Business Model Innovation at Tesla

After the demise of Better Place, I have picked up the Tesla case to teach in my business model innovation course. I think it illustrates nicely how a start-up can try to compete in a very difficult and mature industry by focusing on very particular choices that differentiate it from others. These choices are what enables business model innovation at Tesla. Contrary to Christensens’s claims about disruptive innovation coming from the lower-cost competitors providing for unsatisfied customers, Tesla started from the top, first serving the top of the market, while nourishing its dreams about expansion into the mass market (for more recent criticism of the disruption theory check here).

Another part of Tesla’s business model innovation is the development of key partnerships with several high-status organizations such as Daimler, Toyota, BMW, Panasonic, etc. Developing a network advantage, as argue Greve, Rowley and Shipilov in their new book, is definitely becoming more and more important to gain a competitive edge. Mastering networks is more challenging for new firms, however.

At the same time, partnerships with Renault as well as Israeli government and energy utility companies did not save BetterPlace from bankruptcy. Maybe consumers will have the last say on this (as well as many other up and coming innovations) – and Model S seems to find more acceptance than Renault EV models these days.

Interesting industry to continue following for BMI enthusiasts in any case. For more about Tesla, check out this National Geographic (a bit bombastic) reportage about the company here:

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