Alcoa & the Auto Industry Case Study

QUESTION

For the Final Exam Course Project, you will:

Prepare a “Creativity and Innovation” assessment on the Alcoa & the Auto Industry Case Study. The assessment must be a minimum of 5 pages double spaced in APA format, to include a cover sheet, reference page, proper citations, and free of misspellings.
Leverage the information contained in the Weekly Study Plans. Use the SuperSearch function on the OC LRC website to research alternative approaches, models, fringes, trends, etc., to support your assessment. This project does require that you conduct research outside the scope of the weekly study plans, articles, videos, etc.
Be creative and innovative in your assessment and solutioning and demonstrate the knowledge you gained throughout the course.

To maximize your grade points, the following elements must be incorporated into your assessment:

Read the Alcoa & the Auto Industry Case Study;
Identify and describe why their aluminum alternative was innovative;
Explain if or how Alcoa leveraged its creative resources (i.e., Horizontal Insight Model);
Discuss who or what was the catalyst for creative change in the organization’s strategy;
Identify and discuss a process, product, or service that Alcoa may or may not need to reset;
- If a reset is necessary, formulate an innovative and or disruptive alternative as the solution;
Review and discuss Alcoa’s implementation plan and recreate their implementation plan from your innovative perspective (i.e., 3-Step Method, etc.,);
Identify and discuss which of Alcoa’s innovative characteristics align best with which strategy (i.e. traits, trends, fringes, etc.,);
Identify and discuss which Helix Model they align with most closely and the data analytics used to support their innovative strategy;
Identify and discuss which change management plan aligned with their strategy (ADKAR, Kotter 8-Step Model, etc.);
Identify and discuss the Alcoa’s implementation strategy (i.e., Four-dimensions of behavioral implementation strategies, buying innovation, outsourcing innovation, creating innovation, or starting an autonomous organizations).

If you need help with APA writing style:

Review APA writing styles at the OWL at Purdue website – https://owl.english.purdue.edu/owl/resource/560/01/

You can also make appointments with the Odessa College Writing Success Center, which is located in Wilkerson Hall, Room 106. The Writing Success Center staff is also available in the LRC at night and in the evenings. Their contact information is – https://www.odessa.edu/current-students/student-success-center/tutoring/index.html

Case Study

In early 2014 Alcoa announced that Ford’s F-150 pick-up trucks, the best-selling vehicles in the U.S., would use aluminum1 rather than sheet steel in the truck bed and cab. Starting with the 2015 model year, the F-150 would be the first mass-market vehicle to be built with major body construction from aluminum. Alcoa spent $300 million expanding its Iowa factory and planned another $150 million on facilities in Tennessee to meet the demand generated by the Ford contract.

The aluminum industry’s growing success in the automotive sector reflected the response of auto manufacturers to the increasingly rigorous fuel economy standards for U.S. vehicles and consumer preferences for high mileage vehicles. To meet those standards, automakers had begun using aluminum to reduce vehicle mass, allowing a smaller, more efficient engine to produce the same performance with increased miles per gallon. For example, the F-150’s switch to aluminum for 2015 was a major part of the savings of 700 pounds in vehicle weight compared to the 2014 model

But even with the announcement of the F-150’s aluminum body, Alcoa still faced significant challenges in selling to the auto industry. First, there was the problem of consumer perceptions. Car and truck buyers tended to believe that aluminum was not as strong as steel. Especially in the truck market, where Ford promised that its trucks were “Built Ford Tough,” beliefs in the vulnerability of aluminum could hurt sales. Ford had launched an educational campaign about the strength of aluminum, but consumer reactions were not yet known. Furthermore, the steel industry was expected to promote steel’s virtues to maintain its place as the material of choice of among carmakers and car buyers.

Adoption of aluminum by the auto industry also could be constrained by other factors. Aluminum was already more expensive than steel, and increased demand could drive aluminum prices even higher. Furthermore, automakers had long relationships with steel makers and for over a century had geared their production to steel components.

In addition, aluminum faced competitive threats from other materials. Steel makers were working on lighter alloys to compete with aluminum. Meanwhile, manufacturers of carbon-fiber based composites were touting their material as even lighter than aluminum and just as strong. Plastics manufacturers were also increasing their lightweight alternatives for specific automotive components.

Given these uncertainties, planners at Alcoa and other aluminum manufacturers faced a difficult challenge to forecast the potential size of the market for aluminum in the auto industry. Would other U.S. automakers follow Ford’s lead? Would aluminum vehicles gain a foothold outside the U.S.? How would steelmakers respond to losses in the auto market? Would carbon composites create a significant challenge?

