Innovative and Viable Sustainability at Tesla
While Mintzberg cites 5 key strategies that can help with corporate sustainability (Neugebauer 2016), Tesla appears to pursue a long-term approach. As a leader in renewable and sustainable automotive technology, Tesla prides itself in driving innovative sustainability at an enterprise level as well. Tesla’s CEO, Elon Musk, has a vision that drives a long-term strategy, which continues to result in making sustainable technologies more available and affordable. Thus, it is no surprise that Tesla has taken at least a decade and significant leadership changes to get to its current state, and it continues to look far ahead for building out the future. As part of their push for continuous improvement with regards to sustainability, Tesla’s sustainability strategy is driven by 5 key priorities. Alignment of these 5 priorities is how Tesla hits its “sustainability sweetspot”, where sustainability and innovation exist at the crux of each element. Such a strategy is commensurate with A.W. Savitz idea of a successful and innovative company that is sustainable (Savitz 2013). The company’s key priority are the communities they serve and work with. The organization’s remaining priorities are their customers, employees, shareholders, and governments. Tesla’s sweetspot is shown below.
With regards to communities, Tesla wants to make sure that they are creating vehicles while also being environmentally friendly both during production and after. They also want to promote innovation among the grander community to pursue similar efforts towards sustainability. Hence why Elon Musk announced that individuals and entities can use the company’s patents. As far as their customers go, Tesla continues to find ways to make Tesla batteries more accessible and affordable for customers. For instance, Tesla made the strategic decision to create its own batteries so that we could continue to drive down costs, rather than outsource production to Panasonic. Employees are incentivized to find ways to build more efficient and eco-friendly systems, while also encouraged to partner with other firms in sustainability initiatives. Incentivization manifests itself in the form of career growth and additional career opportunities. Investors and shareholders have an interest in the capitalization of Tesla. Tesla aligns this priority with sustainability through the development of long-term strategies that revolve around the transformation of the automotive industry, so that vehicles using renewable energy are the future. From a governmental standpoint, Tesla works with governments to not only enable them to operate, but to also get governments to encourage the purchase electric vehicles. An example of this can be seen with the United States’ offering of tax breaks for those purchasing hybrid and electric vehicles. Therefore, it is evident that Tesla is pursuing innovative and viable sustainability. By hunkering down on these 5 key areas, Tesla has developed the following proposition model.
Remove
- Dependence on non-renewable energy.
- CO2 emissions
- Maintenance associated with gas-fueled vehicles
Increase
- Efficiency in relation to gas-fueled automobiles.
- Driving range
- Vehicle acceleration as it relates to performance.
Decrease
- Options for vehicles
- Requirements for car servicing
- Time required for battery recharge
Build
- A sleek, sporty, and sustainable vehicle.
- Easy and convenient battery charging capabilities.
The Tesla of Today: Innovative and Viable Sustainability
With Tesla’s strategy in mind, it makes sense to understand what the Tesla of today looks like. As mentioned previously, Tesla focuses on making sustainability more affordable and available. They achieve this through tackling five key areas are focusing on communities, customers, employees, shareholders, and governments. Tesla has successfully demonstrated innovative and viable sustainability efforts for each of its initiatives individually and holistically. For example, in 2010 Tesla received an award for the Tesla Roadster. The Roadster was innovative because it was the world’s first fully electric-powered sports car, which ran off a lithium-ion battery. The award was won at the 7th annual Designing a Sustainable and Secure World Awards. Upon receiving the award, Tesla’s CEO at the time voiced that the Roadster was a product was a byproduct of some of Tesla’s most critical concerns, which are the depletion of resources and sustainability (Tesla 2010). By the same token, the achievement is representative of the type of feats they have achieved over the last decade. Their continued research and development has allowed the automaker to make a name for itself in both sustainability, innovation, and luxury through their 5-point strategy. The SWOT Analysis below sheds light into how today’s Tesla measures up.
(Stratwide 2014).
