Innovation Management at Ford Motors Thesis

Excerpt from Thesis :

Additionally, aside financial resources, they also used their assets. The most relevant example in this sense is the selling of part of its interests in Mazda. It as such transformed its assets into liquidities -- the 20% shares in Mazda were converted into $540 million (Murphy) -- that better allowed them to pursue their innovation objectives.

The matter of technological innovation is not only a core focus of Ford's, but of all players within the American automobile industry. The reasons for the rivalry in terms of R&D are numerous, the most outstanding however being constituted by the desire to attract and satisfy as many customers as possible, managing as such to increase organizational revenues. "R&D efforts in the U.S. Auto industry are channeled into a variety of processes such as stamping, casting, machining, and assembling. Within the time-frame of our investigation, R&D efforts had to embrace sudden changes in taste toward small, fuel-efficient cars due to the OPEC crises and other concerns. […] Ford […] invested more in production technologies that made greater use of robotics. They developed product lines that competed directly with foreign makes and models. They have increased product performance and new design in all regional markets. They also have changed their industrial relation practice, making layoffs a function of declining sales rather than technological changes, outsourcing, productivity, and reorganizations" (Ramrattan, 1998).

The players in the American automobile industry consider sales as the main force of rivalry, but technological innovation and innovation management come to a close second position. Ford is striving to achieve innovation in terms of new product, new product features, as well as new processes. Otherwise put, they are determined to achieving "product innovation via new processes" (Ramrattan). Rivalry between Ford and other automobile manufacturers escalades in terms of being the first to get the patent for a new technological advancement or being the first to sell the product to an awaiting customer base. To this day, there are four top automobile manufacturers in the United States striving for the first technological patents (Slide 4). In overcoming the competition in the field of technological innovations, the Ford executives readjusted the budgets in the meaning of increasing them. Also, they hired more professionals that would work harder and compact the time spent on research. All these ensured that the company would be the first, or at least among the first, to launch a car incorporating the latest technological developments. Their reputation within the industry as such increased, their role in technological innovations increased as so did their profits.

Another means of using resources and assets to consolidate a strong competitive position in the field of technological innovation has been that of closely following the actions of the main rivals, namely General Motors and Daimler-Chrysler. "General Motors and Ford corporations react to changes in each other R&D expenditures at a level of 0.96, and 0.23, respectively" (Ramrattan). The innovation trends between these tree large players are close as all of them looked at the technological strategies developed and implemented by the rivals and adapted them to meet their own needs.

5. Processes in Seizing Technological Innovation Opportunities

Historically, the Ford Motors Company has been favored in the competition for best technological innovations by its settlement in Michigan, the heart of the American automobile industry. This setting allowed it to maintain constant and fruitful communications with major players in both IT as well as automobile industry. It was as such able to rapidly integrate the advancements made into its products and improve its technological processes. Another means of scanning the industry for innovation was, as previously mentioned, the benchmarking against its primary competitors -- General Motors and Daimler-Chrysler. More recently, Ford also benchmarks its technological innovations and scans for new opportunities by looking at the strategic innovations adopted by Japanese manufacturers such as Toyota or Mitsubishi.

Then, in terms of selecting the actual innovations that would succeed, Ford strived to align what the IT industry had to offer with what the customers needed. Except for the recent mistakes in not developing environment friendly cars sooner (and the consequent loss of its position to Japanese manufacturer Toyota), Ford has generally been able to maintain close communications with its customers and identify and incorporate the technologies they desired. This in turn materialized in the adequate selection of the most desirable technologies that improved not only product features, but also customer utility and subsequently, organizational revenues.

Relative to the resources used in the process of technological innovation, as it has been previously mentioned, Ford uses its own assets and financial resources. In the context of the contemporaneous financial crisis, the automobile maker transformed part of its interests in Mazda into liquidities and as such increased its resource availability. Generally, the investment resources come from redistributed profits or from bank loans. Again, given the recent economic challenges within the U.S. And its automobile sector, Ford was forced to borrow money from the U.S. authorities less than two years ago. Yet, unlike GM and Chrysler, it declared that it does not desire to receive money under TARP (Troubled Assets Relief Program); they will however continue to accumulate debt from credits. "Though Ford will not take TARP funds, it is increasing its reliance on debt, having planned to draw $10.1 billion more on credit in the first quarter of 2009. The company claims it has 'sufficient liquidity to fund its business plan and product investments'" (Directorship, 2009).

The process of strategy implementation at Ford is generally a complex one as the company strives to maintain unity across its 90 worldwide agencies. Ensuring this unity nonetheless translates into difficult, and, at times, even tedious, implementation processes. The team of skilled and specialized managers makes intense efforts to transform an idea into a real life process and have so far succeeded in their endeavors. Also, since Ford is such a large company, they are less adaptable and major changes imply significant efforts. In implementing technological innovation however, the executives at the automobile manufacturing organization strive to reduce uncertainty, reduce risks, link the innovation to market needs and allocate sufficient resources (including capital, time, labor force and technologies). Once the idea is translated into a strategic approach, they test its validity, introduce it into product manufacturing and continually strive to improve it (Slide 5).

Learning from the previous successes and failures plays a pivotal part in the technological process at Ford and the company officials strive to continually improve their processes through training programs and through constant research of market and industry (customers and competitors) trends and needs.

6. Conclusions

The contemporaneous business community is characterized by numerous changes, the most prominent challenges coming from the treatment of employees, the satisfaction of customers and the integration of the latest technological development. These modifications generate an impending need to more efficiently address the matter of innovation management. Ford Motors Company is an undisputed international leader in terms of both sales and revenues, as well as technological efforts. The Dearborn-based organization has the largest R&D budget in the automobile industry and the second largest budget in all industries. Just like with any other organization, their efforts in implementing technological innovations are channeled onto three simultaneous channels -- path, position and process. The path section refers to the technological trajectory followed by Ford and this is, without any doubt, an ascendant one, increasing in focus and resources spent every year. Then, in terms of position, this refers to the usage of resources in consolidating the competitive position within the market and the industry. Despite its recent financial challenges, Ford Motors remains highly capable of financing its operations and investments through in-house funding; additional sources are attracted through bank loans and the company did not desire to be a recipient of the TARP funds as they already possess sufficient liquidities from the loan contracted two years ago. Finally, relative to the position, Ford is highly able to identify, seize and implement any opportunities for technological innovation. The Ford Motors executives scanned for opportunities for innovation management within the industry (the competitors) and maintained close communications with the IT specialists. They selected the most viable opportunities by linking the potential offer to the demand from customers. Then, they allocated sufficient resources, including all budgets, people and technologies, to implementing and improving the novel technology. All the efforts made across its existence of more than one century have materialized in a strong competitive position in both national and international market, major financial performances and millions of customers across the globe.

In terms of its future, this is yet uncertain and depends highly on the path followed by the contemporaneous economic crisis. As a recommendation for future triumphs however, Ford should remain focused on developing and integrating fuel-efficient engines. Actual statistics and estimated about the number of electric cars or hybrid cars are scare and often unreliable. Despite this however, the trend in industry endeavors and customer demands has already been set and…

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