Henry Ford and the entrepreneurial process

INTRODUCTION

The role of entrepreneurs in a society is highly placed. Both ancient and modern societies have revered such individuals due to their ability to promote development and see to the emergence of products that satisfy needs and wants (Morales-Gualdron & Roig, 2005). This paper seeks to revisit this concept by exploring the concept of the entrepreneur and the entrepreneurial process. Rather than explicating theory all through, this essay uses the theory of the entrepreneurial process to demonstrate the process a famous entrepreneur – Henry Ford – undertook on his quest to develop and establish a new market that shaped the 20th and continues to impact the 21st century (John & Dodge, 2010). The essay begins by providing the theoretical framework for entrepreneurship and the entrepreneurial process, as well as its components. To rigidify theory, the case of Henry Ford is presented and examined to observe how a historical entrepreneur went through the entrepreneurial process and what components were relevant to him. Most of the story on Story Ford is derived from John and Dodge (2010).

Defining the Entrepreneurial Process

Entrepreneurship itself is a concept for which no generally acceptable theory exists (Willard, 1993). However, to not to spend too much effort on the dynamics of definition, this essay adopts Shane’s (2003, p.4) definition of entrepreneurship as “an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways of organizing, markets, processes, and raw materials through organizing eff orts that previously had not existed. Also adopted is Bygrave’s (2004, p. 7) definition of the entrepreneurial process as “all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them”.

This essay also bases its general description of the entrepreneurial process on Bygrave’s (2004) model. Bygrave (2004) presents the entrepreneurial process as a set of stages and events that follow one another. He stipulates these stages as: the idea or conception of the business, the event that triggers the operations, implementation and growth. Within each stage is a range of distinct components which culminate to the realisation of the stage. This model was selected to be used as the foundational framework for this essay because it is both general and accommodates many of the appropriate components; although being a stage model, it is criticized by Moroz and Hindle (2012) as narrowing the scope of investigation and manifesting temporal orders of events that may not fit the proposed stages and/or often overlap. However, this essay contends that this model is sufficient to provide an effective analysis. Ma and Tan (2006) present a slightly similar model of the entrepreneurial process labelled the 4-P framework, which states pioneer, perspective, practice and performance as forming the entrepreneurial process. This model may also be used to provide a more comprehensive analysis of the entrepreneurial process.

Using Bygrave and Ma and Tan’s models as the foundation, six specific components of the entrepreneurial process are focused upon: opportunity recognition, resourcefulness, innovation, idea creation, achievement orientation, and risk taking. It is structured such that each component manifests under a specific stage of the entrepreneurial process. Under the innovation stage (Bygrave’s model), and the pioneering stage (4-P framework), idea creation and innovation are components that manifests. Under the triggering event stage and perspective stage, opportunity recognition and is the component that manifests. Under the implementation and practice stage, resourcefulness and risk taking are components that manifest. Finally, under the growth and performace stage, achievement orientation is the component that manifests. Using this theoretical structure, it is then shown how Henry Ford’s progress was characterized by it.

Henry Ford and the Entrepreneurial Process

According to John and Dodge (2010), Henry Ford was born on his father’s farm in the United States in 1863. Early on, in his family, Ford built rudimentary steam engines and waterwheels. He generally showed a lot of interest in machine design. Ford could simply have followed in his father’s footsteps and become a farmer, but he left the farm to become an apprentice at a machine shop. Ford moved to Detroit, where he took a job as night engineer for the Edison Electric Illuminating Company (Ford & Dodge, 2010).