Tesla utilizes a holistic 5-point strategy for achieving innovation and sustainability. Therefore, Tesla’s culture and vision focus on aligning the needs of communities, customers, employees, shareholders, and governments. At a high-level, driving a Tesla vehicle produces a significantly smaller carbon footprint than its gas-consuming counterparts. The stance has been defended on multiple fronts, despite the skepticism around Tesla’s claim to zero emissions. Nonetheless, empirical studies have been carried out to defend the claim. For example, statistical research shows that CO2 emissions from electrical cars are significantly lower than emissions released by cars fueled with gas. The same study indicated that the CO2 emitted by the creation of electricity is approximately .76 kg CO2/kWh. For the Tesla Model S the same figure was 137g CO2/kWh. While the Tesla model seems to emit more than the average electric car, that is only because the Model S is much more than an average electric car. Rather, it is a luxury sports car, and it’s emission rates are still much lower than similar gas-fueled vehicles. For example, the Mercedes S500 generates at least 200g CO2/kWh, which is significantly more than the Tesla Model S, after accounting for refining and producing oil associated with gas-powered cars (Barnard 2016). Thus, it is evident that the Tesla of today is competitive in terms of innovation and viable sustainability.
Tesla has demonstrated itself as being a producer of electrical vehicles that appear to be more sustainable able than comparable gas-powered cars. An example of this can be seen with the Tesla Model 3. In 2016 Tesla announced that the Model 3 would offer significant improvements in comparison to its predecessor, and also pose fierce competition to other sports luxury vehicle. For example, the future Model 3 was expressed as being able to seat 5 people, which is a competitive advantage over many other sports vehicles that often offer no more than 4 seats. Another impressive future was that it would be able to travel 0-60 MPH in under 6 seconds, which put it on par with comparable gas-consuming sports cars. Finally, Elon Musk also spoke to the pricing of the model, stating that the plan was to provide the vehicle with a starting price of $35,000. The announcement struck a chord with many consumers as for quite some time, the Tesla brand was associated with a price tag that was typically at least double that. Within the first week of the announcement, 325,000 reservations were made and paid for, demonstrating the viability of the model (Boylan, 2016). Not only was the announced Model 3 impressive, but it was also a sign of a common pattern seen in Tesla’s work, which was the ability to continuously prove the sustainability and viability of its products. The Model 3 was a testament to this, which was the fourth vehicle produced by the manufacturer. More importantly, it was a part of a trend of more viable and sustainable vehicles, as it was significantly better than its predecessors. The infographic below sheds light on the claim.
(Boylan 2016)
The infographic on the previous page speaks to several key metrics that can be measured over time. The first is the price tag. In 2008 when the Tesla Roadster was first released, its starting price was $109,000. In other words, the starting rice was well over three times the starting price of the Model 3, which was slated to have a starting price of $35,000. Thus demonstrating a projected price decrease of nearly 70 percent over approximately a 10-year period (Boylan 2016). While the Tesla Model 3 won’t have the 3.7 second 0-60 time that the Tesla Roadster had, Tesla recognized that it was not sustainable to produce only elite sports luxury cars. After all, consumers of such vehicles represent the tail-end of automobile consumers. However, the Roadster barely broke the production level of 2400 units. On the other hand, the Tesla Model 3 received more than 300,000 pre-paid reservations, indicating that consumer commitment was far stronger in 2016 than it was in 2007-2008 (Boylan 2016). The aforementioned trends allude to more sustainable vehicles and increased demand, which translates into more favorable circumstances for shareholders. Tesla understands that sustainability strategies often come in phases, with different types of people to lead the way at each milestone (Goleman 2010). For the corporation, these changes were seen with Martin Eberhard’s replacement by Elon Musk. While Eberhard proved to be instrumental in getting the company off the ground, it was Musk who helped drive the company from delivering high-price roadsters to lower cost vehicles, demonstrating the progressive change the company went through organizationally (Blue 2016). Thus, showing how leadership changes correlate with the progress made by Tesla.
Tesla means more than cars – Innovative and Viable Sustainability
Tesla’s proven success with its renewable energy-based vehicles has also allowed it to excel in other areas. An example of this can be seen with the company’s Powerwall batterypack. The batterypack impacts communities, customers, employees, shareholders, and governments alike. The reasoning for this is because the batterypack has what it needs to provide renewable energy at home. The claim is that the battery can power a home with enough power to substitute non-renewable energy (Edie newsroom 2015). Communities and communities can benefit by having access to these technologies so that they can play a role in global sustainability. By the same token, the adoption of the renewable energy technology can help fuel more work for employees, create more return for shareholders, while also supplementing governmental efforts towards battling environmental issues. The innovative battery pack also signs of viable sustainability. For example, in 2015 the battery had a base price of $4,000. While the price seems high, Elon Musk stated that the consumer version of the technology would be developed in a way that could double the power it offered in 2015 for no extra cost (Edie Newsroom 2015). By the same token, the future trajectory of the battery technology can be expected to see its pricing become more affordable for consumers as it matures. Thus demonstrating not only how the battery is innovative, but also how efficiency and cost-saving efforts are being made to make the technology both economically and ecologically sustainable. Musk’s push to expand well beyond electric vehicles, is what makes him the type of far-reaching leader that sustainability strategies often demand (Goleman 2010).
