Does a Tesla Electric Car Qualify as a Disruptive Innovation?

 

img-elonmuskteslasubsidiestaxrebate021012_08312577904

Here is a brief description of disruptive innovation theory, via the Clayton Christensen Institute:

The theory explains the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo. Initially, a disruptive innovation is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.

So does a pricey Tesla electric car qualify as a disruptive innovation of the auto industry? Not so, according to Tom Bartman, a research associate of the Harvard business professor, in Harvard Business Review. Rather Tesla is a “sustaining innovation” that makes incremental improvements and competes on price against competitors. So what would be a disruptive innovation? From HBR:

If Tesla won’t disrupt the industry, what could? Bartman’s research points to the “neighborhood electric vehicle”—a low-speed vehicle that resembles a souped-up golf cart. NEVs are used by security on university campuses, for transportation in retirement communities, and for delivery in cities. They cost just a few thousand dollars and are cheap to operate and easy to park. And their manufacturers are starting to add features found in conventional cars. “Disruptive theory is all about the disrupter being better suited for people who use it early on and then improving over time,” Bartman says. Particularly in the developing world, NEVs could eventually be what PCs were to minicomputers or what desktop copiers were to giant Xerox machines. Starting at the bottom still makes strategic sense.

There are 55 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. Frozen Chosen Inactive
    Frozen Chosen
    @FrozenChosen

    Tesla is not a practical option for those of us in the frozen north because the battery power is significantly compromised by cold temperatures.  Not many people can afford to pay $90k for a car – let alone one you can only drive 6 months out of the year.

    • #1
  2. Pilli Inactive
    Pilli
    @Pilli

    Tesla’s disruptive innovation is not with its cars but with its sales system.  Don’t worry about dealers, don’t worry about haggling over price (knowing full well you’re getting beaten) don’t worry about which dealer has the best price on the car you want.  Go online and buy a Tesla.  (Then wait 2 years for delivery but that’s a different issue.)

    • #2
  3. skipsul Inactive
    skipsul
    @skipsul

    Pilli:Tesla’s disruptive innovation is not with its cars but with its sales system. Don’t worry about dealers, don’t worry about haggling over price (knowing full well you’re getting beaten) don’t worry about which dealer has the best price on the car you want. Go online and buy a Tesla. (Then wait 2 years for delivery but that’s a different issue.)

    If only that were true in all states.  Many states (like my native Ohio, to its eternal shame) have banned Tesla from doing this.

    • #3
  4. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Not yet, but if Tesla is able to ever make a real breakthrough on battery technology, THAT would potentially be a game-changer.

    So far, they have not really delivered on their own hype and/or promises in that regard.

    • #4
  5. Mendel Inactive
    Mendel
    @Mendel

    It seems to me the article is jumping the gun. The definition of “disruptive innovation” above stated:

    but eventually the new product or idea completely redefines the industry.

    It is still to early in the game to know whether Tesla will be disruptive – saying it is not a disruptive technology is like saying that Scott Walker is not the most influential president of the 21st century.

    If Tesla ever manages to build cars which save middle-class buyers substantial money over the lifetime of the car compared to those with internal combustion engines, it will become a disruptive innovation. But for now all bets are off.

    • #5
  6. skipsul Inactive
    skipsul
    @skipsul

    Misthiocracy:Not yet, but if Tesla is able to ever make a real breakthrough on battery technology, THAT would potentially be a game-changer.

    So far, they have not really delivered on their own hype and/or promises in that regard.

    That’s true across the entire battery industry.  Believe me, they are working on it, but batteries are tricky animals (my own business has several product lines just for handling battery systems in vehicles).  Current chemistry lets you pack a lot of energy into a battery, but there are also the issues of getting it out, then replacing it.  You just cannot utilize all that is in there – it’s rather like having a gas tank that you can never let go below about 1/2 empty without totally killing the tank.  Wouldn’t be a problem if you could also quickly recharge the battery too.

    The really good batteries can also be major fire hazards if mis-handled.

    • #6
  7. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    I’m not sold on the idea that NEVs are all that disruptive, beyond retirement communities.

