Betting the Ranch on Innovation

Everybody knows that innovation is the key to continuing success in this globalized 21st century. But innovation is tough. Innovation requires change. And innovation entails risks. Sometimes, very big risks.

Today, I watched Elon Musk’s Space-X attempt to land a rocket roughly 15 stories tall on a barge in the Pacific Ocean, in heavy seas. The attempt failed. But an earlier attempt on land was successful. That Space-X will soon have the tremendous competitive advantage of reusable booster rockets becomes is becoming increasingly likely. Space-X innovated. Now, the established players – Boeing / Lockheed and the Russian space agency — can try to catch up.

The Courage to Innovate, a post from two years ago, talks about Ford’s gutsy innovation in converting its F-150 pick-up truck line to aluminum bodies. It is worth repeating, now that the success of Ford’s innovation has been demonstrated. Now, the rest of the automotive industry can try to catch up.


The Courage to Innovate – From 16 January 2014


Judgment and Courage


This blog often discusses innovation as a route to thriving in perpetuity in today’s globalized manufacturing economy. Innovative products, innovative production and business processes, as well as innovative business models all count. But innovating is often expensive and risky. The perceived opportunity — opportunity to gain or opportunity to avoid loss — must substantially outweigh the anticipated costs and the very real risk of failure. Taking innovation to market requires judgment. Moreover, taking innovation to market requires courage.


The Ford F-150 Truck


Ford F-150 TruckThis week (13 January 2014), Ford Motor Company unveiled the 2015 models in Ford’s F-150 light truck line. The new models offer a list of innovative features, most prominently the extensive use aluminum in place of steel in the truck’s body. This change in materials results in trucks that are about 700 pounds (about 15%) lighter than corresponding 2014 models.


The significantly lighter weight offers advantages from several points of view:


>> Fuel consumption is expected to improve to about 30 miles per gallon, from the 23 miles per gallon the fuel – thriftiest 2014 F-150 model offers. Critically, the 2014 models position Ford to comply with — or exceed — the government’s C.A.F.E. fuel economy requirements as they roll out over the years from now to 2025.


>> With the lighter weight body, an F-150 fitted with an equivalent power train, should significantly outperform older models in acceleration, carrying capacity and almost everything else light truck drivers care about. 700 pounds is a lot of weight to not carry around every place the truck goes, through its entire service life.


>> The lighter weight allows design engineers to make more weight reductions in the future. Less weight means less stress on the suspension, the drive train, shock absorbers, tires (and on and on), so lighter components may prove to be practical.


Ford and the F-150 series


As impressive as all of this is, it is prudent to consider what is at stake for Ford. The F-150 series isn’t some isolated product or minor product line. The F-150 series has been America’s best selling truck line for 37 consecutive years, and America’s bestselling vehicle (cars or trucks) for 32 consecutive years. The F-150 series accounts for over a third of Ford’s North American revenues and, due to high per vehicle margins, and disproportionate share of the profits. One doesn’t cook a golden goose like the F-150 series.


Further, manufacturing a primarily aluminum vehicle is substantially different from manufacturing a steel vehicle. Metal cutting and forming equipment need be changed out. Joining aluminum parts requires much different methods, tools and so on. Employees must be retrained. Maintenance procedures need be revised. New supplier logistics need be arranged. And on and on. Manufacturing people know how long the list of changes must be. Two manufacturing plants are involved, sharing a 750,000 vehicle per year production schedule.


Clearly, the production change-over must be seamless — the new models have to roll out right on schedule. And the new trucks have to be flawless, because the entire automotive world will be watching — especially GM, Chrysler and Toyota, all of whom would love to take market share from the F-150 series.


F-150 or F-15?


Then there is market acceptance. The F-150 buyer community has been remarkably faithful for decades. If the buyer community likes the new truck, they will likely remain faithful. If they don’t like it, the goose is cooked. The major worry is whether or not the new F-150 will be perceived as Built Ford Tough. Beer cans are made of aluminum. But so are F-15 fighter jets. Technically, the right grades of aluminum are quite tough enough, as has been proven in many demanding applications. The question isn’t technology — its perception.


Betting the Ranch on a Green Product


Compliance with the government’s C.A.F.E. fuel economy standards require major changes to American cars and trucks. The new F-150 series is a really major initiative on Ford’s part. Success will reconfirm Ford’s leadership in the light truck segment. The aluminum – based design and manufacturing technology will be ported to Ford’s other car and truck lines. Buyers will enjoy better products that consume considerably less fuel.


2014 AEO ER Fig 12The reduction in fuel consumption will result in lower environmental emissions. It will also help balance America’s petroleum consumption with petroleum production. As the chart labeled “Figure 12” indicates, America imported 60% of the petroleum it consumed in 2005. By 2012, the gap reduced to 40%, with further reduction to about 20% expected within this decade. This improvement is due to increased crude oil production (primarily from “fracking”), to already improving vehicle fuel consumption efficiency, and to redirection of many non-vehicle uses of petroleum to natural gas (residential heating, for example).


Bill Ford, Ford’s Executive Chairman and Henry Ford’s great-grandson, is a confirmed Greenie. The environmental emissions reductions that the new F-150 series pioneers are, in my opinion, are a big part of Bill’s endorsement of all of this.


Alan Mulally is Ford’s CEO. He has led a remarkable turn-around since coming to Ford from Boeing in 2006. As an aeronautical engineer, he knows a lot about aluminum in critical applications. And he understands from the importance of executing this product change-over with a precision rivaling that of Tesla and Elon Musk.


Why lead the industry in the change to aluminum? Why not wait and let somebody else dare the “slings and arrows of outrageous fortune”? Because leaders lead. That’s what they do, and that’s what they are.


Chuck - Red RocksThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about prospering in the globalized 21st century … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.