The Blue Owl
Endangerous Herbivore
In reverse order:
He said that, but I confess I don't buy it. I simply don't believe they have stacks of PowerWalls that they can't install for lack of electricians. I mean, there may be a shortage, but I don't think that is the bottleneck. I'm way more inclined to think that they can't make the PowerWalls in the large numbers demanded by the market right now, simply because they can't source enough cells.
This one is really interesting, and it has really been a long-running phenomenon with Tesla. Customer service seems to be really disorganized and erratic, with no shortage of horror stories. But I don't regard it as a constraint on growth, and I am really, really not worried about it.
A while ago, I read this book (highly recommended) called Inside the Tornado by Geoffrey Moore (of Crossing the Chasm fame). He makes the striking observation that companies going through the 'tornado' stage (which, by my estimate, Tesla has just entered in Q2) should focus all their resources on themselves and not the customer. That doesn't mean shipping crappy product; quite the contrary, quality is essential to avoid returns and service expense. But you can afford to, or even should, ignore the customer! This stage is fundamentally a land grab. The only thing that matters is to ship.
His exposition matches Tesla to a tee (emphasis mine):
One of the premier embodiments of this principle was Oracle. In their tornado stage, their main competitor was Ingres. Oracle didn't care about the customer; Ingres put the customer first. The rest is history:
The shorts retweet incessantly every bad Tesla customer service experience they can find and present it as evidence that Tesla is crumbling. This sounds somewhat perverse, but I see it as confirmation that they are doing the right thing. They are focussing all their resources on the single most important thing, which right now is not the customer, but their ability to ship.
He said that, but I confess I don't buy it. I simply don't believe they have stacks of PowerWalls that they can't install for lack of electricians. I mean, there may be a shortage, but I don't think that is the bottleneck. I'm way more inclined to think that they can't make the PowerWalls in the large numbers demanded by the market right now, simply because they can't source enough cells.
This one is really interesting, and it has really been a long-running phenomenon with Tesla. Customer service seems to be really disorganized and erratic, with no shortage of horror stories. But I don't regard it as a constraint on growth, and I am really, really not worried about it.
A while ago, I read this book (highly recommended) called Inside the Tornado by Geoffrey Moore (of Crossing the Chasm fame). He makes the striking observation that companies going through the 'tornado' stage (which, by my estimate, Tesla has just entered in Q2) should focus all their resources on themselves and not the customer. That doesn't mean shipping crappy product; quite the contrary, quality is essential to avoid returns and service expense. But you can afford to, or even should, ignore the customer! This stage is fundamentally a land grab. The only thing that matters is to ship.
His exposition matches Tesla to a tee (emphasis mine):
The market consequence of this stampede is that, virtually overnight, demand dramatically outstrips supply, and a huge backlog of customers appears. The financial implications of this backlog are hard to overstate. For not only does it represent a massive sales opportunity in and of itself, it also represents an even larger follow-on market opportunity. That is, since switching costs in high tech are so high, once customers settle on a particular vendor, they rarely switch. So each sale gained in a tornado really should be looked at as an annuity, and the total number of sales a company can garner while the tornado is in process sets the limits of their installed base and thus the boundary conditions on their future revenue from that marketplace.
In sum, the tornado is a hugely significant time. It is also a bit confusing for the marketing department. They are used to defining their value to the company as creating demand, but in a tornado there is no need for this service. So what should the marketing strategy be now?
To put it as succinctly as possible—just ship!
Don’t segment. Don’t customize. Don’t commit to any special projects. Just ship. It is like a sardine run. You don’t bait hooks, you just stick in your bucket, pull them out, and go back for more. Do anything you can to streamline the creation, distribution, installation, and adoption of your whole product. The more friction you can avoid, the more throughput you can achieve. Focus on supply chains and quality to ensure that as you ship you do not get caught up in returns. Don’t focus on the customer, in other words; focus on yourself. You, not they, are the gating item in this market.
In sum, the tornado is a hugely significant time. It is also a bit confusing for the marketing department. They are used to defining their value to the company as creating demand, but in a tornado there is no need for this service. So what should the marketing strategy be now?
To put it as succinctly as possible—just ship!
Don’t segment. Don’t customize. Don’t commit to any special projects. Just ship. It is like a sardine run. You don’t bait hooks, you just stick in your bucket, pull them out, and go back for more. Do anything you can to streamline the creation, distribution, installation, and adoption of your whole product. The more friction you can avoid, the more throughput you can achieve. Focus on supply chains and quality to ensure that as you ship you do not get caught up in returns. Don’t focus on the customer, in other words; focus on yourself. You, not they, are the gating item in this market.
