Analysis of Innovation Theories: Tesla's Development and Growth

This essay delves into the innovative strategies employed by Tesla, examining the application of diffusion of innovation and S-curve theories to its historical development and future growth prospects. It explores how Tesla has targeted different consumer segments, from innovators to laggards, to drive product adoption and market penetration. The analysis includes the impact of disruptive innovation and the company's vision for the automotive industry. The essay also provides insights into Tesla's marketing, production, and sales strategies, highlighting how the company has differentiated itself from competitors. The essay also provides insights into how Tesla can use disruptive innovation to expand its market share and increase growth by removing existing goods from the market.

MANAGING INNOVATION

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Innovation theory........................................................................................................................1
Development of Tesla using innovative theory..........................................................................3
Critical analysis of diffusion theory with regard to historical and future growth.......................5
Application of theory in relation to historical and future development......................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
Online........................................................................................................................................10

INTRODUCTION
Innovation is a process of converting an idea or invention into products or services which
create value for customers who are willing to pay. It helps company in satisfying the needs and
demands of consumers. Innovation can be evolutionary which are continuous in nature or
revolutionary which can be discontinuous or disruptive in existence. Organisation that wants to
invent innovative products take greater risks. Essay would include innovative theories which
would explain the historical development of Tesla. Further, it will include one or more ways in
which product can be developed in the forthcoming time and it will also include how theories
will be helpful in future growth of Tesla.
MAIN BODY
Innovation theory
Innovation means bringing new ideas or products in market. To achieve this invention
has many new concept where most important theory for business development is Diffusion of
innovation. It is one of the oldest theories which help an organisation to understand and explain
how a purchaser adopts and engages with new goods, technologies and techniques overtime.
Enterprises use this theory when launching new goods or services or introducing existing product
in new market(Frow and et.al., 2015). This theory explains how goods or services can be
accepted by five different categories of consumers and how to do a business with these types of
people. It also determines the success of product. Further, it includes characteristics of people
adopting this theory. They can be innovator which includes a small group of workers or
entrepreneurs exploring new ideas or technologies. These people are the first to try product and
are willing to produce innovative and creative products. They are also known as risk bearers and
trend setters. Subsequently, product will become famous and sales will increase which would
result in higher profits of organisation.
Early adapters are also included in this theory. They are those people who like to explore
new things and have an ability to bear risk( Mac., 2015). There group is larger than innovators
and also, they have a keen knowledge about the product. This knowledge makes it easy for them
to advertise the product by using word of mouth advertising which helps in increasing sale of
goods or services.
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Early majority consists of people who love trends but wait for a while for purchasing any
item. The product will be purchased in plenty by people of this particular group and it will help
company to increase sale of goods which will become popular by time and it will assist in
increasing demand of item. Late majority has a follows a buying criteria which includes that they
will only buy good after many people have purchased it and has become an old or unpopular
product. People of these group lack confidence in taking risk and they want to be absolutely
certain about situation and try not making a bad buy. People also in this group have low self-
esteem.
Laggards group do not like innovation. They will buy particular product only if they have
no alternatives left(Prokop and Stejskal, 2017) They will only purchase the product after reading
reviews, statistics and complete relevant data related to goods or services. Adoption of diffusion
theory is the most important when looking at new good development and also, it can be useful
while launching existing product in new market.
Another theory which is most important is Schumpter S curve theory which was
introduced by Schumpeter who was a most influential thinker and this theory is one of the
famous concepts of innovation and includes curve, the technology life cycle and this theory is
used in determining performance in regard to time and effort. Also, assists in determining the
level of maturity of industry/product and while evaluating the product or an industry, its
importance to see is this coming on s-curve or is not coming on s-curve. Therefore, to check the
all possibility of risk and downfall(Wu, Lii, and Wang, 2014). This theory also contain some
stages which are needed to be targeted by company. Ferment stage is first stage of s-curve
theory, period where new product s are introduced in market and also known as beginning stage
of commodity. Therefore, company check market value of product and according to requirement
of the product research and development process take place for good and all the changes in the
commodity are made according to the requirement of the market. This stage is also known as
start up.
