Edsel’s Waterfall

I recently read Business Adventures, a book highly recommended by Bill Gates. One of the chapters of the book talks about Edsel, Ford’s failed division in the late 1950s. The story was so compelling that I decided to dig a bit further. Edsel’s development and marketing became a synonym for failure and have been discussed extensively. The Wikipedia article does a decent job at listing all theories, so I won’t get into details.

The hypothesis I’ll present here is that Edsel’s failure is a prime example of the weaknesses in the Waterfall product development model.

Why Did Ford Want to Start a New Division?

Despite having mid-range and high-end makes in Mercury and Lincoln respectively, Ford was mostly operating in the lower end of the market in the early 1950’s. A study conducted in 1952 concluded that over 75% of Ford’s production was in the economy range of the market (Dicke, 2010, p487). This was a great position to be in during and after the Great Depression, but with the rising GDP levels after WW2, a significant fraction of the population was expected to move into the middle-income range.

The growing middle class meant more people will be buying cars in the middle market segment soon and Ford had proof that Ford owners traded up to other makes, mostly made by GM — as Lewis Crusoe, VP at Ford in the fifties said “We have been growing customers for General Motors”. (Brooks, 2014, p.32). Ford’s only mid-range make, Mercury was perceived as a muscle car brand not in the mid-range segment (Brooks, 2014, p.41).

What Went Wrong?

Ford started considering the Edsel in late 1952, and it took them almost two years to figure out what car they want to build, and another two and a half years to actually build it. That means there was a five year delay from the moment planning started until the release day which was internally known as “E-Day”. During that time, the US economy went through two recessions (1953 and 1958), which had a drastic effect on the car market, but also on user needs, wants, and demands.

US car sales in the 1950s. Source: Wikipedia

Consumer preferences shifted towards smaller and more economic cars — the so called “compact segment”. The only such car on the market at the moment of Edsel’s introduction was Rambler, which sold remarkable 242,734 cars in 1957–1959, compared to only 118,287 Edsels in 1958–1959. In fact, at the end of the 1950s, all of Edsels competitors saw disappointing performance. Chrysler even killed DeSoto, Edsel’s direct competitor. The only Edsel competitor that did well at the end of the decade was Dodge, whose success mostly came from sales of Dart, Dodge’s entry in the economy segment.

Edsel’s competitors at the end of the 1950s. Source: Wikipedia.

Did Ford Learn Anything?

They did. The 1960’s Edsel lineup already had a compact car planned, but when Edsel was killed, they decided to sell the car as Comet and transferred it to the Mercury brand in 1962.

Edsel Comet prototype. Source: Edsel.net

They also seem to have changed their approach to developing and launching new products, as exemplified by Ford Mustang, one of their most successful products of all time. While building the Mustang, instead of the “big-bang launch” strategy, Ford employed a more agile approach, resembling Lean Startup’s build-learn-measure cycle.

Mustang began its life as a concept car (Mustang I — their Minimum Viable Product) that was first shown to the public in 1962 at the US Grand Prix and went on to be shown at trade shows. Ford even toured the colleges to gauge their target audience’s interest. Based on that feedback, they did 13 different variants and eventually settled for Mustang II in 1963. They did another tour of showings and eventually launched the production version in 1964. Mustang was built in only 18 months. They got as close to “release early, release often” as possible with building cars in the sixties.

Conclusion

Mustang’s development was a complete contrast to Edsel’s two years long marketing campaign, followed by a big-bang launch, and ultimate failure. With Edsel they took a classic waterfall-ish approach to product development, which at first sight makes sense — waterfall is considered appropriate is when requirements are fixed and the product is well understood.

Ford certainly knew how to build cars at scale, and the requirements they set up in 1953 were based on sound reasoning and research. The issue was that they weren’t learning while they were building the car, and as a result, their initial assumptions about the car market were no longer true by the time the car launched. Luckily for them, they took a different approach with the Mustang, and it paid off handsomely.

You can find a similar take on the Edsel case, from an “innovation cycle in organizations” perspective here.

References

• Brooks, J: Business Adventures: Twelve Classic Tales from the World of Wall Street, Open Road Integrated Media, New York, 2014
• Dicke, T: The Edsel: Forty Years as a Symbol of Failure, The Journal of Popular Culture, Vol. 43, №3, 2010, pp.486–502.
• Wilder, S: Mini Case Study, Ford Edsel, University of Amsterdam, 2014
• https://en.wikipedia.org/wiki/American_automobile_industry_in_the_1950s
• https://en.wikipedia.org/wiki/Dodge_Dart#1960
• https://en.wikipedia.org/wiki/Donald_N._Frey
• https://en.wikipedia.org/wiki/Edsel
• https://en.wikipedia.org/wiki/Ford_Mustang
• https://en.wikipedia.org/wiki/Rambler_American
• https://en.wikipedia.org/wiki/U.S._Automobile_Production_Figures
• https://en.wikipedia.org/wiki/Waterfall_model