Tesla is not as disruptive as it seems

A DISRUPTIVE INNOVATION IS ONE THAT ESTABLISHED FIRMS IGNORE BECAUSE IT OFFERS PERFORMANCE FEATURES THAT DO NOT APPEAL TO EXISTING CUSTOMERS, THAT ONLY APPEAL WITHIN A SMALL MARKET SEGMENT

by Camillo Papini

Tesla is not disrupting the automobile industry. The company’s electric cars are groundbreaking and are reshaping the auto industry, with many established companies following Elon Musk’s lead to offer high performance and attractive electric models. There is no doubt that the company has taken great risks and succeeded where few others had before. But disruption means something very specific in technology and strategy. As aggressive and smart as it sounds to throw around the word “disruption,” we lose some of its power when we abandon that meaning. A disruptive innovation is one that established firms ignore because it offers performance features that do not appeal to existing customers, that only appeal within a small market segment.

Some innovations then disrupt an industry by growing out of their small niche and stealing the entire market. This happened, for instance, with steel mini mills. But this doesn't look like the pattern we are seeing with electric vehicles. While Tesla’s design and brilliant marketing have kept it perched atop the electric vehicle market, strong offerings from traditional automakers - from Porsche to Volkswagen and Hyundai - are going to keep the company fighting hard for market share. That doesn't really resemble an innovation that has disrupted the whole industry. So, from the perspective of Associate Professor of Management Charles Williams, “while Tesla is an innovative company with a big impact, it does not seem like a true case of disruptive innovation. For understanding the future of the industry, this can make all the difference".