By Cyndi Pyburn
In 1908, Henry Ford cornered the automotive market by using his innovative factories to build an automobile with an affordable price tag. The Model T made automobile ownership, and the autonomy that came with it, available to the average consumer at the low, low price of $850 or about $11 000 in today’s dollars.
Fast forward 110 years and Tesla’s leadership and innovations in creating the upcoming Model 3 (majority available in 2018) are equally impressive. Why? As did Ford’s Model T, Tesla’s Model 3 is disrupting the automobile industry.
While not yet regarded as profitable, Tesla’s high market valuation means that Wall Street is betting that Elon Musk, Tesla’s founder, can revolutionize the industry with yet another innovative approach to making and selling electric cars. It’s part leadership and part innovation. Taking on complex industries, such as the automotive industry, has a high degree of difficulty and requires a unique set of leadership skills. But often, taking on something difficult can lead to innovative solutions. Let’s explore what it takes.
Purpose & Commitment: Tesla’s massively transformative purpose is to accelerate the world’s transition to sustainable energy. Every product Tesla brings to market is focused on this vision and backed by their master plan, something Musk has shared on the website. In fact, Musk says he believes 500 percent in what he is doing. As founder, his leadership and commitment have attracted a diehard fan base around himself as evidenced by his 11.4 million Twitter followers, including me!
New Approach to Sales: Tesla’s revolutionary, direct-to-consumer sales model, which allows customers to purchase directly from Tesla versus through third-party franchised dealerships, has disrupted the way people today think about buying cars (just like Uber disrupted the way we think about taxis and Airbnb disrupted the way we think about accommodations).
Out-of-the-Box Thinking: Tesla received 325,000 reservations for the Model 3 in the just the first week of the launch (USD $35,000 for the compact electric car or about CAD $44 000). You can reserve one here. Each customer, including a few of my friends and family, believes so much in the vision of the product and the leadership that they’ve handed over $1,000 to reserve theirs. With over 400,000 reservations to date, Tesla raised over $400 million in ‘free’ capital. The ‘funds through reservations’ cash allows Tesla to fund many things such as research and development projects, construction of its battery factory, and an expansion of its Supercharger network. Their commitment to innovation is clear if you consider that their R&D intensity budget is three times higher than traditional autombile manufacturers, as shown in this chart by statista.
Autonomous driving: Virtually all major car and tech companies are pursuing self-driving technology as the future of transportation but Tesla’s Autopilot System is the most advanced on the road today. Musk says “When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere.” Think about it. Effectively, consumers will have their own personal chauffeur that allows them to work, sleep, and pretty much do anything they please while they commute somewhere.
New sources of energy: Tesla’s Gigafactory in Nevada, when complete, will be the world’s largest producer of batteries. By 2020, the Gigafactory will reach full capacity and produce more lithium ion batteries annually than were produced worldwide in 2013. But in the future, Tesla doesn’t want to power its cars with just batteries—it wants to use solar. This is yet another avenue for technological innovation and growth.
Tesla for sure is winning in innovation as outlined in Rowan Gibson’s Four Lenses of Innovation – A Tool for Creative Thinking, by doing the following:
- Challenging orthodoxies: Gas and petroleum might be the norm today but they don’t have to be the future and quite possibly they shouldn’t be
- Harnessing trends: Climate warming is already having negative effects on people and business
- Leveraging resources: People are willing to financially support companies with free capital when they believe in the brand purpose and mission
- Understanding needs: People want and need safe roads, and they want to free up time normally spent commuting
So is Tesla at the front of the automotive industry transformation? Tesla has shown the world that electric vehicles are desirable—they are faster, safer, require less maintenance, and are better for the environment. “Musk’s track record of promising the impossible is matched by a track record of delivering the wildly improbable.” – Forbes Magazine, August 2016
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