Disruptive innovation by Henry Ford

Henry Ford noticed a problem. Middle class America in which he was apart of wanted a family car. However, cars were too expensive to produce which made them expensive to purchase.

Cars represented more than just a status symbol. Cars represented opportunity. Ford took notice of this market which was ready to emerge from the middle class. He just needed to build a product that would fit this market.

Henry Ford reduced the amount of time it took to build one car from over 12 hours to under 30 minutes. He did it while creating jobs for people. He also did it without the help of a tech startup’s productivity software.

Cars were only built one, two, or a few at time. You’d also have to travel to find the right parts from a variety of different sources. Both of these problems contributed to the high price and the length of production time. How was he going to figure out how to get the cost of production low enough so all Americans could afford to buy a car?

Disruptive Innovation

Ford unpacked the old business model. He looked at the end product and worked backwards. He broke down all the steps and looked at all the pieces of the process separately.

Integrated Assembly Line 1913

He mapped out each step of the build process. This allowed him to figure out which parts connected with each other at which time and what he would need to build in order to streamline the process. Then, he picked up the important pieces and built a new business model.

Henry Ford’s model consisted of 84 distinct steps. Each step had a dedicated worker who specialized in one of the 84 steps. This idea of “specialization” in the workforce became an influence in how the education system prepared students for the economy. At this time in history, the industrial specialization was exactly what the economy needed. Today, however, the economy may require different education.

It was because of Henry Ford’s innovative mass production via automated assembly line were a majority of Americans able to afford a car for the first time in history.

Henry Ford became one of the most rich and famous people in the world, but it wasn’t because he focused on generating profits. Among Ford’s monumental contributions to society, there is one that seems to have been forgotten.

Ford continued to streamline the production process which lowered the cost of a car, but he didn’t do this to generate more money to stick in his pocket. He did it so more Americans could afford to have a car. He always made a point to pay his workers high wages, no matter how inexpensive the cost of production was. This concept became known as “Fordism“. If you haven’t heard of Fordism it’s because when the company you work for streamlines a process to increase profits they do it so they can fire you.

For Henry Ford, his driving force was to provide opportunity to his fellow Americans. Opportunity.

The “Why”

The “why” is the differentiating factor between social entrepreneurs and profiteers.

The “why” is the reason a founder is passionate in starting a business. It’s the driving force for the founder. The reason she wakes up everyday and works alongside her workers in her factory instead of sitting in her ivory tower by herself. Henry Ford’s sleeves were rolled up, his hands were dirty, and he was immersed in the production process. That is how disruptive innovation happens.

Mark Zuckerberg works on Facebook everyday. Is it because he wants to put more money in his pocket? Or, does the “why” that drives him have nothing to do with money? The money is the easy part. The “why”, that’s the hard part. If you’re a founder that’s driven by something other than money, you better not ever let go of it. Never tell yourself it’s not worth pursuing. Your driving force, your “why”, no matter how intangible it may seem, is priceless.

We’ve just been trained to think that ideas which benefit society are connected to nonprofits and charities and volunteerism and hippies and being poor. That’s how I used to think about it.

Henry Ford quote too many men are afraid of being fools
I thought social entrepreneurs were connected with nonprofits. I associate nonprofits with volunteerism which, in my mind, connects with having no money. Why would anyone want to work their entire life for no money? Not me. That brought me to be super focused on profit again. There is a balance, however, and once I gave myself a chance to find the balance – the gray area – something remarkable happened.

Why is Henry Ford a Social Entrepreneur

By 1916, Henry Ford generated profits exceeding $60 million. His first inclination was to reinvest that money back into the country by creating more factories that would create jobs and reduce the cost of the cars he sold. Before he could follow through with the expansion, two of Ford’s shareholders took him to court. The Dodge brothers owned 10% of the Ford Corporation. They demanded that the company’s profits be paid to the shareholders. The Supreme Court held that Ford owed a duty to the shareholders, and was ordered by the court to pay the Dodge brothers over $19 million. By law, a corporation’s sole purpose is to generate profits for the shareholders.

Henry Ford wanted to build a social enterprise. A corporation for the people. A corporation that is built to positively impact society. Unfortunately, it wasn’t until the 1960s and 1970s did the term “social entrepreneurship” begin to emerge.

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