In this article, we’ll discuss examples of the innovative practices of the Ford Motor Company, … [+]
Tech startup founders usually draw their lessons from the history of the information technology industry. However, companies have been innovating technologically for much longer, meaning there might be some forgotten lessons in business history worth revisiting.
In this article, we’ll discuss examples of the innovative practices of the Ford Motor Company, founded in 1903 by Henry Ford, that helped it revolutionize the automobile industry.
1. Standardization
Ford Motor Company was also a pioneer in the standardization of automobile parts. By creating standardized parts that could be used in multiple models, Ford was able to reduce costs and increase efficiency in its production process.
First, when the parts are standardized the demand for them is higher, which makes their manufacturing cheaper due to economies of scale.
Second, this also made it easier for customers to repair and maintain their cars, which increases the demand for standardized parts further.
In general, it’s a great practice to treat your systems, code, designs, and any other parts as lego blocks that you can standardize and repurpose. Access to these blocks makes it much cheaper to innovate and scale up production. This is crucial for startups because it helps you go from the idea stage to the growth stage as quickly as possible.
2. Vertical Integration
Ford Motor Company was one of the first companies to vertically integrate its production process. This meant that the company controlled the entire process of producing cars – from mining the raw materials to manufacturing their standardized parts and assembling the finished product.
By doing so, Ford was able to reduce costs and exercise greater control in its production process, which further helps innovation.
This is not a forgotten strategy – Apple is a modern example of a company great at vertical integration.
That said, vertical integration is very resource intensive and should be attempted by startups only after they have an established market and access to abundant capital.
Trying to scale prematurely is, in general, a big mistake.
3. Continuous Improvement
Ford Motor Company was committed to continuous improvement in its production process. The company regularly analyzed its production methods and made changes to increase efficiency and reduce waste. This helped to keep the company ahead of its competitors and maintain its position as a leader in the automobile industry.
It’s worth remembering that Ford’s success could be boiled down to them being able to sell cars much cheaper than anybody else.
This is a crucial mindset for startups, especially in the efficiency phase. After all, after finding out that there is a market for the product or service you are offering, your next order of business is to make sure you can provide this value and grow sustainably. To do this, you need to constantly optimize your processes and make improvements to your cost structure.
4. Employee Benefits
Ford Motor Company was also one of the first companies to offer its employees benefits such as health care, pensions, and profit-sharing. This helped to create a loyal and motivated workforce and helped to reduce turnover and absenteeism.
This is crucial for tech startups, in which you need to attract the top talent in your industry without being able to pay them top salaries directly. Employee stock options or other forms of pay correlated with the performance of the company are some of the best tools you can use to attract, motivate, and retain the people that would make your company successful.