Tesla's Innovation Strategy and its Impact

The provided document is an analysis of Tesla's innovation strategy, focusing on its organizational culture, patent sharing, and impact on the electric vehicle industry. It discusses how Tesla's approach has led to increased R&D spending, tripled compared to traditional automakers. The assignment also examines the benefits of Tesla's patent-sharing strategy, including opening the road to sustainability for transport and for itself. The document references various studies, research papers, and articles that support Tesla's innovative approach. It provides a comprehensive understanding of how Tesla has become a pioneer in the automobile industry through its adoption of open-source principles.

Running Head: Innovation 1
Innovation

Innovation 2
Contents
Section 1: Innovation.......................................................................................................................3
Role of creativity and innovation.................................................................................................3
Innovation policy and integration................................................................................................3
Innovation categories...................................................................................................................3
Environment Scanning.................................................................................................................3
Business Model Innovation..........................................................................................................4
Value Innovation..........................................................................................................................5
Types of innovation.....................................................................................................................6
Section 2: Innovation process..........................................................................................................6
Pattern of management behavior..................................................................................................6
Innovation process management..................................................................................................6
Organizational structure...............................................................................................................7
Finding innovation opportunities.................................................................................................7
Technical innovation....................................................................................................................8
Social innovation..........................................................................................................................8
IPR strategies...............................................................................................................................8
Section 3: Involvement in innovation..............................................................................................8
Economist perspective.................................................................................................................8
Impact of National Accumulated Resources and Capabilities.....................................................9
National infrastructure and culture..............................................................................................9
Key players in Innovation............................................................................................................9
Section 4: Economic perspective.....................................................................................................9
National System of Innovation....................................................................................................9
Government Support..................................................................................................................10
New Technology........................................................................................................................10
Science parks, technology centers and cluster effects...............................................................10
References......................................................................................................................................11

Innovation 3
Section 1: Innovation
Role of creativity and innovation
Innovation is the crucial part of any growing economy. Entrepreneurship is the key for
innovations at the business level as well as inspiring overall business sector growth. Within the
organizations (private and public), innovation is the implementation of ideas that comes from the
creative process. So, creativity is the crucial part of innovations. Along with this, innovation also
drives economic growth by helping the businesses to produce more and rising productivity. As
the business and employees become more productive then the prices and products fall and
employees’ salaries rise and improve the standard of living (Verworn & Herstatt, 2002).
Innovation policy and integration
For the discussion, most innovative company Tesla Motors is selected. The innovation
policy of Tesla in overall strategy is as follows:
 Provides new products and services open new areas for the industry, and provide
extraordinary way for the existing products and services,
 Having good performance, unique competitive advantage reflected in the cost and
profitability, and
 Setting number of elements in the business model that are different from others for the
innovation
 Accurate customers and capital orientation along with the asset management (Berkhout,
Hartmann & Trott, 2010)
Innovation categories
In case of Tesla Motors, the company has adopted disruptive and integrative innovation.
With the innovation, company was focused on high performance and environmental stewardship.
Further, the company has ‘high end’ technology disruptions that includes producing innovation
and enhance the performance over the time. Further, the innovations done by Tesla can be
measured by some ways i.e. number of new offerings to launch, number of successful handoffs,
increase in value of ideas, and number of ideas implemented (Shane, 2014).

Innovation 4
Environment Scanning
Political  Distinctive political patterns affecting
business,
 Environmental protection laws
 Energy loan programs
Economic  GDP and inflation rates,
 Rise in fuel prices,
 Economic growth of the countries
Social  Increasing environmental concerns,
 Losing trust of consumers in gasoline
fuel,
 Electric cars enhance social status
Technological  Impact of globalization,
 Electric cars and computerization
 B2B platforms provide innovation
opportunities
Environmental  Challenge of producing eco-friendly
vehicles,
 Awareness of climate change,
 Produce zero emission to attract the
customers
Legal  Various laws and regulations originated
from green movements,
 Energy loan program
 Franchise law in US States
Business Model Innovation
Key Partners
 Changing
network
partners
Key Activities
 Setting new
standards for
automobile
Value
Proposition
 Performance
 Connectivity
Customer
Relationships
 Automated
services
Customer Segments
 Niche market- High
end niche market
 Mass-Market-