Tesla has a few key gaps that can impact its sustainability. These elements revolve around sustainability around manufacturing, automobile support, and overall value. The first area of opportunity revolves around making production processes and electric generation more efficient, in an effort to lean out the emissions associated with these various stages of product development and support. For instance, the electricity needed to power electric vehicles may be generated from coal-powered plants. On the bright side, this is not an issue that is unique to Tesla, but rather much of the electric vehicle market. Thus, it is a systemic issue at a scope well beyond Tesla’s core business. Analysts suggest that the electric generation makes electric vehicles a less appealing mechanism of sustainability after taking into account such factors. Nonetheless, they also acknowledge that after the refinement and production of oil for gas-fueled vehicles, electrical vehicles still remain superior for sustainability (Wade 2016). The recommendation to fill this gap is to have Tesla use SolarCity, for building their first solar-powered factory for creating vehicles within 5 years, and within 10 years be fully dependent on solar power for car production. Tesla can leverage the work they have put into their Gigafactory, which uses solar power for making batteries as a starting point. While it is not necessarily the job of Tesla to solve the macro-level problem of electricity and sustainability, Elon Musk has taken on addressing the issue by spearheading the problem through the development of SolarCity (Tesla 2016). By becoming the owner of SolarCity, Tesla has the chance to align sustainable energy initiatives to cater to both its production and operational areas needing attention. With the aforementioned discussion in mind, it is evident that Musk and Tesla are already on a path to integrate sustainability energy into Tesla vehicles. If Tesla continues to invest and prioritize their work behind sustainable energy, the viability and sustainability of Tesla Motor’s innovation remains bright, and the gap can continue to be filled.
The second gap can be seen with the support of Tesla vehicles. At the end of the day, Tesla products depend on an electrical charge. Therefore, drivers of Tesla vehicles need to have relatively easy access to charge stations, ideally at a level similar to the availability of gas stations for gas-fueled vehicles. For context, there are approximately 168,000 fuel stations in the United States, with well more 250 million vehicles that are supported by these stations. This equates to approximately 1500 fuel stations for every vehicle. By the same token, there are approximately 600,000 electric vehicles in the United States. Furthermore, there are roughly 16,000 electric charge stations to support these vehicles, which translates into approximately 40 stations to support each electric vehicle on average. The recommendation for this is to increase the number of stations-to-electrical vehicles ratio by at least 10 percent annually for the next decade to not only keep up with projected growth in market share, but to provide greater availability. Projections allude to more than 1.2 million cars annually in a decade, meaning by 2027 there may be up to 10 million electric vehicles on the road (Cohan 2017). The effort can be tackled by developing governments, business establishments, manufacturing companies, and other electrical vehicle producers in expanding the availability of charge stations. Furthermore, efforts to expand should begin domestically. Once Tesla is able to figure out how to expand in the United States, it may make sense to explore supporting the expansion of charge stations in other countries, so as long as Tesla has interests in foreign markets. While the performance, price, and luxury elements are all important factors of Tesla vehicles, they are not as useful if people don’t know where they will get their next charge from. Thus, demonstrating the importance of increasing the availability of charge stations.
