Alan Mulally and His Transformation of the Ford Motor Company
Long before the Great Recession, Ford had run in tough shape (Hoffman, 2012). Allan Mulally took over the leadership of the company in 2006, a time when it was headed for closure. Since the early 1990’s, Ford had lost about 25 percent of its market share to its competitors (Hoffman, 2012). This was a period when Ford held a great deal of high end products including Volvo, Aston Martin, Land Rover, and Jaguar. For all this time, none of these brands was selling. They needed an amassment of capital to be able to compete effectively in the vehicle industry. For a better part of the 20th century, Japanese automakers controlled the market, acting as pure monopolies in different parts of Europe, America, and Asia. Generally, production costs were high with the cost of labor rising as high as $76 per hour (Hoffman, 2012). This made the firm’s operating margins lag both overseas and at home. Ford’s products were altogether uncompetitive and thus a total overhaul of the company’s operational framework was needed. The much needed change came with the appointment of Allan Mulally as the leader of the company.
In his struggle to revive the company as one of the major automaker firms in the industry, Mulally drafted a plan he dubbed ‘One Ford’ (Hoffman, 2012). His plan did not sound one that would redeem the company from its current situation to many critics. However, as months passed, his plan was integrating all the major components necessary to spur the company to the direction of innovation. Mulally used an integration referred to as ‘sponsor spine.’ Sponsor spine is an high end innovation strategy that not only builds on accomplishment of visions and development of new products but the capacity of an enterprise to drive and contain modernized thinking from one partner to another, one function to another, and one team to another. In his innovation framework, Mulally drafted four major ideas that would change the company for in the long term. These included bringing together all Ford employees as a worldwide team, leveraging the company’s distinctive assets and knowledge on automotives, building trucks and cars that people would prefer to competitors’ products, and arranging for the financing that would foresee the implementation of the entire plan. At the start of the implementation of this plan, the Ford announced a fire up of its product development, workforce competitiveness, financial health, and strategic vision (Hoffman, 2012).
Mullaly reengineered Ford as a mobility company. As a starting point, he acknowledged that the core function of the company did not just lie in the production of cars and trucks but also in the kind of technology to be used to make this a success. For Mulally, technology in the motor industry was key and thus he planned to make this a selling point for the company’s products. Products developed at Ford Company were to become powerhouses in an industry otherwise dominated by consumer electronics. The company would turn trucks and cars into communication and entertainment mobile centers, moving in correspondence with the fast growing social media and smartphone industry (Hoffman, 2012). One of these moves was the introduction of MyFord Touch entertainment panel that was located on a central position in a car, replacing a location previously occupied by radio. This innovation was a breakthrough in the automobile industry with many companies imitating the idea. Through this technology, a driver could engage technology through unique applications, verbalized commands, and radio systems that were growing beyond the expectations of the modern consumers. At present, major automakers have followed Ford’s innovations, incorporating technology in automobiles in the form information centers and mobile entertainment.
In the One Ford plan, Mulally created a platform of collaboration and accountability across the Ford’s leadership structures. Mullaly initiated a transformational culture whose core business was to innovate. This was heckled at the start of his tenure where he stated that the company had been running out of business for the last 40 years (Hoffman, 2012). This statement created a bargaining platform for the CEO with the United Auto Workers. As a result of this negotiation, labor rates were reduced by a whopping $20 per hour to land at $55 per hour (Gifford, 2013). This action was not aimed of depriving workers of their income but a platform that was meant to create a safe landing for the company. This came a long way with reducing production costs threefold at the end of the first financial year of Mulally’s tenure. Mulally would not stop until he influenced the way everything was conducted within the company. He changed the way employees treated one another, the way contractual agreements were made with suppliers, and the way meetings were chaired. Before Mulally took over leadership at Ford, meetings were dominated by executives who sought self-preservation over group effort. All meetings were characterized by combat for supremacy. However, Mulally changed all these by creating a meeting environment where issues would be discussed without passing blame from one individual to another. The way to innovation success dominated the better part of all meetings (Gifford, 2013).
In his meetings, Mulally initiated a ‘Traffic Light’ system where he would get reports on key initiatives underway in the company (Gifford, 2013). A project that bore a green light denoted a pass, a yellow light meant some improvement was direly needed, and a red light asserted the need for an instantaneous change of course. In their initial stages, most of the projects initiated by Mulally showing yellow light. At Ford, Mulally is renowned for paving the way for outstanding execution. Contrary to the beliefs of many innovation strategists, Mulally advanced a system where new products were developed in line with those that consumers had valued in the previous years. For instance, instead of developing purely new products, he redesigned the Fiesta, Focus, and Taurus brands not only in the United States but also across the world (Gifford, 2013). Mulally wiped out weaker automobile brands and introduced a leaner and simpler product line that was channeled to customer service excellence, product development, and manufacturing excellence.
Before Mulally’s appointment, Ford used to develop a different plan each ending year. Whenever one plan did not materialize, the company developed a new one. However, Mulally’s plan was far much different. Based on the four points, working as a team, designing cars and trucks according to customers’ preferences, and leveraging Ford’s worldwide assets, he constructed very simple plans which employees found easy to implement. Mulally would reemphasize on the four points in all kind of meetings and press conferences he summoned. In general, Mulally advocated for coming up with one idea and sticking to it (Schermerhorn, 2012).
From the start of his tenure, Mulally did not take long to realize that Ford did not just constitute a single product, that is one Ford. In essence, there were many Fords. He realized that there was Ford of Africa, Ford of Asia, Ford of Europe, and a number of other divisions and subsidiaries across the world (Hoffman, 2012). In addition, he realized there has only a little coordination between the company’s many parts. At the implementation of the One Ford plan, Mulally devised sub-plans that would help integrate these many regional divisions into one worldwide enterprise. This, he knew, would be a milestone towards the creation of economies of scale. A multinational automotive powerhouse would also be developed as a result. In the initial stages of the One Ford implementation plan, Ford Company did not show any sign of progress and thus critics were quick to go against Mulally’s one way plan. When asked of a possible merger to boost the company’s capital base, Mulally, suggested that Ford would only merge with itself. This showed Mulally’s rigidity to One Ford plan and an impossibility to a change of course (Schermerhorn, 2012).
From the time of the introduction of the One Ford plan, Ford Company has made tremendous progress in the automobile industry. For instance, the company has been successful in developing EcoBoost Engine, enhancing efficiency in fuel consumption in most of its automobiles. Over the last five years, Ford has generated about $50 billion in revenues. The once deteriorating company is now selling its shares at $13 (Hoffman, 2012). This is a 500 percent increase in share price compared to the price in 2009. What has left many people wondering is that when Mulally joined Ford in 2006, he was naïve in the industry. However, he understood all that was needed to change a volatile culture that would grow a business, a brand, and people (Schermerhorn, 2012).