    In my own personal case (and really, we all know that my life is a template for all the world to follow), living in a downtown area, the only reason I have a car is so that I can get out of the city once in a while, or for when I need to haul a bit of cargo (like groceries, for example).

    I don’t need an NEV for the little trips around town. For that kind of trip I can walk, or ride my bike, or take the bus.

    A more disruptive “technology” for me would be a really good car-sharing service. There is one in my city, but regulations (to protect the taxi industry) prevent it from being good enough to get me to sign on.

    • #7
  8. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Mendel:It seems to me the article is jumping the gun. The definition of “disruptive innovation” above stated:

    It is still to early in the game to know whether Tesla will be disruptive – saying it is not a disruptive technology is like saying that Scott Walker is not the most influential president of the 21st century.

    If Tesla ever manages to build cars which save middle-class buyers substantial money over the lifetime of the car compared to those with internal combustion engines, it will become a disruptive innovation. But for now all bets are off.

    If nobody’s been able to bring the cost of hybrids down to a level where they can be adopted by the mainstream consumer market, I don’t really see how fully-electric vehicles can make that leap.

    You almost never hear about hybrids any more. The Toyota Prius was first sold way back in 1997.

    That’s almost 20 years ago!

    You’d think that the technology would have developed enough since then to become close to ubiquitous, and yet it hasn’t.

    • #8
  9. ctlaw Coolidge
    ctlaw
    @ctlaw

    Misthiocracy:Not yet, but if Tesla is able to ever make a real breakthrough on battery technology, THAT would potentially be a game-changer.

    So far, they have not really delivered on their own hype and/or promises in that regard.

    Tesla’s main innovations are largely dead ends.

    They figured out ways to utilize a legacy cell technology somewhat more efficiently/effectively than did previous players, but with not much more room for improvement.

    The next battery technology is the one that might be disruptive.

    Tesla is still in a good position to exploit that hypothetical technology when it arrives.

    • #9
  10. Mendel Inactive
    Mendel
    @Mendel

    Misthiocracy:A more disruptive “technology” for me would be a really good car-sharing service. There is one in my city, but regulations (to protect the taxi industry) prevent it from being good enough to get me to sign on.

    I think this and the Tesla sales model bring up another point: many of the most obvious “disruptions” of the last few years haven’t been novel technologies per se, but rather novel implementations of somewhat dated technology.

    iTunes certainly disrupted the music industry, but by the time it emerged, MP3 technology was relatively mature. The technology underpinning Uber also isn’t exactly cutting-edge.

    Robust car sharing and direct car sales could revolutionize the auto market without requiring a single minute in the research lab.

    • #10
  11. Mendel Inactive
    Mendel
    @Mendel

    Misthiocracy:

    If Tesla ever manages to build cars which save middle-class buyers substantial money over the lifetime of the car compared to those with internal combustion engines, it will become a disruptive innovation. But for now all bets are off.

    If nobody’s been able to bring the cost of hybrids down to a level where they can be adopted by the mainstream consumer market, I don’t really see how fully-electric vehicles can make that leap.

    I’m nowhere near as versed as others on the technologies behind hybrid/electric cars, but this still seems like something of a false comparison.

    Hybrid vehicles require three distinct processes: an internal combustion engine, an electric engine, and a mechanism to convert excess energy into electricity. That adds a Rube Goldberg-component to their design which may never be possible to simplify.

    Electric vehicles, on the other hand, have an intrinsic simplicity which will probably remain appealing as long as cars exist. Perhaps nobody will ever find the ideal battery and they will remain as elusive as cold fusion, but I don’t think the economic hurdles of EVs can be compared to those of hybrids.

    • #11
  12. user_1008534 Member
    user_1008534
    @Ekosj

    I agree that Tesla isn’t disruptive yet. No electric car that has to recharge for much longer than it takes to fill up a conventional car will be truly disruptive.

    Here is a disruptive electric car idea. Make the batteries standardized and easily replacable. I want the batteries in the car to be as easy to swap out for fresh ones as the batteries in my flashlight.

