Posted on August 25, 2016 by Matt Pressman
For the second year in a row, Tesla topped the prestigious list of the world's most innovative companies published by Forbes*. The magazine explained that Tesla Motors [NASDAQ: TSLA] has an: "innovation premium that helped Tesla race to the top of our Forbes Most Innovative companies list in 2015 – and stay there. It maintains its #1 position for the 2016 ranking. Tesla’s next challenge is whether or not it... [will] be the catalyst behind transforming the auto industry from ICE [internal combustion engine] vehicles to electric vehicles? Our analysis signals it can and likely will." How does Forbes outline Tesla's unique innovation premium? Here are their key insights.
Above: Tesla ranks #1 in Forbes 2016 list of the world's most innovative companies (Source: Forbes*)
Forbes reports on Elon Musk's unorthodox style of management: "Overpromising is Musk’s MO. Some frame this as a critical flaw. Yet, it could actually be what makes him a compelling leader of innovation. 'Elon is pretty good at harnessing and channeling the team to do pretty amazing things that were beyond what the team even thought was possible,' says co-founder and chief technical officer JB Straubel. 'If you challenge people to work hard, they achieve more than they think they can. Most leaders don’t want to do that.'"
Above: Tesla profile at the #1 spot in Forbes' rankings (Source: Forbes*)
Making the impossible, possible
Forbes notes one telling example of, "Musk’s track record of promising the impossible [which] is matched by a track record of delivering the wildly improbable... Take a simple act like moving one of the world’s largest stamping presses from the east to west coast in the U.S. After purchasing the machine at a bargain price, Tesla asked the manufacturer how long it would take to disassemble and deliver to California. The quote was a year. Tesla’s response was, 'we can’t afford to wait; we’ll figure out a way to do it in three to four months.'"
Above: Tesla's massive Schuler press is seven stories tall and is responsible for stamping out Tesla's aluminum body panels (Source: Business Insider)
How did Tesla pull this off? It turns out, "they did [it] with an internal team that was pulled together expressly to pull off the move quickly. The team hit a number of roadblocks along the way but problem-solved their way to getting the press safely transported and installed in Fremont [Tesla's factory] in four months. Concerned the press was too large for tunnels and overpasses, they cut seven inches off the press bed. They even modified and raised cranes at the factory so that the press could be reassembled and programmed. To finish off the installation, Tesla employees, including VPs, volunteered personal time on the weekends to repaint the press red, white and grey – Tesla colors."
Forbes reports ongoing cost reductions in vehicle manufacturing: "Our analysis (with professor David Kryscynski of Brigham Young University) of Tesla’s improvement in cost per vehicle shows Tesla is making money on the Model S and will likely make solid profits on the Model 3." How? Take a look at the scale curve (see below) in which: "This scale curve analysis allows us to project with some confidence what Tesla’s future costs per vehicle will be when Tesla ramps up production on the Model 3... It also shows [remarkably] Tesla’s cost per unit has been dropping roughly 20% with each doubling of unit volume."
Above: Tesla’s cost per unit has been dropping roughly 20% with each doubling of unit volume (Source: Forbes*)
Disruptive sales model
Forbes also points out Tesla's sales model innovations: "Tesla’s revolutionary, direct-to-consumer sales model – which allows customers to purchase directly from Tesla as opposed to through third-party franchised dealerships – has upended the way people today think about buying cars (just like Uber has changed the way we think about taxis). Now you can also shop for your Tesla while you browse for suits at Nordstrom. Just this year, a Tesla 'Gallery' showcasing Tesla vehicles opened inside the high-end retailer, located in the men’s department at the Grove in Los Angeles. It’s an experiment that will likely pressure traditional dealers to get more creative about sales."
Above: Tesla features its Model X SUV inside the 400-sq. foot gallery in Nordstrom at The Grove in Los Angeles (Source: Fast Company via Nordstrom)
A shared autonomous future
Looking ahead, Forbes also references Musk's Master Plan in which he forecasts a future in which, "Tesla is planning to create a 'shared fleet' and a mobile app (like Uber) so that you can 'add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation.' Think about it: your car could become an income generating asset. This could dramatically lower the true cost of ownership since most cars are only in use by their owner for 5% to 10% of the day."
Above: Kathryn Dill, Forbes Editor-in-Chief, discusses the top innovative companies on the list starting with Tesla (Source: CBS This Morning)
An energy innovation company
Last, Forbes looks at Tesla's plans to combine with SolarCity, its Gigafactory, and evolving battery technology which — when looked at all together — triggers them to conclude: "All this adds up to Tesla making the move from automotive company to a rapidly expanding energy innovation company. And Tesla’s history of solving tough, seemingly impossible problems means its goal of becoming the best manufacturer in the world might actually be possible... Tesla dreams big because it asks and answers the big questions. And that’s why investors have kept Musk’s Tesla #1 on our 2016 list of most innovative companies."