Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

Harvard Business Review: Tesla’s Not as Disruptive as You Might Think

dha

Member
Jul 18, 2013
586
2,497
Los Angeles
Dr. Dean Dauger's response in the comments is superb. Completely respectful, on-point and articulates the key competitive advantages Tesla enjoys:

Bartman's argument falls flat on the notion that "competition will be fierce".


Since 2008 Tesla produced BEVs with more than 200 miles of range, starting with the Roadster. In those _seven years_ the "Competitive Response" from incumbent automakers is pathetic, offering less than 100 miles of EPA-rated electric range. (The Mercedes B-class and Toyota RAV4 are not competitive responses because they use licensed Tesla technology.) EV sales are slow because most people don't want short-range EVs like those; those are demand-constrained. They want EVs like Tesla's, which today are supply-constrained. Bartman seems blind to this vital difference.


Perhaps Bartman is confused too by vaporware, aspirations that do not yet exist from incumbent automakers, like Chevy and Audi, who are all talk right now about long-range BEVs. Their actual response to the Model S today is to increase the horsepower in their gas engines. Tesla responds with a 691-hp dual-motor P85D and autopilot, showing Tesla will keep making their product better than any comparable gas car.


The reason why gas car makers can't respond is that the attempt exposes themselves to fiscal jeopardy. Bartman's team needs to understand the Innovator's Dilemma.


GM, Ford, MB, Toyota, etc., have billions of $ of assets invested in gas car tech in the form of intellectual property, tooling, manufacturing assets, ongoing R&D, and human resources. To fully engage in BEVs, these gas car automakers would have to write off these billions in assets immediately, which is _fiscal suicide_. They'd be killed in the stock market and that CEO would be kicked out that quarter. Add that no one gas car maker will go first. It's the Prisoner's Dilemma.


Instead these automakers must amortize these gas car assets over 20 years, moving only gradually away from gas car tech. Unable to "shift ... quickly", the incumbents' "competitive response" will be lackluster at best and inadequate to close Tesla's 7-year lead.


Therefore, for the current foreseeable investment timeframe, Tesla Motors, with no assets in gas car tech, can fully engage in BEVs facing very weak BEV competition, giving this young carmaker a very unique advantage and unique opportunity to disrupt.


Bartman also fails to recognize the advantage of Tesla's 2.5-year-old Supercharger network, a major part of what makes Tesla cars practical. Except for Nissan with CHAdeMO, the competition gives no response to that infrastructure advantage. And CHAdeMO, only half the charging speed a Supercharger, is years behind both in deployment and effectiveness.


Look for these critical pieces of a sensible BEV business plan, which incumbent automakers are missing:


1. A compelling, production 200-mile BEV - Anything less than offering one to buy today is a distraction from their embarrassment.
2. A high-speed EV charging infrastructure - The offerings from Nissan and BMW are a half step. Where are the other makers?
3. An inexpensive battery supply requiring the economy of scale of a Gigafactory - The incumbents have nothing to show.


Tesla's 1 & 2 are growing unimpeded and building of Tesla's 3 is well underway. The incumbents might sandbag their 1, but 2 & 3 are far too big to keep secret and take years to design and build; if they exist we would have seen them. With incumbents' inability to mount a "fierce" response to Tesla so abundantly clear, the opportunity for disruption is Tesla's.
 

Drucifer

Active Member
Nov 30, 2014
1,117
263
Charlotte, NC
A surprisingly ill-informed study at the Harvard Business School is highlighted in this article:

Tesla’s Not as Disruptive as You Might Think - HBR

I'd say is a good case of GIGO. A few of us might like to point out their flaws. I did.

Elon Musk has two undergraduate degrees from Penn (B.S. in Physics, followed by a B.S. in Economics from the Wharton School at Penn). He then went on to Stanford. Do you really expect HBS to write positively about Wharton graduates?

As we used to say about the Harvard case studies and the Harvard Business Review, "there is no BS like HBS".

- - - Updated - - -

The other thing that is amazing is that HBR seems surprised that the disruption is happening at the high end of the car market. Apple did not disrupt the cellular phone market (and essentially destroy RIM/Blackberry, Motorola and Nokia) by coming in with a cheaper, better performing device. What they seem to fail to take into account, with their 20 year old theory, is that most consumer markets have bifurcated, moving both upmarket (think Nordstroms/Neiman Marcus) and downmarket (think Walmart) while having the middle of the market left abandoned (Sears). Cell phones are the same way (cheap, throwaway prepaid phones or iPhone/upper end Android phones, leaving cheaper Androids and others in the dust) and so are Cars (GM still makes Cadillac and Chevy, Olds and Pontiac are history, Ford still makes Lincoln and Ford, Mercury is history).