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 Suppliers
 Regulators
 Panasonic
industry,
 Innovate
 Convenience
 Accessibility
 Recognition
 Personal
assistance
 Communiti
es
Implemented for
domestic batteries
Key Resources
 Automotive
R&D,
 Super
charger
network,
 Battery
manufacturin
g
Channels
 Online
platforms
 Retail
stores
Cost structure
 Manufacturing,
 Technologies,
 Maintenance,
 Engineering salaries
Revenue Streams
 Car sales and leasing
 Subsidies
 Electric Power train
 Battery sales (Perez & Chen, 2017)
Value Innovation
Eliminate-
 Carbon emission
 Gasoline Usage
 Messy maintenance- Oil filters, air
filters, power steering fluid etc.
Raise-
 Driving range as compared to previous
electric vehicles,
 Energy efficiency as compared to
hybrid vehicles,
 Acceleration rate
Reduce-
 Servicing requirements,
 Charging time of battery,
 Vehicle options
Create-
 Built-in battery charging systems
 Stylish and high performance electric
sports car
Types of innovation
Customer engagement- Tesla builds customer focused initiatives by putting the customers’
experience first. Company ensures the customers that the products are manufactured for them.
The customer engagement is also enhanced by commitment to the culture.

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Social green- Tesla is manufacturing electric vehicles that will run by the power of battery. This
reduces the carbon emission in the environment. So, the company moves towards the green
technology. The e-cars will run by the electricity produced by dirty fossil fuels. As compared to
diesel cars, these cars are eco-friendly and minimize the environmental hazards.
Disruptive innovation- Tesla focuses on the disruptive innovations that create market value for
the business. The electric cars are champion of innovation in terms of product designs and
business strategies. Electric cars are disruptive technology that has brought a big change in the
automobile industry (Chesbrough, 2003).
Section 2: Innovation process
Pattern of management behavior
Tesla has various objectives i.e. innovation, profit, and environmentally friendliness. The
employees and management are very ambitious in the company as they believe that electric cars
will revolutionize the automobile industry and they will move forward by working with Tesla.
Employees are enough capable to provide optimal product. There is the little room for mistake as
one small mistake in the process can be the cause of big loss for the company. Employees and
management are motivated and give their best for the innovation as they focus on the efficiency
and output. There are some key features of organizational culture of Tesla i.e. move fast, do the
impossible, continuous innovation, cause from ‘first principles’ and think like owner (Pressman,
2016).
Innovation process management
Tesla manages its process of innovation in three key steps i.e. having innovative and
silicon-Valley management team, focus on providing the perfect user experience with the
concept of sustainability and having effective marketing and distribution channels instead if
using 4S stores.

Innovation 7
Organizational structure
The secret of the success of innovation is effective culture of the organization. In Tesla,
there is function based hierarchy, centralizations and divisions. In the function based hierarchy,
there are chairman & CEO, Finance, technology, Global sales and service, engineering and legal.
Along with this, Tesla basically supports the autonomy of its regional and global offices (Meyer,
2018).
Finding innovation opportunities
There are two types of innovation for the organizations i.e. closed open innovations.
Tesla has adopted open innovation process in order to identify more innovation opportunities.
The company manufactures and markets its own electric vehicles (Hernández, Noruzi &
Sariolghalam, 2010). Along with this, the company also acts as the original equipment
manufacturer by selling its electric power train components to the companies that are interested
in making electric vehicle. Company also encourages to other companies to enter in the electric
vehicle markets (Moritz, 2015).

Innovation 8
Technical innovation
Tesla is the most innovative company in terms of technical innovation. The company has
done innovations in designs of electric car vehicles. The company focuses on electrifying the
models in terms engineering services and continuous supply. Along with this, company is
successful in the business by the networking and knowledge sharing. By the patent sharing, the
company makes allow other companies to manufacture electric vehicles (Forbes, 2014).
Social innovation
By the social innovations, companies are able to provide value to the society by the
products and services. For example, with every new product, Tesla brings values for the society.
The company directly satisfies the concerns of society. The interest of the society is ensured that
the natural environment is protected or conserved with the Tesla’s electric automobile products.
The company gives high priority to the corporate social responsibility programs and seeks new
ways to minimize batter costs (Purificato, 2014).
IPR strategies
IPR strategies have key role in protecting the innovation opportunities. For instance,
Tesla has built significant patent portfolio in order to create patent. The company had doubt that
big care companies would copy its technology and then use it in the manufacturing, marketing
and sales to overpower Tesla. Further, the company is also involved in the legal combats in
respect of intellectual property. Along with this, there is the significant patent lawsuit in Tesla
related to green cars and transpirations (Buschmann, 2016).
Section 3: Involvement in innovation
Economist perspective
In the economic perspective, innovations in the technology have an important role in the
growth of the economy. So, it is important to understand about the factors affecting the
development of technology. According to the economists’ strategy, resources required in the
innovation are less. Innovation focuses on the structural change in which resources are used in
the productivity. Further, according to economists, innovation by networking means enhancing
the efficiency of innovation process to overcome the obstruction to the division of innovative

