write a paper
8954r8m5m
Theme5-StrategicDevelopment.pptxModule 5 Strategic Development (Business Function model in an emerging market)
How to give responsibility for capturing value
and take responsibility for creating value?
A Case Study of Tesla – the Master of Electromobility
Professor Vipin Gupta
Learning Objectives
To understand the grand challenge of exchange imbalances
To apply understanding to the art of exchange proficiency
To analyze technological-corporate exchange balances – include money, method, and machine through market-taking relationship, and engage through market-making relationship
To evaluate corporate-organizational development balances – include workforce, vendors, and customers through market-taking relationship, and engage through market-making relationship
To create organizational-technological growth balances – include operating, leading, and stewarding through market-taking relationship, and engage through market-making relationship
To discover the correlation between the science of exchange proficiency and the art of business function development
The Grand Challenge of Exchange imbalances
IMAGINE if we had the power to actualize one-to-one exchange balance for all technological challenges, then
We will have the money to trade manpower and material power necessary for solving the specific technological challenge
We will know the method to design the solution with the available manpower and material power
We will have the machine to sustain that joyful solution at each moment of our desiring
All we need to do is imagine, to dream of becoming an omnipotent imaginer without any limits for trading technological inputs and for designing technological servicing solutions
In reality, our imagination is limited by the resources we have, the knowledge we know, and the imbalance in exchange with our precise moment of desire – the moment where our passion to actualize our desire is at infinite intensity
The art of exchange proficiency
Our exchange is proficient when we are able to service our desire at the moment of desire, using technological inputs traded just prior to that moment – when the exchange value of those inputs is guided purely by market forces, and not impacted by our desire
We have several organizational entities whose services we need to actualize our desires, and several technological assets that we need to trade
When we correlate with organizational entities and technological assets prior to our desire becoming known, then we seek to discover and evaluate the purposefulness of these entities and assets. We compensate them for the value of their purposefulness, and this value is guided by the market.
Those entities and assets will be indifferent in becoming part of our solution only if they receive the market determined compensation value.
Thus, we are able to create new relationships through market-taking correlation.
If our desires are derived from the grand purposes of life that permeate across all markets where we trade, then those technological inputs will be one to one solution for addressing all our specific future desires. And our exchange will be proficient.
The Tesla way https://www.youtube.com/watch?v=BCPaO1Sv-hE
The Market taking alternative
In 2016, Tesla reached 31K employees, including
12K from solar energy firm - Solar City & ~1K from German manufacturing systems automation firm - Grohmann Engineering
Tesla’s market making relationship with its customers
Tesla using social media for helping customers spread the message
https://www.youtube.com/watch?v=B4lkWO1TC5c
7
Ascending technological-corporate exchange balances
Let’s consider electromobility
Money – requires significant investment
Method – battery module is rapidly evolving
Machinery – requires battery charging infrastructure
It is not possible to simply trade money, method and machinery at market value – necessary money, method, and machinery does not exist, and need to be created
Unlike conventional auto makers, who rely on utility providers and government to create charging station infrastructure; and rely on home charging kits; Tesla has taken loans from the governments for setting up super charging station infrastructure; it has sought partners who run lease the supercharging station and then run it as a utility service; and it has partnered with Panasonic to create Gigafactory for battery cell manufacturing.
To recover these additional private costs, Tesla needs a market-making relationship with money, method, and machinery – where it makes stakeholders responsible for adapting them purposefully to its desired needs.
Thus imbalanced technological inputs are transformed into balanced technological inputs.
The Tesla Way for Technology Market Making
Attract market taking investors, partners, and mentors
Fund managers such as Fidelity who believe in the power of market making: mass market model 3 could sell 1.5 million in 5 years, at $50K/ car, [typical sales of BMW 3 series, Audi A4, and Mercedez Benz C-class) generating sustainable $75 B revenues and $7.5 B operating profits (10% typical in the market) implying market cap of $150 B
Solar city and Grohmann engineering who believe in the power of Tesla: First, will electric vehicles see mass market adoption? It’s “almost inevitable.” And, second, will Tesla be one of the industry leaders? There’s a “strong possibility.”
Government who believe in the power of the private sector market in setting up battery charging station infrastructure - Unlike conventional auto makers, who rely on utility providers and government to create this infrastructure; and rely on home charging kits, Tesla has has taken loans from the government for setting up super charging station infrastructure
Develop market making monetary, machinery and method power
Individual partners attracted to lease Tesla supercharging stations and run it as a utility service
Panasonic partnered to create Gigafactory for battery cell manufacturing, and then to create factory for making solar roof products
Grohmann engineering – the world leader in advanced manufacturing automation to yield exponential improvements in the speed and quality of production, while substantially reducing the capital expenditures required per vehicle
Ascending corporate-organizational development balances
Tesla takes services of several organizational entities
Workforce – for delivering style (aesthetics and design) plus performance (speed and range) and value (cost-effectiveness)
Vendors – for delivering various modules that make up the electric vehicle
Customers – for delivering their desire and interest in the electric vehicle, despite higher cost and lower performance compared to a conventional vehicle
It is not possible to simply take these services at the market value.
It needs workforce to collaborate and to learn from one another, rather than simply use their own imagination.
Similarly, it needs vendors to adjust to the evolving concepts, and customers to embrace rapid erosion in the value of their purchases and adoption of new services such as connected mobility – so that it may bring new partners.
To unlock these additional social benefits, Tesla needs a market-making relationship with workforce, vendors, and customers – based on deep relationships, futuristic investments, trust, reciprocity, holistic engagement, community-building, and co-development
The Tesla Way for Organization Market Making
According to Lambert (2017) Tesla's worker's salary is considerably lower than the average automobile worker in the country. The workers work in a higher cost of living areas. Further, a great percentage of Tesla's workforce commutes for almost two hours daily, and have daily extended work hours.