ANSWER

A “Creativity and Innovation” Assessment on Alcoa & the Auto Industry

Why Alcoa’s Aluminum Alternative was Innovative

Innovation is usually characterized by the ability to collaborate with other groups and individuals, ideating, implementing, and creating value. Alcoa collaborated with the auto industry, specifically Ford, to announce that the best-selling trucks would use aluminum, which was a product they majorly sold. This idea led to other auto businesses moving in to use aluminum for their vehicles to reduce their weight. Therefore, Alcoa’s aluminum alternative was innovative, considering its compatibility with the auto industry and the general reasoning of the relative advantage of using aluminum instead of steel. At the same time, an innovative alternative is likely to provide proof of an innovative concept (Qu and Liu, 2021). Alcoa and Ford’s idea provides proof of their innovative concept through the sustainability and energy-saving aspects.

How Alcoa can Leverage its Creative Resources

Considering Alcoa got into a contract with Ford and sold aluminum to the company during the initial periods and even the following days, it can be concluded that Alcoa leveraged its creative resources. During this period, Ford gave Alcoa some maturity in business through the contract, which was made public to automakers. Despite its struggle in selling to other automakers, this maturity in the market must be faced with declining growth gradually as innovation eventually leads to inertia. Consistency may be challenging because of consumer reactions to the new change. To leverage its creative resources, Alcoa has to focus on its existing business with Ford and consider how it will grow its future sales to other automakers.

In applying the Horizontal Insight Model, Alcoa will first focus on Ford as the business already identifies with the company. Ford probably provides great profits and cash flow to Alcoa, therefore calling for performance improvement to maximize the remaining value. Since Ford is in Horizon one, emerging opportunities for Alcoa will be in Horizon two, which will account for the emerging opportunities in the automobile industry. When the time comes, Alcoa will invest in these opportunities to generate further profits. Horizon three for Alcoa will include research into ways to further leverage sales to automakers and change consumer perceptions about the strength of aluminum.

The Catalyst for Creative Change in the Business between Automakers and Aluminum Sellers

Credit can only be given to Alcoa for announcing Ford’s new move because it benefits aluminum businesses to prepare for this business opportunity. However, Ford becomes the catalyst for creative change by being a leader in changing from steel use to aluminum in their F-150 pick-up trucks’ bed and cab. Ford guided, navigated, and accelerated other automakers to change to using aluminum in place of steel for the bed and cab of their vehicles. Since Ford’s F-150 is best-selling, other businesses must have concluded that Ford is a giant manufacturer and won’t risk using materials that may make vehicles undesirable. Furthermore, Ford helped change perspective, even for a short while, about aluminum use on their vehicles.

Resetting Planned Investment to Focus on the Current Investment Due to Uncertain Demand

Although Alcoa still faces challenges in selling to the auto industry, it is a promising niche as their future depends on the insistence of Ford on using aluminum on their trucks. Consumer perceptions will gradually change because of the efforts Ford puts into ensuring consumers are aware of the advantages of aluminum. For instance, Ford launched educational campaigns on the strength of aluminum, whose consumers’ reactions are not yet known. Since innovation, especially implementation part takes time to monitor with regard to the results and the necessary improvements, Alcoa should not reset their initial innovation in production of aluminum because of the sales challenges (Chung and Choi, 2018).

Instead, Alcoa should invest in creating awareness of how aluminum is strong and can be viable for use in trucks. Plus, consumers know how challenging the fuel economy is becoming in the country, i.e., reduced vehicle mass will allow a smaller and more efficient engine for better performance per mile per gallon of gas. However, Alcoa needs to reset the planned investment of $150 million on the Tennessee facilities meant to meet the demand as a result of the Ford contract, focus on the existing $300 million, and create awareness of the strength of aluminum.

Reviewing Alcoa’s Implementation Plan

Alcoa’s implementation plan began with getting a reaction from the automotive industry on its partnership with Ford. As expected, Alcoa wanted to shake the competitors like the steel industry and Ford’s competitors with the new sustainability idea. To reinforce the plan, Alcoa proceeded to invest $300 million in their expansion and scheduled another $150 million investment on facilities, such that they can meet the demand from their contract with ford. This implementation plan worked for Ford due to the success of the partnership. However, it did not work with the external demand they may have anticipated, as Alcoa faced challenges in selling to other automakers.

Recreating Alcoa’s Implementation Plan

Considering Alcoa’s challenges in selling to automakers, an implementation plan with research and marketing may help improve the outcomes. Immediately when Alcoa announced their partnership with Ford for the future use of aluminum in their trucks, they should have increased their marketing efforts to create awareness of their company. After the partnering and expansion, Alcoa can then begin to showcase how effective aluminum is on the vehicles to get more automakers to purchase aluminum from them. Still, they will need to change their attitudes towards aluminum by further announcing how they will improve its quality.

