What Associations Can Learn from Alfred Sloan, Not Henry Ford

What Associations Can Learn from Alfred Sloan, Not Henry Ford:
A guest post by Rachna Choudhry.

There’s an old saying that I often hear repeated when people are talking about disruptive change: “If Henry Ford had asked people what they wanted, they would have said ‘faster horses’.” I had discussed the quote at an Association Chat panel about getting feedback from your association’s members—suggesting that we shouldn’t be seeking advice from Ford—and the audience’s enthusiastic response led me to write this article.

While there isn’t any evidence that Ford actually said those words, he did run his company with the attitude that he knew best. Ford’s contribution wasn’t that he bred faster horses, nor did he invent the automobile. His innovation was simply applying the principles of assembly line production to auto manufacturing.

The “faster horses” quote began spreading within the technology community in the early 2000s, when Ford’s great-grandson used the quote and attributed it to Henry Ford—and it stuck. In a 2005 Ford Motor Company earnings conference call, William Clay ‘Bill’ Ford Jr., explained: “My great-grandfather once said of the first car he ever built, “If I had asked my customers what they wanted, they would have said a faster horse.” At Ford, we’re going to figure out what people want before they even know it and then we are going to give it to them.”

However, if we’re looking to inspire change or even just “rev things up” in our organizations, we should really be quoting Alfred Sloan, not Henry Ford.

Alfred Sloan became CEO of General Motors (GM) when Ford Motor Company dominated the industry. Ford produced more than two million Model Ts in 1923, up from 10,000 in 1908. Ford was such a popular brand—with more than 50 percent of the market—that the company didn’t even need to advertise. They believed they had the right design for the Model T, and Ford’s approach was to keep things the same and focus on refining production to cut costs and lower prices.

1915 Ford Model T ($440; or $10,400 today’s dollar) Petersen Automotive Museum

Then on May 26, 1927—less than five years later—the Ford Motor Company stopped production of the Model T. What happened to cause such a change in the Model T’s fortunes?

In 1923, when Sloan became CEO, General Motors had 12 percent of the car market. The following year, Sloan announced a plan for a “car for every purse and purpose.” The goal was to create an agile company that could respond to varied consumer tastes and price-points. Sloan understood that a car was more than just transportation. It was a “statement and reflection of their own status and aspirations.”

Sloan’s strategy worked. By 1927, General Motors sold twice as many cars as Ford. And by the late 1920s, Chevrolet sold more than 1 million vehicles and became the number one brand in the United States. Meanwhile, Ford’s production was so streamlined and tailored to one product—with most production occurring in the highly integrated Rouge complex—that the company had to literally shut down all operations to launch it’s next car model, the Model A. Ford couldn’t react to rapidly changing customer needs, and the company suffered a loss in market share because of this fact.

Associations don’t sell cars, but they do compete for “customers” just like Ford and GM did. And like automobile manufacturers, organizations must be responsive and tailor their products to fit the various needs of their members, or they run the risk of losing these members’ full engagement in the future.

Here’s what organizations of all kinds can learn from Alfred Sloan:

— Talk to your customers. For associations, “customers” may be the members you need to engage. Sloan and the leadership at General Motors were “relentless about getting out of the building” and talking to not only their customers, but everyone else involved in their ecosystem. GM had an entire department that studied consumers, dealers, suppliers. And perhaps more importantly, Sloan led by example, visiting dealers and suppliers, and talking with customers directly. Getting feedback from “customers” helps organizations design programs that are effective and meet their needs.

— Understand your customer’s desires. Sloan knew that by the 1920’s, most people who were in the market to buy a car had already owned one. The problem he needed to solve was this: “how do you get consumers with functioning cars to go out and buy a new one”? Sloan understood his customers’ desires. They wanted to get more than just transportation out of owning their car. They also wanted a custom look, more comfort and a status symbol with sex appeal. With new models coming out every year in all five brands, General Motors appealed to their desires. (Similarly, we see this trend with iPhones today, when we turn in perfectly functioning phones for the latest and greatest models.)

Sloan also looked to Southern California’s custom auto body shops, which were creating bespoke auto bodies for clients. At the time, even the simplest of customization—body color—was a tall order for mass-produced vehicles. Painting a car required multiple layers of varnish with days of drying time. Black enamel paint, on the other hand, took only a few days to dry, so most cars were painted black. (Think of the Model T.) So Sloan innovated and General Motors began using a new paint by du Pont, called Duco, which yielded bright colors and could be applied with a spray gun rather than a brush. Best of all, Duco only required a few hours of drying time. By 1926, Chevrolet was using this new technique on all of its cars, leading to a huge competitive advantage over the dull, monochromatic Model T.

