Friday, May 8, 2015

HBR: "Tesla’s Not as Disruptive as You Might Think" (TSLA)

I'll tell you what's not disruptive, it's Tesla's new battery, that's what.
There's a reason you haven't seen us gushing, the thing is just so...pedestrian.
More next week, for now, the Harvard Business Review where they don't use the "I'll tell you what...that's what" locution:

In the fall of 2014 an investor contacted HBS professor Clayton Christensen with a friendly challenge. Christensen is best known for his theory of disruptive innovation, which describes how firms that introduce rudimentary products can eventually overrun established players by systematically improving the products until they meet the needs of mainstream consumers, generally at low prices. The investor, a shareholder in the electric vehicle company Tesla, suggested that Tesla’s founder, Elon Musk, is creating a new model of disruption, in which products start at the high end and move down. During its 10-year history Tesla has made just 59,500 cars, most of which cost upwards of $100,000. But it expects to introduce a model in late 2015 with a sticker price of about $70,000, and in 2017 it plans to launch one for $35,000. Musk is outspoken about his goal: to create an affordable mass-market electric vehicle that will supplant gasoline-powered cars.
It was the kind of challenge Christensen loves—he believes that the best way to improve a theory is to study anomalies. (Aviation, he has said, was dramatically improved by studying early crashes.) He assigned his research associate Tom Bartman and colleagues at HBS’s Forum for Growth and Innovation to conduct a deep study of Tesla to determine whether the firm really is pioneering top-down disruption and to assess any other companies that might disrupt the global automobile market.
If demand rises, researchers believe that GM, Toyota, and others could shift to electric vehicles relatively quickly.
The time is ripe for such examination. As the theory of disruptive innovation celebrates its 20th birthday—it was first articulated in a 1995 HBR article—recognition is growing that it has been co-opted as a trendy buzzword and applied to businesses that aren’t truly disruptive. “The word is [now] used to justify whatever anybody—an entrepreneur or a college student—wants to do,” Christensen told Bloomberg last year, responding to criticism of his work in the New Yorker. Bartman says that the popular press routinely cites Tesla and Airbnb as examples of disruptive innovations. Airbnb’s business model seems to fit the definition, he adds—but does Tesla’s?

To investigate, Bartman’s team posed five questions it uses to evaluate disruptive innovations. First, does the product either target overserved customers (by offering lower performance at a lower price) or create a new market (by targeting customers who couldn’t use or afford the existing product)? Second, does it create “asymmetric motivation,” meaning that while the disrupter is motivated to enter higher performance segments over time, existing players aren’t motivated to fight it? Third, can it improve performance fast enough to keep pace with customers’ expectations while retaining its low cost structure? Fourth, does it create new value networks, including sales channels? Fifth, does it disrupt all incumbents, or can an existing player exploit the opportunity?...MORE
HT: Barron's Tiernan Ray who highlights an analyst who disagrees with Professor Christensen:
Apple, Tesla Misunderstood by Clay Christensen’s ‘Disruption,’ Says UBS

Previously on the Clay Christensen Channel:

Climateer Line of the Day: Clayton Christensen Cringes Edition
Clayton Christensen: The Next Industry Headed Toward Disruption--Consulting
Harvard's Clayton Christensen: The World's Most Influential Business Thinker (and what he's investing in)
The Guy Who Wrote the Only Business Book Steve Jobs Ever Bothered to Read Talks Academia and Big Data
"Disruption guru: Why Apple, Tesla, VCs and Academia May Die" (AAPL; TSLA)
UPDATED--Point-Counterpoint: "Disruptive" is Silicon Valley's Most Pernicious Cliché
Institutional Investor: "Controversy In the Land of Disruptive Innovation"

Professor Christensen's paper "The Process of  Theory Building" is available from him at
We have links to Christensen's thinking.