Innovation 9
labor. Innovation is crucial for all the stages of development and economic growth of every
country (Tidd, 2006).
Impact of National Accumulated Resources and Capabilities
The resources and capabilities available in the country have positive impact on the
innovation of the company. For instance, the manufacturing industry is innovation driven in
Thailand due to innovative capabilities of joint-venture and direct investment. National
innovation agency of Thailand is established to promote innovation and technology. Proper
technological infrastructure and resources and availability of labor force in the country have
significant impact on the innovation process of the organizations (Bailey, 2014).
National infrastructure and culture
The infrastructure of the company and culture has significant impact on the process of
innovation. Culture has significant impact on the innovation diffusion and consumer behavior.
The reason is that culture drives behavior of customers, innovations and customer services. The
infrastructure and culture of the country impact on thinking and behavior of people in terms of
opportunities risk and rewards. National prosperity of the country is viewed as the by-product of
innovation.
Key players in Innovation
There are various key players in the innovation process of the organizations. In the
innovation process, the key players are research and innovation teams, government, networks,
physical infrastructure, technology transfer associations and business support. These all are keys
to innovation that are used by most innovative companies systematically for the successful
innovations. Governance sets strategic directions for the management to create and organize the
innovation activities. Along with this, methods, collaborations, learning and performance are
also keys for successful innovations (Tavassolia & Karlsson, 2015).
Section 4: Economic perspective
National System of Innovation
In order to enhance innovation in the external environment, there are national systems of
innovation as a tool of social and economic development. These systems include innovation

Innovation 10
surveys to gain knowledge for innovation, cluster interactions, international knowledge flows,
industry activities and technology diffusion.
Government Support
There are various policies and laws imposed by government in order to support the
innovations done by the companies. For instance, Tesla has government support while
manufacturing electric vehicles. There are Federal government research funding to support plug
in electric vehicles, institutional support to promote electric vehicle readiness, taxation support
and streamline permits, codes and regulations.
New Technology
The innovation can be enhanced by the new technology, diffusion, knowledge generation
and adoption. For instance, Electric vehicle technology is comparatively new and social,
technological and political environment is favorable in acceptance and growth of this
technology. There are some key factors in EV technology i.e. range improvements, rising petrol
fuels and policy support makes EV more adaptive for the customers (Coope, 2014).
Science parks, technology centers and cluster effects
These factors are also helpful for enhancing innovation and technology in the external
environment. There is the need of science parks, technology centers and cluster effects in order
to create assets such as highly educated and skilled workforce and supporting infrastructure for
the innovation. The innovation competitiveness is decided by these science parks, technology
centers and clusters that provide with the applicability for development policy to the
competitiveness. Science Park is the creation of new settlements that focuses on basic research
and development process. Next, technology centers are the creations of production activity that
focuses in the high-tech production. Innovation cluster is the combined development of
technology centers and science parks in order to focus on innovative and entrepreneurial
activities of the organizations (Woerter, 2014).

Innovation 11
References
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categories, (online). Available from:
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Berkhout, A., Hartmann, D., & Trott, P., (2010) Connecting Technological Capabilities with
Market Needs using a Cyclic Innovation Model. R&D Management, 40(5), pp. 474-490
Buschmann, C., (2016) Tesla’s patent strategy opens the road to sustainability for transport and
for itself, (online). Available from: https://techcrunch.com/2016/05/26/teslas-patent-strategy-
opens-the-road-to-sustainability-for-transport-and-for-itself/ (accessed on 3rd April 2018)
Chesbrough, H., (2003) Open Innovation: The New Imperative for Creating and Profiting from
Technology, Boston: Harvard Business School Press
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https://skemman.is/bitstream/1946/17028/1/Cooper_thesis_final.pdf (accessed on 3rd April 2018)
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automobile industry along the open source movement, (online). Available from:
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_Pioneer_towards_a_new_strategic_approach_in_the_automobile_industry_along_the_open_sou
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3rd April 2018)

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