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If Tesla executes, they are going to be the leading company in a number of industries, of which battery technology and manufacturing is one of them. They are al

If Tesla executes, they are going to be the leading company in a number of industries, of which battery technology and manufacturing is one of them. They are also leaders in direct sales, JIT manufacturing, motor design, any one of which is a disruptive innovation channel they could monetize, all in the service of building electric cars. Tesla is an energy company, a battery company, a car company, etc, just as GE or any other innovator ends up in many segments. What they are is a nascent Multi-business, Multi-national company that the market is betting (based on the stock price) is going to be able to be a global force. A lot of publicly traded companies are single-business companies that derive most of their revenues from a domestic operation. The few companies that manage to become multinationals have this outsized influence because they tend to drive massive revenues, earnings, and markets caps. The correlation between operating in multiple business areas and being a massive multinational is a direct relationship, because disruptive businesses always reach a saturation point. Businesses like Tesla that set out to disrupt industries that represent significant portions of GDP will naturally need to move into multiple markets in order to execute their strategies, because they need to disrupt or create a sequence of disruptive or creative strategies in order to reach that saturation point (natural market size). I love Elon for the fact that he thinks of his businesses on a planetary basis, and if you consider the point, you'll see he's actually executing Tesla in multiple markets simultaneously, and essentially going directly from startup to Multinational, and skipping the domination of a single category. He knows that if he doesn't, he's going to face stiff competition from entrenched companies and it's likely he'll lose his advantage. But by tight control of the supply line businesses, and a few strategic relationships with existing multinationals, he's able to elevate Tesla into a multi-business, multi-national organization in record time. Sure, they're a battery company, but what they really are is an organization that's shooting for the moon and actually executing at that scale. Simple incredible to watch.

