption, enabling Ford to reach a low-end market consumer base. The company has taken steps through a series of acquisitions to meet this demand, including the recent acquisition of Rivian for $500 million (MarketLine Company Profile: Ford Motor Company, 2019). However, should the demand for electric cars diminish and traditional cars remain more affordable, Ford could incur substantial losses with this investment.
Business Model Innovation
Organizations can use business models to describe how their organization functions, they can be used to experiment with new concepts and ideas, or they are a general template or formula with slight modifications to fit the needs for innovations (Braden-Fuller & Morgan, 2010). Despite how they are used or formulated, adaptability is critical with these models; companies need a mechanism in place to help react to new emerging trends (Giesen, Riddleberger, Christner, & Bell, 2010). Companies can set up new business models to coincide with new industry-changing product launches or make creating new models a repeatable process within the companies' strategy (Johnson et al., 2008; Christensen, Bartman, & Van Bever, 2016). With Ford planning to launch several new products aimed at seizing a dominating market share of the hybrid and electric car industry, a new business model should be considered due to the disruptive nature and change in infrastructure requirements needed to support these vehicles (Christensen & Kagermann, 2008; MarketLine Company Profile: Ford Motor Company, 2019). Electric cars could also be viewed like traditional cars, where a new business model may not be needed (Christensen et al., 2016).
Messaging Innovation
Social media offers much potential in responding to customer service issues, internal networking, and collaboration (Burrus, 2010). While it does have much potential, the same platforms can be used against a company just as quickly; an angry United Airlines customer created a music video about how he was mistreated and generated over 9 million views (Tripp & Grégoire, 2011). When dealing with customer service issues, response time is critical if the company wants to avoid an act of revenge like what happened with United Airlines (Tripp & Grégoire, 2011). The suitability and environmental impacts of automobiles have long been a point of contention between environmental groups, governments, and automobile manufacturers. The Chairman and CEO of Ford, William Ford, has long advocated for more sustainable and environmentally friendly vehicles (Bonini & Kaas, 2010). Ford continues to work diligently to change both internal and external perceptions of car manufacturers by collaborating with NGOs, environmental groups, and local governments to create more sustainable products (Bonini & Kaas, 2010). These efforts helped to improve the company's image while simultaneously pushing forward new, environmentally friendly initiatives (Bonini & Kaas, 2010).
Business Enabling Ecosystem
A business ecosystem is a system of network actors and interactions that work together to produce a product or service that generates revenue (Adner, 2016). The network actors are typically suppliers, distributors, and any affiliated organization that contributes to the final offering (as cited by Scaringella & Radziwon, 2018). Companies can significantly benefit from the collaborative nature of these ecosystems, but the roles, capabilities, and ownership need to be clearly defined for the ecosystem to be successful (Adner, 2016). In order to enhance its data-sharing capabilities, Ford, GM, IBM, and several other companies have all teamed to collaborate and design a new system incorporating blockchain technology (Peters, 2018). This ecosystem will allow Ford to enhance its technology and data tracking capabilities and further improve its offerings by allowing even more data transfers from vehicles to be made more safely and efficiently (Peters, 2018). Ford also announced a $7 billion joint venture with VW to develop and distribute autonomous vehicles in Europe, and the project could potentially disrupt the entire auto industry (MarketLine Company Profile: Ford Motor Company, 2019).
Competency Platforms
Competencies are an organization's capabilities, and how they are used makes a company unique (Leinwand & Mainardi, 2010). These capabilities align to form a competitive advantage; these competencies should feed into one another and work together to improve overall performance (Leinwand & Mainardi, 2010). Management, Adaptation, and Innovation competency align in such a way that helps the organization better design new innovative products and services by understanding the business environment and customer needs (Rahab, Anwar, & Priyono, 2016). Ford's competencies revolve around mass-producing traditional vehicles. However, with electric vehicles slowly capturing a larger market share, Ford must develop new competencies quickly to adapt to the market (Thai-Tang & Schwartz, 2019). The potential downside of investing resources into developing a new competency is the company's risk of losing its competitive advantage by focusing on competencies that may need to align with its capabilities (Leinwand & Mainardi, 2010).
