Innovation And Sustainable Business Development at Tesla

MGMT20132 INNOVATION AND SUSTAINABLE BUSINESS DEVELOPMENT

Executive Summary

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The following report is a type of proposal to the issues faced by Tesla in current time. The company is facing issue related to its autopilot’s inability to detect stationary objects and blind spot. The proposal is to develop a system that has sensors to detect the stationary object and alert the user. For that purpose, the value proposition had been detailed out along with a thorough discussion of business model. Also, the company’s supply chain development and competitive advantages were also elucidated in the report. Certain assumptions related to customer, technical and financial feasibility were also discussed. At last, the discussion on certain innovation tools was done in context of Tesla.

Introduction

In modern world, organisations face many issues and challenges. These might be related to funds, operations, product design, HR, etc. However, these challenges can be resolved by making use of innovation in that particular area. In this report, an analysis of the issue faced by Tesla is done i.e., Tesla’s autopilot technology is poor in detecting blind spot and stationary vehicles which is leading to fatal accidents.This issue will be resolved by making use of an innovative sensor technology that identifies blind spots and stationary objects at a distance of 500 meter and alert the driver. This report is mere a business proposal that comprises a value proposition model of Tesla, business operation development, supply chain development, competitive advantage, strategic fit, and phased development plan. In addition to this, certain innovation tools are also discussed followed by the critical self-analysis.

Description of the business model

 While going for strategic planning, the business model can assist Tesla in carrying out innovation in its current Autopilot issues. If this is done properly, the company can expand sustainably (Joyce& Paquin, 2016). The business model canvas given by Osterwalder & Pigneur (2014, pp.16-41) is discussed below:-

• Channels:Tesla has many channels to carry out sales of its updated Autopilot cars through Trade partners, retailers or distributors, online booking, mass merchandise, and telephonic conversation (Joyce & Paquin, 2016).
• Customer Relationships:Tesla believes it can improve its customer relationships through word of mouth and pre and post sales services. This would help in improving people’s trust on Autopilot system (Joyce & Paquin, 2016).
• Key Resources:These include human resources, distribution network, financial and technical resources, and more than 100 car manufacturing units.
• Key Activities:Innovation and Development, Manufacturing of Cars and other important auto parts, quality control, and sales of cars.
• Key Partners:Investors, Ad agencies, distributors, retailers, media partners, research institutes, etc.
• Revenue Streams:Licensing, sales of cars, batteries, interest on deposits, financing, insurance, etc.
• Cost structure:Taxes, marketing cost, contract manufacturing, logistics, parts and other material purchase, salaries, and incentives.

Disciplined Entrepreneurship Canvas

In this business canvas model, the discussion of certain key elements have been done in context of Tesla’s newly designed autopilot system and cars in which it is installed. The elements are:-

Customer Acquisition:Tesla already has a high brand image across the world due to its capability to carry out innovation and product development. For its new autopilot system, acquiring the customer won’t be tough as it is related to customer safety. People would be happy to invest in the cars that has better safety system (Bickersteth, et.al 2018). For acquisition of customers, the company would be running nationwide awareness campaigns highlighting benefits of the new project.

Product Unit Economics:These include the direct cost and revenue associated with the upgraded autopilot systems expressed in per unit. These costs and revenues are important for the financial success of the system.

Scaling:The product scaling would be large and the product would be installed in large number of cars (Bickersteth, et.al, 2018).

Design & Build:Tesla is very particular about the designs and product quality. Hence, there is no doubt that the new system would not be up to the quality standards. The customers would be satisfied with the updated systems.

Overall Economics:Talking about the overall economics, this involves cost-benefit analysis. The initial cost of investment for the product development is high but in the long run, it has many benefits which can overshadow the cost.

Sales: The product would build a trust in the customers and would increase the sales of Tesla Cars.