This model seems to fit Samsung (entering as a cheap TV maker and moving up market over time) or Hyundai (entering as a lower cost car maker and moving up over time). These examples are contemporaneous with the 1990's. This model may need a significant rework to get with the times.
 

aznt1217

Active Member
Aug 27, 2012
2,559
1,869
New York, NY
Lol I'm surprised. I'm actually a friend of Bartman's. I think he has valid points but not "real world." This is all written in the scope of academia in regards to this theory: Disruptive innovation - Wikipedia, the free encyclopedia

It really depends on how you view Tesla.

The true disruption is the motor and batteries... Not the car itself. The litmus test for the definition of disruption is: does tesla create a new market that will eventually overtake the existing one?

This is debatable because the Model S is good at many things. Luxury EV market in is disruptive. If you put it in the pool of luxury cars like Bartman argues, it isn't disruptive but revolutionary in the subclass of sustaining innovation.

But doing a parts explosion of the Model S. Does the battery pack, software, inverter, etc. Create a new market that can eventually overtake : Yes. That's why the power train business was compelling but the key constraint is cell supply which we all know is being addressed with the GF. remember Toyota wanted more but it just wasn't possible to do it profitably.

It can be argued direct sales is disruptive. OTA updates are disruptive within the auto industry.I can keep going but food for thought before we whip out the pitchforks
 

dauger

Member
Jan 21, 2014
240
207
Huntington Beach, CA, USA
Lol I'm surprised. I'm actually a friend of Bartman's. I think he has valid points but not "real world." This is all written in the scope of academia in regards to this theory: Disruptive innovation - Wikipedia, the free encyclopedia

It really depends on how you view Tesla.

So Bartman fed malformed data into a logical argument, but expects the conclusion to be correct? Of course it's wrong. That's GIGO.

The article implies Model S started as a $100k car and gradually lowered in price, fitting a "sustaining innovation" model. It didn't. The 2012 introduction included a $59k 40kWh Model S, but with only 150 miles of range it captured less than 2% of orders, so it's gone. That proves market demand bifurcates above and below 200 miles of range. In fact, the low end is going up, with the discontinued 60 replaced by a 240-mile 70D. Bartman and that article use data that is the reverse of these facts.

Yes it's a matter of context. In the context of luxury cars, Tesla's disruption of that market occurred in 2008 or 2012. Just look at how quickly Model S outsold gas luxury sedans in 2013. Once established then it's sustaining innovation, expanding geographically, etc. I fully expect Model X to disrupt the SUV submarket the same way.

In the context of the mass-market car, I agree Tesla has not yet disrupted. That will occur with the Model 3, whose story follows the mass-market Model T to ah, well, T, as described in that link. The Model S' disruption in its context makes the Model 3's disruption and success in its (bigger) context believable.

Bartman is glaringly wrong about expecting "fierce competition", which is why I started there, which is really the powertrain context you've identified, wherein the car is merely packaging around it. The most valuable assets the incumbents own is in the ICE powertrain vertical from design to maintenance, so yes Tesla is creating a whole new long-range BEV powertrain market that will overtake the old. Why doesn't Bartman recognize that?

Bartman's other error is to insert a luxury sedan (Model S) in a confusion of the mass-market context and the electric car context. Perhaps Model S is "sustaining innovation" relative to Roadster, but then Bartman conflates that long-range EV context with mass market, skipping over layers of short-range EV and luxury sedans and incumbents' fixed assets. He took the Far Side "a miracle occurs" leap.

I see nothing wrong with the Disruptive Innovation theory; Bartman's team misapplied it. We've listed at least four ways to correctly apply it above. As Einstein said, "Everything should be made as simple as possible, but no simpler."

My PhD is in Physics, and I also know some business from real-estate investment and management. Perhaps I've just completed my peer review of this HBS study.
 
Last edited:

Jaff

Active Member
Aug 15, 2010
3,135
326
Grimsby, Canada
Isn't Bartman the dude who kept the Cubs outta the World Series in 2003? :wink:

Great response Dr. D ! :smile:


Lol I'm surprised. I'm actually a friend of Bartman's. I think he has valid points but not "real world." This is all written in the scope of academia in regards to this theory: Disruptive innovation - Wikipedia, the free encyclopedia

It really depends on how you view Tesla.

