Why Innovation Eats Reinvention's Lunch, Every Time

May 15 2014, 5:36am CDT | by

Why Innovation Eats Reinvention's Lunch, Every Time
Photo Credit: Forbes Auto

By Cameron Welter

Once upon a time, an automotive company was started with a bold dream: to usher in a new era of motorized transportation. This company would employ thousands of people, from a CEO down to the factory floor. This company would generate tremendous economic gains for the surrounding communities — and the nation as a whole. This company would come to symbolize American innovation and capitalism, creating radical new business models and products that would define an industry and a nation.

Think I’m talking about Ford? This was all true about Ford — about 100 years ago. Today, the car company that’s shaking things up and redefining the American auto industry is Elon Musk’s Tesla.

Henry Ford was a firm believer in consumerism; that economic prosperity could be achieved through cheap goods and high wages for workers. This led to many technical and business innovations as Ford strived to drive down the cost of his automobiles. Two of these innovations exist today: the assembly line and the franchise model of automobile dealers. In passing off the responsibility to experts in the local markets and communities, Ford created a cultural obsession with cars that we still see today.

Just over a decade ago, Elon Musk founded Tesla Motors with a more modern version of Henry Ford’s dream. As climate change accelerates around us and fossil fuel supplies dwindle, Musk aims to liberate us from our oil dependence. In the process, he created a new vision for the American automotive industry: electrically powered cars. With state-of-the-art research and manufacturing, we are watching Tesla as it drives prices down in its relentless search to make a product affordable for every American. Just last week, Musk announced that Tesla and Panasonic were partnering to produce cheaper and more efficient Tesla batteries — an investment that could climb as high as $5 billion!

Musk is also challenging the status quo of the dealership sales model by selling directly to customers. While this disruption is being fought tooth and nail by dealerships and their lobby groups — who have successfully banned Tesla’s distribution model in three states — the future is bright for Tesla. The company’s target demographic strongly relies on social media and online research, instead of the advice of a dealership salesperson. And these same consumers are increasingly eco-friendly and conscious of their carbon footprint.

In 2006, Ford was teetering on the edge of bankruptcy. Just three years later, during the onslaught of the Great Recession, rival General Motors filed for a Chapter 11 bankruptcy. Detroit, the home and symbol of the American automotive industry, filed for Chapter 9 bankruptcy on July 13, 2013. Politicians on both sides of the aisle speak of the needed “rejuvenation” of the American car industry. But, while all of this talking of “rejuvenating” an industry has gone on, the world has continued changing around us.

The automotive industry is quintessential Americana. But, in a world changing as rapidly as ours, rejuvenation isn’t enough. To stay ahead you must innovate — something Henry Ford recognized 100 years ago and something that Elon Musk is capitalizing on today.  Ford Motor Company and General Motors may be the names that we immediately think of when we think about the American auto industry, but in the coming years, be prepared for the list of American automotive titans to grow. Elon Musk and Tesla are on their way to becoming household names.

Cameron Welter works at Kotter International, helping leaders accelerate strategy implementation.

 
 

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