CASE ANALYSIS

ENGI 9396

SPRING 2016

Innovation Management

Case analyzed by Mr. Chintan Rathod under the supervision of Mr. Daan Goossens
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

TABLE OF CONTENTS

1. About Tesla .......................................................................................................................................... 3

2. Roadmap of Tesla ................................................................................................................................. 3

2.1 The EV Market ................................................................................................................... 5

3. Intellectual Power of Tesla .................................................................................................................... 6

3.1 Tesla’s Innovation Approach ............................................................................................ 6

3.2 Tesla’s culture of integrative innovations ......................................................................... 7

4. Autogiants Vs. Tesla ............................................................................................................................. 9

4.1 Discussion ......................................................................................................................... 9

4.2 Who win the ‘EV’ game? ................................................................................................. 10

5. Conclusion .......................................................................................................................................... 11

BIBLIOGRAPHY……………………………………………………………………………………….12

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

1 | ABOUT TESLA
Tesla Motors was founded in 2003 by a group of engineers in Silicon Valley who

wanted to prove that electric cars could be better than gasoline-powered cars.

As of July 2016, having 140,000 electronic vehicles (EV) on the road worldwide, Tesla

is preparing to deliver Model 3 (stylized as "☰") which is an affordable high class EV.

According to Tesla, they are not just an automaker, but also a technology and design

company with a focus on energy innovation. <Ref Tesla.com>

Art 1 Tesla Flag Copyrighted

“ The purpose of Tesla is to expedite the move from a mine-and-burn

hydrocarbon economy towards a sustainable solar-electric economy ”

2 | ROADMAP OF TESLA
Tesla’s summarized strategy is…

1) Build sports car (Tesla Roadster)

2) Use that money to build an affordable car (Model S & X)

3) Use that money to build an even more affordable car (Model 3 – design unveiled)

While doing above, also provide zero emission electric power generation options

It looks a simple strategy and so far, Tesla is doing really well. But, there were years of hard work behind
this success.

Art 2 Tesla Roadster Art 3 Tesla Model S Art 4 Tesla Model X

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

Graph 1 Luxury Sedan Cars Sales in the US in 2013 (Capgemini Infographics)

This is what happens when a Technology

firm enters into automobile market. Even

though, Tesla was selling EV, it literally

passed sales of Mercedes/ BMW/ Lexus/

Audi/ Porsche in luxurious sedan cars sales.

Tesla’s Roadster and Model S were sold

over EV industry expectations because of

Tesla’s “GREEN and ENVIRONMENT

FRIENDLY” brand marketing.

This influx of multimillion dollars powered

Tesla’s potential to build an affordable car.

Affordability needs innovation, thus, Tesla has literally Image 1 Tesla’s patent wall at its headquarters

achieved some milestones in in-house innovations.

Image 1 shows patent awards in the name of Tesla. In June 2014, Elon Musk announced, that the

company will allow all its technology patents be used by anyone in good faith.

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

2.1 | THE EV MARKET

The electric vehicles (EVs) have long been under emerging stage. It has a history of more than 100 years,

with significant efforts in the early 20th century, followed by sequences of stops and starts and now new

enthusiasm in the last decade. The new enthusiasm comes with high oil prices, climate protection

policies, battery technology and recharging infrastructure development, and the rise of organized car

sharing and intermodality. EVs are believed to play an important part in the near future according to

policy makers, car companies and other stakeholders. Ambitious regional and national goals have

stimulated the progress of EV penetration by subsidizes for the vehicle and corresponding infrastructure

deployment. Meanwhile, most car manufacturers have added EVs in their portfolios and prepared to

make mass production with different level of strategies and expectations. However, commercialization

has been ineffective thus far, and dominant design is still dormant. Sales of EV are far from satisfaction

and lag behind from national goals. <Ref Chen and Perez, 2015>

Accordingly, there is a huge need of innovations in the EV industry. As per analysts, Innovation which

leads to economic viability of EV will take over the market. Tesla Motor, viewed as a black horse to the

auto industry, is obtaining a success as an OEM dedicated for EV, and changed people’s idea of EV as

well as re initiated the enthusiasm for pure EV. Tesla is rapidly covering the market with more than

135,000 pre orders of its Model 3.

