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Tesla: The Innovators Dilemma

Tesla: The Innovator’s Dilemma?

Tesla has opened its first showroom in Stuttgart Germany, in the heart of the upmarket German auto industry. An audacious American electric car-maker is putting two fingers up to the traditional centre of the Global motor trade. Diesel schmiesel! Daimler Benz has reacted by declaring they are going to invest $1Billion on developing electric cars in the U.S.

Professor Clayton Christensen, in his essential MBA manual, “The Innovators Dilemma” describes this process taking place over and over again: a new upstart arrives into a traditional industry and surreptitiously takes it over by stealth. Honda did it to the motorbike industry in America (think Harley Davidson) and Yamaha took over the piano business from Steinway. It was when a Yamaha piano was played in Carnegie Hall that Steinway knew the game was up. When Honda launched a small 50cc motorbike without a clutch, the motorbike industry laughed.

It is the essential renewal of enterprise described by Schumpter as

“Creative Destruction”, without which nothing new would happen in our material lives. The new replaces the old without being seen by the incumbents for quite some time, or worse, seen and ignored. This, of course allows the startups the opportunity to access the market before the big guys get wind of what you are doing.

Electric cars are coming to a driveway near you, like it or lump it, and the big car companies have missed a trick. They are playing frantic catch-up: Volvo are going electric motors only from 2018. Others are scrambling to do likewise.

Christensen described how large companies fail to innovate because it forces them to essentially compete with themselves. Too busy doing what they do well, they often miss the huge disruption coming on the horizon.

The motor business is about to go through a major revolution and the big players may find themselves usurped by the likes of Tesla, Apple and the Alphabet group, all of whom are years ahead in technology and are about to bring the world something completely different: a silent high-tech air-friendly vehicle that portents a major change in how we live.

Dr Owen O’Brien

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