Ford Futurist Notes Shift in Industry

August 20, 2012, Palo Alto, CA–We talked with Sheryl Connelly, a futurist at Ford Motor company who focuses on trends, scenario, and understanding buyer behaviors related to brands and technology. She has been working in this space for the past 8 years, and has access to multiple corporate resources.

One of the directions she is pushing at Ford is the knowledge that no one can completely accurately predict the future. A company becomes vulnerable if it takes its long-term forecasts too seriously. A company needs some skills to predict the future to get better plans, and the plans have to be malleable. They look at five major trend sources for their work: social, technological, economic, environmental, and political.

The trends are measured over a global footprint, and they try to find a unified view across all the levels. The trend data cover over 200 categories of issues and make cuts across the data in aspects like short- and medium-term information, international versus local, etc. The data analysis is sorted for the top 70 categories and analytic methods cluster the various responses.

One example of a trend is denim. In the early 1900’s, this material was for work clothes. Now, it is a sign of high fashion. The trends have changed so they have to consider what constitutes a trend change versus a fashion statement. The frequency of change is a indicator of the value of the data. A fast-changing category is less significant for trend analysis than one that moves more slowly.

Soon, the world will have 9 B people, up from today’s 7 B. The emerging markets are the fastest growing and will dominate the economies by the 2050 timeframe. We have to consider the planet carrying capacity when that many people inhabit the planet. One of the challenges will be to feed all of those people.

Currently, land in agricultural production amounts to about 3.5 B acres. This land is sufficient to produce food for 9 B people, but only if all of them are vegetarians. Resources and technology can only help so much if there are significant distribution problems. The world’s ecology needs help and the first world countries and companies have to start accepting the burden of being the monitor for the planet’s wellbeing.

This fact also illustrates the levels of interconnections in the world. An organization can get into a trap if they assume that history forecasts the future. The increasing inter-consecutiveness of the manufacturing sectors was illustrated by the tsunami in Japan. The supply chain broke when some suppliers could not produce and their products became the critical items for others.

The volcano in Iceland is another example of a local issue affecting many around the world. Air traffic had to be rerouted or canceled to most of Europe for months. When companies elect to use a just-in-time manufacturing flow, they are subject to the vicissitudes of weather and nature.

The needs to find the lowest cost producer must be balances against the ability to control your won destiny by sourcing locally. To this end, Ford is highly risk adverse. They want the best of the world’s products for their cars and trucks, but don’t want to pay the local vendors’ prices.

The problem is that there are no good tools for them to use to find ways to think about the future. The existing tools have little precision and no way to interact with the data. A good tool would have three major functions: wild card analysis, global trends, and scenario planning.

Wild card analysis considers the events and actions that have low probability to happen, but can have a major impact on the world. For example, the earthquake in Japan should have been known, and steps taken to minimize adverse effects. Everyone has to consider the outliers.

Global tends have to consider many categories to identify the most important ones. The fact that some countries don’t do things the same way we do is not a sufficient reason to ignore the data. For example, green action became more public in ’02. The fringe concerns became mainstream as governments, people, and religions started to talk about the environment.

We saw the emergence of ethical consumption, where consumers started to think that the products they bought reflected upon their values. Issues like fair-trade coffee, and blood diamonds became big issues for many people. Consumers started to look at the brands as curators for inputs in the world. Ethical consumption is evolving into careful consumption. Passion and practicality are values that drive the consumer.

These changes require companies to draw insight from trends, and build a case for strategy. The trends have to be in a common language and must be measured over a fairly long time frame, up to 10 years. If done properly, this analysis becomes scenario planning.

Ford has an ongoing 2 year project that looks out 10 years. They try to prepare for multiple futures that are not only different but also plausible. They held workshops in North America, South America, and Asia to find out what is happening and what matters. Their domain experts helped to create a number of scenarios thate were distilled down to 4 views of the future. The views were incorporated into product plans with the idea that the plans would be more robust.

The concept of using multiple futures helps make the plans more flexible and realistic. If a plan can handle any of the main scenarios, it is likely to be workable even through natural and economic disasters. In addition, the plans are formulated to incorporate some feedback mechanism to allow for close monitoring and early corrections to unanticipated changes. This structure addresses the fact that no one can accurately predict the future, and any future plans have to allow for changes.

Technology advances are especially difficult to address, since cars can take 3-5 years from concept to production. The fact that a feature is available may not account for an inability to incorporate it into a production-ready vehicle. Autonomous cars are such a category. They will come, but it may take the governments, manufacturers, and insurers a long time to come to an agreement.