Value proposition

At present, Tesla is aiming at improving the current autopilot system installed in the cars that fails to determine the location of stationary objects and bling spots. For this purpose, the present manufacturing and sales processes have been halted. Being the best in the automobile market by carrying out research and innovation in electric cars is the prime value for the company (Litman, 2017). Company is known for its innovation and unique features in the electric automobiles. With its newly proposed sensor technology, the company is aiming at gaining the same trust of customers as it used to be prior to accidents due to autopilot failures (Augsten& Marzavan, 2017).

Business operation development

For business operation development, it is required by Tesla that it should focus on Client’s requirements and current failures in the product design. Tesla needs to modify its pitch so as to fulfil the requirements of the customers. Innovating the current product designs and providing clients something new beyond their expectation would result in marketing by word of mouth (Augsten& Marzavan, 2017). This is the major competitive advantage for Tesla. It does not believe in mainstream advertisement for business development. Publicity via word of mouth is enough for the company.

In addition to this, Tesla is investing in new start-ups in order to get access to a latest innovation and technology for its automobiles. Apart from this, the company is forming alliances with local leaders in different countries.

Supply chain development

In order to implement the upgraded version in its cars, the company has to bring some changes in its current supply chain (Carson, et.al, 2018). The supply chain is provided below. All that is required from the management is to change certain process in the designing process and manufacturing process as these process would help in innovating and installing the new autopilot systems, sensors, and alert system

Scope of Change in Supply Chain of Tesla

Financial value capture

A special budget is required for carrying out modification in the current autopilot system. The cost of the project is met by value capturing process (He, 2015). For that purpose, it is important to understand the overall costing of the innovation which is shown in the table given below:-

The value capture for this project is done from investors, interest gained on deposits, and some part of business revenue.

Competitive advantage

Tesla has been a renowned name in the mainstream luxury automobile industry. Tesla cars have superior performance, low mechanical complexity, and lower maintenance. These are some of the USPs of Tesla cars. It is the leader of the EV automobile market and is heavily investing in improving its battery’s performance. In addition to this, with its large supercharger network, it is reaching new heights. The new entrant may take decades to set such a huge charging network Its R&D team is exceptional and is capable of updating the current technology and resolve all technical issues related to automobile (Pakhomova, et.al, 2019).

Strategic fit

Talking about the strategic fit, the proposed solution for the current problem of Tesla, is compatible with the current operation of the company. This is because the problem is occurring with all the cars having autopilot feature. If this is not resolved properly, then the Tesla’s brand image would be at stake. Hence, it is required from the company to put this solution at priority.

Identification and assessment of assumptions and uncertainties  

Phased development plan of the company for uncertainties

Selection of the innovation tools and different techniques

In order to resolve the current autopilot issue can be resolved by making use of certain innovation tools. These tools has the capacity to comprehend the issue and assist Tesla in resolving the issue:-

• Market Segmentation: This tool can help Tesla in determining the right customer segment. The primary focus is on elite class people with high earning. The products can be sold in local as well as international market.
• BHM End User Profile:This tool will help Tesla in determining the needs and wants along with other invaluable data related to user behaviour. This will help in improving the current design of cars and its autopilot system.
• Product Plan:This tool is useful in the current situation analysis and provide a roadmap and direction to fulfil the needs of the target customers. To develop a sensor-based technology, Tesla need such plans.
• Quantified Value Proposition:QVP is crucial for marketing and sales operations of Tesla. With the new and upgraded autopilot system, the company can prepare its pricing strategy. QVP keeps a right balance between sales volume and market share (Dikmen& Burns,2016).
• Test Key Assumption:It is a fact that while developing the new design of Autopilot system, Tesla needs to make certain key assumptions.Once these are made, experimentation would be done to test those key assumptions for gathering data.
• Identify Key Assumption:The assumptions are required to be identified that might help in improving the design and gathering data for approving or disapproving the results.
• Minimum Viable Business Product (MVBP):it is the way of developing an innovation at a very low cost. MVBP of a Tesla’s new  idea allows a team to gather the maximum amount of data and information for learning about customers’ preference and issues they face with the least effort (Agafonow, 2015).
• Pricing Framework:In order to carry out innovation project, it is required to capture value. With a proper pricing framework, Tesla can arrange required amount of funds for the project (Agafonow, 2015).

