MGMT20132 Innovation and sustainable business development Business name : Tesla
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This assignment highlights the business which innovates, with a purpose and formulates a strategy to link capabilities to deliver value creation process for the customers.
1.1 Company profile:
Tesla Inc., is an US MNC manufacturing electric vehicles, solar panel and roof tiles, lithium ion batteries was founded in 2003. It has its factory ‘Gigafactory 1’ in Nevada and has main vehicle manufacturing in Fremont California (Tesla, 2018).
2. Tesla and innovation
Tesla the electric vehicle manufacturer has distinct strategies as it is rolling out series of car models. The automotive manufacturing strategy uses ‘complex coordination’ where different innovation pieces are being fixed together. The company is in early growth phase, as the consumer interest towards electric vehicles is rising along with launch of differentially priced models. It entered as a luxury car market, but later on entered high volume segment. In order to sustain its business model, it identified volumes in each target market segment, and designed cars to appeal the consumers. The cost of technology embedded in each car is different as it moved to larger markets with lower price points, continuously improving battery and electric power train to compete with combustion car segment (Hardman, Shiu, & Steinberger-Wilckens, 2015, p. 1629). Innovation in products, the process of manufacturing, service innovation, and paradigm innovation are evident as the company weaves the organisational culture to drive the value into decision making process.
2.1 Innovation trend in Tesla
In a highly intensive technology firm like EV (electric vehicle) automobile manufacturing, they have moved up the value chain curve by choosing between the open innovation model or closed innovation models (Karamitsios, 2013, p.21). The top management drives corporate entrepreneurship as it had to reduce dependency on outsourcing function and propose partnership with OEM. Currently business relationships are based on supplier alliances, OEM alliances. While Tesla is not limiting the journey of its innovation in R&D for new product development process, it has embraced open innovation model to develop joint production with Lotus cars, Panasonic batteries, other OEM like Toyota and Diamler (Mercedes Benz).
2.2 Innovation strategy
The first phase of innovation in Tesla car design was with Lotus cars that are typically related to engineering design and later on Tesla extended into R&D alliances as well. Therefore the criticality of Lotus to shape the first prototype in design was important and the method it was achieved is through partnership. The second most important factor for EV (electric vehicle) was reduce of weight of the vehicle which was done by Sotira for Tesla. The third critical component in EV is the battery and the innovation with Panasonic producing high efficiency litihium-ion ones has completed the circle for Tesla. Therefore, in the initial phase of new car development, the innovation strategy sustained through the alliances and partnerships that contributed to create a NPD, a new production plant that is capable to produce from scratch to prototyping and finally testing of the final product (Naor, Bernardes, Druehl, & Shiftan, 2015 p.38). The product innovation was component specific and Tesla was pushed harder to achieve a given launch date, testing of vehicle to perform as per specifications. This closed innovation strategy later on was transformed to open innovation strategy to let in Mercedes Benz and even Toyota to source Tesla EV prototype (Is Tesla a disruptor, 2018) This strategy helped Tesla to drive higher volumes in production, create more variety of EV prototypes. It also led to establishment of the fact that innovation has helped to be single source supplier, market leader in EV segment, though it is not the inventor of EV. The pace of innovation trend in Tesla automotive batteries, electric power train forced other OEM auto brands to be dependent on them. In a globalised market, when the market innovation trends is on EV, Tesla has also forayed into battery charging and batter changing schemes in different cities and countries where it has launched its vehicle range. This allows the owners (consumers) to charge their EV, which linking the product innovation to service innovation. It helps to meet customer expectation sets and to sustain the Tesla vehicles to run on roads.
The innovation done in Tesla under leadership style shows it is using employee capabilities to keep the knowledge curve steep, and time the innovation to aid in completion of a complete new EV. Chen & Perez (2018, p. 58) argued that the high performance based work culture, openness helped to support the innovative manufacturing, and meet sustainability goals (zero waste). However, setting goals in innovation that is closely linked to the Tesla’s business goals needed to create a high performance organisation, adopt lean practices, and with aggressive CEO the deliverance of the promise in goals was possible. The company has shown that selling EV without dealers is possible, without offering any discounts. It has two year order waiting period and customer can opt for a refundable deposit, and Tesla had to offer spares without dealership backup. The success of battery technology is driven by innovation, when adapted from solar home panels to EV it added to customer delight and link solar (renewable energy) reducing fossil fuel dependency (Telsa’s innovations are transforming auto industry, 2018). Tesla offers to buy back the cars sold from customers, which is innovation in the marketing. The EV with lesser engine complexity unlike combustion engine which is first in car marketing history, has addressed customer queries using social media that reflects speed, transparency and high visibility. The conceptualisation of NPD, its marketability has focus of future, and Tesla top and middle management have successfully adopted practices to link continuous innovation capabilities in workforce. Secondly they adopted open innovation to collaborate with partners, reduce threats of copying that impact EV development journey. Competitors like Nissan Leaf was there, while Tesla succeeded with variety of EV models, each with different design that is value creation for different customer segments. The relentless innovation, has led Tesla to shift from a niche player to foray into arenas of renewable energy, storage, space programme.