Graphics below shows WHERE INNOVATION HELPED Tesla to grow tremendously in EV market.

Tesla’s Key Dimensions of EV Innovation:

Battery Cell
1. The Innovation towards the vehicle

• Self-learning auto pilot mode

• Luxurious features in base model

Battery 2. The Innovation towards the battery
Packing
• 345 kilometers towards single supercharge

• 5-star safety rating of battery

3. The Innovation towards the infrastructure system

EV
• 4,175 Superchargers

• Spanning across North America, Europe and

Sale Asia

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

3 | INTELLECTUAL POWER OF TESLA

From the beginning, Tesla is growing intellectually. That helped the company to stand out in the market.

The company is filled with successful leaders from the top to hardworking engineers at the bottom.

Just to give an idea of company’s top management:

Name Designation @Tesla Experience

Elon Musk CEO, Product Architect Space X, Solar City, Pay Pal

J B Staudel CTO M I T, Innovator of the year

Deepak Ahuja CFO Ford

Franz Van Holzhausen Chief Designer Audi, GM

Amnon Geshori VP, HR Google

Table 1 Tesla’s leadership

3.1 | TESLA’S INNOVATION APPROACH

Tesla empowers innovation at all the levels in the company. An

innovator is recognized and awarded with financial perks and

promotions.

120 of Tesla’s patents are related to battery and charging Image 2 Tesla’s Patent Infographics
technologies, and not surprisingly, this technology makes up

the vast majority of its patent portfolio. Tesla also owns 20

patents related to electric motor and drive control, 10 patents

on vehicle frames and chassis, followed by a handful of patents

related to doors/latches, air conditioning technology, sunroofs

(note the signature panoramic roofs of the Model S), and user

interfaces/displays.

The data is outdated, but clearly, for a new company in a

century old market, this growth is truly exponential.

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

3.2 | TESLA’S CULTURE OF INTEGRATIVE INNOVATIONS

Here, I will discuss about some of Tesla’s leading innovation and how it propelled the company’s growth.

1. Tesla leads on battery power (maximum miles per single charge)

Graph 2 Maximum Miles per Single Charge

Chevy Volt 35
As shown in the
Nissan Leaf 73
graph 2, Tesla

Ford Focus EV 100 Model S has the

highest battery
Tesla Roadster 245
capacity than any
Tesla Model S 300
other peer EVs.
0 50 100 150 200 250 300 350

2. Tesla leads on cost (battery pack cost in $/kWh)

As shown in graph
Graph 3 Battery Pack Cost ($) per kWh
3, battery pack
700 650
590 cost would go half
600
500 440 by 2020, that
400 320 means Tesla’s
300
dream of
200
100 affordable EV
0
would come true.
2010 2014 2018 2022

3. Tesla had improved performance from Roadster to model S

Battery Module Power Electronics Motor

Continuous Power Up by 50% Liquid Cooled Liquid Cooled

Continuous Power @70 mph Up

Energy Density Up by 40% Continuous Current Up by 50% by 100%

Table 2 Performance Improvement from Roadster to Model S

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

Therefore, Tesla is an Integrative Innovation

In the case of Tesla, Elon Musk set the bar high by combining what at the time seemed to be two

diametrically opposed ideas in a car:

• High performance

• Environmental

stewardship

When Tesla launched the

Roadster it was a breakthrough

in electric vehicle performance

that could outperform many of

the world’s elite sports cars. But

the Roadster was only the first

step in the master plan. Image 3 Tesla’s Integrative Innovation Framework

The second step was what has come to be known as the best car ever made – the Tesla Model S. What

was so revolutionary about the Model S is it inherited the performance and environmental stewardship of

the Roadster while adding a third capability – family transport.

But even with the Model S the appeal from the mass market was limited because of the steep $75,000

starting price. <Ref Jake Neilson, the innovative manager >

At $35,000 the Model 3 shows significant promise for being a dramatically successful innovation. The

latest Model 3 has a number of process/ safety/ design improvements.

Until now from beginning,

I have talked about Tesla’s innovation potential, its success and its intellectuality.

At last,
I will compare Tesla’s analysis to other automakers and define, What Tesla is doing right in the EV

business?

