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

Discussion in 'TSLA Investor Discussions' started by dauger, Apr 15, 2015.

  1. dauger

    dauger Member

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    #1 dauger, Apr 15, 2015
    Last edited: Apr 15, 2015
  2. Perfectlogic

    Perfectlogic Member

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    So Tesla isn't disruptive, but the literal golf cart is? They can't be serious.
     
  3. dha

    dha Member

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    Dr. Dean Dauger's response in the comments is superb. Completely respectful, on-point and articulates the key competitive advantages Tesla enjoys:

     
  4. CHG-ON

    CHG-ON Still in love after all these miles

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    Wrong. Fail!!!
     
  5. Drucifer

    Drucifer Active Member

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    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.
     
  6. aznt1217

    aznt1217 Active Member

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    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
     
  7. dauger

    dauger Member

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    #7 dauger, Apr 16, 2015
    Last edited: Apr 16, 2015
    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.
     
  8. Jaff

    Jaff Active Member

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    Isn't Bartman the dude who kept the Cubs outta the World Series in 2003? :wink:

    Great response Dr. D ! :smile:


     
  9. mershaw2001

    mershaw2001 Member

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    Reject, with the option of modifying and resubmitting? Or Reject with no resubmission?
     
  10. mkjayakumar

    mkjayakumar Active Member

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    The diversity and the intellectual capital in this forum is amazing
     
  11. Saghost

    Saghost Active Member

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    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...
     
  12. mejojo

    mejojo Member

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    Or become a "valued customer".
     
  13. EldestOyster

    EldestOyster Member

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    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.
     
  14. dauger

    dauger Member

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    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


     
  15. jhm

    jhm Active Member

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    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.
     
  16. aznt1217

    aznt1217 Active Member

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

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