#SpringRefreshSeries | #2 Become More Profitable
Business is what you do. It’s what you’ve always done. You have dedicated clients and customers. Your brand is known. You are satisfied with your progress. It is all good. But, would you like to know what separates good companies from great companies?
Great companies constantly look for ways to be better.
This month, we profile 4 companies we all know. We will look at how revamping their business models – new dedication to customer service, expanding internet presence, new leadership and updating processes-- took them from good to great!
This week, we continue our #SpringRefresh series, exploring Four Reasons to Consider a Business Revamp, with a look at Ford Motor Company.
It's been hailed one of the greatest business revamps in history. Iconic, even.
I remember reading headlines about Alan Mulally, now retired CEO of Ford Motor Company, a few years back.
“Engineering a Comeback”
“Ford’s Turnaround: How Mulally Saved The Company”
And, my personal favorite, “How Ford CEO Alan Mulally turned a broken company into the industry’s comeback kid."
To anyone who hadn't been paying attention, it would seem preposterous. How could Ford, name we all know, commercial we see every 10 minutes, obvious industry veteran, be anyone's idea of a "comeback kid?"
Harry Kraemer, Professor of Management & Strategy at Kellogg School of Management (Northwestern University) once perfectly described a tale we see all too often with companies – large and small – who see levels of success: “An organization achieves a comfortable lead on the competition. It's media coverage is highly favorable, and shareholders are very satisfied. Believing that everything is and will continue to be great, leaders start reading their own press clippings. Complacency sets in. In the worse cases, the company completely loses sight of its vision. The most talented people leave first. When panic sets in on how to “fix” things (slashing costs, compromising quality), brokenness soon abounds.”
This had become Ford’s reality.
In 2006, while heading into a 12.6 billion dollar loss, at risk of losing their number 2 sales spot in the US and housing a less than stellar vehicle lineup, Bill Ford made a choice. He decided Ford needed change and needed it now. He recruited Alan Mulally, who had recently been passed over for CEO of Boeing, a company who was (at the time) experiencing it's own share of disappointment. One industry veteran called the move to pass over Mulally as CEO, “the final step in downgrading Boeing’s innovative engineering culture.”
Mulally's new leadership came with big changes to Ford, starting improving from within.
One of the most significant changes Mulally introduced was “Admitting to problems that did no have immediate fixes.” Changing from a culture that saw problems as weaknesses, Mulally instilled in the idea that problems were "growth opportunities". Using a color-code system, he helped leaders assess, identify and address real problems plaguing their departments. Meeting on a weekly basis, executives would use this system for their business plan charts -- to be shared with the entire group. If developments were going well, they'd be highlighted on the charts in green, while new issues would be yellow and problems with no immediately known solution would be red. Admittedly this was hard for “the Ford people” because “they just didn’t do red.” In the initial meetings after the color-coding system was implemented, all of the charts were green. But Mulally knew better. He knew there were problems somewhere, with the company facing a $17 billion loss. Reportedly, the first admission, in red, came from Mark Fields, Mulally’s eventual successor as CEO, who was, at the time, Business Unit Chief for Ford America’s operations. Experiencing an issue in Canada, with the launch of the Ford Edge, he had to halt production. In the following weekly business plan review, he presented a launch chart with three columns in red. Fields explained that he didn't know what the issue was, but they were working on it, and Mulally began “top clap”. Next, someone else at the meeting said he had a similar issue with another product. And then, another in attendance noted a possible solution. The collaboration got the issue solved quickly and introduced a culture of collaborative teamwork, which improved the overall culture at Ford. Accountability and collaboration in leadership changed the culture at Ford, for the better.
Another innovation, from Mulally, was the concept of "One Ford." A unifying force, “One Ford” successfully reined in the company’s global operations and got them all working on the same agenda. Before Mulally, subsidiaries were semi-independent kingdoms. The “One Ford” platform conquered four main points: 1) bring all Ford employees together as a global team; 2) leverage Ford’s unique automotive knowledge and assets; 3) build cars and trucks that people wanted and valued; and 4) arrange the significant financing necessary to pay for it all.
Four years after Mulally’s arrival at Ford, they reported a $6.6 billion profit, the largest in the sector that year. Ford eventually avoided bankruptcy, and the government bailout that sent it’s competitors into the “ignominy of government ownership.”
The Ford Motor Company revamp has been rightfully named one of the greatest turnarounds in business history, bringing the company to it's most profitable since it's humble beginnings.
Take a page out of Ford's book. Now is a good time to take a look – or bring an outside contractor in to take a look – at your processes and where you stand in an ever growing market. Complacency is an enemy of progress. Now is the time to ensure you continue to grow and stay the top of your game….and profitable.
