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Lessons from Tesla's Approach to Innovation

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https://hbr.org/2020/02/lessons-from-teslas-approach-to-innovation

hbr.org

Lessons from Tesla's Approach to Innovation
Executive Summary Tesla has shifted the auto industry toward electric vehicles, achieved consistently growing revenues, and at the start of 2020 was the highest performing automaker, in terms of total return, sales growth and long-term shareholder value.

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Tesla’s innovation strategy

Tesla’s innovation strategy offers lasting lessons for any innovator, especially in terms of

  • how to win support for an idea and
  • how to bring new technologies to th...

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Innovation Capital

There are four factors how innovators build up their innovation capital: Who you are, who you know, what you have done, your ability to draw att...

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Winning the resources

Winning the resources

Elon Musk is a master of building and using innovation capital to win support for his ideas. To gain support:

  • He leverages his past success at PayPal and Space X
  • He...

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Commercializing the idea

A part of Tesla's strategy, which forms the core products and requires the most investment, aims to transform an industry by paying attention not just to the product, but to the entire product ecos...

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Elon Musk And The Roadster

The current CEO of Tesla wasn’t the founder of the company and joined in 2004. His investments and lobbying provided the company with much-needed traction to build the first completely electric sports car, called the Roadster, which went into production in 2008.

The futuristic electric sports car was a technical marvel but out of reach for most people at USD 100,000, and also had a slow charge.

Leadership Shuffle And The Model S

  • 2008 saw many upheavals and changes in leadership, with Elon Musk taking over as CEO in October 2008, and cutting manpower by 25 per cent.
  • Tesla faced financial problems in 2009 but drove through it safely by going public in 2010.
  • The company unveiled its mainstream consumer vehicle, named the Model S in 2011, and was critically successful, gaining a wide user base due to its lower cost (only USD 76,000!) and futuristic technology.

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First Principle

First Principle

Is a foundational truth that is "known by nature". It is not an assumption or deduction based on another theory or supposition but it’s also not an absolute truth but rather an observed one, meanin...

First Principle Thinking In Practice

The CEO might re-envision the way his company tackles development, by bringing in other departments that don't normally get to participate in this work, and creating incentives for original thinking from anyone in the company.

On a personal level, you may make yourself more open to other people's perspectives and find value on discussions that you may not have previously had. 

4 Steps For First Principle Thinking

  1. Identify the problem you want to solve.
  2. List all the reasons you can't solve this problem.
  3. List all obvious solutions that apply but don't solve the problem adequately.
  4. Ask yourself: "If I could create a solution based on my desires, what would that solution be?"

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Elon Musk

"I tend to approach things from a physics framework. And physics teaches you to reason from first principles ra..."

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The Two Types of Thinking

Comparison thinking: comes up with solutions based on pre-existing ideas. It is the way we normally think but it also limits the solutions to possible permutations of what already exists.

First principles thinking: starts free of preconceptions by studying the fundamentals of something and then working your way to a new thing. This helps you understand complex problems.