Ford's "Way Forward" in Brazil

Yesterday's Wall Street Journal featured an article about Ford's "Way Forward" program successes in Brazil.

I have to say, I was unimpressed with what it portends for the giant auto maker.

To distill the well-written article to its essence, the Brazilian unit of Ford has scored major gains with a new SUV model by doing two things: sensibly restructuring the physical manner in which they produce the car, and doing intensive consumer market research to design a car which the relevant market segment will buy, at a profitable (to Ford) price.

The good news, of course, is that some people at Ford down in Brazil, led by one Luc de Ferran, pulled this off. It's inspirational, and certainly better, as the saying goes, "than a sharp stick in the eye."

However, the bad news is that this "turnaround" at Ford Brazil is nothing fancy. Basically, the unit had fallen on extremely bad times, and simply rediscovered what, I believe, intelligent business people everywhere would acknowledge are obvious maxims.

They redesigned manufacturing to adapt to current realities, thus cutting wasted time and expense. They returned to classic marketing in the design of a new vehicle, using consumer research to uncover wants and needs, the incorporation of which, in the new Ecosport SUV, caused the car to gain an 80% market share.

This anecdote brings me to recall some of my prior posts regarding mediocrity and ineptitude in the general business environment. Specifically, this post about UAL, this one about Starbucks, and this one about Intel v. AMD.

Why is that Ford's Brazilian unit, or, for that matter, Ford itself, globally, must have its back to the wall in order to rediscover basic business sensibilities?

I suspect that the reason boils down to one word- discipline.

In a process which parallels Aristotle's thoughts on the decline of governmental systems from the pinnacle, the 'philosopher-kin' phase, I think corporate leadership/management undergoes something very similar.

When a company is "on top," competitively and in terms of consistently delivering superior total returns for shareholders, a sense of complacency begins to set in. The questioning, innovative behaviors which probably drove the company's success, begin to be institutionalized by a second tier of acolytes as 'revered processes.' The originators of the initial success move on- retirement of the lauded CEO, perhaps a few SVPs move to head other companies. Too, some of the wizards of the successful change are promoted, focus upward, and leave the nuts and bolts continuation of the success to less-capable subordinates. The new generation of leaders begin to do two things: view the changes wrought by the earlier successful managers as 'codes to live by,' missing the fundamental value of the changes having led to success, not the particular endpoint of the organizational, product, etc, changes, and; beginning to introduce some of their own changes.

Truth be told, management teams that drive companies to truly excellent, consistently superior performances, are pretty rare. Whomever comes after them, like Paul Otellini at Intel, faces are daunting, and, essentially, more difficult task.

In time, the company begins to fill with lesser-talented management, its performance coasting to 'good,' from 'consistently superior.' The focus on prior methods and successes makes it hard for a less-talented group to recapture the successes of an early management generation.

If the company is lucky, another group will rise and repeat the earlier fundamental business practices that, once again, restore manufacturing, production, and/or service delivery to more productive levels, while introducing more relevant new products and services.

In short, it seems that, in large companies, there is simply a lack of discipline, over time, of management to value and retain a focus on 'purposeful change' of the company and its practices. It's as if nobody watches the measurements of performance which might signal that it's time for the company to innovate and change once again.

So, in a sense, Ford is no different, I suppose, than the average US company. And that's both a pity, and, I think, my point. The WSJ piece merely confirms that Ford is a normal US large-cap manufacturer that loses its way more often than it finds it.

Trouble is, today, it may have much less time and financial leeway to recover one more time.