Ford’s incoming CEO wants the U.S. automaker to run like a Deere.
From the moment in February he was named chief operating officer and heir apparent to the top spot at Ford Motor Co., Jim Farley has touted the growth potential of its commercial vehicles.
But it’s not just more trucks and vans that Farley wants to sell. As he prepares to takes over as CEO on Oct. 1, he is betting Ford can transform its commercial vehicle business to generate recurring revenue through sales of services that take advantage of the software, data and connectivity in its F-Series pickup truck and Transit vans.
“Think of it as a second F-150,” Farley said, referring to the U.S. automaker’s lucrative full-size truck business that generates $50 billion in annual revenue. “We have the F-150 everyone loves. There’s this other business out here that’s huge.”
“Think of the data being more powerful than the fuel economy of the vehicle,” he added.
Farley is counting on a new hire to help build data-generated revenue from Ford’s commercial vehicle business: Alex Purdy, former head of Deere’s Silicon Valley office.
At Deere, Purdy led efforts to deliver artificial intelligence (AI) on the farm through smart equipment and founded John Deere Labs to help build a “sticky” relationship with customers.
Deere’s aftermarket parts and services business accounted for about 15 to 20 percent of its $35 billion in sales last year.
Purdy, who joined Ford in May, said he “helped transition an industrial goods business that thought about metal bending into a service business.”
Among the products developed by Deere while Purdy worked there were the ExactEmerge planter that offers improved seed spacing at higher speeds, freeing up workers for other jobs; and the See and Spray distribution system that will use smart cameras to distinguish between healthy and unhealthy crops, allowing for reduced use of herbicides when it’s introduced next year.
Purdy and other Ford officials want Ford’s commercial customers to regularly pay for services, creating a revenue stream that flows throughout the vehicle’s life, beyond a one-time transaction every few years.
Ford officials talk about products such as geolocation services to optimize route planning and reduce gasoline usage, predictive products that allow for faster oil changes and fleet management operations.
“When you measure time as a commodity like money, there are lots of those kinds of experiences that customers are willing to pay for because they’re in the productivity business,” Farley said.