One of the premier embodiments of this principle was Oracle. In their tornado stage, their main competitor was Ingres. Oracle didn't care about the customer; Ingres put the customer first. The rest is history:
None of this was reflected in Ingres’s approach. They were the nice guys. They said, we simply cannot grow any faster than 50 percent and still adequately serve our customers. No one can. Look at Oracle. They are promising anything and everything and shipping little or nothing. Everybody knows it. Their customers hate them. They are going to hit the wall. They will implode, just wait and see. We are doing things the right way; we are going to stay our course.
Ingres was confident it was taking the high moral ground and would be rewarded. It turned out it was only half right. In 1991 Oracle did indeed hit the wall, but that was long after the critical market share competition was over. By that time, Ingres was a bewildered company that had lost its sense of direction and sold itself to ASK Computers. It simply could not believe what had happened. It was as if Darth Vader had slain Luke Skywalker, as if Bambi had met Godzilla.
What Ingres—as well as many of the rest of us at the time—did not understand is that, for pragmatist customers, the first freedom in a rapidly shifting market is order and security. That can only come from rallying around a clear market leader. Once the apparent leader-to-be emerges, pragmatists will support that company, virtually regardless of how arrogant, unresponsive, or overpriced it is. Thus the penalty for poor customer satisfaction in a tornado is negligible compared to the rewards for going out and getting the next customer.
And that brings us to the third and final lesson that Oracle taught.
Ignore the Customer
In a tornado, the correct marketing strategy really is to ignore the customer! The reason is that, in a tornado, customers are lining up for the hot product. They do not need—or want—to be courted—the problem is not to create demand: they need—and want—to be supplied. Anything you do to restrict the throughput of the supply process works against this goal. That is why Henry Ford not only could say, but was correct in saying, “You can have any color Model T you want as long as it’s black.”
To be sure, once the tornado was over, Ford ended up painting its cars in two-toned purple if that’s what the customer wanted. But that is not what the market requires or the customer desires during the tornado. They just want to get their first car, or their first telephone, or their first PC, or their first laser printer. They want the commodity. So your focus must be on getting them that item as quickly, easily, and cheaply as possible. This means becoming intensely internally focused on your delivery capabilities and not letting yourself get distracted by “secondary” factors such as an individual customer’s particular needs.
Ingres was confident it was taking the high moral ground and would be rewarded. It turned out it was only half right. In 1991 Oracle did indeed hit the wall, but that was long after the critical market share competition was over. By that time, Ingres was a bewildered company that had lost its sense of direction and sold itself to ASK Computers. It simply could not believe what had happened. It was as if Darth Vader had slain Luke Skywalker, as if Bambi had met Godzilla.
What Ingres—as well as many of the rest of us at the time—did not understand is that, for pragmatist customers, the first freedom in a rapidly shifting market is order and security. That can only come from rallying around a clear market leader. Once the apparent leader-to-be emerges, pragmatists will support that company, virtually regardless of how arrogant, unresponsive, or overpriced it is. Thus the penalty for poor customer satisfaction in a tornado is negligible compared to the rewards for going out and getting the next customer.
And that brings us to the third and final lesson that Oracle taught.
Ignore the Customer
In a tornado, the correct marketing strategy really is to ignore the customer! The reason is that, in a tornado, customers are lining up for the hot product. They do not need—or want—to be courted—the problem is not to create demand: they need—and want—to be supplied. Anything you do to restrict the throughput of the supply process works against this goal. That is why Henry Ford not only could say, but was correct in saying, “You can have any color Model T you want as long as it’s black.”
To be sure, once the tornado was over, Ford ended up painting its cars in two-toned purple if that’s what the customer wanted. But that is not what the market requires or the customer desires during the tornado. They just want to get their first car, or their first telephone, or their first PC, or their first laser printer. They want the commodity. So your focus must be on getting them that item as quickly, easily, and cheaply as possible. This means becoming intensely internally focused on your delivery capabilities and not letting yourself get distracted by “secondary” factors such as an individual customer’s particular needs.
The shorts retweet incessantly every bad Tesla customer service experience they can find and present it as evidence that Tesla is crumbling. This sounds somewhat perverse, but I see it as confirmation that they are doing the right thing. They are focussing all their resources on the single most important thing, which right now is not the customer, but their ability to ship.
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