The true disruption is the motor and batteries... Not the car itself. The litmus test for the definition of disruption is: does tesla create a new market that will eventually overtake the existing one?

This is debatable because the Model S is good at many things. Luxury EV market in is disruptive. If you put it in the pool of luxury cars like Bartman argues, it isn't disruptive but revolutionary in the subclass of sustaining innovation.

But doing a parts explosion of the Model S. Does the battery pack, software, inverter, etc. Create a new market that can eventually overtake : Yes. That's why the power train business was compelling but the key constraint is cell supply which we all know is being addressed with the GF. remember Toyota wanted more but it just wasn't possible to do it profitably.

It can be argued direct sales is disruptive. OTA updates are disruptive within the auto industry.I can keep going but food for thought before we whip out the pitchforks
 

Saghost

Well-Known Member
Oct 9, 2013
8,224
7,088
Delaware
There won't be fierce competition for the mass market EV in five years unless the future competitors or their subcontractors start investing in big battery factories now.

Tesla is building a plant to produce more capacity every year than the entire industry did in 2013 - which they figure is enough to support 500k cars per year.

Anyone else wanting to approach that volume is going to need that kind of battery production for themselves...
 

EldestOyster

Member
Apr 17, 2014
265
174
Moonlight Beach
HBR said:
If that happens, Bartman believes that GM, Toyota, and others could shift to EVs relatively quickly

Note the use of "relatively quickly". For the auto industry, would that be three years, or more like ten?

If they all drop what they're doing to start knocking out EV's at a record pace, how is that not disruptive?

And if it were to come to pass, Elon will have accomplished his stated goal of prying us off fossil fuel.
 

dauger

Member
Jan 21, 2014
240
207
Huntington Beach, CA, USA
A follow-up: I replied yes to this today from HBR. Maybe it'll be in print?:

Hi there,

My name is Nicole Torres and I'm an assistant editor at Harvard Business Review. Thank you for your comments on Tesla’s Not as Disruptive as You Might Think on HBR.org. You're receiving this letter because we liked what you had to say – and we’re considering publishing your thoughts in the Interaction section of the July/August print issue.

To have your comments published in the print magazine, please reply to this email by Friday, May 8, 2015 with your full name, job title, and company affiliation, so that we may consider it.

We reserve the right to edit for clarity, content, and space. Also, please note that in the case of last minute changes to the section, your comments may not appear in the print issue.

Please let me know if you have any questions at all.

Thanks again, and keep reading,
Nicole




Nicole Torres
Assistant Editor
Harvard Business Review | HBR.org


 

jhm

Well-Known Member
May 23, 2014
9,644
34,400
Atlanta, GA
Tesla's entry into stationary storage demonstrates that it can migrate from a high margin product line (performance autos) to a low margin product line (Powerpacks). This is from a margin of 28% down to something well below 20%. The economies of scale an collocation will enable Tesla to improve the PowerPack up to a 20% GM. Battery packs are the enabling technology for electric vehicles and renewable energy, but it is doubtful that they will sustain makers of the internal combustion engine, fossil fuel power plants or fossil fuels.
 

aznt1217

Active Member
Aug 27, 2012
2,559
1,869
New York, NY
A follow-up: I replied yes to this today from HBR. Maybe it'll be in print?:

Hi there,

My name is Nicole Torres and I'm an assistant editor at Harvard Business Review. Thank you for your comments on Tesla’s Not as Disruptive as You Might Think on HBR.org. You're receiving this letter because we liked what you had to say – and we’re considering publishing your thoughts in the Interaction section of the July/August print issue.

To have your comments published in the print magazine, please reply to this email by Friday, May 8, 2015 with your full name, job title, and company affiliation, so that we may consider it.

We reserve the right to edit for clarity, content, and space. Also, please note that in the case of last minute changes to the section, your comments may not appear in the print issue.

Please let me know if you have any questions at all.

Thanks again, and keep reading,
Nicole




Nicole Torres
Assistant Editor
Harvard Business Review | HBR.org



Nice! I took a more direct approach and gave Bartman feedback on FB...
 

Products we're discussing on TMC...

About Us

Formed in 2006, Tesla Motors Club (TMC) was the first independent online Tesla community. Today it remains the largest and most dynamic community of Tesla enthusiasts. Learn more.

Do you value your experience at TMC? Consider becoming a Supporting Member of Tesla Motors Club. As a thank you for your contribution, you'll get nearly no ads in the Community and Groups sections. Additional perks are available depending on the level of contribution. Please visit the Account Upgrades page for more details.


SUPPORT TMC
Top