Ford recently shifted the race for supremacy in the auto market into high gear with its announcement to expand electric car production capabilities with a one-time capital investment, its largest manufacturing investment ever.
This decision is likely driven by several factors: first, a growing push from governments to reduce emissions—like President Biden’s pledge to achieve a 50% reduction in emissions by 2030; second, a greater societal focus on the rising threat of climate change and the corresponding shift in consumer preferences and behaviors; and third, recent supply-chain disruptions from Covid-19 and the corresponding global shipping shortages that required leaders to rethink strategies and build greater flexibility. The external environment is demanding rapid transformation, and Ford has chosen to react.
Similar to what we are seeing in many other industries, external change in the auto industry is happening faster than many organizations’ ability to respond, creating a large gap between the adaptation that is needed vs. what is occurring. For example, the first Tesla was introduced over a decade ago, yet established industry players, like Ford, Toyota, and GM, are still playing catch up. In describing its $11B plan, Ford’s Executive Chairman, Bill Ford, hits on the reason for this gap: “[This requires] us to completely remake our company in many, many ways.”
As Mr. Ford alludes to, the shift to electric cars is not just about product innovation. Rather, this kind of transformation affects nearly every aspect of the business—from brand to supply chain to required workforce skills. This type of change also extends beyond the typical boundaries of the industry. There are upstream impacts, such as how higher education prepares incoming engineers to work in the auto industry. At Kotter, our study of the science of change provides an understanding of the limitations that our human biology and management systems place on our ability to cope with this scale of change. Our research also provides insights—three of which we share below—into what leaders can do to overcome these limitations and help their organizations not only adopt change, but also embrace it.
Articulate a common, collective, and compelling narrative
The challenge for leaders is to create a compelling, forward-looking narrative that resonates across the business. While those involved with Ford’s electric car division will naturally be excited and energized by these changes, others might see these innovations as a threat to their power and influence, or even their jobs. We have seen this dynamic play out in many businesses where a new product or emerging market captures the focus and investment, and the legacy business units stagnate and decline.
While not all individuals will see the change as personally beneficial, the leadership team’s narrative must be inclusive of the opportunities for the business and help employees see how they can contribute to success. In Ford’s case, this could include creating segment-defining vehicles, re-evaluating ways of operating, and/or redefining the brand to foster sustained success. The key is to ground the change in the exciting business outcomes that can come from the transformation.
Highlight what isn’t changing
In a world shaped by increasing uncertainty, adding clarity and predictability, where possible, can calm anxiety among employees. Leaders can help by clarifying what is not changing—through their words and, more importantly, through their actions.
While we are not privy to the internal deliberations at Ford, judging from its first big push in electric cars—the F-150 pickup truck and the Mustang Mach-E—the move to electric is not a move away from its most popular segments or products. Articulating how the new strategy can reinforce past successes in some areas, while making pivots in others, can help employees who worry that the change will throw out the baby with the bathwater.
Encourage mindsets and behaviors that align with the new strategy
Leaders often underestimate the shift in behaviors and mindsets that are necessary to truly maximize the benefits of a new strategy. Completely remaking the company requires not only innovation in new products, technologies and manufacturing processes, but also new ways of working and performance expectations. While a heavy focus on productivity and efficiency may have been essential in the old world, a greater emphasis on creativity and collaboration is table stakes to our new reality. An organization that focused relentlessly on cost reduction in its supply chain will need a shift in behaviors if it now prioritizes flexibility over efficiency. Identifying these shifts in expectations and intentionally focusing on the culture and behavior changes that must accompany the change in strategy is critical to success.
The automotive industry is undergoing a significant transformation with established players having to make dramatic changes to avoid becoming obsolete. So far, they have started by focusing on introducing the right technologies and products. Only time will tell if auto leaders also focus on equally important factors, such as creating an overarching narrative and a foundation of stability, while not overlooking the behaviors and mindsets that are necessary for success. Failing to focus on these important areas is like building a fast racecar with no crew—you may start the race, but you are unlikely to get far, let alone win.