Shared from the 1/15/2020 Sydney Morning Herald eEdition

Tesla's rise to top a lesson for all business models

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VW sells 11 million vehicles a year, 30 times the Tesla total. But investors have, quite rightly, decided electric cars are now the future – and they are backing the company that got there first, not the old giants still desperately trying to find a way to catch up.

That is a major transformation in an industry which, in many ways, defined 20th-century capitalism (it may not be long before a President quips that what’s good for Tesla is good for America).

Other technology giants have created corporate empires out of new industries such as social media, or web search. But Tesla has taken an old one and used pioneering technology to turn it upside down.

What are the wider lessons from that for every other business? Here are three to be starting with.

First, no one is safe

Cars were a high tech industry a hundred years ago but they aren’t anymore and haven’t been for a long time. Some changes in style and some extra electronics aside there isn’t much difference between the vehicles on the road today and those of 50 years ago. But Tesla has taken a traditional industry, and used a single innovation – a powerful battery – to reinvent it.

If that can be done in cars, then it can be done in aviation, or healthcare, or law, or any industry you care to think of. Any major company that thinks it is secure from a competitor coming out if nowhere just because it is big is kidding itself.

Next... the environment matters more than anything else right now

It was worries over climate change, and rising consumer concern over the damage their car was doing to the planet, that gave Tesla its opening. There wasn’t any other reason for buying one. That started in wealthy, liberal California but it has now gone global.

Companies shouldn’t just think about making their own products and processes greener

– they should be thinking about the way start-ups might use that issue to completely overwhelm them. From consumer goods, to agriculture to electronics, plenty of other existing giants might soon find themselves in the same kind of trouble. Fixing the planet is driving as much disruption as the internet, and that is going to increase dramatically over the next ten years. Ironically, even the web giants might be disrupted by greener rivals one day – Google, Facebook and Netflix all use a scary amount of energy.

Finally, buy quickly

Rewind five years and GM, Renault or VW could have bought Tesla for hardly anything. It’s a quoted business, and Wall Street has long since regarded Musk as a very, very loose cannon. It would have fallen to a knockout bid if one of the auto giants had been brave enough to launch one. Even a year ago that would have been true.

But it is too late now. Tesla is more likely to buy one of the traditional giants than the other way around (the financing expertise and servicing and dealer networks might be interesting even if the factories are irrelevant).

True, it remains to be seen whether Tesla can dominate the auto industry the way GM and Toyota once did.

The traditional players have plenty of money to spend, and they may win the battle for the mass market. Tesla may not be able to cope with making a million or more vehicles a year.

And it may well get disrupted itself as the tech companies develop driverless pods as a more efficient alternative to the old-style car. We will see over the next few years. But its sleek electric cars have already turned the auto industry upside down. And every company in the world should be learning the lessons from the revolution.

The Telegraph, London

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