Tesla Motors was founded in 2003 by engineers who wanted to prove that people didn’t need to compromise in speed to drive electric vehicles. Today, Tesla is the world’s only vertically integrated sustainable energy company, offering end to end clean energy products that include generation, storage and consumption1. Tesla has rapidly managed to grow into today’s company by leveraging their core capabilities to push towards their mission: To accelerate the worlds transition to sustainable energy.
This paper will explore the strategy Tesla has used to grow the company and their innovative approach to successfully create value to their customers as well as their shareholders. HistoryNamed after the famous inventor Nikola Tesla, Tesla Motors was founded in Silicon Valley in 2003 by Marin Eberhard and Marc Tarpenning, along with the co-founders JB Straubel, Ian Wright, and the now CEO, Elon Musk. While none of them had any previous experience in the car industry, their amateur knowledge of it was perhaps the reason they managed to become the first U.S. company to successfully enter this highly competitive industry since WWII with a mass-produced car2.In August of 2006, Elon Musk revealed the infamous “The Secret Tesla Motors Master Plan (just between you and me)” blog post where he announced the intentions of modifying the company’s mission to speed up the adoption of a solar electric economy.
Use that money to build an even more affordable car. While doing above, also provide zero emission electric power generation options3Tesla went through a series of financial distress within the next years. The global financial crisis of 2008 put Tesla in the brink of bankruptcy and was forced to raise $40M in debt. To alleviate some more of the financial stress and further develop its battery technology, Tesla entered into a strategic partnership with Daimler AG for 10% of their equity. ‘We are looking forward to a strategic cooperation in a number of areas including leveraging Daimler’s engineering, production, and supply chain expertise. This will accelerate bringing our Tesla Model S to production and ensure that it is a superlative vehicle on all levels,’ Musk said at the time4. Tesla went public in 2010 at $17 per share and was able to raise $226.1M. The capital raised would allow them to grow faster and speed up their car production but at the high expense of becoming a public company that must face tough investors each quarter and deliver on promised growth.
The company began the building of their “Gigafactory” in 2014, a giant battery factory that will help it dramatically cut the cost of its batteries by ‘using economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof.5’ according to their website. On April of 2015, Tesla launched the “Powerwall” in an event that highlighted Elon’s plans of growing into business segments that would be built based off their core technology. Tesla Energy would become the product line that can provide a suite of batteries for homes, businesses, and utilities fostering a clean energy ecosystem and helping wean the world off fossil fuels6.To further increase its competitive advantage in their cars, Tesla launched the Autopilot feature in October of 2015.
A futuristic feature that showed great promise but carried a hefty risk of public relation issues that later caused legal battles for the company. Nevertheless, Tesla has been resilient into perfecting the software as they believe in the future of the industry to be led by self-driving carsIn June of 2016, Tesla acquired SolarCity, a solar installation company, for $2.6B. The move helped Tesla take the next step into bringing two sustainable energy business under the same company. Tesla framed the takeover as creating the worlds only vertically integrated energy company that could power both your home and car7In 2016, Elon Musk announced “Part Deux” of his master plan.
The plan highlights how the company has changed its strategy and refocused their goals as they enter the emergent horizon of their core capabilities and use those to continue their growth plan. His four key goals are:
- Create stunning solar roofs with seamlessly integrated battery storage.
- Expand the electric vehicle product line to address all major segments.
- Develop a self-driving capability that is 10X safer than manual via massive fleet learning.
- Enable your car to make money for you when you aren’t using itIn 2017, Tesla Motors officially changed their name to Tesla, which better reflects their strategic position today.
Tesla’s future, as described by its own CEO, is quite intriguing. If they manage to follow through the “master plan” successfully, it will surely continue to dominate the markets and keep creating value for clients and shareholders. Innovation at TeslaTesla has proven to be a disruptor within all facets of their operations. A big portion of their ability to do so is due to its ability to innovate in areas where competitors haven’t. Tesla purposely hires employees who have never worked at a car manufacturing company to maintain the creative flow.
Musk is known for selecting people based upon their ability to solve complex problems. Not previous work. Promotions are based on the employee’s innovations over the course of the year. …..other than the hiring, I feel like I am going to step into the innovations that will already be mentioned in our deep dive of business segments… I will leave this part as is and we can decide later if we want to keep this section. If so, I can finish it later once everyone else has written their part.
