Learning from Tesla’s iteration within strategic innovation

Tesla's objective remains as it was over a decade ago: ‘to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible’.

Tesla has now released four models, iterating its initial plan to cater for the growing SUV demand. At the Tesla Model 3 launch, Elon Musk explained how each have served an innovation purpose:

The Tesla Roadster: high price and low volume. It showed the world you could make an electronic car.

The Tesla Model S: lower price and mid-volume. Taking the learnings from the Roadster and applying these to an everyday sedan electric car. The market and customers liked SUVs as much as sedans, so the Tesla Model X was introduced to meet those expectations. The revenue from both vehicles helped the next stage of innovation. Model X SUV was introduced to meet the growing SUV demand and uses the MODEL S platform.

The Tesla Model 3: affordable price and high volume. This was possible due to the earlier stages of the innovation process. Strategic technical innovation will require investment prior to mass market penetration. The identification and agreement of milestones for this innovation approach are important as the return on the investment could potentially be delayed. The Model Y SUV leverages the same platform and Elon is forecasting this model will sell more vehicles than all previous models combined.

Those leading or facilitating innovation programs within their organisation need to be aware of not lumping all initiatives into the same program, categorise ideas:

Implement now: This makes sense and aligns to our organisation’s agenda. Concrete suggestion: This is likely to be implemented within a year. The idea needs to be further refined and socialised; possibly matured. This also aligns to the organisational agenda. People generally tend to be overly optimistic of what can be delivered. It is likely that some of these ideas will go beyond a year. A dream. This is exciting; however, it is unqualified and likely to take several years and iterations. The Tesla learnings need to be applied to the dream. Whenever considering dreaming in an organisation determine if:

  1. There is a product niche with a small market willing to pay a high price for the first iteration.

  2. There is a mid-market that will be excited by the next generation of product. Your product is probably not going to be the cheapest; however, it must be differentiated. Is this mid-market a niche?

  3. Is there a possibility of this differentiation becoming mainstream?

The business could then scale. Be mindful that scaling attracts attention and niches do not. Often there is a desire for scale, but the niche may be more lucrative if you could make it profitable and sustainable!