Tuesday, 20 June 2017

Strategic business development: A lesson learned from the automotive pioneers, Henry Ford, DuPont and General Motors

In nowadays business world, we often discuss and talk a lot about how the “competitor can be shaped”. In other words, how can we put our businesses ahead in the game? However, often the opposite is forgotten: it is also critical that your competitor does not shape our businesses!
In this blog post, I give you an example that I heard back at university. I hope that you will find it useful and will keep it in mind in your next strategic steps.
Henry Ford, the founder of the Ford Motor Company, was an impressive man, ahead of time entrepreneur, respected by a broad audience. By introducing the assembly-line concept, which produced the Model T, the selling numbers increased from 6,000 cars in 1909 to 200,000 in 1914. Applying the economy of scale, price dropped from $1,000 to $260 per car by 1924. Shifting to the assembly-line production required the cars to be colored black, because this color would dry faster than other colors. Therefore, every car manufacturer used it. Most of us know Ford’s statement:

“You can have any color car you want, as long as it’s black”

In the beginning of the 1920’s DuPont introduced a quick-drying paint [1]. General Motors adapted this paint and following a multi-product strategy General Motors was able to introduce new car models with different colors every year. Ford’s single-product strategy could not withstand this and by 1927 General Motors took the lead in market share. Ford could never regain this position. Ford “got shaped by the competitor”, because he kept his concept for success too long. As a result, upcoming innovation took over.

To summarize it by Sun Tzu:
“Therefore, when I have won a victory I do not repeat my tactics but respond to circumstances in an infinite variety of ways”. (VI.26)

Greetings and till next time!

P.S.  New to my blog – check out my ‘start here’ section.

[1] Mark McNeilly: Sun Tzu and the art of business

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