Alliances, Acquisitions, and Collaboration
Organizations should take a balanced approach when using external and internal innovation resources; both enhance the organization's innovative capabilities in various ways (Malhotra, Majchrzak, Kesebi, & Looram, 2017). External innovation refers to outsourcing innovative processes through acquisition or stakeholder partnerships (Malhorta et al., 2017). This type of innovation incorporates more diversity than internal innovation and helps create solutions beyond an organization's capabilities (Furr, Keeffe, & Dyer, 2016). Internal innovation affords the benefits of enhanced knowledge sharing and increased employee engagement; this type of innovation can assist with incremental product improvements (Malhorta et al., 2017).
Ford's electrification strategy involves minor incremental improvements to its hybrid and electrical lineup, and eventually, these vehicles will account for up to 25% of its offerings (Hughes-Cromwick, 2011). While its engineers have been able to make these improvements, there still needs to be more infrastructure to support a higher volume of electric cars on the road(Hughes-Cromwick, 2011). Ford's head of global product development, Hau Thai-Tang, suggests partnerships with local governments and stakeholders are essential to creating solutions regarding these infrastructure problems as this is beyond Ford's capabilities to solve by themselves (Thai-Tang & Schwartz, 2019). Ford's approach to its electrification strategy is an excellent example of how a company should balance its internal and external innovation processes.
Global Market Innovation
Companies that expand beyond their markets and seek out emerging markets need to do so with a clear understanding of the culture, market conditions, and environment they will try to operate (Oyedele, 2016). Organizations will need to engage with consumers and build a business ecosystem that will allow them to operate better within these new markets; companies should only take these steps with the help of local strategic partners (Oyedele, 2016). China is one market with enormous potential, especially within the automotive sector; however, hundreds of electric vehicle manufacturers are competing there (Naughton,2019). Ford has several projects underway to increase its market share in China and India, including a recent $19.25 billion joint venture to distribute Ford vehicles in India (MarketLine Company Profile: Ford Motor Company, 2019). Tesla currently controls a significant market share due to the high demand for luxury vehicles and government support for electric vehicles (Naughton,2019). Ford is considering introducing its new Mach-E electric Mustang to the Chinese market, and its recent partnership with Changan Auto should help with this task (Naughton,2019; MarketLine Company Profile: Ford Motor Company, 2019).
Opportunity Map
An opportunity map will show the potential risks and profits associated with each innovation opportunity and how these factors change over time. The "In the Business" column shows incremental product changes and acquisitions associated with the development of an electric vehicle line. The "On the Business" column shows opportunities reflecting new product offerings associated with the development of autonomous vehicles. The "Out of the Business" column reflects opportunities associated with global initiatives to increase profitable growth in emerging markets.
Conclusion
There are several avenues of innovation opportunities Ford can exploit with great potential. Ford has taken steps to enhance its current market position within the hybrid and electric automobile industry, such as acquiring the electric car startup Rivian (MarketLine Company Profile: Ford Motor Company, 2019). Ford continues to pursue opportunities such as developing its presence in Asia, primarily the emerging markets in India and China (MarketLine Company Profile: Ford Motor Company, 2019). Should Ford wish to remain competitive within its industry, it must continue to invest in these opportunities while building more substantial and collaborative business ecosystems.
References
Adner, R. (2016). Navigating the leadership challenges of innovation ecosystems. MIT Sloan Management Review, 58(1), 0. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1832181503%3Faccountid%3D27965
Baden-Fuller, C., & Morgan, M. S. (2010). Business models as models. Long Range Planning, 43(2), 156-171. doi:10.1016/j.lrp.2010.02.005
Bonini, S., & Kaas, H.-W. (2010). Building a sustainable Ford Motor Company: An interview with Bill Ford. McKinsey Quarterly, (1), 90–96. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=47918213&site=bsi-live&scope=site
Burrus, D. (2010). Social networks in the workplace: The risk and opportunity of business 2.0. Strategy & Leadership, 38(4), 50-53. doi:http://dx.doi.org.library.capella.edu/10.1108/10878571011059674
Cauley, P. (2018). Millennial Marketing Magic. Response, 30–34. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=130461772&site=bsi-live&scope=site
