Tesla Explained: Tesla, Apple, and Disruption
Tesla has been the instigator in the great auto disruption we’re currently watching play out. They’ve brought one of the lowest cost, high performance electric vehicles to market in the Model 3. Proven that owning an EV is not only a viable option, but cheaper to own and operate than a gas car in the long run. In essence, they’ve been a major disruptor in the automotive industry. I think part of that success stems from how they operate, which is more like a Silicon Valley tech company instead of an automotive company. And other new EV companies may follow the same playbook.
And this is where a lot of you will get angry with me again ... because yes ... they have a lot in common with companies like Apple. As much as some of you may hate Apple, I really do think Tesla shares many of the same traits. But the comparisons also extend to companies like Google too. With Apple announcing their new iPhones recently, I thought it was worth taking a look at how Tesla’s EV disruption has similarities to Apple’s smartphone disruption that happened a decade ago.
Apple and holistic design
Most of the time product and user experience design is looking at addressing a specific issue, feature, or problem. It’s not uncommon to have an answer presented as the solution before you’ve even addressed what the problem is ... or better yet ... what the question even is. In holistic product design you’re taking a step back and looking at the full picture.1 Seeing how all of the different pieces of the product interact and relate. And seeing how a customer’s interactions with your company and products are affected throughout the experience.
Apple is one of the best companies in the world at doing this. I can feel the rage growing in some folks out there, but hear me out. Apple has always been an incredibly secretive company. They try their hardest to prevent any details of products in development from leaking before they’re ready to announce them. And the vast majority of the time they’re not announcing a product until it’s ready to ship immediately or within a few weeks. There’s a couple of good reasons for this. One is surprise and delight. The big reveal of a new product has a wow factor and garners attention. The other reason, which is more important, is that it gives them time to iterate, polish, and think through the full experience of that product. As Steve Jobs is famous for saying:
“People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I'm actually as proud of the things we haven't done as the things I have done. Innovation is saying no to 1,000 things.” -Steve Jobs
And at WWDC in 2013, Apple put together a great video reiterating that idea.2 The entire Apple manta is stated clearly in the video with, “The first thing we ask is what do we want people to feel?” And, “We simplify, we perfect, we start over, until everything we touch enhances each life it touches.” This is holistic design in a nutshell.
Tesla’s manta is centered around first principles thinking, which is about breaking down complicated problems to generate original solutions. Tesla’s existence and success can be mapped pretty clearly to that principle. And it’s really not far off from holistic design. Both are beginning with questions rather than the answers. Both are about creating your own theories and how to apply those to a better product, experience, or manufacturing technique.
Both Apple and Tesla design their products and operations with the full product life cycle in mind from manufacturing to disposal. Apple rarely takes parts off the shelf from suppliers. A good example is in recent years is how Apple brought processor design in house. Their A series of mobile processors are among the fastest available today. And by bringing it in house, they can custom tailor their silicon to their product features and software needs. Other mobile phone makers are using off the shelf parts with features that are meant to cover a broad spectrum of needs. The end result is an iPad Pro that uses less power than a typical laptop, but still beats the performance of a majority of laptops on the market. iPhone’s often have smaller batteries than their competition, but will last as long. This comes down to the tight optimization that Apple is able to accomplish between their hardware and software.
Tesla designed their own battery pack and cooling system instead of using third party suppliers with more generic, ready-made parts. One outcome of that is the super bottle, which you may have seen Sandy Monroe talk about on Sean Mitchell’s recent interview. Instead of needing multiple coolant systems that cover the cabin, electronics, motors, and battery, there’s one system for all of it. Fewer parts and more efficient.
Tesla has also designed their own self-driving computer instead of continuing to use an off the shelf system from Nvidia or another company. This helps to make them a master of their own destiny. Reducing their dependence on a third party supplier for a core piece of technology means that they won’t be held back in rolling out a new product or feature because that suppliers hardware isn’t yet capable of what they need it to do. And Tesla is able to tailor the silicon and software to complement each other and achieve incredible efficiencies.
Google and rapid iteration
Google may have started as a search and ad company, but they’ve always been an artificial intelligence company under the hood. Using machine learning and algorithms to figure out relationships between websites and content in order to surface the most relevant search query. Or machine learning to put just the right ad, in front of the right person, at the right time. Google Now parsing through your web history, emails, and calendar, to figure out what notifications and reminders to display on your Android phone when you start your day. And right here on YouTube, figuring how what videos you are most likely to be interested in watching with suggestions on your home screen or along the side of videos just like this one. They are an artificial intelligence company through and through.
The head of Google Now has said:
“You want to pick problems that are hard for humans, and easy for machines, not the other way around. It’s about making the technology do the heavy lifting for you, rather than doing it yourself.” -Aparna Chennapragada3
But unlike the holistic design approach, Google tends to look at technology and features first, and then see if there’s a product that can come from those breakthroughs. There’s no better example of that then Google Glass.4 There was a product that had some amazing technology, but if you asked a simple question of the average consumer, “what problem does this solve and why do I need it,” they’d come up empty. There’s a graveyard of half-baked Google products over the past decade that resulted from the technology first, product second mentality. Google Buzz, Google Wave, Google Talk, Google Nexus Q, Google +, and Allo.5 And those are just a few.
On one hand the “fail fast, fail often, but always fail forward” mentality that drives much of silicon valley, can bring about rapid change. You learn what works and doesn’t work and quickly change direction. But if you’re not careful, this can leave a trail of corpses behind you that make it difficult for the public to trust that you will follow through and stick with a product that they may actually enjoy.
