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Ford CEO Hackett: Digital transformation means making the business fit first

Ford CEO Jim Hackett outlined a broad plan to bet on mobility, connectivity and retooling manufacturing with a bevy of new technologies. But first the company needs more financial fitness to fund the future.

How big data powers digital transformation

Ford outlined its digital transformation plan, which revolves around smart connected vehicles, speeding up its product development and becoming more fit as a company on costs.

The interplay between Ford's quest for fitness and digital transformation is a notable one. CEO Jim Hackett, on the job at Ford for 100 days, is betting on a strategy where it can use efficiency and cost savings to fund the future.

As noted previously, there will be more trade-offs for multiple companies as future bets compete with delivering returns today. Nike, Taser, Campbells Soup, QVC and others are also making pivots to be more digital.

Hackett said Ford will embrace multiple technologies and focus on "integrating hardware and software in complex devices." Ford's pitch almost sounded a bit Apple-ish.

The catch is that Ford must stick to a long-term goal of 8 percent operating margins on its vehicles. That margin is very un-Apple-like.

Hackett on a conference call outlined Ford's vision:

Ford will prepare for disruption by becoming fit. There's no doubt that we've entered this period of disruption, you all know that. But we have to design the business to be more fit because it's going to give us time, resources and flexibility to evolve to where we know we have to be. We're going to be the vehicle business moving both people and goods. Some myth about not being in the car business is gone. In the future, people around the globe will still want and need our cars, trucks and SUVs and commercial vehicles. And I'm answering that question of whether Mobility would chip away at that cookie in any kind of way that would make us retreat. Not at all. Those vehicles though will be smart and connected. The reason, there's a wider berth now between dumb and smart products as we learn about robotics and their role in our vehicles. This will influence customer expectations of what they want in their vehicles in the future. Smart vehicles will be a given at Ford Motor Company. These smart vehicles will pair or thrive with a new transportation operating system. The history of transportation systems requires that pairing between whatever asset it was that moved people or goods in the environment that it was in, that could have been trails for horses, roads and stoplights for the cars as we knew them growing up, or GPS for satellites. Consequently, we see a dawning of a new transportation operating system for cities that's dealing with the fact that they're becoming more congested as more people move to cities and yet, they need more capacity.

In broad strokes, Ford said it is targeting the following:

All new vehicles in the U.S. will have built in connectivity by 2019. Ninety percent of Ford's new global vehicles will have connectivity by 2020.

Cut automotive cost growth by 50 percent through 2022 with common parts, fewer prototypes and cuts in order complexity. Ford expects $4 billion saved in incremental efficiencies over 5 years and $10 billion in materials.


Pare down customization. The current model of the Focus has 360 orderable combinations and Ford wants to get the to 26. The Escape has 2,302 combinations and Ford plans on 228.

Focus on electrification beyond the $4.5 billion investment already planned. Ford will also move manufacturing of its next-gen Focus to China. "Why didn't we move more quickly in the battery electric vehicles? Simply, it's uneconomic, and we were too much focused on the now. We believe that it was an all or nothing question. And now we know that there's a future around propulsion that we have to pay attention to. Propulsion is a selection then by customers based on their use case and there's going to be a variety of choices that they want to have," said Hackett.

Double down on partnerships with Lyft and Domino's Pizza for autonomous vehicles.

Technologies such as 3D printing, robotics, big data and virtual reality will be deployed in Ford's "factories of the future." The goal: Cut new vehicle development time 20 percent and product changeover time by 25 percent.

These factories will move from lean manufacturing approaches to processors powered by machine learning, artificial intelligence, 3D printing, virtual factories and "manufacturing 4.0." The cost savings will be derived from a smaller manufacturing footprint.

Previously:

Concepts in this article include:

CXO budget priorities for 2018:

Big data:

Digital transformation:

IoT:

AI:

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