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Henry Ford

I have no use for a motor car which has more spark plugs than a cow has
teats.
Henry Ford
American car maker
18631947

Breakthrough ideas
Mass production

Key book
My Life and Work
The Ultimate Business Guru Book 66

The standard view of Henry Ford (18631947) is that he was the first exponent
of mass production. While this is true, there was a great deal more to the career,
personality and achievements of the car maker.
Ford was originally a boy racer. After spending time as a machinists apprentice,
a watch repairer and a mechanic, he built his first car in 1896. Quickly he became
convinced of the commercial potential and started his own company in 1903. (There
was nothing unusual in this between 1900 and 1908 over 500 American companies
were set up to make cars.) Fords first car, was the Model A. After a year, he was
selling 600 a month. In 1908, Fords Model T was born. Through innovative use of
new mass production techniques, between 1908 and 1927 Ford produced 15 million
Model Ts. At that time, Fords factory at Highland Park, Michigan was the biggest
in the world over 14,000 people worked on the 57-acre site. And it was to the
world Ford looked. He was quick to establish international operations Fords first
overseas sales branch was opened in France in 1908 and, in 1911, Ford began
making cars in the UK.
In 1919 Ford resigned as the companys President with his son, Edsel, taking
over. By then the Ford company was making a car a minute. In 1923 annual sales
peaked at 2,120,898. At the time, Fords market share was in excess of 57 percent.
Henry Ford developed mass production not because he blindly believed in the
most advanced production methods. He was no clone of Frederick Taylor. (In fact,
the unique Ford was no clone of anyone.) Ford believed in mass production because
it meant he could make cars which people could afford. And this, with staggering
success, is what he achieved. At one point the company had cash reserves of $1
billion. (This did not stop Ford from maintaining: A business that makes nothing
but money is a poor kind of business.)
In 1907, Ford professed his aim was to build a motor car for the great multitude
. . . It will be so low in price that no man making a good salary will be unable to own
one and enjoy with his family the blessing of hours of pleasure in Gods great
open spaces . . . everybody will be able to afford one, and everyone will have one.
The horse will have disappeared from our highways, the automobile will be taken
for granted. Fords commitment to lowering prices cannot be doubted. Between
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1908 and 1916 he reduced prices by 58 percent at a time when demand was such
that he could easily have raised prices.
The paradox of Ford was that by thinking of the consumer first and production
second his was a triumph of marketing as much as of production methods. Though
the two were inextricably linked, he is usually associated with the latter rather than
the former.
Fords masterly piece of marketing lay in his intuitive realization that the mass
car market existed it just remained for him to provide the products the market
wanted. Model Ts were black, straightforward and affordable. The corollary of this
was to prove Fords nemesis. Reasonably priced cars demanded mass production
methods and costs could only be lowered through increased efficiency and
standardization so that more cars could be produced. Ford followed this strategy
through with characteristic thoroughness. General Motors chief, Alfred Sloan, noted:
Mr Fords assembly line automobile production, high minimum wage, and lowpriced
car were revolutionary and stand among the greatest contributions to our
industrial culture. His basic conception of one car in one utility model at an ever
lower price was what the market, especially the farm market, needed at the time.
Ford stuck rigidly to his policy. Having given the market what it wanted, he
presumed that more of the same was also what it required. He was reputed to have
kicked a slightly modified Model T to pieces such was his commitment to the
unadulterated version. When other manufacturers added extras, Ford kept it simple
and dramatically lost ground. The companys reliance on the Model T nearly drove
it to self-destruction.
The reasons why were explained by Ted Levitt in his article Marketing myopia
which re-evaluated Ford from a marketing perspective. Mass production industries
are impelled by a great drive to produce all they can. The prospect of steeply
declining unit costs as output rises is more than most companies can usually resist.
The profit possibilities look spectacular. All effort focuses on production. The result
is that marketing gets neglected, Levitt wrote. Finally, there is concentration on the
product as this lends itself to measurement and analysis.
The Ultimate Business Guru Book 68
In terms of management, Ford was an atheist with attitude. In the same way as
Ford didnt believe in Models Ts in different colors with fins and extras, he didnt
believe in management. Fundamental to Henry Fords misrule was a systematic,
deliberate and conscious attempt to run the billion-dollar business without managers.
The secret police that spied on all Ford executives served to inform Henry Ford of
any attempt on the part of one of his executives to make a decision, noted Peter
Drucker in The Practice of Management.1
As a result, production, in the Ford companys huge plant, was based round strict
functional divides demarcations. Ford believed in people getting on with their jobs
and not raising their heads above functional parapets. He didnt want engineers
talking to salespeople, or people making decisions without his say so.
The methods used by Ford were grim and unforgiving. How come when I want
a pair of hands I get a human being as well, he complained. Ford will never be
celebrated for his humanity or people management skills. Among his many
innovations was a single human one: Ford introduced the $5 wage for his workers
which, at the time, was around twice the average for the industry. Skeptics suggest
that the only reason he did this was so that his workers could buy Model Ts of their
own.