Take-off stage comes after ferment stage. Also, known as growth stage. In this stage
product start to develop and earn good amount of profit. Demand for product also increases and
cover the full market acceptance. This is stage in which demand of product increases and
Therefore, there is rapid growth in the production. For example: at take-off stage Tesla
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company introduced cars for customer to meet needs and demand of customer. In this phase
company earn profit at its best.
Maturity stage is third stage of s-curve analysis, this stage is also known as competitive
stage . In this stage there are many competitors of product and price discrimination of product is
also there. (Diffusion of Innovation Theory 2017. )This is phase where company is at no profit
and no loss situation, in this period company need to bring changes in there product. Otherwise,
company can decline. In this stage many innovations take place to increase its sales. For
example: If Tesla is not involved in bringing innovative products in market its competitors will
take its place in environment.
Discontinuity stage is the last stage of s-curve, in this level product continues to decline
and has to face tough time due to less innovation and more competition in the market. This stage
is also known as decline stage(Nguyen and et.al., 2014). Totally new product is being started by
the company and new s-curve process begins. For example : Tesla tend to bring new and creative
products in market which consist of cars, batteries, roadster, lorry etc. They are stages of s-curve
theory which was given by Schumpeter to know different levels of product.
Development of Tesla using innovative theory
Tesla is one of the leading motor car company headquartered in California. Tesla began
its services by selling sports car which were designed particularly for early adopters which was
followed by main stream and mass market vehicles. It was the first organisation to use lithium
ion battery cells and first production in EV with a range more than 320 km per charge. Tesla has
a vision to change auto mobile industry by creating more innovative and creative pieces that fit
together. This process was called as “complex coordination”. It follows different marketing,
production and sales strategies from its competitors(Nguyen and et.al., 2014).
Tesla has undertaken various innovative theories for the development of its product. One
of the most important innovative theories chosen by company was diffusion of innovation. This
theory has helped Tesla in development of products like cars, lorry, roadsters and batteries.
Company has a strategy which only focuses on innovators who want to try new ideas and
strategy as their interests in innovation give them a status of out of a local circle of peers and
also, they tend to have different social relationship.
Tesla knows that innovators are also guarded by huge financial resources and also have
ability to understand complex structure of new products. Innovators helped Tesla in increasing
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growth of their cars as they were ready to bear risk involved in buying new products like cars
sold by company and also, they accept setback which is involved in new product. After targeting
innovators and gaining their trust, Tesla then focused on early adapters. Company knows early
adopters are group of people who are consists of majority of local people They have the greatest
degree of opinion which was beneficial for company as they tend to receive important feedbacks
on products offered by them(Zeyen, Beckmann, and Akhavan, 2014). Local people have most
influence on items of enterprise during evaluation stage of innovation decision process. Also,
company focused on these adopters as they have great exposure to mass media like radio, TV,
hoardings, magazines, etc. and have greater ability to accept changes. These people tend to have
high social influence, increased economic status, and are more innovation accepting people than
others. People were organised into hierarchy within society and have a great influence of people
below and above them. After, targeting early adopters group of people Tesla than focused on
early majority group of individual which has played an important role in diffusion process.
Buyers try to interact with peers who are which are linked to them before making any
decision regarding buying of car. Purchaser of this group wait and see progress of product and
how many people are buying new cars of Tesla. And then make purchasing decision. Their
decision is totally based on quality, features and price of product. They will also compare price
and features of car with competitor’s product and after that, they will make any buying decision.
They also choose the products of company based on its popularity as after focusing on
innovators and early adopters, Tesla became famous and it was easy for them to target early
majority.
For increasing sales of its product like cars Tesla than focus on targeting people who
belongs to late majority group. As people of this group are conscience regarding innovation and
new creation of products, they will only buy product after a huge number of individual have
bought it(van de Wetering, Mikalef, and Pateli, 2017). Weight system norms of enterprise have
helped company to convince the majority of person. Individuals of this group also make
purchase decision if there is pressure from peers and so, Tesla has also adopted policy to impress
peers through advertising, public relations and sales promotion activities. Company last focuses
on laggards which includes people who tend to adopt innovation after every one has adopted it as
they are suspicious of innovation and change. This theory has helped Tesla in increasing its
growth which resulted in higher profitability for company.
