- Billionaire Tesla CEO Elon Musk says there have been 250,000 preorders for the Cybertruck, an electric car he unveiled last year. The car is scheduled for production in late 2021.
- Innovation scholars in the Harvard Business Review credit the company’s accelerated growth to using “innovation capital,” studying the product’s ecosystem, a system of tools that brings value to clients and predicting the needs of future customers.
- By predicting what a consumer wants before they know it, the company increases its innovation value, or a way of offering product upgrades, and in return cheaper costs.
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Tesla’s Cybertruck not only is bringing in a wave of new customers but is a future revenue model for faster growth.
Last year, CEO Elon Musk wrote in a tweet that the electric car received about 250,000 pre-orders in a month, Business Insider previously reported. According to experts at Harvard Business Review, Musk accelerated growth by convincing people to support his ideas, developing ways for the cars to connect with other company products and predicting what the customer will need to use next.
“Tesla’s innovation strategy — which focuses on transforming the auto industry as a whole — offers enduring lessons for any innovator,” writes Nathan Furr, a strategy professor at INSEAD’s School of Business and Jeff Dyer, a strategy professor at the Marriott School of Business, in the Harvard Business Review.
The Cybertruck case is especially instructive “in terms of how to win support for an idea and how to bring new technologies to market,” they added.
Over the last five years, companies have invested $3.2 trillion in the innovation markets, according to the strategy consulting firm Accenture. But failing to innovate is pricey. Anthony Ulwick, a founder and Chief Executive Officer of innovation consulting firm Strategyn, estimates that innovation failure costs US companies $100 billion dollars annually.
As companies look to Tesla as a model for innovation, it can be helpful to look at how Musk’s automaker is repeatedly commanding attention — to a massive stock run-up now putting the company market cap at $145 billion.
1. Innovation capital
Furr and Dyer define “innovation capital” as a way of rallying support for new releases. With Tesla’s concert-style debuts for products, Musk is making the most of the capital he’s created. In this case, as the company’s platform grows, they can advance in the market.
“When Musk stands on stage and reveals the Cybertruck, he doesn’t just talk about the new idea, he materializes it, putting it into physical form to convince skeptics,” writes Furr and Dyer. “He also broadcasts the idea through big media launches like the demo for the Cybertruck, which gets third parties talking about the company and generating buzz.”
While Musk, one of the world’s most famous executives, has the bully pulpit of the startup press, his virtuoustic hyping is applicable to anyone with a entrepreneurial streak. Gaining institutional support leads to growth.
“Most importantly, we found that no one is born with innovation capital — it is something accumulated over time through thoughtful action,” writes Furr and Dyer.
For instance, Musk uses his background as the CEO of SpaceX and former head of Paypal to show he can break ground on a range of topics. Through attention-grabbing stunts, Tesla convinces leaders that they are truly missing out on the product.
2. Develop the product’s ecosystem
Through understanding the networks that can make a brand stronger, a company can potentially increase their sales. A study by Accenture discovered that 59% of high-growth companies use a “carefully managed” ecosystem to “bring the best innovation to customers,” meaning they bring a series of upgrades to products that connect.
Tesla’s “ecosystem,” a connection of products that bring value to the customers includes charging stations, self-driving cars, batteries, and a solar-panel factory.
According to the Harvard Business Review, Tesla benefits from investing in their current models.
Last March, Tesla announced it will offer same-day car repair and will upgrade software on the Model 3, allowing it to go faster and travel longer distances, Business Insider reported. That summer, Tesla also slashed prices for the car.
“What makes this part of the strategy truly unique is not just that Tesla produces electric vehicles,” write researchers, Furr and Dyer. “But that it introduced a new hardware and software architecture (the way you put the car together).”
3. Predict a consumer’s wants
Using innovation as a tool to satisfy the customer and simultaneously gain more revenue is explored in “The Little Black Book of Innovation.” The book’s author, Scott D. Anthony, is a senior partner at the strategic consultancy Innosight, and he observes that predicting the customer’s wants allows them to build a connection to the company.
“The quest to identify opportunities for innovation starts with pinpointing problems customers can’t adequately solve today,” wrote Anthony in Fast Company. “Companies think they are selling products and services, but in reality, people hire those products and services to get jobs done in their lives.”
One example of solving customer problems include Tesla’s expanding global charging network. The electric car manufacturer is thriving off of consumers who use thousands of supercharging stations around the world. What’s more, a growing focus on environmental sustainability has caused a decline in the number of gas stations across the US. The dropping numbers of gas stations once again offer an opportunity for Tesla to stay ahead.
“Acting early enabled Tesla to be the only electric car that could drive long distances because there was an infrastructure in place for charging,” writes Furr and Dyer. “In the future, this advantage may erode if other automakers build charging networks and piggyback off their existing dealership networks to potentially offer more convenient service. But for now, Tesla has the advantage.”
The takeaway: Innovation doesn’t happen in a vacuum. The better you build a relationship with your audience, the better you can accelerate ahead to what they want next.
SEE ALSO: Tesla raises $2 billion in secondary stock offering priced at $767 a share – 5% below where it’s trading now
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