To paraphrase a famous expression, “It’s the Strategy, Stupid!”
Recently Greg Satell, Publisher of Digital Tonto, reminded me of the difference that two companies used to accomplish a vision, with two different strategies and very different outcomes. In “Anyone Can Have A Vision”, he compares the strategies of two visionary entrepreneurs committed to shifting the world from fossil fuels to renewables, and deciding to create enterprises focused on bringing electric cars to the masses. Yes, one of them is Elon Musk and Tesla.
The other, Shai Agassi, committed to this compelling vision in 2007 by forming a company called “Better Place”, focused immediately on producing the car for the masses. With a focus on the technology, he envisioned that the car, at least at the beginning, would have a very heavy battery and need to be recharged for drivers traveling long distances. Drawing on the model for gas-powered vehicles – where drivers stop in on stations to fill up when power was running low, the company focused on battery switching stations that would remove and install a new battery when power was running low. The company went public and tested the initial model in places like Hawaii, Ireland and Israel, where the distances were relatively small and only one or two “charges” would be needed. Renault Fluence Z.E. created the electric car to hold the batteries . At its peak in 2012, there were 21 operational battery-swap stations open to the public in Israel. Better Place filed for bankruptcy in May 2013.
Musk adopted a different strategy – focusing on the user. He did not attempt to immediately build a car for the masses; instead he used the “adoption of innovations” approach and focused on early adopters: Silicon Valley celebrities and millionaires who wouldn’t rely on the car for everyday use, choosing to use it as their second car which they could show off to their friends and neighbors. That gave Musk the opportunity to learn how to manufacture cars efficiently and effectively, with the goal of producing cars for the masses in the future.
Musk focused on building competence in designing and delivering cars that buyers would want and could afford – and succeeded. In contrast, Agassi focused on battery switching, leaving him with only one automobile supplier – which provided only the “shell-of-a-car” running on someone else’s battery!
There are many ventures that teach us similar lessons. Webvan was one of the first delivery services for home goods. Despite raising a lot of money and hiring an experienced leadership team, it failed within a year, because it spent its money on distribution system warehouses, with a poorly designed scheduling system that made many deliveries unprofitable. Since then food and other home delivery services (e.g., Fresh Direct, Peapod, etc.) have learned the importance of smart user-friendly scheduling slots with profitability.
So before you launch your technology driven service, make sure you’re meeting customers’ immediate and long-term needs, profitably. Use a “pre-mortem” to challenge your assumptions!