I have been recently impressed by the wisdom of Henry Ford, Senior. He wrote in his book, ‘Today and Tomorrow’ (Doubleday, 1988 Reprint, p.31) "A business cannot serve both the public and the money power. As a matter of fact, the money power has always lived more exploiting or wrecking business than by the service of business. There are signs, however, that this may be on the mend.
"Money put into business as a lien on its assets is dead money. When industry operates wholly by the permission of 'dead’ money, its main purpose becomes the production of payments for the owners of that money. The service to the public has to be secondary. If quality of goods jeopardizes these payments, then the quality is cut down. If full service cuts into the payments, then service is cut down. This kind of money does not serve business. It seeks to make business serve it.”
Taiichi Ohno, the creator of the Toyota Production System, read this book and knew the teachings of Dr. W. Edwards Deming. Ironically, Dr. Deming worked with Ford Motor Company well after the death of Henry Ford the senior. Subsequently, in 1986 the company produced the Taurus and that year became America's most profitable automobile company, ahead of GM.
Fast forward and now Toyota is the World's most profitable car company. Unfortunately, American car makers, bowing to short-term investors (i.e. 'money power'), have fallen victim to the myth of value engineering. Falsly believing (or hoping) that costs can be independently reduced, they cut quality to the bone and hope customers will not notice.
They do, and that is the short of it. Henry Ford knew how to build a great company: improve processes, improve quality, reduce prices, sell more, improve wages. A great company is in service to society, not in service to dead money. If you want to become a great and big company, start by trying to be just a great company. Start in service to your customers and your employees, not investors.
Ford Motor Company forgot this lesson after the death of its founder. They rejected this lesson following the death of Dr. Deming. Until American industry remembers it we will be doomed to bad economics. America needs to reject the poor practices of value engineering, short-term investing, and embrace the New Economics.
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