In this article, we 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 in the technology field for much longer, which means that some forgotten lessons in company history are worth revisiting.
In this article, we discuss examples of the innovative practices of the Ford Motor Company, founded in 1903 by Henry Ford, that helped revolutionize the automotive industry.
1. Standardization
Ford Motor Company was also a pioneer in the standardization of auto parts. By making standardized parts that could be used in multiple models, Ford was able to reduce costs and increase production efficiency.
First, when the parts are standardized, the demand for them is higher, making them cheaper to produce due to economies of scale.
Second, it also made it easier for customers to repair and maintain their cars, further increasing the demand for standardized parts.
In general, it’s good practice to treat your systems, code, designs, and other components as Lego blocks that you can standardize and reuse. Access to these blocks makes it much cheaper to innovate and scale production. This is crucial for startups because it helps you go from the idea phase to the growth phase 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 extracting the raw materials to manufacturing their standardized parts and assembling the final product.
This has allowed Ford to reduce costs and exert greater control over the manufacturing process, further driving innovation.
This is not a forgotten strategy – Apple is a modern example of a company that is good at vertical integration.
That said, vertical integration is very labor intensive and should only be attempted by startups after they have an established market and access to abundant capital.
Trying to scale up prematurely is generally a big mistake.
3. Continuous improvement
Ford Motor Company is committed to continuous improvement of its manufacturing process. The company regularly analyzed its production methods and made changes to increase efficiency and reduce waste. This helped the company stay ahead of its competitors and maintain its position as a leader in the automotive industry.
It’s worth remembering that Ford’s success comes down to being able to sell cars for much cheaper than anyone else.
This is a crucial mindset for startups, especially in the efficiency phase. After all, after you’ve found out there’s a market for the product or service you’re offering, your next job is to make sure you can provide that value and grow sustainably. To do this, you must continuously optimize your processes and improve your cost structure.
4. Employee Benefits
Ford Motor Company was also one of the first companies to offer benefits to its employees, such as health care, pensions and profit sharing. This ensured a loyal and motivated workforce and helped to reduce turnover and absenteeism.
This is crucial for tech startups, in which you have to attract the top talent in your industry without being able to pay them top salaries directly. Employee stock options or other forms of compensation related to company performance are some of the best tools you can use to attract, motivate and retain the people who would make your company successful.
