Olds, Ford and Sloan: The Automobile Upstarts
Most Americans would tell you the first American automobile was the Model T. Untrue. John William Lambert created the “Buckeye gasoline buggy” more than a decade before the Model T was invented. Why then does no one know who John Lambert is? Because the Buckeye buggy never sold! In fact, even if he was the first American to build an automobile, it was the pioneers below who created the industry as we know it. To jump to the lessons we can learn from them skip to the conclusions.
Ransom E. Olds
As soon as Karl Benz invented his automobile in Germany in 1885 there was a flurry of effort in the United States to duplicate his invention. While he was not the first American to sell an automobile, Ransom Olds still saw an opportunity. At a time when automobile companies were manufacturing their vehicles by hand Olds gathered capital, built a factory, and adopted mass production techniques to manufacture his Oldsmobiles. By 1901, just four years after its founding, Oldmobile was producing 2500 automobiles a year, making it the first obvious leader of the American automobile market.
I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one — and enjoy with his family the blessing of hours of pleasure in God’s great open spaces. -Henry Ford
In 1908. a time of Oldsmobile’s dominance, Ford began to do just that. The Ford Motor Company produced the first Model T with an initial price tag of $850 but over the course of the next 20 years used lean manufacturing and moving assembly lines to drive the price down to only $260 (about $5000 today). As a result of Ford’s rock-bottom prices, the Ford Motor Company soon owned 50% of the global automobile market and had more than 10 million vehicles on the road.
Just when the Ford Company had dominated the automobile market, Alfred Sloan, then President of General Motors turned the market upside-down. While the Model T was affordable and accessible, Sloan realized that consumers needed more choices in the market. He organized General Motors into a progression of five brands from the value-oriented Chevrolet up to the premium Cadillac so consumers could stay in the GM “family” as their age and preferences (and income level) changed. Additionally, Sloan pioneered annual style changes to the GM vehicles, introducing a sense of novelty to new cars that was previously non-existent.
In short, due to Henry Ford’s resistance to change (he was once quoted as saying consumers can “have any color he wants as long as it is black”), GM’s new approach to the automobile market captured new customers like never before and rocketed GM to the top of the automobile sales charts, a position GM enjoyed until the recent economic collapse began in 2007.
The men described here changed the world in which we live and while they made their millions a century ago we can still learn several lessons that can be applied today:
- Marketing is key. You can invent the greatest product in the world but unless consumers know about it they can’t buy it! It’s tempting to sink all your funds into development but make sure you budget sufficiently for marketing that will put your company in front of its target consumers.
- Go for mass market. There is certainly money to be made by selling to niche markets but it’s much more risky. If you indeed have a niche product, find ways to position it with overlapping or adjacent consumer groups to increase its marketability.
- Don’t be afraid to attack the incumbent. Each of the automakers here left their mark on the industry by taking down the incumbent. Unlike them, you don’t need heaps of capital to create a revolutionary product. If you don’t believe me, just look at Craigslist, Skype, or Hulu.
- Treat your employees well. Henry Ford paid his employees much more than his competition. As a result, the Ford Motor Company had drastically reduced turnover, decreased training time, and much more innovation coming from the shop floor. If you look out for your people, they will look out for you.
- Listen to your Consumers. The main reason General Motors was able to steal the market from Ford was due to Ford’s resistance to change. If you want to develop a winning product or service, don’t develop in a bubble. Listen to your consumers and include their feedback in your design!
Have we missed anything here? What else have the auto giants taught us? Leave a comment below and let us know and always, if you enjoyed the article click the “Like” button below!