Harvard Business Review Logo Thumbnail 130 x 130Everyone’s talking about a future in which vehicles are shared rather than owned, autonomous rather than driven, and where car companies make large shares of their profits on digital “mobility services.” But if you are the Ford Motor Company and face the prospect of investing billions in new technology while your century-old business model is overturned, you might first have a few questions. How are consumers going to react to all of this? What do they really want? How can you tell which opportunities are real and which are science fiction?

To help test drive the future, in 2016 Ford paid about $50 million to acquire Chariot, a startup mobility service. Incubated at Y Combinator, the venture was aimed squarely at the most important, most reliable, most consistent mobility need that consumers have every day: getting to and from work. While this seemed like a small bet for a $165 billion company built on the mass production of vehicles, the deal was scouted, in part, by Jim Hackett, then head of Ford Smart Mobility who has since been elevated to CEO.

All this makes the early lessons from the Chariot venture worth heeding as it gains traction in the market. Here are five to learn from Ford thus far, about mobility services in particular, and more broadly, about how to deal with the uncertainty of new business models in new markets by testing and learning one’s way forward. (Full disclosure: my company, Innosight, has advised Ford on strategy).

Each of these lessons deals with a different aspect of creating and scaling a new business model, defined as a way of growing in new markets via four components that must work together as a system: the customer value proposition, the profit formula, as well as key resources, and key organizational processes.

  1. Be ambitious but start small

As a so-called “micro-transit solution,” Chariot began life in one of the world’s most high-tech and commute-challenged regions, the San Francisco Bay area, with a small fleet of 14-passenger vans equipped with Wi-Fi, electric outlets, and overhead storage. Using the Chariot phone app, riders could sign up for existing routes and also propose new ones under a crowdsourcing model.

Only when the service was successfully operating did Ford begin to expand it, adding dozens of new routes and growing its local fleet to more than 200 vehicles. Ford’s next market was Austin, where it has grown to more than 50 vans. Seattle and Columbus were next, followed by a set of strategically chosen routes in London and New York.

Now that Chariot is scaling up, the scope of its ambition has become clearer. Ford is also introducing a specially designed vehicle especially built for urban micro-transit: the zero-emission, plug-in hybrid electric Transit Custom. This van is currently being tested in London ahead of volume production in 2019.

Read the full article ON Harvard Business Review