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Theory of diffusion can also help Tesla in future development of products like battery,
roadster, etc. This theory includes presentation of new idea or culture, its acceptance by
environment and integration of accepted products. For gaining popularity Tesla cars needs
have to focus on majorly five types of consumers which are innovators, early adopters, early
majority, late majority and laggards.
Company will be able to understand the need and demand of consumers more easily and
will also develop cars in a way which are accepted by customers. Also, it will help Tesla in
setting prices for cars as per the purchasing power of consumers(Levén,Holmström, and
Mathiassen, 2014.). For increasing profitability, many factors need to be considered by
organisation which includes understanding of environment, keen knowledge of products,
competitor’s strategies and techniques, price of substitute products, demand and supply of Tesla
car, building relationship with people or employees working in company; all these aspects need
to be covered for future development and higher growth of Tesla cars. This theory will also help
company to motivate the consumers or its peers to purchase cars manufactured by Tesla.
High disruptive innovation
Disruptive innovation can also be used by Tesla for expanding its's market share and
increase growth. It includes procedure of developing new products by removing existing goods
from market. This procedure requires creative and innovative techniques, use of unique
promotional tools . Disruptive innovation will help company in shaking markets. It creates a new
market and value and eventually remove old products from existing market and can also help
Tesla in removing leading marketing firms, leaders. There are two disruptive technology which
company can implement that is new market and low end disruption. First process targets
consumers whose need were not fulfilled by existing firms and second process is where company
can design new products with low price and attract more consumer.
Critical analysis of diffusion theory with regard to historical and future growth
Diffusion theory has helped organisation in launching new cars by making company
understand whom to target to make product a huge success. However, if enterprise does not use
this theory, they would not be able to know which consumer needs to be targeted. Targeted
people includes group of innovators, early adopters, early majority, late majority and laggards.
This theory also consists of communication channels which help Tesla cars to set its place in
market. Channel do its work by taking messages from one person to another. In contrary, if
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company does not use this channel of communication, it would not be able to transfer innovation
from one place to another.
Communication can be done through advertising like using social media platform,
television, radio or word of mouth act. Theory also includes company to know about length of
time taken by people to adopt innovation. So if this theory was not there, organisation will not be
able to understand time taken by consumers for adoption of change. Diffusion theory consists of
social system which includes inter related networks which come together to achieve common
goals. On the contrary, if this theory is not used by Tesla, it would not be able to know about
social requirements of people relating to culture, religion, etc(Frow and et.al., 2015).
Tesla brings successful products in the market only by managing its team properly. There
are many factors which have contributed to the success of organisation like determining market
needs. Tesla has researchers who are able to determine the needs and demands of consumers.
Many techniques are used by organisation to know the need of buyers like customer surveys,
product sample marketing and polling. However, if Tesla does not know needs of consumers, it
would create a negative impact on the minds of people(Lind, 2017).
Company involves in selling quality products to consumers which has also helped in
development of organisation. Products with good features are desired by people and they are
always engaged in buying products with high features. In contrary, if enterprise does not sell
quality items, it would affect the reputation of company. Effective promotional strategies are also
followed by Tesla to increase the sale of its cars. They choose the right media to target
consumers and leaving a powerful impact on them. Nevertheless, if company does not use
promotion as a technique to grow, it will lead to marketing failure(Bieraugel, 2015).
Tesla is also involved in creating and developing products which offer different features
from competitor’s commodity. It makes a clear market position which is being derived from
competitor’s analysis and differentiation. However, if enterprise is not involved in differentiating
items, it makes consumer decision more arbitrary. Company focuses on using updated
technology to create and deliver products according to the market and consumer needs. On the
contrary, if organisation is using old technology, it will result in wastage of time, money and
resources.
Managing knowledge is also one of most important tasks in the success of enterprise.
Market research and other data including information related to products are highly guarded by
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managers as if not done so, releasing of data can lead to downfall of company(Prokop and
Stejskal, 2017). These factors also have a social impact on the environment as products
manufactured by company are created keeping in mind items which are environment friendly,
non-hazardous in nature, do not harm social, cultural and ethicalsentiments of people, use of
quality materials and are related to trends followed by people. These factors contribute to the
growth and development of Tesla cars.
