Why Tesla Is Not Disruptive; A Systems Thinking Assessment.

Watch Bloomberg West and you would be forgiven if you came away with the impression that Tesla recalling all 90,000 Model S cars is good news. It is quite interesting to watch how commentators fawn over Elon Musk and all the disruption he's causing. Don't get me wrong I'm not suggesting we all pile on, I know it is terribly difficult to build a business (or 3), but let's stop calling Tesla disruptive.

Tesla is impressively innovative (with a CTO at the top of his game) but the company is not disrupting the automobile industry. Disruptive innovation is not what we think it is. Tesla's innovation is in bringing a beautifully designed electric car to the market but for the company to be disruptive it would have to have entered the automobile market one of two ways.

  1. 'Low-end footholds that occur because of the incumbents focus on their most profitable and demanding customers with ever improving products and services'. Tesla is selling products that are well above the annual wage of the average American. There is no low-end foothold in a product that only the 1% can afford. Even moving into the low-end of the market with new cheaper products does not make this count as a disruption to the status quo, it's just the natural trajectory of any competitor in a market like this.
  2. 'New market footholds of creating a market where none existed before': in this entry mode Tesla also fails to disrupt. Wealthy consumers were going to buy expensive cars regardless of the fuel source. Fantastic design and great marketing doth not a disruptive product make (even thought it maketh a more sustainable world). Tesla captures market share, making it competitive, but I'll suggest it has not created a market where none existed before as people were buying electric cars before Tesla came along. The majority of consumers who were not thinking of buying an electric car (or able to afford one) are not about to buy or lease a Tesla.

Assessing Tesla through a simple Systems Thinking lens

From an innovation frame Tesla is not disruptive. What about from a systems thinking perspective? A method we can use is what I call zooming (in and out). Through this lens we also see that Tesla, while innovative, is not disruptive.

  • If we zoom into the company (squint) and pick one of the component parts - let's go with manufacturing - we see a company that is using new technology, robots and humans to build an electric car (video here). For most people who haven't visited a car manufacturing plant this all looks cool and great. I almost ended up working in one of these manufacturing plants in 2001 and I can assure you the plants in the midlands of the UK that I visited had technology, robots and humans building their cars too. A state of the art car manufacturing plant, as evidenced below, is innovative but it is not disruptive.
  • Zooming out of the company and putting on a systems lens you see that Tesla's supply chain (sourcing parts from 200 global partners), distribution channels (company owned stores), service coverage (high quality no questions asked) and type of vehicle (electric) all differ from that of traditional auto manufacturers. But the elements of the business model are basically the same as that of said traditional auto manufacturers. Most engineers would look at a Tesla manufacturing plant and recognize every element of the plant. What might be new is the level of technology applied to what is a traditional plant. Again, innovative but not disruptive.
  • Like Clayton Christensen (an innovation sage), in his HBR article that fueled this post, I'm not suggesting that Tesla isn't doing amazing work. As a systems thinker what I worry about is how we devalue words (and the work that underlies the work) by ascribing it where it is not applicable. There are people doing truly disruptive works across all industries and you yourself might have an idea and can use the framework above to assess whether your product or service is truly disruptive.

    Innovation abounds around us. But disruption? It's actually pretty hard..