Henry Ford’s Philosophy of Business

Henry Ford and his Model T

Henry Ford and his Model T

It’s easy to get caught up in the latest business ideas flying around, but a lot of wisdom can be found from the past. It was over 100 years ago that Henry Ford began his business, developing a philosophy that was revolutionary and is widely used today.

Just as Steven Jobs and Bill Gates were born at the perfect time to become pioneers of the computing industry, Henry Ford came into the car industry at precisely the right time.

Back when Ford began, the idea of making cars was more like making unique furniture. The cost of producing cars meant that it was a rich-man’s game, and rich people don’t want to own the same as everyone else. All of the car companies accepted that.

Ford, though, wanted to make cars accessible to the man in the street. He knew that he’d have to get prices down. He realised there would be a tipping point – when the price would get so low that there would be a huge surge in demand, which he could benefit from.

Although we now like the idea of growing business, this wasn’t necessarily always the case. His own shareholders were horrified that he planned to scale operations up – they seemed to be interesting in maintaining the business at its current scale, and didn’t want to risk what had been built up.

Ford pressed ahead. After producing several versions of Ford cars with different confirations (each given a letter, such as Model A, Model F, etc) he hit upon the idea of combining the best to produce a car that would be so good, that it would good enough for almost everyone. He called this the Universal Car, and would become the Model T.

In fact, he went further – saying that it would be the only car the Ford Motor Company would produce. The newspapers thought this was crazy, and began predicting he would be out of business in months. Ford was so true to his philosophy, though, that he even announced that people could have any color they wanted, as long as it was black.

By focusing on one product, they were able to perfect it. Once sales started coming in, he could hire more staff and factory space and make more efficient use of both. The prices continued to drop, and he eventually succeeded in what he set out to do – make a car that was so cheap, the average man in the street could afford one. It was estimated that the average worker at Ford Motor Company would only need 4 months pay to afford one.

Some of the central ideas of Fords philosophy:

  • Keep getting prices down. Don’t focus on profits, but on growing your business by offering better quality, for cheaper.
  • Get the product right before you begin manufacturing. Don’t bring out redesigns to get costs down, focus on reducing the manufacturing costs.
  • Simplify – focus on a creating a few products. Ignore the 5% that want more features.
  • Build interchangeable parts. You don’t change the filament when a bulb burns out – it’s easier just to replace the whole bulb. The same can apply to exhaust systems, gear boxes and seats.

Henry Ford’s philosophy took the ideas of mass-manufacture, and applied it to things previously thought too big. Everything expensive must be custom built, was the prevailing thought. Now, we see the ideas he introduced to build houses, ships, planes… one day even spaceships.

Scale did not seem to intimidate him. If something was to be produced in large quantity, it could benefit from his philosophy.

His ideas were so revolutionary, that the 1930s Aldus Huxley novel Brave New World envisaged a world where his ideas were applied so far that he was considered as a religious prophet, as babies rolled off production lines in factories. We may not be there yet, but many of the consumer goods we take for granted today would not be available if it were not for Ford.

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