2.3 Robotic automation:
The robotic automation is a process that uses the blend of software to control the industrial robots applying AI (artificial intelligence). This is typically a process based innovation and Tesla has been active as it has understood that EV manufacturing process is definitely their core competency but it requires them to build competitive advantage over time. The increase in volumes gives them higher margins in profit, while the existing business model to maintain relationships with the alliances to continue, the cost in R&D needs to be reduced. Robotic automation offers precise output, with improved production efficiency in the manufacturing plants. It is an evolutionary process as the current line up of robots in the plant is able to perform repetitive tasks, however, connecting them to see through problems, perceive ML (machine language) coordination would dramatically impact the production environment.
The robotic automation is aimed to reduce the workforce dependency and achieve higher level of automation, where robots in a given shop floor task to manufacture a component coordinate and collaborate with each other (Appleyard & Chesbrough, 2017, p.319). The implications of Tesla proceeding with robotic automation, AI, are reduced delivery risk, higher quality in EV parts and components. This reduces the risk mitigation of defective components being manufactured and post sales, vehicle recalls in EV. While in an electric vehicle the security of passengers is important, as the electric charging and battery needs failsafe wiring. Therefore, deploying robotic automation would lead to achieving consistent production, with quality and quantity for each automobile component manufacturing process. Tesla is able to accomplish repetitive tasks in high volume, take a note of faults in operation, coordinate with other industrial robots in the task area, use machine sensing by analysing shared data on real time basis (Naor, Bernardes, Druehl, & Shiftan, 2015, p.58) The rule based programming in the robotic automation helps to allow the company to cater to higher production volumes with zero defects. This automates also the material requirements (procurement phase), better production planning, reduce machine idling and energy consumption to develop intelligent automated procurement strategies.
All of these is linked to the aggregate order management process for Tesla, to execute and ship vehicles on time to global destinations as the demand for EV is soaring (Mangram, 2012, p.301). The robotic automation can be altered even if programmed, at later stages as it can help to allow the human decisions to be programmed if there is requirement in production process in the dynamic business environment. The fall in the prices of robots worldwide shows how automotive industries are looking forward to leave innovation to humans and repetitive tasks to robots. Prestes, Carbonera, Fiorini, Jorge, Abel, Madhavan, Locoro, Goncalves, Barreto, Habib & Chibani, (2013, p. 1201) explained that automobile firms have realised that human cognition and intelligence to create innovation in product or process enables them to capture the value, and robotic automation helps to cut cost, achieve production numbers, balancing the innovation tasks left for humans. However, the challenge is to built robotic automation strategy to be linked to operations strategy (reduce time, cost, increase quality and flexibility). The programming of robots however need to be flexible to improve, provide right solutions as the workforce tries to adhere platforming to integrate to production cycles (Automation, robotics and factory of future, 2018). A host of robots creating a system, integrating other robots along with CAD, CAM technologies, ERP (enterprise resource planning) softwares would help to control production process, coordinate the variables in real time.
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The big issue of the EV entering the passenger vehicle market globally is a disruption and it requires judicious use of the finances, people management to manage production, supply chain decisions. The order to delivery cycle can choke on external forces, and hence sustaining the order centric supply chain and production process needs streamlining of all activities. The people, planet, process paradigm seeks CSR driven ideologies, and hence the companies needing to built on advance level technology for business processing is also seeking robotic automation at production side (Prestes, Carbonera, Fiorini, Jorge, Abel, Madhavan, Locoro, Goncalves, Barreto, Habib & Chibani, 2013, p. 1198). In order to protect intellectual property in Tesla, deploying robotics is a credible move, however the complexity in aligning robots to a similar or a group of tasks is important. Therefore scaling up operations through robots to meet higher order volume, Tesla is readying itself to reduce waste, emit less GHGs, investing heavily in R&D to stay of competition.
