Brand innovation and disruption are exploding. News feeds are filled with stories of emerging brands re-imagining nearly every product and service category.
However, when it comes to innovation in the Australian food & beverage industry, everything is eerily quiet. Yet food & beverage brand owners need to innovate; it’s an essential driver in helping companies grow their brand, get the right products to market with speed, and establish competitive differentiation. (Innovation is one of the top 5 strategies to grow manufacturing businesses.)
So where should you look for inspiration? Electric vehicle designer and manufacturer Tesla shows that sometimes the best lessons can be learned from outside your own industry.
A disruptive innovator?
Tesla has sold little more than 59,500 cars over a 10-year period. This, together with the fact that electric cars account for less than 1% of the 16.5 million cars sold in the US market alone in 2014, may not appear remarkable.
So why does Tesla continue to attract the attention of market analysts and leading business theorists?
It comes down to both Tesla’s approach to product development and its unique business model. This combination, and the exceptional path Tesla has taken into the car market has been the topic of debate about whether the company can be classed as a “disruptive innovator”.
But disruptive innovator or not, one thing is for sure: food & beverage brands, and those in other industries, can take valuable lessons from Tesla’s approach.
Lesson #1: Develop a product like nobody else in the market
Business courses abound with case histories of how the giants of industry have succumbed to new entrants with low-cost alternatives.
Japanese lower-priced models disrupted both the car and motorcycle industry in the United States, with the once-dominant business model of US car manufacturers including Ford, GM and Chrysler, shaken up by the lower-priced, smaller and more reliable Japanese cars. Similarly, Honda, Yamaha and Kawasaki “disrupted” the motorcycle market with small motorcycles that were distinct from the powerful bikes produced by manufacturers such as Harley-Davidson and BMW.
According to Clayton Christensen, author of The Innovator’s Dilemma and renowned authority on “disruptive innovation”: “The leaders get killed from below.” The established logic in the car and motorcycle industry is that new market entrants introduce lower-cost options.
All of which makes it remarkable that Tesla embarked on a strategy of building a market for electric cars using not an everyday road car, but a high-performance electric luxury sports car. The company manufactured the Tesla Roadster as a compelling alternative to the traditional petrol-fuelled car. It’s unique among electric vehicle options on the market.
According to CEO Elon Musk, Tesla “decided to build a sports car” because, as a new entrant, they could see no way of securing the economies of scale and mass market for a low-cost electric car product.
So the company worked at establishing its brand and reputation with a top-end car. In doing so, Tesla has shaken up contemporary thinking and consumer perceptions about electric cars. Electric cars can be eye-catching. Electric cars can be sexy. Electric cars can be luxurious, fast and desirable. This is a powerful proposition.
Lesson #2: Shake up your business model
Mention electric cars to consumers and they will typically talk about how they’re great for local trips around town, but the need to charge electric batteries regularly makes a long trip impractical.
This is a challenge that some companies might find insurmountable. Not Tesla.
Tesla has developed a multi-faceted approach to building a business model for sales, servicing and charging of cars which hinge on one crucial factor: it avoids any reliance on the traditional infrastructure that supports the motor industry.
Tesla’s growth is not dependent on the car industry’s infrastructure of franchised dealerships or fuel outlets. As a result, its business model challenges traditional thinking about both the electric car and the car industry as a whole.
Take these examples of the business model in action:
- Direct sales: stores and galleries: Tesla has circumvented the franchised dealership network and established its own international network of company-owned showrooms and galleries, including three showrooms in Australian urban centres. By employing their own sales and service staff, Tesla believes it can provide a better customer experience than that offered through franchised dealerships, which will result in an enhanced brand and reputation. Also, consumers can customise and order their car via Tesla’s online Design Studio.
- Service: ‘Service plus’ and mobile technicians: Many of Tesla’s global sales centres are combined with service centres, “Service Plus”, which provide car servicing and charging. Tesla’s service centres are supplemented by Tesla Rangers – mobile technicians who service the car from the consumer’s home address. These mobile technicians are advantaged by the Tesla car’s advanced technology, which supports wireless data upload and enables technicians to view and fix problems online.
- Supercharger network: In the same way that petrol-fuelled cars need to refuel, electric cars are dependent on a recharge. Tesla decided that access to recharge stations, where drivers can charge their car for free, would be critical to the adoption of electric cars, which is why it has developed a network of supercharge stations. Now, drivers can recharge their electric car in the time it takes to recharge themselves with a coffee.
Lesson #3: Use your competencies for new markets
Already, Tesla’s brand has moved beyond the launch of the first electric sports car. In much the same way that Honda used its small engine-manufacturing competency to expand into any number of products dependent on small engine technology, Tesla is leveraging its competence in electric technology for other markets. It now provides powertrain systems to other vehicle manufacturers and has developed home batteries that can be used in conjunction with solar energy systems.
Finally, never stop challenging the norm
Whether or not Tesla is the latest disruptive innovator remains open to question. Either way, the company continues to challenge traditional thinking about electric cars, as well as redefine a new business model for the car industry. Their chosen entry path has addressed the “boring” tag that might otherwise continue to attach to electric cars, and has gone a long way to addressing the barriers to electric-car adoption. Just take a look at the way they describe themselves on their website: “Tesla is not just an automaker, but also a technology and design company with a focus on energy innovation.”
That says it all.
You may find this piece on disruptive innovations ready to rock your supply chain interesting and this on “riding the wave of change”, where innovation is a key plank — make sure you read The Brand Guy’s epic comments!
We’ve been part of some pretty epic and innovative things ourselves over the past 3+ decades — first RFID trial in frozen food, first use of serialisation in QR codes for authenticity and supply chain traceability for export, design awards for innovative (there’s that word again) software for manufacturers… and the list goes on, so talk to us about innovation in your plant.
Photo credit / : Anthony Brown