How does this tie into Tesla? On the surface Tesla looks like a car company, but they’re really an energy company driven by software. They’re heavily invested in AI and machine learning to enhance their products, with the obvious one being auto pilot and self driving. Tesla’s Autonomy Investor Day event walked everyone through their approach to computer vision and the exponential growth of machine learning systems in autonomous driving. The end result is a product that could make cars an appreciating asset because the car you own could be earning you money as part of a ride sharing network.
“Buying a car today is an investment into the future. I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset — not a depreciating asset.” - Elon Musk6
They’re using machine learning in their Energy products too.
Tesla developed its own software in-house to monitor, control and monetize Megapack installations ... Autobidder, Tesla’s machine-learning platform for automated energy trading. Tesla customers have already used Autobidder to dispatch more than 100 GWh of energy in global electricity markets. And, just as Tesla vehicles benefit from continued software updates over time, Megapack continues to improve through a combination of over-the-air and server-based software updates.7
And that brings me to the constant software updates that Tesla brings to all of their products. Much like Google, Tesla is constantly tweaking and adjusting their systems and features they put in front of their customers. As soon as a feature hits a certain level of readiness, it’s rolled out for everyone to start using right away.
Apple overturned the music industry with the iPod and iTunes. And then they did it again with the iPhone and the mobile phone market. Steven Sinofsky, the former president of the Windows Division at Microsoft, wrote a great article in 2014 titled, “The Four Stages of Disruption.”8 Those stages almost read like the stages of grief when it comes to the incumbent being disrupted. And you can see that the pattern fits what we’re seeing today in the auto industry.
Stage 1: Disruption of Incumbent
- The disrupter introduces a new product with a distinct point of view.
- The incumbent discounts the disrupters product as irrelevant to existing customers.
When Apple released the iPhone, the reaction from the phone industry leaders should sound familiar to what we’re hearing today.9
”There’s no chance that the iPhone is going to get any significant market share. No chance.” - Steve Balmer, Microsoft “We've learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They're not going to just walk in.” - Ed Colligan, Palm “It’s kind of one more entrant into an already very busy space with lots of choice for consumers. But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.” -Jim Balsillie, Blackberry
Sound familiar? Like Ford Europe’s CEO, Steven Armstrong, mocking Tesla only being able to produce 7,000 cars a week.10 Or Bob Lutz, former GM CEO, saying that Tesla is “heading for the graveyard.”11 And that we all just need to wait for the big auto companies to step in and start producing EVs.
Stage 2: Rapid linear evolution
- The disrupter rapidly adds new features and capabilities after gaining traction with early adopters.
- The incumbent begins to compare their full-featured product to the disrupted product to show deficiencies.
Tesla has been rapidly improving their manufacturing process to reduce costs; beginning to upgrade their Supercharger network to even faster charging speeds; and rolling out new features to the fleet, which will ultimately culminate in self-driving. Meanwhile, we have companies like Toyota creating ads touting their “self-charging” electric vehicles (a.k.a. hybrid cars).12 Or Lexus trying to hit slow charging times.13 Or BMW’s “Wait or Drive” ad campaign.14
Stage 3: Appealing convergence
- The disrupter sees opportunities to acquire broader customer base by appealing to slow movers.
- The incumbent considers cramming some element of disruptive features into existing product line to show they can keep up with trends.
This is the stage I think we’re in right now. I think you could argue that the new Tesla Insurance is a part of trying to capture slower adopters. Same with the upgraded Supercharger speeds and new locations. The current cars that Tesla are making can go toe-to-toe with the competition, but they’re continuing to push forward with motors that can last one million miles. And it’s looking like Tesla may be on the cusp of a battery pack that’s rated to last one million miles, too.15 These kinds of advances push an EV from going toe-to-toe with an internal combustion car, to blowing right past them on the cost and maintenance fronts. This is the kind of thing that will pull in the slow movers.
And on the side of the incumbents, you have pretty much every car company in the world having announced some portion of their fleet moving towards EVs. Most of the 2020 models and beyond. Even Toyota.16
Stage 4: Complete reimagination
- New entrants to the market can benefit from all the disrupters product has demonstrated.
- The incumbent is too late and goes into retreat.
As I said, I think we’re somewhere around stage 3 right now, so there aren’t good examples here yet. We’re just now starting to see new, from the ground up EVs hitting the market that can compete with Tesla’s offerings, like the Porsche Taycan. And we have entries coming from other new auto manufactures like Rivian and Byton. The true reimagination of the industry has yet to take shape, but I’m betting that it’s autonomous cars. The cars we’re seeing made today still resemble traditional cars, but with a different power source. The power of computers and software will completely upend cars as we know them. We’ll start to see cars without steering wheels. Seating that’s tailored more to comfort and entertainment than to operating a vehicle. And with robot taxis we’ll see fewer and fewer people wanting to own a car in the first place.
Setting aside what you think about Apple or Google, I think it’s pretty clear that Tesla isn’t a car company. They’re a technology and energy company. They approach producing cars like most technology companies approach writing software ... including their own manufacturing process and car improvements. They don’t have model years on their cars, and they roll out new features and improvements as they’re ready. It’s treating hardware improvements like software improvements. Nothing like a traditional car company. This is one of the reasons they’ve been so effective in disrupting the auto industry. The rapid, Google-like, approach to development makes them extremely nimble and quick to adapt. Their first principles thinking is leading to a better product, much like Apple’s holistic design approach.