Driven by Tesla, Elon Musk net worth have been a super hot search query. Since a year ago on March 18 2020, Tesla share price has gone up from $71 by 10 folds, making him once the world’s richest man.
Tesla cars exemplify the Internet of Things technology. But how this piece of smart, connected product can generate such an unrivalled fortune? The marketing theorists of competitions and competitive advantages have given the answers.
Thus spoke Porter and Heppelmann
Michael Porter and James Heppelmann wrote in 2014 in Harvard Business Review that the technologies such as IoT have revolutionised old types of products composed solely of mechanical and electrical parts to become complex systems that combine hardware, sensors, data storage, microprocessors, software, and connectivity.
They used a farmer’s tractor 🚜 in the original version of the infographic adapted below to show the revolution process. The “complex systems” reside in Stage 4.
Replacing the tractor with an electric car, we can see that a smart, connected car forms a product system involving at least, but not limited to, manufactured deliverables, energy and maintenance services, plus data and connectivity capabilities.
But neither the Porter & Heppelmann’s tractor nor an electric car would stop at Stage 4. These complex product systems will cruise into Stage 5 – the “system of systems”.
A Tesla car in the near future will be a product system in a larger transportation system. This Transport System must also have a sustaining network of, for example, the GeoData, Energy Supply, and Communications systems.
The automobile industry today is in Stage 4. But stock buyers invest in the future. The rising Elon Musk net worth indicates investor votes of confidence in Stage 5 when Tesla would take an upper hand in competitions.
Change of heart
The two authors also suggest that smart, connected products not only change the competitions within industries. They also redefine industry boundaries in which the competitive dynamics are completely different.
Take another look at the infographic. In stages 1 to 4, the basis of competition shifts from discrete products to product systems.
In Stage 5, the systems of systems link an array of product systems together. Tesla will find itself competing in the broader driverless transportation industry.
Why would it have a competitive upper hand? That’s because automobiles will have a change of hearts to work their brains.
In the stages when auto companies competed on the product level, the internal combustion engines were the heart of cars. Carmakers spent tens of millions to design viable engines to be planted in different models and product lines.
Electric car engines are not that expensive to design and less difficult to build. In electric cars, batteries are the heart. More importantly, for self-driving electric cars in the era of the automated transportation system of systems, data processing and connectivity capabilities will be the brains.
The big tech companies like Tesla are more competent in building the hearts and brains of the new auto industry. They leave the traditional auto brands chasing their taillights from far behind.
American cars great again?
The smart, connected electric cars may rebuild the former glory of the American automobile industry because of the country’s power in the interlinked technology industry systems.
The American cars basked in the glories of the Ford Model T till the 1970s Oil Crisis. After that, global consumer preferences shifted to fuel efficiency. Japanese and German cars were the biggest winners of the shift, beating American peers badly.
But Elon Musk’s Tesla is leading the changes in the competitive landscape. It may eventually disrupt the world order of the auto industry because the smart, connected cars in the future run on the new battery hearts and the data-processing brains.
A new formation of American Big Techs, with Google and Apple in it, is joining the competition by becoming carmakers. They are set to make great American cars, knowing better how to programme the chips in them.
Elon Musk’s net worth today is because of the prospects of Tesla in the new global competitive landscape of tomorrow. It all started with cars becoming smart, connected. The magic of IoT.