Innovation Characteristic versus Innovation Strategy

Alcoa’s innovative strategy depended on Ford’s introduction of a new trend where trucks would do better with less weight. With the demand for less energy-consuming and high mileage vehicles, Alcoa’s strategy became Passive as the consumer demands fueled Ford’s need for lighter materials on their trucks. At the same time, Alcoa used a reactive innovation strategy when partnering with Ford because they were sure of their aluminum quality if used on cars. The innovative characteristics involved in the case study mostly feature trends, whereby Ford and Alcoa are only responding to the demand for less energy-consuming cars. Therefore, trends as innovative characteristics align best with the reactive innovation strategy witnessed in the case study.

Trends as an innovation characteristic align closely with the Triple Helix Model that works best in developed countries. In this model, the university, government and industry are intertwined. With strategic demand (trends), the industry uses the university to find new product ideas and innovations. The same applies to the reactive innovation strategy Alcoa used when announcing its partnership with Ford. On the other hand, the government is working to reduce the amount of waste emitted by vehicles. By Ford and Alcoa advocating for the reduction of vehicle weights and efficient engines, they are completing the interrelationship between the characteristics, innovation strategies, and the Helix Model.

Alcoa’s innovative strategy is long-term. This means they will have time to reset some actions and decisions made throughout their implementation plan. Therefore, they will need predictive data analytics to determine the future of innovation as the trends in the automotive industry continue to increase. Still, big data can help gather perceptions directly from consumers to ensure they record concerns and opinions to avoid investment mistakes in the future as the automotive industry embraces aluminum use.

Alcoa and Kotter’s 8-Step Model

Alcoa ensured they created a sense of urgency by announcing that Ford was beginning to use aluminum instead of steel for its trucks. Through the powerful partnership with Ford, whose Trucks are the best-selling in the country and the vision for significant change, it can be realized that Kotter’s 8-Step Model aligned with Alcoa’s innovation strategy. Alcoa communicated their vision for the automotive industry and strived to remove obstacles related to competition with the already prominent in the market steel industry. As the company waited on the change from steel to aluminum to take over, they invested in the facilities and pledged to expand further. Finally, Alcoa anchored these changes in their corporate culture by reinforcing the preferences for high mileage vehicles. This evaluation incorporates all steps of Kotter’s change management plan.

Alcoa’s Implementation Strategy

Alcoa did not independently engage in the innovative idea as it partnered with Ford. In Innovation outsourcing, a company will outsource aspects of the invention to gain a breakthrough in the line of operation. Therefore, it can be concluded that Alcoa’s Implementation strategy was Innovation Outsourcing. According to Rehman et al. (2018), this implementation strategy will help a business access better expertise and gain increased focus on their business while mitigating risks, as it was with Ford, a renowned company with the best-selling trucks in the country. While strategy creates an interrelation of activities, it contributes to a transformation through innovation, a characteristic of innovation outsourcing implementation strategy.

Conclusion

Creativity and innovation call for investment in time and resources, which most companies may find challenging. Once the innovation has been put into action, an implementation plan followed by a strategy is compulsory. as with Alcoa, their partnership was innovative, although they do not fully satisfy the criteria for innovation. This idea may have been used in another industry where businesses changed the materials they used in manufacturing their products. Still, Alcoa benefitted from this innovation while contributing to the growth of the aluminum industry.

References

Brøndum, K., Byrge, C., & Hansen, S. (2018). Business Model Creativity: A Horizontal Insight Model. Journal of Business Models, 6(2), 10-14. https://journalofbusinessmodels.com/media/lrshavrz/vol-6-no-2-pp-10-14.pdf

Chung, G. H., & Choi, J. N. (2018). Innovation Implementation As A Dynamic Equilibrium: Emergent Processes And Divergent Outcomes. Group & Organization Management, 43(6), 999-1036. https://doi.org/10.1177/1059601116645913

Cui, Z., & Loch, C. (2011). A Strategic Decision Framework For Innovation Outsourcing. International Journal of Innovation Management, 15(05), 899-930. http://dx.doi.org/10.2139/ssrn.1617279

Rehman, S., Tiwari, A., Turner, C., & Williams, L. (2018). A Framework For Innovation Outsourcing. International Journal of Business Innovation and Research, 16(1), 79-111. https://doi:10.1504/IJBIR.2018.091085

Qu, X., & Liu, X. (2021). How Can Creative Ideas Be Implemented? The Roles of Leader Performance-Prove Goal Orientation and Boundary-Spanning Strategy. Creativity Research Journal, 33(4), 411-423. https://doi.org/10.1080/10400419.2021.1943135