#4 Keeping your competitive advantage: Cars
- #1 Keeping your competitive advantage
- #2 Keeping your competitive advantage: Retail
- #3 Keeping your competitive advantage: Delivery
Recently, Elon Musk was visiting Chile and everyone were speculating about lithium and the next generation of Tesla motor’s batteries.
The revolution Tesla has bring upon us is outstanding and can only be compared with the revolution another young man started almost 100 years ago.
Henry Ford, changed everything in 1903 with his famous model A.
The things Ford executed differently were the production, distribution and access his company was bringing to the equation (yes, there were cars before Ford). Once you think about a car everyone can afford, the market is deeply disrupted. In a time when the average wage was below $500, Ford competitors were pricing their cars somewhere around $15.000 and $35.000. Their game was on margin and not volume.
Ford thought differently, he had the vision of building a product that could be afford by normal people under normal conditions (and not getting a loan bigger than the loan of a house). After the model A, Ford continue with the model B,C,D and so on. Until he got it: The model N was the first one that was somehow near what he wanted. But a wooden frame was the biggest challenge to overcome: too sturdy and small for a family.
The model T was a seminal event on the manufacturing industry. It change our culture, remade our cities and launched a company that achieved world domination.
More than half of the cars driven in the world (by the 20’s) were model T.
But then, Ford went another step further by creating a moving assembly line in which each person had 1 specific task to accomplish. He moved the production of a single car from 12 hours to 90 minutes. The last great impact Ford had were the salaries: he started paying $5 a day in a time when companies were paying on average $2.25 per day.
But the tireless innovator ran out of gas when he stuck to his model T and slowed down the innovation pace of the company, while competitors were introducing big changes to their products: safety, style, gas consumption and specs were now appealing to the consumers.
Also, the innovation left the US. By then Asia and Europe started to create products that were amazing and affordable. Nowadays, Elon Musk is changing the scenario and trying to make consumers adopt electric cars, just like Ford democratized cars over a century ago.
Tesla is not only building the best electric cars, but perhaps the best cars ever build. However, the price is still far from the average consumer and only in cities like London or San Francisco you can see many Tesla's going around daily.
If Musk wants to truly change things, the price of Tesla models will have to come down dramatically so everyone can enjoy the comfort and cleanliness of its products.
Also, today the perceived value on cars is changing from horsepower to technology. The traditional companies might not have the skills to stay on top of the game with transferable skills that are hard to grasp and retain. Silicon Valley is now accelerating the changes of the car industry through software. The best example? Autonomous cars. Every aspect of our lives could be changed through self driving vehicles.
The only question left is when, not is it possible?
And this is far from being something new, over a decade ago, in 2004, the U.S. government held a race unlike anything that had come before it. It was called the DARPA Grand Challenge, and it followed a 150-mile route through the rugged Mojave Desert.
The participants were cars, trucks, ATVs, and one motorcycle. The catch? Each vehicle was required to drive itself—no remote control, no human intervention. Dozens of engineers and robot enthusiasts worked relentlessly to make it happen. The Carnegie Mellon team was a favorite, but every team faced hurdles—from smashed sensors and exploding toilets to poorly placed tumbleweeds. Was the Grand Challenge too grand for its time?