Why you'd better buy a Tesla

Ed Marsh | Sep 8, 2016


Complex buying, evolving sales channel models & product service systems

Capital equipment manufacturers tend to have a pretty conservative view of the world. It was, it is, and it will be much as they know it.

That is....until it isn't.

I recommend that every owner of a capital equipment manufacturer or distributor run, don't walk, to go buy a Tesla. Why? Sure, it's cool. The technology is amazing and the way they've taken the freakish electric car and turned it into a comfortable, performance, luxury vehicle is inspiring.

But that's not their most important innovation.

They've flipped car selling and buying on it's head. They've eliminated dealers.

Excerpts from a recent FastCompany article, Road Rules: How Tesla Plans to Change the Way we Buy Cars, tell the story

For all the talk of Tesla’s product innovations, it is leading another battle: this one centered on how vehicles are sold, as much as how they’re made.....over time, automakers have become disconnected from the sales experience, hindering both dealerships and the brands they represent. Today, consumers increasingly want to research and even buy their cars online: A 2015 survey by Accenture revealed that 75% of respondents would consider conducting the entire car-buying transaction online if they could.....Tesla fashioned its retail model in response. ....When you’re ready to purchase, you can do it on-site or at home on Tesla’s website. "We like the idea of owning the entire process," says Srivats. "It creates an information loop from our customers straight into manufacturing and vehicle design."

Needless to say, this has dealers and other manufacturers pretty riled up.

One can understand why the dealers would be agitated, but what about the manufacturers? Why would they object?

Well, there must be something in the process of dealing directly with customers that they'd prefer to avoid. And so they're suing Tesla, through proxies in most cases like dealer associations, to try to force them to sell through traditional sales channel models - in your world you may call them reps, distributors or channel partners.

We know how that worked for the music industry, right? The cat's out of the bag. So the industry can use legal maneuvers to try to slow the process; they can concoct dire sounding warnings to dissuade customers from doing what customers know is ultimately in their best interest; they can make it expensive, inconvenient and awkward for the short term (what a great way to appeal to your customers!) But they can't stop it.

Customers of Tesla receive product updates automatically, and transparently. They (and nearby workshops) have diagnostic info to help troubleshoot any problems. They're part of an ecosystem of services and products which simplify and enrich. Sounds pretty good, right?

Speaking of the ecosystem, some point to the fact that electric vehicles challenge traditional auto insurance underwriting parameters. That's a good point - much like evolving recurring revenue models challenge much of the structure of traditional steel bending for capital equipment manufacturers.

Well....there's a solution for that too. Tesla's starting it's own auto insurance unit / profit center in partnership with prominent carriers. Certainly traditional insurers will turn to regulators to tamp this down, but they're ill prepared to understand the nuances and implications of electric and autonomous vehicles.

The extent of related disruptions will open new market opportunities - and new product service business models - in Tesla's world....and in yours.

That's why you'd better loop yourself in. Your customers gradually will, and that consumer experience will become the yardstick by which they measure their interaction with you. If it's only a theory for you, you'll never understand why you're losing customers. 

Live it, so you can learn it and build your strategy accordingly.

Unless, of course, something like that could never happen in your industry!

That leads to the next question.....

Do you know the right questions to ask?

In his book The Inevitable, Kevin Kelly explores the importance of questions. He writes

A good question:

  • is not concerned with the correct answer
  • cannot be answered immediately
  • challenges existing answers
  • is one you badly want answered once you hear it, but had no inkling you cared before it was asked
  • creates new territory of thinking
  • reframes its own answers
  • is the seed of innovation in science, technology, art, politics, and business
  • is a problem a what-if scenario
  • skirts on the edge of what is known and not known, neither silly nor obvious
  • cannot be predicted
  • will be the sign of an educated mind
  • is one that generates many other good questions
  • may be the last jog a machine will learn to do
  • is what humans are for

Too many capital equipment companies ask "What can we build?" and use that as the genesis for their "innovation."

That's how you end up with breathless announcements about a new HMI...and similar "innovations" that are irrelevant to buyers.

What questions are you asking yourself? Especially around changes to which you may be blind?

I'm working on a handbook of questions that I believe the owners, managers and directors of industrial manufacturers should be asking themselves. More on that soon, but in the meantime, you'll need to start articulating the story. You can develop the appropriate revenue growth muscles even before you refine a sexy product roadmap. And it makes financial sense as I outline in this Guide to the Finance of Industrial Content Marketing. Grab your copy today.