Patrick Vlaskovits on HBR takes a look at the history behind Henry Ford’s “faster horse” quote, and what Ford true innovation & failure were in the early 20th century.

Henry Ford’s genius lay not in inventing the assembly line, interchangeable parts, or the automobile (he didn’t invent any of them). Instead, his initial advantage came from his creation of a virtuous circle that underpinned his vision for the first durable mass-market automobile. He adapted the moving assembly line process for the manufacture of automobiles, which allowed him to manufacture, market and sell the Model T at a significantly lower price than his competition, enabling the creation of a new and rapidly growing market.

But everything changed with the onset of the innovations introduced by General Motors in the 1920s, which took the direct opposite of Henry Ford’s tack of “Any color … so long as it is black” and is best summed up by Alfred Sloan’s consumer-research driven “A Car for Every Purse and Purpose,” which aimed to produce cars for distinct market segments aided by:

  • Installment selling
  • Used car trade-ins
  • Closed car models
  • Annual model changes

In light of these, Ford persevered stubbornly with his cycle (now no longer disruptive nor virtuous) and as such, Ford’s response to these new innovations can only be described as tepid at best. The Ford Motor Company did introduce a closed-body Model T, and did so without significantly altering its open-body design, which most observers at the time felt amounted to a reluctant afterthought.

In 1921, the Ford Motor Company sold about 2/3 of all the cars built in the U.S. By 1926, this share had fallen to approximately 1/3. And in 1927, when Ford belatedly responded (at tremendous financial cost and internal strife) to changes in the market’s tastes and competitive innovation by shutting down production temporarily to re-tool his factories and bring the Model A to the market, that percentage fell to about 15%.

It was clear what people wanted, and it wasn’t faster horses. It was better cars, with better financing options.