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

4 | AUTOGIANTS VS. TESLA

To compare Tesla, let me first discuss about Tesla’s current situation ~

Year Car Model Units

2017 Tesla Model 3 ~ 135,000 (BOOKED)

2015 Tesla Model X ~ 3 000 (SOLD)

2012 Tesla Model S ~ 110 000 (SOLD)

2008 Tesla Roadster ~ 2 000 (SOLD)

Table 3 Tesla’s yearly unit selling/booking

Here, booked units of Tesla model 3 shows, the popularity and acceptability of Tesla as a brand.

Anyways, this number is nothing compared to the monthly global sales of auto giants like GM, Ford,

Toyota, Honda… But, all mentioned companies are mature in this business and they understand the

market really well. The competition in EV segment will be fruitful from a customer’s aspect. As for now, let

me talk about the most important analysis:

4.1 | DISCUSSION

Similarities Differences

• Car by tech company

– CEO Elon Musk (founder of

PayPal and SpaceX)

• Luxury brand car with high price • First electric car to drive with a realistic
• Innovative development of electric range and is a true pleasure to drive
vehicle – Utilizes gathered data into good
• Big Data collection e.g. Market Analysis use for customers

– Autopilot (parking, steering)

• Brand narrative (no marketing, sustainable

transportation)

• No dealerships

Table 4 Tesla’s business (Similarities Vs Differences) with Auto giants

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

4.2 | WHO WILL WIN THE ‘EV’ GAME?

Clearly, EV market is high risk, new and immature. There is limited competition and high rewards.

Still, as discussed the company who will “INVEST TO INNOVATE” will win the game.

Tesla is a good example of this and as of now, it is leading the market with unprecedented growth.

According to me, as I understood from the course, these parameters would be really important:

o Defining innovation goals and objectives

o Selecting strategic innovation areas

o Developing a strategic innovation map

o Allocating necessary resources

o Management of innovation

o Rewarding innovators

o Trademark/ Purchase/ Partner/ Transfer/ Sell innovations

o Flexible to market change

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

5 | CONCLUSION

Based on the data analyzed for this study, following conclusion can be drawn:

Initially, the strategy of Tesla Motors is to apply product innovation by designing innovative vehicles and

process innovation by combining multiple know-hows deriving from different companies. Therefore,

Tesla can be considered as an innovative company.

In addition, Tesla applies open innovation and its coupled process by establishing R&D collaborations

with major companies. That way, it manages to further develop its innovative technologies. Therefore, it

can breakthrough integrative innovations.

Tesla shows a very high level of integration of information technology into many aspects of EV business.

This helped Tesla to grow more as an IT spin-off but an automobile player. Therefore, The Tesla story is

one of singular bold vision of innovation and out-of-box thinking to ensure it stays a lap ahead of

the competition.

According to financial services firm – Morgan Stanley

“ Tesla has a reasonable chance of rocking the trillion-dollar car industry

by flooding the market with fun-to-drive EVs ”

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ENGI 939 6 | Mem orial Un ive rsity of Newfoun dland
 How Tesla is intellectually innovative?
Case analyzed by Chintan Rathod under the supervision of Mr. Daan Goossens

BIBLIOGRAPHY

1. Amit, R., & Zott, C. (2001). Value creation in e-business. Strategic Management Journal, 22(6-

7), 493–520

2. Bohnsack, R., Pinkse, J., & Kolk, A. (2014). Business models for sustainable technologies:

Exploring business model evolution in the case of electric vehicles. Research Policy, 43(2),

284–300

3. Dijk, M., Orsato, R. J., & Kemp, R. (2013). The emergence of an electric mobility trajectory.

Energy Policy, 52, 135–145

4. Kley, F., Lerch, C., & Dallinger, D. (2011). New business models for electric cars—A holistic

approach. Energy Policy, 39(6), 3392–340

5. Weiller, C., & Neely, a. (2014). Using electric vehicles for energy services: Industry

perspectives. Energy, 77, 194–200

6. Tesla Motors: A Silicon Valley version of the automotive business model, Capegemini

Consulting

7. Tesla Motors: intellectual property, open innovation and the carbon crisis

8. Open innovation in EVs by Achilleas Karamitsios

9. Business model design: lessons learned from tesla motors, chen and perez

10. Company Overview, Tesla Motors

11. We are Tesla, Tesla Motors

12. Datalive/ Tesla Motors

THANKS! J

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