On Thursday, March 31, my wife drove two hours each way and waited in a two-hour line for us to put down a reservation on the design-yet-to-be-released Tesla Model 3. It was a phenomenon experienced nationwide and by the time of the model unveiling at 11:30 p.m. EST, Tesla had more than 100,000 reservations. Within a couple more weeks the number had reached more than 400,000. How did Tesla do it?
For one, the company has a strong, if not somewhat eccentric, leader in Elon Musk. Musk was one of the founders of PayPal and in addition to running Tesla, he is also founder and CEO of SpaceX and is purportedly the real-life Iron Man. While not without his personal flaws (he is human after all), several lessons can be learned from the fan base that Musk has built.
- Think big and execute. When Musk started Tesla, he had a grand vision of starting with a pricey, highly specialized electric vehicles and eventually shifting more to the mass market. The Roadster, Model S and Model X were all specialized vehicles that have allowed the company to develop and learn the technology and business model necessary to mass produce the Model 3.
- Innovate and disrupt. Don’t accept the status quo. In Musk’s case, that was to create a popular electric car, an area where others had failed. It also could be to view his car company as more of a technology and software company than a vehicle manufacturer. While that could prove challenging with mass production, there is no other car company in the world that can push changes and improvements through a software update.
- Create (and reward) raving fans. Early Tesla adopters tended to be wealthy, environmentally focused people. They would have been happy with a high-end electric car. However, Tesla continued to add features and a user experience that really created raving fans. Musk has rewarded early Tesla owners by providing them with premium delivery spots for the Model 3.
- Tease demand. Drip information to potential customers so that the suspense builds demand. Continue to do so over time and deliver with a superior product.
- Upsell your customers. Build features in to your products that can be released with the flip of a button. Tesla offers more range, speed and autopilot features both at purchase (slightly cheaper) and post-purchase. Standardizing the features helps the company simplify production, while the ability to turn them on and off allows Tesla to capture value where customers see it.
Time will tell if Tesla succeeds and if Musk prevails with his vision. I hope that he does, but either way there are great business lessons here for us to learn.
Adam Shay, CPA (N.C. License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. He focuses on minimizing taxes and improving the financial results of entrepreneurs, and is actively involved in supporting the Wilmington entrepreneurial and startup community. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at (910) 256-3456.