Issues for Debate: Tesla's Business Model Effects on the Auto Industry 1616 unread replies.1616 replies. Note: This scenario is related to your reading, "Managing Innovation and Fostering Corporate Entrepreneurship." Few would argue with the observation that Tesla is an innovative firm. It has taken out a leading position in developing technology for electric vehicles. It is also building autonomous control systems into Its cars. It has taken one seeming step backward and strategically developed its own technology for batteries and manufacturing capacity to produce batteries. It has subtly innovated the design for its cars. Rather than putting the batteries for its cars in what would normally be the engine compartment, it places them under the main compartment of the car, allowing the firm to include a "frunk" (or front trunk) in its cars. It has also innovated on the distribution side of the business by circumventing dealers to sell its cars directly to customers through company-owned showrooms. Thus, it is innovating in ways that change the supply system, the technology of automobile drive trains, the technology of driving, the physical design of cars, and how cars are distributed. However, it is not clear whether Tesla is offering a disruptive innovation in the automobile market. For this to be the case, Tesla's business model would have to innovate in ways that can significantly undercut the value of the resources of Ford, GM, Toyota, and the other incumbent competitors in the auto industry. Discussion Questions

1. Do you see Tesla's business model and product as offering a sustaining or a disruptive innovation? Why do you see it this way?

2. In what ways will incumbent firms be able to respond effectively to Tesla? In what ways will it be difficult?

3. Whether or not you see Tesla as offering a disruptive innovation, what would be a different way that an entrepreneurial firm could offer a disruptive innovation in this market?