lugg 12y ago
I simply cannot wait for the biography. I really find this story to be more interesting than any other in similar vein. I really want to know did he start out with this plan or did he simply see batteries as being the easiest thing to improve on by multiples compared to alternatives. Perhaps better said, there are many parts to a car that could be innovated on to such great improvements but the battery in electric cars really needed to be improved by an order of magnitude to make them competitive with petrol power. Was it that fact that drove him to move into the global space using batteries or was moving global going to happen with whatever he needed to do to improve over the competition so much?
jeremyrwelch 12y ago
My point with this post is that their business hinges on Battery production and tech more than any other component, and thus the lead they've created in this space matters more than any of their other innovations. But you're right, their execution on multiple fronts is truly unreal.
- happertiger 12y ago
  I mean it's a hell of a good point. Not trying to take away from the post.
- hnnewguy 12y ago
  >thus the lead they've created in this space matters more than any of their other innovations What lead do they have in battery production? Currently, they purchase all cells from Panasonic, if I'm not mistaken. Sure, the Gigafactory is going to be...big. But it's far from finished (and there's speculation that construction is on hold). Meanwhile, it's not like all the other large-scale battery producing conglomerates are just sitting around; they are also expanding production.
- e12e 12y ago
  Somewhat related: I remember that in the late 90s a Mitsubishi subsidiary, SUN-A, was tasked with developing transformers for Toyota's new hybrid cars. It'll be interesting to see if building a megacrop will be better than building a market place with various competing companies/contractors for this technology (Not that Tesla will prevent such a market place to develop -- indeed one already exists. I just mean it'll be interesting to see if Tesla will benefit from dominating by themselves, rather than delegating to existing market leaders).
darkmighty 12y ago
I have a little trouble seeing all the businesses you see, which unsubstantiates your point a bit for me. For example, being a leader in direct sales is great for their goal of spreadings EVs. But how is this applicable anywhere else outside the car industry? Does apple 'monetize' direct sales as a 'channel'? Does apple 'monetize' JIT manufacturing as a 'channel'? To me they just use it as a tool to better position the company. Similarly, once established it's unlikely other car manufacturers will consistently buy motors from them. Fortunately or not, electric induction motors are beautifully simple, any manufacturer could come up with a design much quicker than an ICE for example. Now for it's two markets, electric cars and commercial batteries, I do think they're posed to succeed provided pure electric cars actually gain widespread adoption and so do Li-ion batteries (and not other storage methods which may turn out to be cheaper). The interesting point for me is that all his business currently rely on steady, yet iterative, technological improvement to reach their goals (they're already successful, but haven't reached the ultimate goals yet). Tesla needs better batteries, SolarCity better cells, SpaceX reusable rockets. It will indeed be a thrill to watch over the next few years.
- NamTaf 12y ago
  > Does apple 'monetize' direct sales as a 'channel'? Does apple 'monetize' JIT manufacturing as a 'channel'? Yes, keeping their stock pool as low as it does has real financial benefits associated with it. Cook's entire empire at Apple was built on the back of his prowess at streamlining this, such is the value of it to the business. In that sense, they certainly did monetise their skills in JIT manufacture. I'd argue they also did monetise the direct sales aspect, since the whole 'Apple Store' experience is presumably of net financial gain to them, or else they wouldn't do it.
- cloudwalking 12y ago
  I agree with what you are saying. I'd just like to be pedantic about 300+ HP induction motors: they are deceivingly complex to manufacture. The tolerances required are measured in microns. Fortunately, the motors are inexpensive (relative to ICE engines), easy to swap out of the car, and cheap to teardown and rebuild. Manufacturing, design for manufacturing, and efficient service and rework departments will be important for scaling motor production.
istvan__ 12y ago
Exactly. I think they had to re-imagine how the big companies doing car production and it resulted in the innovations you are talking about. The reaction Tesla triggered in the car industry in US is rather laughable, screaming for legislation to limit the impact of Tesla on their sales. There are promising changes though, it is good to see that some companies go this far: http://money.cnn.com/2013/03/27/autos/mercedes-tesla-b-class-electric/ http://money.cnn.com/2013/03/27/autos/mercedes-tesla-b-class... If Tesla is going to be a battery company, be it, but I think they have a bright future for most of their business (including selling electric cars).
shas3 12y ago
Usually, with exceptions, conglomerates (the dreaded c-word) are not desired by investors. There's even an estimated "conglomerate discount" for companies of this kind. With certain word-replacements, your comment can be applied for Hewlett Packard too, until the last part. GE, Berkshire Hathaway, General Dynamics, UTC, Honeywell, DuPont, 3M, etc. are exceptions to the rule, when it comes to the performance of conglomerates! One thing common to these companies is adaptability: they are constantly in churn and constantly seek changes in direction to focus on whatever products are profitable. For every successful conglomerate, there are dozens which failed or were broken up. Given all this, it is too early to sing praises for Tesla! Musk is a great visionary, but creating the next GE also requires a lot of luck and happenstance. [1] http://www.economist.com/news/business/21593412-conglomerates-once-seen-heading-extinction-are-spreading-their-wings-dodo http://www.economist.com/news/business/21593412-conglomerate... [2] http://www.foxbusiness.com/markets/2011/01/19/dismantling-conglomerates-trendy/ http://www.foxbusiness.com/markets/2011/01/19/dismantling-co...
- chatmasta 12y ago
  Those conglomerates developed before the age of computers. They designed their operational structures without the convenience of modern technology, and therefore relied on expanding work forces to grow their company. Labor was cheap, and necessary for growth at the time because humans had to do so much more than they do now. Facebook is a multinational company with only a few thousand fulltime employees. If GE or Microsoft developed in the same technological context as facebook, they would likely employ far fewer people than they do now. The market increasingly favors agility, and monolithic business models are becoming obsolete (if they are not also decentralized in some capacity, a la Uber). Tesla can become a powerful multinational player while remaining agile.
  - kriro 12y ago
    The conglomerate structure is kept by choice in the case of Berkshire Hathaway. There's a pretty good outline of the reasoning by Buffett in the 50th anniversary letter. 3M is often used as an example in Strategic Management, particularly as an example of Mintzberg's views (strategies emerge and are not planned). I think the emerged strategy is usually labeled "working with surface material" or something. I guess one could argue "battery company" is an emergent strategy for Tesla in that sense but I think there's certainly planning to it and it wasn't just discovered. But you can use that "post-branding" that is typical of Mintzberg and I think the author of the blog does a good job.
higherpurpose 12y ago
Don't forget the "car charging" business. Tesla announced before that it's willing to license its Supercharger network to other car makers. That business could one day replace most petrol charging stations.
- patrickk 12y ago
  And the backup battery business for homes and business: http://www.bloomberg.com/news/articles/2014-05-08/musk-reveals-what-tesla-s-solar-backup-battery-may-look-like http://www.bloomberg.com/news/articles/2014-05-08/musk-revea...
- hnnewguy 12y ago
  >That business could one day replace most petrol charging stations. Why wouldn't gas stations merely re-equip with electric charging equipment? They already have the best real estate. There are also competing standards for DC charging, so I find it highly unlikely that the other manufacturers will license anything from Tesla, rather than settling on another standard.
  - mikepurvis 12y ago
    Tesla has the established network, and also the fastest technology— by far. I'm not sure existing gas stations really have the best real estate. Pulling off the highway for five minutes to gas up is pretty different from plugging in for an hour, and I'm not sure I'd want to do those two things in the same kind of location.
rplnt 12y ago
How are they multi-national?
- davedx 12y ago
  They sell cars in multiple countries. For example, here in the Netherlands, Tesla has a pretty big presence for the size of the company. I frequently see Model S's on the roads here.
  - rplnt 12y ago
    I'm not sure that qualifies as multi-national. I'd say you have to own R&D in multiple countries, not just sell there (through someone probably). But I see your point.
    - the-dude 12y ago
      Tesla has a distribution-centre near Eindhoven, The Netherlands.
    - lotsofmangos 12y ago
      They are going to be building a UK R&D center apparently, so they are on their way. http://www.managementtoday.co.uk/news/1306223/electric-cars-become-familiar-sight-uk-tesla-plans-huge-expansion/ http://www.managementtoday.co.uk/news/1306223/electric-cars-...
PinguTS 12y ago
In what sense is Tesla a leader in JIT manufacturing? Do you know how manufacturing takes place at all those other car companies in Germany, Japan, and South Korea? I can not talk about the Asian-based companies, but I know for sure that the manufacturing plants in Germany are very ahead. Because they produce different models at same time on the same track. Each and every car is different in every aspect. In Europe it is very common that you order your car they way you like it and do not buy the one that dealer has in its parking lot. You order to your specification and the option lists are huge compared to the one from Tesla. Tesla is having only one Model with limited different features and many same parts from Ford, Audi, Mercedes, Bosch and others and still is unable to keep up with delivery as you can see from their latest IR reports. BTW, the Tesla plant is build with German technology by German companies. Just to remind you.
- eterm 12y ago
  The claim about leading JIT does seem a bit ridiculous, given JIT manufactoring grew out of the Toyata Production System[1] which encompases Kaizen, Kanban and similar. All of which was pioneered decades before Tesla existed. [1] http://en.wikipedia.org/wiki/Toyota_Production_System http://en.wikipedia.org/wiki/Toyota_Production_System
  - PinguTS 12y ago
    I learned that as Toyotism. EDIT: Another therm for that is "Lean manufacturing" http://en.wikipedia.org/wiki/Lean_manufacturing http://en.wikipedia.org/wiki/Lean_manufacturing
    - lanaius 12y ago
      Lean manufacturing works right up to the point where one of your vendors gives you a bad part. Your choice is to either shut down a line or have excess backup supplies at which point there's no need to have been lean.
      - e12e 12y ago
XJOKOLAT 12y ago
I remember trying this strategy in Civilization. While trying to dominate the long term macro quickly, short-term micro-specialists obliterated parts of my network which caused the entire long term strategy to fail. (Yes I did just make that comparison :). I hope Tesla succeed though. We need someone out there to run this opportunity and encourage competitors in this space.
- eru 12y ago
  Did they rush you with an attack?