    What are now ‘gas stations’ could become ‘battery stations’. Instead of buying a gazillion gallons of gasoline, they’d buy hundreds of the standard battery and a charging station to recharge. When I pull in to ‘fill up’ they confirm with me the amount of charge left on the batteries in my car. Then they take those depleted ones out of my car and swap them for fully-charged ones from their charging station They bill my credit card for the difference in battery charge-level. And I’m off.

    Existing gas stations don’t need to convert to something expensive and exotic like hydrogen storage. Just keep a bunch of charged batteries on hand. The transition is simple …. They start by buying a little less gas and a few batteries. Then switch the proportions as more electric cars appear. And I as a driver don’t have to worry about mileage limitations etc.

    That’s disruptive.

    • #12
  13. EThompson Inactive
    EThompson
    @EThompson

    Elon Musk has lost any respect he may have engendered from me for the co-founding of PayPal.

    Tesla was rescued/subsidized by taxpayers to the tune of $465 million. In the meantime Musk squandered the hundreds of millions of profit he had earned at PP.

    Not impressed.

    • #13
  14. ctlaw Coolidge
    ctlaw
    @ctlaw

    Ekosj:I agree that Tesla isn’t disruptive yet.No electric car that has to recharge for much longer than it takes to fill up a conventional car will be truly disruptive.

    Here is a disruptive electric car idea.Make the batteries standardized and easily replacable.I want the batteries in the car to be as easy to swap out for fresh ones as the batteries in my flashlight.

    What are now ‘gas stations’ could become ‘battery stations’. Instead of buying a gazillion gallons of gasoline, they’d buy hundreds of the standard battery and a charging station to recharge. When I pull in to ‘fill up’ they confirm with me the amount of charge left on the batteries in my car. Then they take those depleted ones out of my car and swap them for fully-charged ones from their charging station They bill my credit card for the difference in battery charge-level. And I’m off.

    Existing gas stations don’t need to convert to something expensive and exotic like hydrogen storage.Just keep a bunch of charged batteries on hand.The transition is simple …. They start by buying a little less gas and a few batteries.Then switch the proportions as more electric cars appear. And I as a driver don’t have to worry about mileage limitationsetc.

    That’s disruptive.

    It was called Better Place. It failed miserably.

    • #14
  15. Seawriter Contributor
    Seawriter
    @Seawriter

    skipsul:The really good batteries can also be major fire hazards if mis-handled.

    Now that sounds like a plot handle for a thriller. Or a MacGuffin.

    Seawriter

    • #15
  16. skipsul Inactive
    skipsul
    @skipsul

    Hybrids, if you factor out the government subsidies (which only apply to certain models anyway), cost far too much compared to standard vehicles to be competitive.  I worked out that a Toyota Highlander, given our annual mileage, would take about a decade just to break even, even with gas at $4.00 a gallon.  But the reason they exist is that the range of purely electric vehicles is limited.

    Regarding battery swap outs:  You ever heft a regular car battery?  Now imagine the great weight of enough such batteries to power a Tesla.  That alone is a deal breaker for changing stations unless they also invested in hoists or circus strongmen.

    But it’s worse than that… there are no easy quick change connectors.

    Easy connectors that can handle more than even 50 amps are just not readily available on the market (as I said above, I’m in the business).  When you get into that sort of range you are using lugs and bolts unless you have a lot of money.  Now we can certainly envision high-power connector designs (there are a few out there, but they are very very costly and bulky), but you have another issue: sparking / arcing, which leads to fun things like fires and contact-welding, and downstream power surges.  You will get sparking every time you engage or disengage these connectors (you get it anyway when dealing with lugs, which you would notice if you’ve ever had to change a regular car battery).  If you have a loose connector, you could incinerate your vehicle as the loose connection would have a very high resistance – high current + high resistance = HEAT (plus more sparking / arcing).  If a changing station left even 1 connector or lug too loose, you could set your vehicle on fire.

    • #16
  17. Mendel Inactive
    Mendel
    @Mendel

    ctlaw:

    Ekosj:I agree that Tesla isn’t disruptive yet.No electric car that has to recharge for much longer than it takes to fill up a conventional car will be truly disruptive.