Application of theory in relation to historical and future development
Tesla has being involved in bringing innovative products which includes cars which are
produce in accordance with market needs and demands of consumer. Diffusion of innovation
theory has a huge contribution in the historical development of company. Key focus of company
was on early adopters which also acts as opinion leaders. They are the group of people consisting
of huge financial resources and are also able to bear risk related to purchase of new product or
service(Wu, Lii, and Wang, 2015). Early adopters include majority of people who are young
and have high social status, sound financial condition, well-educated and more knowledge about
commodities offered by the enterprise. They have an ability to buy creative products like cars
offered by Tesla.
Communicating to them was also easy for organisation as these people have access to all types of
media whether it is mass media, print media or social media. They are also known as trend
setters as products purchased by them become trend in market. Tesla provides them with great
quality and differentiated product which have unique features and techniques and has lead to
organisational success of company(Acemoglu, Mostagir, M. and Ozdaglar, 2014).
Tesla for its future development has to focus on those consumers who are looking for
new and innovative products. Focus of company should be early and late majority or laggards.
These groups consist of majority of people who can contribute to growth of organisation. Unique
promotional techniques should be adopted by company to gain interests of citizenry involved in
these groups. People in these groups have a tendency to purchase products only when they have
no alternative left or after seeing purchase of many citizens.
Enterprise should focus on changing this attitude of common man which can include
methods like offering discounts to consumers, product benefits, applying sales promotional
scheme, public relations by organising workshops, exhibitions, conducting seminars etc. Tesla
should involve in removing consciousness of people relating to new products or items, they
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should be involved in building confidence of group. Consideration of these factors can help
company in future growth and success(Nguyen and et.al., 2014).
CONCLUSION
Essay summarises innovation theory and concepts relating to it. Theories which are being
explained in essay are Diffusion of innovation and Schumpter S curve theory. Basic concepts of
theory have been explained in essay. Diffusion of innovation theory includes five type of
customers like innovators, early adopters, early majority, late majority and laggards which needs
to be targeted. Further it includes development of Tesla using diffusion theory of innovation and
its contribution in historical growth of company. It consists of historical development of
company(Frow and et.al., 2015.). Essay also consists of critical analysis of theory used by Tesla
and factors which influence success and growth of organisation also leaving impact on society.
Factors consists of effective promotional techniques, product benefits, clear differentiation,
building networks and knowledge management Further it includes application of theory related
to historical and future development.
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REFERENCES
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health systems: Lessons from the Malcolm Baldrige National Quality Award
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Levén, P., Holmström, J. and Mathiassen, L., 2014. Managing research and innovation networks:
Evidence from a government sponsored cross-industry program. Research Policy.43(1).
pp.156-168.
Lind, J., 2017. The role of accounting for managing innovation processes when relationships
matter. IMP Journal.11(1). pp.7-24.
Nguyen and et.al., 2014 INNOVATION and TECHNOLOGY, 2015. 3D Tracer. U.S. Patent
Application 14/247,267.
Peschl, M.F. and Fundneider, T., 2014. Designing and enabling spaces for collaborative
knowledge creation and innovation: From managing to enabling innovation as socio-
epistemological technology. Computers in Human Behavior.37.pp.346-359.
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Prokop, V. and Stejskal, J., 2017. Different approaches to managing innovation activities: An
analysis of strong, moderate, and modest innovators. Engineering Economics. 28(1).
pp.47-55.
van de Wetering, R., Mikalef, P. and Pateli, A., 2017. Managing firms’ innovation capabilities
through strategically aligning combinative IT and dynamic capabilities.
Wu, L.W., Lii, Y.S. and Wang, C.Y., 2015. Managing innovation through co-production in
interfirm partnering. Journal of Business Research. 68(11). pp.2248-2253.
Zeyen, A., Beckmann, M. and Akhavan, R., 2014. Social entrepreneurship business models:
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Online
Diffusion of Innovation Theory 2017. [ONLINE] Available through:
<http://sphweb.bumc.bu.edu/otlt/MPH-Modules/SB/BehavioralChangeTheories/
BehavioralChangeTheories4.html>
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