Christensen, C. M., Bartman, T., & van Bever, D. (2016). The hard truth about business model innovation. MIT Sloan Management Review, 58(1), 31-40. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1832180944%3Faccountid%3D27965
Christensen, C. M., Raynor, M. E., & McDonald, R. (2017). What is Disruptive Innovation? Accountancy SA. 24-26. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1967324647%3Faccountid%3D27965
Corstjens, M., Carpenter, G. S., & Hasan, T. M. (2019). The Promise of Target Innovation. MIT Sloan Management Review, 60(2), 39-44. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F2168849178%3Faccountid%3D27965
Cross, R., Arena, M., Sims, J., & Uhl-Bien, M. (2017). How to catalyze innovation in your organization. MIT Sloan Management Review, 58(4), 39-47. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1916720849%3Faccountid%3D27965
Furr, N., O’Keeffe, K., & Dyer, J. H. (2016). Managing Multiparty Innovation. Harvard Business Review, 94(11), 76–83. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=118866669&site=ehost-live&scope=site
Giesen, E., Riddleberger, E., Christner, R., & Bell, R. (2010). When and how to innovate your business model. Strategy & Leadership, 38(4), 17-26. doi:http://dx.doi.org.library.capella.edu/10.1108/10878571011059700
ohnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing Your Business Model. (cover story). Harvard Business Review, 86(12), 50–59. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=35386627&site=ehost-live&scope=site
Hughes-Cromwick, E. (2011). Ford Motor Company’s Global Electrification Strategy. Business Economics, 46(3), 167–170. https://doi-org.library.capella.edu/10.1057/be.2011.10
Larson, P. D., Viáfara, J., Parsons, R. V., & Elias, A. (2014). Consumer attitudes about electric cars: Pricing analysis and policy implications. Transportation Research Part A, 69, 299-314. doi:10.1016/j.tra.2014.09.002
Leinwand, P., & Mainardi, C. (2010). The Coherence Premium. Harvard Business Review, 88(6), 86–92. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=50762156&site=ehost-live&scope=site
Malhotra, A., Majchrzak, A., Kesebi, L., & Looram, S. (2017). Developing innovative solutions through internal crowdsourcing. MIT Sloan Management Review, 58(4), 73-79. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1916720815%3Faccountid%3D27965.
Mangelsdorf, M. E., & Posner, B. (2017). 12 essential innovation insights. MIT Sloan Management Review, 59(1), 28-36. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F1950374089%3Faccountid%3D27965
MarketLine Company Profile: Ford Motor Company. (2019). Ford Motor Company MarketLine Company Profile (pp. 1–64). Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=139078604&site=bsi-live&scope=sit
MarketLine Industry Profile: Hybrid & Electric Cars in Global. (2019). Hybrid & Electric Cars Industry Profile: Global, 1–41. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=137168549&site=bsi-live&scope=site
Naughton, K. (2019). Ford May Make New Electric Mustang in China, “Smiling” CEO Says. Bloomberg.Com, N.PAG. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=139723887&site=bsi-live&scope=site
Oyedele, A. (2016). Emerging market global business model innovation. Journal of Research in Marketing and Entrepreneurship, 18(1), 53-62. doi:http://dx.doi.org.library.capella.edu/10.1108/JRME-11-2015-0050
Peters, B. (2018). Ford, GM, IBM Want Transportation To Run On Blockchain. Investors Business Daily, p. N.PAG. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=129586052&site=bsi-live&scope=site
Rahab, R., Anwar, N., & Priyono, R. E. (2016). Effect of Core Competence on Sustainable Competitive Advantages of Batik Banyumas Small and Medium Enterprises. Journal of Comparative International Management, 19(1), 27–45. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=120826012&site=ehost-live&scope=site
Scaringella, L., & Radziwon, A. (2018). Innovation, entrepreneurial, knowledge, and business ecosystems: Old wine in new bottles? Technological Forecasting & Social Change, 136, 59-87. doi:10.1016/j.techfore.2017.09.023
Schultz, E. J. (2019). Ford Takes on Tesla with Mustang Mach-E. Advertising Age, 90(22), 4. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=139784006&site=bsi-live&scope=site
Thai-Tang, H., & Schwartz, D. (2019). Ford’s evolving sense of self: An interview with Hau Thai-Tang. McKinsey Quarterly, (1), 1–8. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=135658847&site=bsi-live&scope=site
Tripp, T. M., & Grégoire, Y. (2011). When unhappy customers strike back on the internet. MIT Sloan Management Review, 52(3), 37-44. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F861419003%3Faccountid%3D27965
Wang, Y., Hsiao, S., Yang, Z., & Hajli, N. (2016). The impact of sellers' social influence on the co-creation of innovation with customers and brand awareness in online communities. Industrial Marketing Management, 54, 56-70. doi:10.1016/j.indmarman.2015.12.008