1922 Chevrolet Series 490 Coupe ($850; $12,200 today’s dollars) Peterson Automotive Museum

General Motors clearly benefitted by harnessing their customers’ desires, and it’s equally critical for organizations and associations to understand the goals of your members or activists. Organizations should constantly be asking themselves, “What are our members trying to accomplish by participating in your programs?” For example, as organizations plan for “fly-in” advocacy trips to Washington, DC, it’s important to assess why people are taking time out of their lives to participate. It’s likely that their goals are more than just about being a good member of the organization. Rather, they may be looking to share their voice, represent their community or gain insight into policymaking. By understanding their goals, organizations can develop better and more relevant programs that keep them coming back and engaging others.

— Meet your customers where they are, and then offer them options. Each of GM’s distinct vehicle brands appealed to a distinct buyer. The entry point was the Chevrolet brand, and it was positioned at the low-end of the market. More affluent buyers could choose a Pontiac, Oldsmobile or Buick because these were priced in the middle of the market. When buyer’s aspirations peaked—and their pocketbooks swelled—they could finally move up to GM’s pinnacle brand, the “Cadillac of automobiles”.

Organizations no longer have the luxury of creating a one-size-fits-all program to engage members, like Ford did with the Model T. It may be that some members can physically come out to Washington, DC to participate in advocacy activities, or attend the annual conference—but others may not be able to make the trip. These members still need to be engaged, and can benefit from various options, whether online, via phone or in their own communities. With a full state of entry points for engagement, organizations can connect with more of their members, and eventually move them along to more involved, time- or resource-intense opportunities in the future.

— Understand your customer’s pocketbook. With General Motors’s five brands unveiling new models every year, customers had a plethora of options if they wanted to upgrade their vehicles. And GM made it easy to do this with trade-in and financing options. As a result, Sloan essentially created the second-hand car market. While the Model-T may have cost less—around $290 in the mid-1920’s—Ford buyers either had to pay cash up front, or secure a bank loan. And by 1926, three out of four cars were purchased using financing.

Whether you’re building a smartphone app or planning a conference, it’s important to understand your “customers”’ financial situation. Many organizations offer pricing for events on a sliding scale, while others enable people to donate time in lieu of membership fees. Some organizations offer discounts for new members or students. The goal is to broaden your base, and then work to retain members and find ways to engage them.

— Be agile! Sloan structured General Motors with the expectation that consumer tastes are constantly evolving, and wanted to ensure that the company was able to quickly respond to meet their changing desires. To decrease the time to market for their automobiles, GM divisions to start using common parts—and Sloan established a general technical committee of engineers from the various divisions to discuss problems of common interest. When GM noticed a gap in the market between the entry-level division, Chevrolet, and Oldsmobile, they created Pontiac with “little or no need for new tools, jigs and fixtures.”

Conversely, Ford built the massive Rouge facility, the largest vertically-integrated production plant in the world. “Coal and iron ore entered from ships on one end of the plant and left as automobiles at the other,” Henry Ford boasted. However, the plant didn’t offer the flexibility to change that Ford needed to compete with an agile General Motors.

Change is hard for all organizations, and maintaining flexibility can feel chaotic or uncomfortable in a rapidly shifting landscape! But much like GM learned in its battle with Ford, strategies that incorporate agility and flexibility are worth it because they can lead to unique opportunities.

Sometimes, trying a new tactic (like using Snapchat for a campaign, or entering into an unconventional partnership), may need sign off from a lot of different people in the organization, wa potentially time consuming undertaking. Granting staff the authority to implement new strategies or employ new technologies quickly—assuming they’ve done the customer research, of course—can help organizations capitalize on opportunities as they arise

Especially with social media, opportunities can be fleeting. Agile organizations have plans in place to take advantage of such opportunities, rather than having to wait to set up a series of meetings or conference calls to make a decision.

Liked what you read? Here’s how you can connect with Rachna:

Rachna Choudhry, Co-founder, POPVOX.com
On Twitter: @rachnacDC

Sources:

  • Billy, Alfred, and General Motors: The Story of Two Unique Men, a Legendary Company, and a Remarkable Time in American History, by William Pelfre
  • Chrysler, Ford, Durant and Sloan: Founding Giants of the American Automotive Industry, by H. Eugene Weiss
  • Henry Ford, Innovation, and That “Faster Horse” Quote, by Patrick Vlaskovits in Harvard Business Review, August 29, 2011