Tesla Motors: Business Model Configuration
Who – the protagonists
Elon Musk, CEO of Tesla Motors, a designer and producer of electric cars. Musk also co-founded PayPal, SpaceX and SolarCity.
The company’s initial goal was to produce fully electric sports cars with an emphasis on performance, aesthetics and sex appeal. Musk took a decisive role in designing and developing the first prototype Tesla Roadster.However, following the 2007 recession, the company had to be saved from bankruptcy at the last possible hour on Christmas Eve 2008. In March 2009, the Model S was launched, and further models are planned including Model X, a crossover minivan/SUV, and Model E, a more affordable compact car.
Over the past ten years, there has been a significant rise in demand for electric vehicles due to volatile oil prices, a huge decline in urban air quality, and the move to reduce carbon-based transport. Global sales of BEVs (battery-electric vehicles) are expected to reach more than ten million by 2025.
Tesla Motors was founded in Silicon Valley by Martin Eberhard and Marc Tarpenning in 2003. They were soon joined by Elon Musk, who served as Chairman from 2004. By 2014, as Musk drove his Model S electric car to work, he knew he was also steering a revolution in the automobile industry.
Tesla’s headquarters are in Palo Alto, California, US. It sells vehicles across the world via online sites and showrooms in a number of countries including China, Australia, Europe, Singapore, Canada and Germany.
‘You’ll be able to travel for free, forever, on pure sunlight.’ – Elon Musk
During its short ten-year history, Tesla Motors had experienced soaring growth by taking a visionary approach and radically deviating from traditional automotive industry business models.
Riding a wave of success, Tesla’s business has reached a turning point and far-reaching decisions on its business model had to be made. Should Tesla return to its core, namely automobile production? Or should it further expand its integrative approach by building a mobility ecosystem?
|Interested in finding out more?|
Download the case and teaching note
Educators can login to view a free inspection copy of this case and its teaching note.
Erwin Hettich and Guenter Mueller-Stewens
Erwin and Guenter explain how they approached writing the case and offer some advice for writing cases from published sources
Winning this prestigious award is a great appreciation of our efforts at the University of St. Gallen to use more of our own cases when teaching. It gives us much confidence on our constant path to excellent education.
And when you get such a wonderful award you know that you didn’t do the work for your own use only. Many thanks to all the users of the case out in the wide global field of case teaching.
Initially, we didn’t intend to write this case from published sources, but getting information from non-published sources turned out to be a challenge. Nevertheless, we were convinced that Tesla would make an incredibly insightful and rich case, as it has pioneered a market at breathtaking speed.
We noticed that media attention on this case was very high and Elon Musk tweeted and posted about virtually everything that was going on at Tesla. We took those snippets of information and told a story.
As researchers, we are convinced primary information could have enriched our case but fully understand that Elon Musk and his team were busy doing other things at that time. This forced us to construct a case from multiple perspectives – which ultimately turned out very well.Our advice would be to look for the interesting learning first, rather than what information is available. Then look for creative ways to find the information you need (for example, biographies or social media).
Agile and experimental
A major lesson from this case is that it’s important to understand that business models are not carved in stone but require a more agile and experimental approach – which we termed ‘configuration’. During its short period of existence Tesla was confronted with multiple business model decisions. Sensing the need for adaptation and making the right choices has significantly contributed to its market edge.
The lessons we learned from the Tesla case also helped us to develop a more generic conceptional approach in our new book Radical Business Model Transformation. There we show that the lessons apply to many other businesses too.
About the authors
Erwin Hettich was a lecturer at the University of St Gallen and research fellow at Harvard Business School until September 2016 and is now Principal Consultant at Namics AG.