lugg 12y ago

I simply cannot wait for the biography. I really find this story to be more interesting than any other in similar vein. I really want to know did he start out with this plan or did he simply see batteries as being the easiest thing to improve on by multiples compared to alternatives. Perhaps better said, there are many parts to a car that could be innovated on to such great improvements but the battery in electric cars really needed to be improved by an order of magnitude to make them competitive with petrol power. Was it that fact that drove him to move into the global space using batteries or was moving global going to happen with whatever he needed to do to improve over the competition so much?

jeremyrwelch 12y ago

My point with this post is that their business hinges on Battery production and tech more than any other component, and thus the lead they've created in this space matters more than any of their other innovations. But you're right, their execution on multiple fronts is truly unreal.

happertiger 12y ago
I mean it's a hell of a good point. Not trying to take away from the post.
hnnewguy 12y ago
>thus the lead they've created in this space matters more than any of their other innovations What lead do they have in battery production? Currently, they purchase all cells from Panasonic, if I'm not mistaken. Sure, the Gigafactory is going to be...big. But it's far from finished (and there's speculation that construction is on hold). Meanwhile, it's not like all the other large-scale battery producing conglomerates are just sitting around; they are also expanding production.
e12e 12y ago
Somewhat related: I remember that in the late 90s a Mitsubishi subsidiary, SUN-A, was tasked with developing transformers for Toyota's new hybrid cars. It'll be interesting to see if building a megacrop will be better than building a market place with various competing companies/contractors for this technology (Not that Tesla will prevent such a market place to develop -- indeed one already exists. I just mean it'll be interesting to see if Tesla will benefit from dominating by themselves, rather than delegating to existing market leaders).

