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Something I’ve been pondering - the single biggest advantage that startups have over incumbents is probably the willingness to take insane reputational risks
I usually avoid discussing Tesla on Twitter, but Tesla in the early 2010s might be the best example of this ever
I usually avoid discussing Tesla on Twitter, but Tesla in the early 2010s might be the best example of this ever
In 2015, the European auto analyst at my old employer Bernstein went to Germany to interview a bunch of top execs in BMW, Mercedes, and Audi’s electric vehicle programs about the disruptive threat of Tesla
Some of these direct quotes look incredibly risk-adverse 7 years later
Some of these direct quotes look incredibly risk-adverse 7 years later
For instance, Tesla had just released the Supercharger network 3 years earlier
It turns out: the Germans also had fast charging tech, but had refused to release it because they feared it’d accelerate battery degradation and cause EVs to fail as fast as “a new laptop or phone”
It turns out: the Germans also had fast charging tech, but had refused to release it because they feared it’d accelerate battery degradation and cause EVs to fail as fast as “a new laptop or phone”
Tesla’s Model S had just become the first mainstream EV to adopt the high energy density NCA chemistry. Today all EV batteries have comparable density
In 2015, the Germans had similar tech but refused to release it because they were still convinced NCA would blow up under stress
In 2015, the Germans had similar tech but refused to release it because they were still convinced NCA would blow up under stress
Let this sink in. In 2015, BMW, Mercedes, and Audi’s research divisions were fully aware of virtually every major battery innovation that Tesla had achieved up to that point
But none of it mattered, because even a single BMW EV blowing up is an unacceptable reputational risk
But none of it mattered, because even a single BMW EV blowing up is an unacceptable reputational risk
When Christensen wrote about the innovator’s dilemma, he focused on revenue cannibalization, i.e. incumbents eschewed disruptive new technologies out of fear they would cannibalize existing profits
But just as relevant is the incumbent’s fear of cannibalizing existing reputation
But just as relevant is the incumbent’s fear of cannibalizing existing reputation
And honestly, it’s hard to blame the incumbents here - some Teslas really did spontaneously combust! But it’s much harder to stomach that risk when you’re a $50B market cap publicly traded German automaker, than when you’re a startup with nothing to lose
This quote really says it all: “If we were a startup, we could take more risks… but the risk tolerances between Tesla and an established brand are different”
You don’t say
You don’t say