    Here is a disruptive electric car idea.Make the batteries standardized and easily replacable.I want the batteries in the car to be as easy to swap out for fresh ones as the batteries in my flashlight.

    What are now ‘gas stations’ could become ‘battery stations’. Instead of buying a gazillion gallons of gasoline, they’d buy hundreds of the standard battery and a charging station to recharge. When I pull in to ‘fill up’ they confirm with me the amount of charge left on the batteries in my car. Then they take those depleted ones out of my car and swap them for fully-charged ones from their charging station They bill my credit card for the difference in battery charge-level. And I’m off.

    Existing gas stations don’t need to convert to something expensive and exotic like hydrogen storage.Just keep a bunch of charged batteries on hand.The transition is simple …. They start by buying a little less gas and a few batteries.Then switch the proportions as more electric cars appear. And I as a driver don’t have to worry about mileage limitationsetc.

    That’s disruptive.

    It was called Better Place. It failed miserably.

    Also, Tesla announced plans several years ago to open battery-swap stations in California. No word on when (read: if) they’ll actually be built.

    • #17
  18. skipsul Inactive
    skipsul
    @skipsul

    Seawriter:

    skipsul:The really good batteries can also be major fire hazards if mis-handled.

    Now that sounds like a plot handle for a thriller. Or a MacGuffin.

    Seawriter

    Several cargo planes (and the occasional semi trailer) transporting Lithium Ion batteries have burned up hauling the things.  Anymore you have to treat them like explosives or dangerous acids when shipping them.

    • #18
  19. Guruforhire Member
    Guruforhire
    @Guruforhire

    Tesla isn’t even a car company its a carbon credit company.

    • #19
  20. EThompson Inactive
    EThompson
    @EThompson

    Guruforhire:Tesla isn’t even a car company its a carbon credit company.

    Well said.

    • #20
  21. user_1008534 Member
    user_1008534
    @Ekosj

    Hi all. I still like the battery swap idea. BETTER PLACE required construction of expensive NEW charging stations. If the car makers could agree on standardizing a battery connection and housing size/shape … regular filling stations could participate at very low entry costs.

    • #21
  22. iWc Coolidge
    iWc
    @iWe

    As an insider I can tell you that major air cargo shippers experience, on average, about one onboard battery fire a month. Very few, of course, end up killing people – but the hazard is very, very real.

    • #22
  23. skipsul Inactive
    skipsul
    @skipsul

    Ekosj:Hi all.I still like the battery swap idea. BETTER PLACE required construction of expensive NEW charging stations. If the car makers could agree on standardizing a battery connection and housing size/shape … regular filling stations could participate at very low entry costs.

    If you were swapping out just 1 battery the same size as on a regular car, sure it would work.  But see above – the batteries that EVs use are HUGE.  This means that, to make this practical, you either need to switch out that 1 big battery for a bunch of smaller ones (see above regarding connections) or invest in large hoists to move them in and out.  Either way you are still talking a much longer time to change the battery than to fill a tank.

    • #23
  24. Mendel Inactive
    Mendel
    @Mendel

    skipsul:

    Ekosj:Hi all.I still like the battery swap idea. BETTER PLACE required construction of expensive NEW charging stations. If the car makers could agree on standardizing a battery connection and housing size/shape … regular filling stations could participate at very low entry costs.

    If you were swapping out just 1 battery the same size as on a regular car, sure it would work. But see above – the batteries that EVs use are HUGE. This means that, to make this practical, you either need to switch out that 1 big battery for a bunch of smaller ones (see above regarding connections) or invest in large hoists to move them in and out. Either way you are still talking a much longer time to change the battery than to fill a tank.

    Also, even if the size/connections of the batteries were standardized, every carmaker (and perhaps every model) would have a different type of battery, since battery technology (and the resulting range) would be one of the main levels on which carmakers would compete.

    Thus, even if the swapping technology were harmonized, a “gas” station would have to stock many different types of huge batteries at any given time, which would probably be a logistical nightmare.

