Tesla's Model S is designed to allow a fast battery swap, exchanging a depleted battery for a fully charged battery in less than half the time it takes to refill a gas tank. To facilitate this, Tesla has introduced an innovative switching station based infrastructure based on a model pioneered by the now bankrupt electric vehicle company, Better Place. These switching stations serve a similar purpose to what gas stations serve for fossil fuel vehicles - if and when a motorist runs out of charge, they can replace their depleted battery with a fully charged battery. Realizing efficiencies and gains from economies of scale, these switching stations can be a win-win for both motorists and Tesla. Motorists are relieved of their anxiety of being stranded with a drained battery and the car company can get many more motorists to buy their vehicles and sign up for use of the stations. Tesla's latest battery swapping switching stations builds upon its evolving strategy of building a complete and robust electric vehicle (EV) ecosystem that started with aspirational cars (0 to 60 miles in 4.2 seconds), batteries with up to a 300 mile range, and supercharging stations.
Innovations come in many forms forms the essence of Principle #5 of my recent book, Living in the Innovation Age (TekNirvana, 2011). I compare these forms of innovations to the concept of avatars of Lord Vishnu in Hinduism - each form unique and specifically designed for a purpose but none any better than the other. While most associate innovation with technology, a crucial and often necessary form of innovation occurs in business models, such as the Tesla switching stations described above. As Karan Girotra and Serguei Netessine discuss in their HBR blog, At Last, a New Business Model for Tesla, groundbreaking technology rarely achieves mass adoption without a corresponding innovation in the business model around the sale/use of the technology. I concur with the authors' assessment that these patterns extend far beyond Tesla — there are numerous innovative technologies that are waiting for an innovative business model that could facilitate their use and adoption.
The Bottom Line
Innovation has many forms. One such form is Business Model Innovation, which is often the catalyst that enables groundbreaking technology to achieve mass adoption. It is a well-known fact that much of Apple's iPod's success can be attributed to its business model innovation of the iTunes Platform. Such is the story with Tesla as well. Tesla realizes that it is not enough just to build a great electric car. In order to make their product truly useful, they are creating an entire ecosystem around it - long range batteries, supercharging stations, and now high speed battery swapping switching stations. So, will Tesla's switching station concept finally be the tipping point that will position its flagship product as the first all-electric, no-compromises, luxury sedan? Only time will tell...
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