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Tesla Motors:Using media and brand-building to accelerate commercialization
Sigvald Harryson
Associate ProfessorCopenhagen Business School
Case-Study Supported by Copenhagen Innovation and Entrepreneurship Lab
MODULE 7 ON ORGANIZATION: SESSION II November 6TH
The Shaping of Tesla Motors – Founders and Co-Founders
Founded in 2003 by Successful Entrepreneurs– Martin Eberhard (r.)– Marc Tarpening (l.)
Several Powerful Co-Founders joined– Elon Musk – co founder of PayPal
(below)– eBay billionaire Jeff Skoll– Founders of Google Larry page and
Sergey Brin
Tesla Motors – using Business Model Innovation – both for Innovation…
Focus on Innovation Partnerships:– Lotus Motors in the UK for complete
chassis– Electronics company in Taiwan for a
unique combined regenerative generator and engine
– Battery company in Japan for superior power-density in the lithium-ion polymer battery pack (6831 individual Li-ion batteries)
– Power management system developed in closeness to Stanford
… Exploitation …
Starting with a Decentralized Ownership-Partnership Model:– 200 employees in San Carlos HQ – now moved to Palo Alto– 15 employees in Taiwan – now moved back to Palo Alto – 25 employees at Lotus Engineering in UK – moving back
… Performance …
Focus on Performance– 0-100 in less than 4 seconds– Top speed above 200 km/h– Range above 300 km
Charging at home:– 6 hours for full charging
overnight– 2 hours if fast-charging is
required, but this requires 400V, a 60 Amp fuse and reduces battery lifetime
– Battery pack guaranteed for 100.000 miles or 4 years
… and Profitable Commercialization
Cash Flow Innovation– Downpayment of 50% of
total price upon client placing an order
– Remaining 50% paid upon delivery 12 months later
– Not unlikely that the initial 50% covers most of the COGS
Brand-building Innovation– Highly exclusive sales
venues– Hollywood Stars as first
Customers– Renting a dozen
Supercars for the opening event in LA (Santa Monica)
Developing a Sales-Concept based on Apple
Innovation in sales & customer relation – driven by George Blankenship
Online sales and web experience
TESLA stores to provide a unique life experience
Tesla Community to exchange knowhow and stories (storytelling for future customer)
Test drive and maintenance via service teams and pick up service
… and the Success Continues through Alliances
Daimler Benz– Taking 10% stake in Tesla
and buying motors and batteries for the eSmart and the A-class “e” version
Toyota– 2010, Toyota decided to
invest $50 million in Tesla – presumably taking 20% ownership
– Tesla Buying Toyota’s largest plant in the US – the Freemont NUMMI Factory at $42 million
– Toyota buying batteries and motors from Tesla that will manufacture the a Toyota utility vehicle RAV4
Dr. Herbert Kohler, Elon Musk and Dr. Thomas Weber at the press conference in July 2009 announcing the partnership between Daimler and Tesla Motors
Revolutionizing the World with Model S to “make the best car in the world – not only the best electric car!”
“Model S” as a new platform for future models with innovative capabilities– Better driving experiences than a regular car– New battery arrangement– Ultra lightweight body– Technological high end product
Starting to generate significant sales
Cash through Trust– Down-payments
ranging from 5,000 to 30,000 USD (signature version)
By October 2011, 6000 units sold globally of which 300 units reserved by Scandinavians– 160 from Norway– 139 from Denmark– 1 from Sweden
More than 17.000 units reserved globally – by December 2012– Norway still Number 1
Case Reflections I
Company Creation – This case starts at a point where the company already exists. By using the web, what aspects of
company creation (the start-up of Tesla Motors) do you find particularly relevant to explain how the founders could manage to get this degree of growth and new product development (both the Roadster and the Model S in less than 9 years)?
Partnering across industry is an important ingredient both for Open Innovation and New Business Creation. – What cross-industry partners do you see as most relevant for Tesla and why (clean-energy,
premium brands, etc)
At times when many automotive experts started to doubt how much longer Tesla Motors would survive Tesla acquired investments by Mercedes and Toyota, which boosted credibility and dedication to survive. It also raises an important point related to another management concept: Co-Opetition– What benefits can Tesla gain from the co-opetition with Daimler-Benz and Toyota?– How can Tesla manage to collaborate with partners and co-owners, who could also be seen as
competitors?– What other co-opetition partners do you think could be relevant for Tesla?
Case Reflections II
For the Tesla Roadster Tesla applied a market-skimming strategy aiming for extreme celebrities as early adopters, and may consider a similar strategy for the Model S– What European markets do you see as most relevant and why?– What celebrities do you think of in your home region – who have a green mind that they may want
to show off in ways that would promote the Tesla brand?
Modularity offers many advantages– What advantages has Tesla been able to extract through modularity?– What further/future advantages could Tesla capture in terms of modularity?
Case reflection– What aspects in the case did you find most interesting?– What aspects in the case did you find least interesting?– What aspects are missing in the case – to make it fully suit your learning objectives? (production
setup;
… bringing us to the following conclusions
What Tesla did well– Cash flow model– Smart marketing and brand
positioning– Radical and revolutionary
development only possible in a completely new non-automotive company
– TBC in class
What you would do differently– TBD in Class