Ford CEO needs to be clear about strategy
Can Jim Hackett walk through the Valley of Death?
I was stunned Ford fired Mark Fields and replaced him with Jim Hackett. First, Fields actually delivered good numbers. Second, Hackett is not a car guy. Nevertheless, Bill Ford, Chairman and heir in chief at Ford replaced Fields with Hackett. Why?
He must have read “Only the Paranoid Survive” by Andy Grove. The former Intel CEO describes what it feels like when your business is hit by a 10X factor. What he means by that is a new technology and/or product which is so much better and cheaper than yours that you have no chance to compete. All your incumbent strengths are useless, in fact, typically they’re even detrimental. You are finished. Grove calls this an inflection point and goes on in the book describing how to deal with it.
Ford is exactly at such an inflection point. In short, Tesla is planning to produce electric Trucks and compact SUVs. Both segments are where Ford earns all its money. If Tesla replicates the success with Model S and Model X in the Truck and compact SUV market Ford will have a problem. This is why the shares of Ford are down even though Mark Fields has delivered a good set of results.
Just look at the chart. Tesla announced the plan to produce trucks and compact SUVS in the summer of 2016. Since then Ford shares have underperformed GM and Toyota. Why? Because Fields relied solely on the earnings of F-150 Trucks and compact SUVs. He tried to do other things, invested a lot in electric, autonomous and mobility, but nothing tangible is coming out of that. That’s why he had to go.
Now, this part of the story makes sense. But why Hackett? And is he going to do the right thing?
Hackett is a former football player at U Michigan and former CEO of Steelcase. At Steelcase he did well reorganizing the company to deal with low price competition and secular changes in the market place. He also served as interims sports director at U Michigan where he was instrumental in bringing ex 49ers coach Jim Harbaugh as head coach of the U Michigan football team. He knows transformation and he knows repositioning as well as hiring the right people.
But my first impression from the presentation he gave together with Bill Ford at the announcement of the new CEO job is that Hackett is not aggressive enough. Let’s look at what Andy Grove has to say about managing inflection points and how Hackett is doing against those targets.
- Be clear in where you going and what you are not going to focus on
- Your agenda is your best strategic weapon when dealing with inflection points. Spend time with what you care about and don’t waste time with legacy stuff just because your predecessor has done so.
On both fronts Hackett wasn’t clear at all. For example, will Ford commit to produce autonomous cars? Will they commit to electric cars? Will they still commit to conventional cars? If so, why? What is Ford going to give up in order to compete with the 10X force coming at them.
Hackett didn’t give clear answers to those questions. The formulation of strategy by Hackett and Bill Ford is very confusing. For example, they talk about the need for change but at the same time say they are focused on the core business. So what are you? Changing or status quo?
Humans don’t like change. They tend to stick with the old and simultaneously try to pivot to the new. Usually the marketplace doesn’t allow for that kind of luxury. You have to be more radical.
Grove describes how Intel was attacked by 10X forces from Japan when the Japanese just crazily invested in memory capacity and drove down the cost. Intel got out of memory and focused on microprocessors, which today is the core of the 60 Billion in sales Intel is making.
What is Ford going to give up? What are they going to look like 10 years from now? This is not clear and Hackett better formulate something soon.
I also expect Hackett to be more discriminating with his agenda. Satya Nadella, CEO at Microsoft is a great example. He said when he took the job that he is will spend time learning online about things like AI, computer vision and other emerging topics. This is a senior manager at a computer company talking about going back to school.
Is Hackett going to learn about battery cells, autonomous driving or computer chips necessary for vision and other AI functions? What is Hackett going to spend his time on? Is he going to have meetings analogous to his predecessor or is he radically going to change his agenda. I would like to hear more about his in the near future.