Candid and critical self-analysis

This assessment on innovation and sustainable development of business helped me in understanding the real-time issues that organisations face. I learned about the impact of an issue on business and its stakeholders & key partners. I learned about the significance of value preposition model and business canvas as I had no idea about what they are and why they are so important for businesses. I gain a better understanding of bringing innovation in the business operation. In the due course, I came across many innovation tools, such as market segmentation, product plan, etc. Prior to this assessment, I had a very little knowledge of these tools. I also gain an insight into the competitive advantage and how organisations can lead in their respective sector. Overall, the assessment helped me in growing my understanding of innovation and sustainable development. I am sure this knowledge would help me in future.

Conclusion

From the above discussion on innovation and business sustainable development, it is very much clear that the issue faced by Tesla can be resolved by proper planning and application of tools. The overall budget for the project is set to be $180,00,000. The funds can be arranged from various sources, such as investors, interest on deposits, etc. The report talked about business operation development, supply chain development, strategic fit, and much more. In addition to this, it consisted of customer desirability, financial viability, and technical feasibility. It was highlighted that with due care, Tesla can resolve such uncertainties. At last, a self-reflection was provided discussing the overall learning from this assessment.

References

• Agafonow, A. (2015). Value creation, value capture, and value devolution: where do social enterprises stand?.  Administration & Society,  47(8), 1038-1060.
• Augsten, A., & Marzavan, D. (2017). Achieving sustainable innovation for organisations through the practice of Design Thinking: A case study in the German automotive industry. In  ISPIM Conference Proceedings(pp. 1-1). The International Society for Professional Innovation Management (ISPIM).
• Bickersteth, J., Rogan, D., Kennedy, L., & Mckenna, E. (2018). Sensor Technology and New Opportunities for Environmental Monitoring.  Studies in Conservation,63(1), 329-331.DOI: 10.1080/00393630.2018.1486096
• Carson, B., Giulio Romanelli, Walsh, P., & Zhumaev, A. (2018). Blockchain beyond the hype: What is the strategic business value? Retrieved from https://www.mckinsey.com/business-functions/digitalmckinsey/our-insights/blockchain-beyond-the-hype-what-is-the-strategic-business-value
• Dikmen, M., & Burns, C. M. (2016, October). Autonomous driving in the real world: Experiences with tesla autopilot and summon. In  Proceedings of the 8th international conference on automotive user interfaces and interactive vehicular applications(pp. 225-228). ACM.
• He, Y. (2015). Acquisition pricing and remanufacturing decisions in a closed-loop supply chain.  International Journal of Production Economics,  163, 48-60.
• Joyce, A., & Paquin, R. (2016). The triple- layered business model canvas: A tool to design more sustainable business models. Journal of Cleaner Production, 135, 1474-1486.DOIi:10.1016/j.jclepro.2016.06.067
• Litman, T. (2017).  Autonomous vehicle implementation predictions  (p. 28). Victoria, Canada: Victoria Transport Policy Institute.
• Pakhomova, A., Salnikova, Y., Namestnikova, L., & Marahovskaya, I. (2019, July). The Use of Ergonomic Methods for Ensuring the Competitiveness of Business Structures. In  International Conference on Applied Human Factors and Ergonomics(pp. 361-367). Springer, Cham.
• Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition.Harvard Business Review, 92(11), 64-88.https://www.gospi.fr/IMG/pdf/porter-2014-hbr_how-smart-connected-products-are-transforming-competitionhbr-2014.pdf
• Toro-Jarrín, M., Ponce-Jaramillo, I., & Güemes-Castorena, D. (2016). Methodology for top-building process integration of business model canvas and technological roadmap. Technological Forecasting & Social Change, 110, 213-22DOIdoi:10.1016/j.techfore.2016.01.009

Appendix

Appendix 1: Application of Product Plan

Appendix 2: Application of MVBP

Appendix 3: Application of Pricing Framework

Appendix 4: Market Segmentation

Appendix 5: Application of Testing Key Assumptions