Tesla over works its employees. Employees work at least 50 hours and going over 60 hours is a routine at Tesla’s factories. For a while did not give their employees a day off until the State of California had a word with Tesla and Space X. It is so bad that Space X has been given the nick name Slave X.
There have been recent layoffs from Tesla as they conduct performance reviews and only retain top talent to perform at the highest level and remove the outliers.
Vendors are qualified based on their willingness to invest in specialized learning, and how they adjust to the concepts of the company; for example, Tesla has fully qualified only two cells from one supplier for its battery packs (6).
In 2015, Tesla spent over $700 million dollars for continued research and development of their product. Much of their funding was spent on materials insourcing and automation and product design improvements.
Prior to manufacturing their battery cells, Tesla would import them from Japan at a much higher price. In efforts to meet their future production needs, Tesla purchased Perbix, a private machining firm that makes automated equipment for factories. Perbix was a Tesla’s supplier for three years, but the acquisition enables Tesla to conduct production of more parts in-house versus outsourcing them.
Tesla has a business model of “we come to you”. Tesla dealers are mostly located in shopping mall and areas that are convenient to shoppers. “Potential Tesla customers need to learn about both Tesla and electric cars”, explains Todd Maron, Tesla general counsel in an interview.
A no spend measure for advertising cost. According to Michelle Kabar, analyst with Auto trader “ Tesla has a strong brand that requires little to no promotion”.
Tesla’s customers are so loyal that they have fought to help keep car dealers out of the sale of their cars which was crucial for Tesla business plan to work.
Ascending Ecosystem growth balances
Tesla is taking the systems of operations, leadership, and stewardship from the market
It is then making new systems of operations, leadership and stewardship
How various entity groups correlate with various technological inputs = source of organizational profiting
Recognizing the need to open up new systems of operations, Tesla in 2016 made available all its patents freely to the entire planet – seeking to engage everybody in the mission to bring in sustainable transport
There are many other successful market making systems, notably The Toyota way
Rapid product development system, with mass customization
Integrated supplier management system, with black box challenges
Flexible operations management system, with first time right and zero waste
Group leadership system, with competency-based coordination
Customer support system, with complementary products and services
The Tesla Way for Ecosystem Market Making
Operations
Tesla does not produce inventory. They produce cars as they are ordered. By reducing massive and unnecessary inventory Tesla can reduce cost of operations. In fact, it generates value prior to cars being built. The average deposit asked from the customer is $10,000-$20,000.
Their goal is to be able to make a car from start to finish with no human intervention. They do not buy one type of machine so they do not restrict themselves to one builder and always buy the best machines with the tightest tolerances for their products.
Robots are part of the workforce at the plant, they are either programmed to a station or free to navigate the floor in accordance with their assigned duties. They are guided by digital maps and floor magnets while making it safe around people due to integrated detection sensors. Employees have grown to work alongside the robots in which they are referred to by their nick-names and are also considered as colleagues. Machines like the SMG, a hydraulic stamping press, is capable of stamping 5000 new car panels per day.
Leadership
Transactional relationships with various stakeholders, allowing leadership as a machine that builds machine to motivate a transformational mission of “Accelerate the world’s transition to sustainable energy” and “While doing above, also provide zero emission electric power generation options”
Stewardship
Limited social benefits as yet, but unprecedented private benefits.
The Grand Challenge of David (the dwarf) vs. Golaith (the giant)
Tesla – The Master of Electromobility
In 2017, Tesla’s market cap doubled to ~$60 B; revenues reached $7B
The science of exchange proficiency and the art of functional market making strategy
The science of ascending exchange proficiency in three steps
First, design technological market making by taking on the tradable money, method and machine on market terms, and then making new purposeful money, method and machine
Then, design organizational market making by seeking to exchange workforce, vendors, and customer energies for high value functioning
Finally, design ecosystem market making by making operations, leadership, and stewardship aligned with the developmental values aware of their emerging transitional nature
If the business keeps practicing this triple exchange advantage, then strategic development will become sustainable attuned with the forces linked to the desiring moments of each entity
How to Develop a Perpetually Dynamic Strategy?
| Development criteria | Without market | Within market | Development condition | Development effect |
| Technological solutions | Trade money, method and machine power from the market | Adapt money, method and machine power for the corporate purpose | Seek Technological trading | Differentiate technological inputs |
| Organizational solutions | Trade workforce, vendor, and customer servicing power from the market | Adapt workforce, vendor and customer servicing power for the corporate purpose | Design technological exchange | Differentiate stakeholder entities |
| Value system solutions | Trade operating, leading, and stewarding system from the market | Adapt operating, leading, and stewarding system to the corporate purpose | Activate technological servicing | Differentiate ecosystem values |
What is our learning from the module on strategic development (self-sustaining exchange system)?
To understand the grand challenge of exchange imbalances
To apply understanding to the art of exchange proficiency
To analyze technological-corporate exchange balances – include money, method, and machine through market-taking relationship, and engage through market-making relationship
To evaluate corporate-organizational development balances – include workforce, vendors, and customers through market-taking relationship, and engage through market-making relationship
To create organizational-technological growth balances – include operating, leading, and stewarding through market-taking relationship, and engage through market-making relationship
To discover the correlation between the science of exchange proficiency and the art of functional development
Summary – perpetually dynamic strategy
Strategic planning: compromise living designing joyful intent
Strategic programming: precarious living sustainable business strategy
Strategic learning: purposeless living purposeful competitive advantage
Strategic profiting: networking entropy proficient corporate strategy
Strategic development: exchange imbalance proficient functional value addition