Henry was a skilled student and rose to chief engineer of the Illuminating Company. Thus, by gaining experience at the company, he developed human capital which Bygrave (2004) deems to be a determining factor for innovation in entrepreneurship. This factor thereby contributed to the innovation component of the entrepreneurial process. This is supported by Clercq and Arenius (2003) who state that there is a relation between the experience and understanding (human capital) of the entrepreneur, and the success of the entrepreneurial activity. The actual innovation stage is seen when Ford eventually began working in small shops trying to make horseless carriages. After reading of these other efforts in media, he modified some of the ideas. A small group of friends were then to help him (Ford & Dodge, 2010). The result was his first initial automobile, followed by a car that was more sophisticated. Ford convinced a group of people to support his highest risk – a horseless carriages producing company. It is seen that Ford had an idea (idea creation) and attempted to create (innovation) – two components of the entrepreneurial process under the innovation/pioneer stage. It is further observed that Ford also manifested the opportunity recognition component, which can be said to be under the triggering event/perspective stage of the entrepreneurial process. Ford recognized that he could create value and thus had an opportunity to develop his business. His perspective helped him. As Shane and Venkataraman (2000) point out, perspective consigns different values to resources and opportunities than general population does, and it is a mindset that encourages innovation and being unique.

Ford then proceeded into the stage of implementation/practice. However, his both his first and second companies failed. First, one recognizes the component of risk taking and resourcefulness at this stage. Ford was able to mobilize both social and financial capital to implement his business idea. He was able to develop a network of people who were willing to fund his company – this is the resourcefulness component manifested. Furthermore, Ford poured in financial and other resources into these business with uncertainty of the outcome. Risk taking is a common component of the entrepreneurial process. However, as Nassif, Ghobril and Silva (2010) iterate, the successful entrepreneur has good business sense – a characteristic which Ford might have lacked at that time.

Ford’s company’s failure was a significant challenge for Henry Ford, and is a significant challenge for all entrepreneurs. After putting in resources to start a company, and seeing the company fall, the entrepreneur’s morale is likely to diminish. However, rather than give up, Ford overcame this challenge and took even bigger risks. He built and drove a pair of racing cars. The success of these cars attracted additional financial backers, and eventually, he incorporated his third automobile venture, the Ford Motor Company (Ford & Dodge, 2010). This company become successful. One observes the growth/performance stage of the entrepreneurial process present here. One component that manifests is Ford’s achievement orientation. Due to Ford’s orientation toward achievement, keeping him determined and focused on achievement rather than regret, Ford overcame his challenge and grew his company. This accords with Ma and Tan (2006) who state that true entrepreneurs have a strong sense of mission, are goal-driven and inspired to win.

Perhaps Ford’s most significant challenge was that the Association of Licensed Automobile Manufacturers were against him selling cars (Barger, 2001). Ford had to then wage a long battle for the right to run his own business. Ford applied to the ALAM for a license, but was rejected on the grounds that he was not a true manufacturer and “only an assembler” (Barger, 2001). But after he was turned down a second time, he moved ahead to build and sell his own cars without a license. So the ALAM responded by filing lawsuits in the hope of forcing him to quit. Eventually, Ford finally won vindication. Ford apparently overcame his challenge by engaging members of his social network to back him up, as well as being highly determined to achieve his goal.

Henry Ford’s vision and journey should be a model for the aspiring entrepreneur. Just like how Ford did not give up or give in to obstructive regret in his losses, an aspiring entrepreneur should do the same. However, the aspiring entrepreneur should expect to face challenges. These challenges may come in legal form, social or financial form, just like Ford faced. Nonetheless, Ford sets an example for overcoming these challenges and reaching the growth stage of the entrepreneurial process.

CONCLUSION

This essay explores the topic of the entrepreneurial process and its components. It adopts two similar models of the entrepreneurial process to examine the journey of Henry Ford – the famous innovative automobile manufacturer. Using the models, it is found that Ford’s process aligns with the stated model, and Ford possessed components of the entrepreneurial process. Also looked at are two significant challenges that Ford faced in his journey – one sentimental challenge and one legal challenge – both of which he overcame and successfully. Aspiring entrepreneurs can learn from Henry Ford’s journey and understand what it means to be an entrepreneur and go through the entrepreneurial process.

REFERENCES

Barger, M. (2001, December 1). How Henry Ford zapped a licensing monopoly. Foundation for Economic Education. Retrieved from http://fee.org/freeman/detail/how-henry-ford-zapped-a-licensing-monopoly.

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