Who knew Henry Ford was an infrastructure VAR?

IT Business, Vladville

Today’s guest blog post comes courtesy of the page 18-19 of the latest issue of the Harvard Business Review. I think it sounds eerily similar to the attitudes we’re seeing in the IT field these days and felt it was relevant enough, so here it is for your consideration. Enjoy:

History has lessons to teach about the role of denial in the decline of companies. The stubborn refusal of the U.S. automobile industry to admit changeability of consumer demand is one of the best examples.

The Model T was introduced in 1908, and over the next two decades the Ford Motor Company sold more than 15 million of these cars. But by 1927 sales had flagged so severely that Henry Ford discontinued the line in order to retool his factories for its successor, the Model A. To make the change, he shut down production for months, at a cost of close to $250 million. This chain of events was disastrous for the company, because it allowed Chrysler’s Plymouth to gain market share and permitted General Motors to seize market leadership.

Why did Henry Ford, who was such a visionary in the industry’s infancy, fail to see that the Model T was about to run its course and that a smooth transition to a new vehicle was essential? Evidence of his signature model’s declining fortunes was everywhere apparent at the time. But Ford dismissed sales figures documenting the Model T’s declining market share, because he suspected rivals of manipulating them. One of his top executives warned him of the dire situation in a detailed memorandum. Ford fired him.

Ford’s blindness resulted from a conviction that he knew what customers wanted: basic transportation. He was equally convinced that this desire would never change. His favorite slogan about the Model T- “It takes you there and it brings you back” – captured his myopic view. What Ford didn’t grasp is that every product or service has two components: the core (the product’s primary purpose) and the augmented (additional functions and features). In every industry the border between the two inevitably shifts over time. (For another take on Core and augmented products, see Theodore Levitt’s The Marketing Imagination)

In 1908 the automobile was mostly core: It got you there and back again.

By the 1920s, however, the world was changing, whereas the Model T wasn’t.

The full piece is well worth the time to read it (and the magazine’s $20 newsstand price) and is written by Richard S. Tedlow, rtedlow@hbs.edu

And yes, I read the Harvard Business Review – as should you.

6 Responses to Who knew Henry Ford was an infrastructure VAR?

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