A final gap can be seen in Tesla’s affordability. The recommendation is to have Tesla bring the starting price down to $30,000 within 5 years, while expanding into the sales of used Tesla vehicles within 10 years for those with lower buying power. Tesla has historically been vocal about being a company that does not compete on price. Regardless, Tesla has proven to prioritize bringing down the price of their vehicles to generate more consumer demand. The reality is that Tesla competes with sports and luxury automakers. While their competitors do offer high-end vehicles, the same competitors also offer more affordable versions of their products, whether it be the BMW 328 or the Mercedes C-class series (Welch 2016). Therefore, as companies like Mercedes, Audi, and BMW work to come out with vehicles that are more akin to Tesla’s Model 3, Tesla is essentially involved in a race against time. The race they are in involves continuing to lower the cost of producing more affordable vehicles like the Model 3, because once German luxury vehicle companies successfully enter the EV market for less affluent buyers, cost-cutting is likely to play a more critical role in an otherwise underserved market. To achieve this, Tesla can take on a variety of tactics that focus on identifying the elements consumers find most valuable in their vehicles, and reduce their investment into less valuable areas of Tesla products. The savings associated with such an approach can assist in driving down overall costs, without harming areas important to the consumer. Other ways to reduce cost include, but are not limited to building more strategic partnerships with their suppliers, in an effort to negotiate lower materials costs. Thus, demonstrating not only the importance of affordability for reaching a broader market, but the types of tactics that be considered for achieving success. More importantly, lowering costs can boost revenue, which can then help Tesla scale the impact of its innovative sustainability efforts. Fortunately, Tesla is already following a growth strategy for supporting affordability. As long as the model below is followed, this gap can be filled.
(Power 2013)
The Future
Overall, Tesla appears to be headed in the right direction. The electrical vehicle producer has been able to successfully introduce an automobile that resonates enough to garner growing adoption of their automobiles. Furthermore, the organization has built a historic track record that shows that they are invested in providing cars that are more sustainable and affordable, while continuing to improve the specifications of its cars. Increased adoption has allowed Tesla to continue to meet the needs of customers in a way that can withstand time and economics. Over the next 10 years Tesla should prioritize production and support efficiencies, product supportability, and product affordability. Doing so can help Tesla drive further alignment between company, consumer, community, and societal needs. Thus, demonstrating the viability of Tesla’s potential growth in sustainability over the next decade.
References
- Barnard, Mike (2016). Forbes. The Carbon Footprint Of Tesla Manufacturing. https://www.forbes.com/sites/quora/2016/04/22/the-carbon-footprint-of-tesla-manufacturing/#3a817e5b6096.
- Blue, John (2016). Strategic Analysis : Tesla Motors and “Powerwall”. Lulu Press.
- Boylan, Chris (2016). A Brief History Of Tesla Cars In One Simple Infographic. CleanTechnica. https://cleantechnica.com/2016/05/27/brief-history-tesla-cars-one-simple-infographic/.
- Edie Newsroom (2015). 5 ways Tesla is leading the sustainability charge. https://www.edie.net/library/5-ways-Tesla-is-leading-the-sustainability-charge/6603.
- Goleman, Daniel (2010). The Change Leader Sustainability Demands. MIT SMR. http://sloanreview.mit.edu/article/the-change-leadership-sustainability-demands/.
- Neugebauer, Friederike (2016). The formation of sustainability strategies: An Action Research inquiry into sustainability strategy making in a corporate innovation project. kassel university press.
- Power, Dave (2013). Tesla Motors: Preparing for the Next S Curve. Venture Fizz. https://venturefizz.com/blog/tesla-motors-preparing-next-s-curve.
- Savitz, Andrew (2013). Talent, Transformation, and the Triple Bottom Line: How Companies Can Leverage Human Resources to Achieve Sustainable Growth. John Wiley & Sons.
- Stratwide (2014). Strategic analysis of Tesla Motors. https://stratwide.files.wordpress.com/2014/08/capture-d_c3a9cran-2014-08-28-c3a0-20-12-25.png.
- Tesla (2016). Tesla and Solar City. https://www.tesla.com/blog/tesla-and-solarcity.
- Tesla (2010). Tesla Motors Receives ‘Environmental Leadership’ Award from Global Green US. https://www.tesla.com/blog/tesla-motors-receives-environmental-leadership-award-global-green-usa.
- Wade, Lizzie (2016). TESLA’S ELECTRIC CARS AREN’T AS GREEN AS YOU MIGHT THINK. Wired. https://www.wired.com/2016/03/teslas-electric-cars-might-not-green-think/.
- Welch, David (2016). Why Tesla’s Mass-Market Car Should Scare Mercedes and BMW. Bloomberg Business Week. https://www.bloomberg.com/news/articles/2016-05-12/why-tesla-s-mass-market-car-should-scare-mercedes-and-bmw.
- Winton, Neil (2016). Does Tesla’s Claim For Environmental Friendliness Stand Up?https://www.google.com/amp/s/www.forbes.com/sites/neilwinton/2016/04/17/does-teslas-claim-for-environmental-friendliness-stand-up/amp/.
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