    • #24
  25. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    skipsul:Regarding battery swap outs: You ever heft a regular car battery? Now imagine the great weight of enough such batteries to power a Tesla. That alone is a deal breaker for changing stations unless they also invested in hoists or circus strongmen.

    The cost of robotics is dropping much faster than the cost of batteries.

    • #25
  26. skipsul Inactive
    skipsul
    @skipsul

    Mendel:

    skipsul:

    Ekosj:Hi all.I still like the battery swap idea. BETTER PLACE required construction of expensive NEW charging stations. If the car makers could agree on standardizing a battery connection and housing size/shape … regular filling stations could participate at very low entry costs.

    If you were swapping out just 1 battery the same size as on a regular car, sure it would work. But see above – the batteries that EVs use are HUGE. This means that, to make this practical, you either need to switch out that 1 big battery for a bunch of smaller ones (see above regarding connections) or invest in large hoists to move them in and out. Either way you are still talking a much longer time to change the battery than to fill a tank.

    Also, even if the size/connections of the batteries were standardized, every carmaker (and perhaps every model) would have a different type of battery, since battery technology (and the resulting range) would be one of the main levels on which carmakers would compete.

    Thus, even if the swapping technology were harmonized, a “gas” station would have to stock many different types of huge batteries at any given time, which would probably be a logistical nightmare.

    Hadn’t even considered that.  Would be like massive oversized tire shops – have to have a battery for a 2019 model, even though the 2024 model just released uses an all new type.

    Forcing all to standardize on one type would likely stifle innovation greatly.  Heck, the reason cars STILL only run on 12v instead of a higher voltage is due to existing infrastructure and parts.  Higher voltages would allow makers to use lighter gauges of wire.  But 12v has been the standard, though, since the late 40s / early 50s, and the last big push to change to 42v flopped badly over a decade ago.

    • #26
  27. user_1008534 Member
    user_1008534
    @Ekosj

    If I can’t jump in my electric car and go anywhere I want with the same carefree abandon that I can in a gas or hybrid car, then I dont see it as ever being disruptive. Interesting niche only.

    • #27
  28. user_1008534 Member
    user_1008534
    @Ekosj

    And I STILL like the replacable battery idea. If I knew I could find a replacement battery virtually anywhere, then range ceases to be as vital as it does today. And I know EV batteries are huge. But I’m envisioning the battery station attendant trundling out my replacement battery on a HomeDepot-like cart with some rollers on the bed.

    Done.

    Don’t you think the industrywould settle on 4 or 5 kinds of batteries? Every other electric device seems to do that…why not cars?

    • #28
  29. Mendel Inactive
    Mendel
    @Mendel

    Ekosj:If I can’t jump in my electric car and go anywhere I want with the same carefree abandon that I can in a gas or hybrid car, then I dont see it as ever being disruptive. Interesting niche only.

    Of course, from a global perspective, the car buyer who has enough money to buy a car powered for 5 people but usually only contains 1, and who has enough free time and a high enough income to simply take off with his car on extended trips, is also a minority niche.

    There are many more people in the world who would benefit greatly from a vehicle which could take them short distances (but for whom standard cars are still too expensive), and plenty of businesses for whom a typical sedan is overkill. That’s not to say electric vehicles are the only or best answer for that niche, but there are plenty of alternatives which have no chance in America yet might be profitable in Europe or the developing world.

    • #29
  30. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    I’m still not clear why hydrogen isn’t considered a superior alternative to using batteries.

    Yes, it takes a lot of electricity to separate the hydrogen from water, but then it takes a lot of electricity to charge a battery!

    Yes, hydrogen is what filled the Hindenberg, but a pressurised tank in a small automobile isn’t nearly the same thing as the airbag of a gigantic airship (and besides, isn’t gasoline pretty dang explosive in its own right?).

    I assume there’s a good technical/engineering answer for why batteries are a better idea than hydrogen, and that the Royal Society of Ricochet Poindexters will be happy to educate me.

    ;-)

    • #30
Become a member to join the conversation. Or sign in if you're already a member.

Comments are closed because this post is more than six months old. Please write a new post if you would like to continue this conversation.