darkmighty 12y ago

I have a little trouble seeing all the businesses you see, which unsubstantiates your point a bit for me. For example, being a leader in direct sales is great for their goal of spreadings EVs. But how is this applicable anywhere else outside the car industry? Does apple 'monetize' direct sales as a 'channel'? Does apple 'monetize' JIT manufacturing as a 'channel'? To me they just use it as a tool to better position the company. Similarly, once established it's unlikely other car manufacturers will consistently buy motors from them. Fortunately or not, electric induction motors are beautifully simple, any manufacturer could come up with a design much quicker than an ICE for example. Now for it's two markets, electric cars and commercial batteries, I do think they're posed to succeed provided pure electric cars actually gain widespread adoption and so do Li-ion batteries (and not other storage methods which may turn out to be cheaper). The interesting point for me is that all his business currently rely on steady, yet iterative, technological improvement to reach their goals (they're already successful, but haven't reached the ultimate goals yet). Tesla needs better batteries, SolarCity better cells, SpaceX reusable rockets. It will indeed be a thrill to watch over the next few years.

NamTaf 12y ago
> Does apple 'monetize' direct sales as a 'channel'? Does apple 'monetize' JIT manufacturing as a 'channel'? Yes, keeping their stock pool as low as it does has real financial benefits associated with it. Cook's entire empire at Apple was built on the back of his prowess at streamlining this, such is the value of it to the business. In that sense, they certainly did monetise their skills in JIT manufacture. I'd argue they also did monetise the direct sales aspect, since the whole 'Apple Store' experience is presumably of net financial gain to them, or else they wouldn't do it.
cloudwalking 12y ago
I agree with what you are saying. I'd just like to be pedantic about 300+ HP induction motors: they are deceivingly complex to manufacture. The tolerances required are measured in microns. Fortunately, the motors are inexpensive (relative to ICE engines), easy to swap out of the car, and cheap to teardown and rebuild. Manufacturing, design for manufacturing, and efficient service and rework departments will be important for scaling motor production.

istvan__ 12y ago

Exactly. I think they had to re-imagine how the big companies doing car production and it resulted in the innovations you are talking about. The reaction Tesla triggered in the car industry in US is rather laughable, screaming for legislation to limit the impact of Tesla on their sales. There are promising changes though, it is good to see that some companies go this far: http://money.cnn.com/2013/03/27/autos/mercedes-tesla-b-class-electric/ http://money.cnn.com/2013/03/27/autos/mercedes-tesla-b-class... If Tesla is going to be a battery company, be it, but I think they have a bright future for most of their business (including selling electric cars).

shas3 12y ago

Usually, with exceptions, conglomerates (the dreaded c-word) are not desired by investors. There's even an estimated "conglomerate discount" for companies of this kind. With certain word-replacements, your comment can be applied for Hewlett Packard too, until the last part. GE, Berkshire Hathaway, General Dynamics, UTC, Honeywell, DuPont, 3M, etc. are exceptions to the rule, when it comes to the performance of conglomerates! One thing common to these companies is adaptability: they are constantly in churn and constantly seek changes in direction to focus on whatever products are profitable. For every successful conglomerate, there are dozens which failed or were broken up. Given all this, it is too early to sing praises for Tesla! Musk is a great visionary, but creating the next GE also requires a lot of luck and happenstance. [1] http://www.economist.com/news/business/21593412-conglomerates-once-seen-heading-extinction-are-spreading-their-wings-dodo http://www.economist.com/news/business/21593412-conglomerate... [2] http://www.foxbusiness.com/markets/2011/01/19/dismantling-conglomerates-trendy/ http://www.foxbusiness.com/markets/2011/01/19/dismantling-co...