This is a corporate strategy driven by innovation as the company readiness itself to handle market behaviour, competition and order status is also linked to the sustainability issues. The production process stabilisation is innovation in business performance while linking AI and robotics is higher level technological achievements that justify Tesla’s future endeavours like space tourism programme after EV car manufacturing business (Engelberger, 2012). The need and urgency to innovate at component level is very high in Tesla, and hence attributing robotic automation relieves human talent from repetitive tasks. This business model in itself is innovative and is helping to create flexible production to meet market based demands as the EV industry is witnessing high demands in its vehicles. The above strategies are sustainable ones, which is enabling Tesla to create a responsive system using its production automation and delivering value to customers. In the process, deploying the robots, the firm is able to optimise the production parameters. The decision of deploying robotics automation for higher quality assurance, and leaving humans for designing, powertrain innovation segregates automobile production to sustain at lower production cost, reduce design to delivery time, making Tesla’s response to be more market centric and responsive.
The strategy to drive innovation, build capabilities to disrupt the automobile market by Tesla shows how technology is important at product level, process level. Tesla have used continuous innovation in products (EV), and deployed automation in robotics to drive error free high volume production to clear backlog order volumes.
i) Rationalise the use of AI (artificial intelligence), ML (machine language) to assist robotic automation, to aid collaboration, to expand consistency, quality in production area against daily production target (aggregate production target).
ii) Sustainable production with minimal human interference is moving towards Industry4.0, however responsiveness and flexibility, to assist the last minute changes in the programmed robots in production is a necessary flexibility.
iii) Innovative strategies to disrupt the market currently pursued has a cost element and time factor, which Tesla can reduce using ‘crowd sourcing’ collaboration platform with its existing suppliers and partners. This is an open innovation paradigm that will help to spawn higher level of innovation as it expands the involvement of partners on a definitive purpose.
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MGMT20132 Innovation and sustainable business development
Business name : Tesla
Appleyard, M.M. & Chesbrough, H.W., 2017. The dynamics of open strategy: from adoption to reversion. Long Range Planning, 50(3), pp.310-321.
Automation, robotics and factory of future, Available at https://www.mckinsey.com/business-functions/operations/our-insights/automation-robotics-and-the-factory-of-the-future [ Accessed on 19 August 2018]
Chen, Y. & Perez, Y., 2018. Business model design: lessons learned from Tesla Motors. In Towards a Sustainable Economy (pp. 53-69). Springer, Cham.
Engelberger, J.F., 2012. Robotics in practice: management and applications of industrial robots. Springer Science & Business Media.
Hardman, S., Shiu, E. & Steinberger-Wilckens, R., 2015. Changing the fate of Fuel Cell Vehicles: Can lessons be learnt from Tesla Motors?. international journal of hydrogen energy, 40(4), pp.1625-1638.
Is Tesla a disruptor, Available at https://hbr.org/2017/08/is-tesla-really-a-disruptor-and-why-the-answer-matters [Accessed on 18August, 2018]
Karamitsios, A., 2013. Open innovation in EVs: A case study of Tesla Motors.
Mangram, M.E., 2012. The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), pp.289-312.
Naor, M., Bernardes, E.S., Druehl, C.T. & Shiftan, Y., 2015. Overcoming barriers to adoption of environmentally-friendly innovations through design and strategy: learning from the failure of an electric vehicle infrastructure firm. International Journal of Operations & Production Management, 35(1), pp.26-59.
Prestes, E., Carbonera, J.L., Fiorini, S.R., Jorge, V.A., Abel, M., Madhavan, R., Locoro, A., Goncalves, P., Barreto, M.E., Habib, M. & Chibani, A., 2013. Towards a core ontology for robotics and automation. Robotics and Autonomous Systems, 61(11), pp.1193-1204.
Telsa’s innovations are transforming auto industry, Available a thttps://www.forbes.com/sites/innovatorsdna/2016/08/24/teslas-innovations-are-transforming-the-auto-industry/#63472ef219f7 [Accessed on 18August, 2018]
Tesla, Available at https://www.tesla.com/about,%5BAccessed on 18August, 2018]
MGMT20132 Innovation and sustainable business development
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