Tesla: The Innovator's Dilemma?

Tesla has opened its first showroom in Stuttgart Germany, in the heart of the upmarket auto industry. An audacious American  electric car-maker is putting two fingers up to the traditional center of the global motor trade. Diesel schmiesel! Daimler Benz has reacted by declaring they are going to invest $1 Billion on developing electric cars in the U.S.

Professor Clayton Christensen, in his essential MBA manual, “The Innovators Dilemma” describes this process taking place over and over again: a new upstart arrives into a traditional industry and surreptitiously takes it over by stealth.

--Honda did it to the motorbike industry in America (think Harley Davidson).

--Yamaha took over the piano business from Steinway. It was only when a Yamaha piano was played in Carnegie Hall that Steinway knew the game was up.

--When Honda launched a small 50cc motorbike without a clutch, the motorbike industry laughed. Surely the macho culture in the US wouldn’t buy a little run-around motor-bike? Well, no, you see, it wasn’t those people who bought them at all, but a whole new consumer altogether who didn’t give a hoot about the image.

It is the essential renewal of enterprise described by Schumpter as:

“Creative Destruction,” without which nothing new would happen in our material lives. The new replaces the old without being seen by the incumbents for quite some time, or worse, seen and ignored. They are often inclined to grossly underestimate the threat.

Other revolutionary systems? Always.

In my own business life, I introduced a revolutionary plastic plumbing system to a very traditional skeptical market where everyone had been using copper and brass fittings for decades. It was a push-fit flexible product that cut installation time by 60 percent. I didn’t even manufacture it, I just became the distributor for a company that was finding it hard to get a market going.

5 years into the market.

I was five years into the market before the existing wholesalers realized the extent of the market penetration I had achieved! By then it was too late, I had distribution in place and thousands of users. A small fish had taken the market and they didn’t even see me coming. The manufacturer of the push-fit product eventually bought me out.

Coming to a driveway near you.

Electric cars are coming to a driveway near you, like it or lump it. The big car companies have missed a trick. They seem to be playing a frantic catch-up game. Volvo is going to electric motors at some time in 2018 (which, when you think about it, is a precipitous call). Others are scrambling to do likewise.

Why do some large companies fail to innovate?

Christensen described how large companies fail to innovate because it forces them to essentially compete with themselves. Too busy doing what they do well, they often miss the huge disruption coming on the horizon -- which is a huge opportunity as well.

The motor business is about to go through a major revolution and the big players may find themselves usurped by the likes of Tesla, Apple and the Alphabet group. All of these usurpers in the market are years ahead in technology of other bigger companies -- and they are about to bring the world something completely different. What will that something completely different be?  A silent, high-tech air-friendly vehicle that portents a major change in how we live.