The Big Story: Ford wants to restructure its dealership model to boost EV sales
The CEO of one of America’s most successful, long-lived companies is staring down a threat to brick-and-mortar facilities that, if left unaddressed could break his business model. His response? Restructuring the organization with the customer experience – and better margins, and more efficient operations, and the next century of evolution – in mind. The Old Guard is nervous.
What it Means for Healthcare
You know the examples: Video rentals. Railroads. Film cameras. Banking. Business books are littered with cautionary tales of industries, or specific companies within industries, that didn’t have the vision or fortitude to reshape themselves for the future. But then turn the page and you see the bright spots, the companies that saw disruption coming and did the hard – often expensive up front – work to avoid extinction.
Here’s an example of the latter that we can watch in real time and draw lessons from as we work to make healthcare better. We’re breaking that example down into two types of leadership.
With 119 years of experience and history, Ford’s the epitome of a legacy brand. And its vast network of highly entrenched franchise dealerships wields significant power and is backed by regulatory protection that has codified the dealership model into law. CEO Jim Farley is upending that by riffing off Tesla’s direct-to-consumer lead. He told TechCrunch he expects
“…massive consolidation among dealers, suppliers and automakers as the industry begins building more EVs. His comments come at a precarious time for car prices due to the supply chain crunch and instances of dealerships gouging customers for new vehicles.”
The parallels with healthcare are myriad and obvious. Consolidation, century-old brands that have led the way with steady evolution and, yes, may have experienced some bumps and criticism along the way for mistakes. As with cars, the cost of care is rising and providers are facing challenges in delivering their “product” to consumers due to external forces. Yet Farley’s play to basically copy Tesla shows that 1) just because you’re not first doesn’t mean it’s not worth doing and 2) there can be huge value in finding ways to apply a Disruptor’s disruptive approach to your legacy model. It’s both/and, not either/or.
We also cannot downplay the significance of and difficulty for a leader of a legacy organization pushing for major evolution. It’s a common refrain that change can be a grassroots effort; yet it requires advocacy from those with decision-making power, as well as commitment of resources.
There’s always a litany of incentives to maintain the status quo. We won’t pretend that making car dealerships sell product online with no markup is anything near as significant as other types of systemic change that needs executive buy-in, such as, say, increasing diversity among corporate leadership. Still, within his industry, Farley has decided to use his power to shake things up. He’s putting his reputation on the line and likely facing tremendous backlash from a disgruntled and powerful dealership lobby (yes, that’s a thing) if it goes badly. In healthcare, the parallel to changing the dealership model could be a shift to value-based care, or going all-in on price transparency, or moving as much care out of the central hospital as possible. Or maybe all of those things.
This is exciting, dangerous work. So, with that, a few takeaways for leaders of all stripes:
- Use your organization’s experience as an asset. Part of the pitch for disruptors like Tesla is that they aren’t burdened by legacy systems. They can start from scratch and reimagine whatever industry or product they’re pursuing. Experience is presented as a negative, a weight holding the Old Guard back – often for good reason. But Ford, like many healthcare providers, has that experience, brand awareness and yes, financial weight to be able to turn it back into a positive. Thus the message becomes, “We’ve been doing this a long time and here’s what we’ve learned,” instead of, “We’ve been doing this a long time, so we’ll keep doing it that way.” Hospitals can leverage their decades of experience, apply fresh ideas and hit that both/and sweet spot.
- Consider how your organization fits into the likely future. Many of the trends pushing the auto industry are pushing healthcare. A tech-enabled experience, remote interactions, a digital front door, simple and clear pricing… In fact, it’s not hard to see direct parallels with the story above: Cars and care are purchased online, at the consumer’s convenience, while visits to the dealership/hospital are reserved for more serious issues. It’s happening. Be ready for it.
- Push for change while recognizing that not everything goes according to plan. As if you needed us to tell you that. For an example, we can turn to Saturn, another car manufacturer built from a legacy brand that planned on doing things differently yet lasted less than 30 years. (Forgive the Wikipedia link, but it’s a convenient summary of Saturn’s launch and failure to reach escape velocity). Even so, risk of failure is no reason not to pursue change because the risk of not changing could very well be higher. Check back on Ford in five years. You don’t need us to tell you that not every new service line you offer will take off, that every new digital program will open the floodgates to new patients. But at least then you’ll know what doesn’t work.
- Explain what the change entails. Farley started raising eyebrows when he announced the split between Ford’s ICE and EV divisions – even more when he announced the proposed dealership model. Yet Ford’s leadership team was ready with clear communications about what they were suggesting, how it would affect dealers, what dealers could do to prepare and how it would benefit everyone in the long run. And yes, that included being open about the significant upfront cost to dealers to make the change. Responsible transparency, if you will.
- Use your personal voice and power for change. Leadership involves risk. To the organization and to your personal standing if things don’t go well. Own it. Change doesn’t come free. Of course, if it goes well, then everyone wins – including the leader who gets to be the hero that helped change the game.
We get it. All the above requires hard thinking, tough choices and sweat equity. Who in healthcare has the time or treasure for that now? No one, really.
But consider this: The jumbled, stress-filled, recalibrating post-pandemic environment has created permission for you to spark big change. You decide: If nothing is “going to be the same,” then what is it going to like?
This piece was originally published over the weekend in our Sunday Quick Think newsletter. Fill out the form to get that in your inbox every week.