chatmasta 12y ago
Those conglomerates developed before the age of computers. They designed their operational structures without the convenience of modern technology, and therefore relied on expanding work forces to grow their company. Labor was cheap, and necessary for growth at the time because humans had to do so much more than they do now. Facebook is a multinational company with only a few thousand fulltime employees. If GE or Microsoft developed in the same technological context as facebook, they would likely employ far fewer people than they do now. The market increasingly favors agility, and monolithic business models are becoming obsolete (if they are not also decentralized in some capacity, a la Uber). Tesla can become a powerful multinational player while remaining agile.
- kriro 12y ago
  The conglomerate structure is kept by choice in the case of Berkshire Hathaway. There's a pretty good outline of the reasoning by Buffett in the 50th anniversary letter. 3M is often used as an example in Strategic Management, particularly as an example of Mintzberg's views (strategies emerge and are not planned). I think the emerged strategy is usually labeled "working with surface material" or something. I guess one could argue "battery company" is an emergent strategy for Tesla in that sense but I think there's certainly planning to it and it wasn't just discovered. But you can use that "post-branding" that is typical of Mintzberg and I think the author of the blog does a good job.

higherpurpose 12y ago

Don't forget the "car charging" business. Tesla announced before that it's willing to license its Supercharger network to other car makers. That business could one day replace most petrol charging stations.

patrickk 12y ago
And the backup battery business for homes and business: http://www.bloomberg.com/news/articles/2014-05-08/musk-reveals-what-tesla-s-solar-backup-battery-may-look-like http://www.bloomberg.com/news/articles/2014-05-08/musk-revea...
hnnewguy 12y ago
>That business could one day replace most petrol charging stations. Why wouldn't gas stations merely re-equip with electric charging equipment? They already have the best real estate. There are also competing standards for DC charging, so I find it highly unlikely that the other manufacturers will license anything from Tesla, rather than settling on another standard.
- mikepurvis 12y ago
  Tesla has the established network, and also the fastest technology— by far. I'm not sure existing gas stations really have the best real estate. Pulling off the highway for five minutes to gas up is pretty different from plugging in for an hour, and I'm not sure I'd want to do those two things in the same kind of location.

rplnt 12y ago

How are they multi-national?

davedx 12y ago
They sell cars in multiple countries. For example, here in the Netherlands, Tesla has a pretty big presence for the size of the company. I frequently see Model S's on the roads here.
- rplnt 12y ago
  I'm not sure that qualifies as multi-national. I'd say you have to own R&D in multiple countries, not just sell there (through someone probably). But I see your point.
  - the-dude 12y ago
    Tesla has a distribution-centre near Eindhoven, The Netherlands.
  - lotsofmangos 12y ago
    They are going to be building a UK R&D center apparently, so they are on their way. http://www.managementtoday.co.uk/news/1306223/electric-cars-become-familiar-sight-uk-tesla-plans-huge-expansion/ http://www.managementtoday.co.uk/news/1306223/electric-cars-...

PinguTS 12y ago

In what sense is Tesla a leader in JIT manufacturing? Do you know how manufacturing takes place at all those other car companies in Germany, Japan, and South Korea? I can not talk about the Asian-based companies, but I know for sure that the manufacturing plants in Germany are very ahead. Because they produce different models at same time on the same track. Each and every car is different in every aspect. In Europe it is very common that you order your car they way you like it and do not buy the one that dealer has in its parking lot. You order to your specification and the option lists are huge compared to the one from Tesla. Tesla is having only one Model with limited different features and many same parts from Ford, Audi, Mercedes, Bosch and others and still is unable to keep up with delivery as you can see from their latest IR reports. BTW, the Tesla plant is build with German technology by German companies. Just to remind you.

eterm 12y ago
The claim about leading JIT does seem a bit ridiculous, given JIT manufactoring grew out of the Toyata Production System[1] which encompases Kaizen, Kanban and similar. All of which was pioneered decades before Tesla existed. [1] http://en.wikipedia.org/wiki/Toyota_Production_System http://en.wikipedia.org/wiki/Toyota_Production_System
- PinguTS 12y ago
  I learned that as Toyotism. EDIT: Another therm for that is "Lean manufacturing" http://en.wikipedia.org/wiki/Lean_manufacturing http://en.wikipedia.org/wiki/Lean_manufacturing
  - lanaius 12y ago
    Lean manufacturing works right up to the point where one of your vendors gives you a bad part. Your choice is to either shut down a line or have excess backup supplies at which point there's no need to have been lean.
    - e12e 12y ago

XJOKOLAT 12y ago

I remember trying this strategy in Civilization. While trying to dominate the long term macro quickly, short-term micro-specialists obliterated parts of my network which caused the entire long term strategy to fail. (Yes I did just make that comparison :). I hope Tesla succeed though. We need someone out there to run this opportunity and encourage competitors in this space.

eru 12y ago
Did they rush you with an attack?