Innovation, Static Practices, & How Tesla Has Disrupted the Industry

There are certain things that traditional OEMs care about that Elon Musk and his team will get to—after they accomplish the important things

By Gary S. Vasilash

In 1997 a book by Clayton Christensen was published that had a thesis that was not something that many people in companies really wanted to accept:

It essentially says that there are incumbent companies—think of the long-in-business vehicle manufacturers—who basically provide incremental improvements to their products. Things get better. Just a little bit better. Other companies are doing the same thing, so a given company really doesn’t need to concern itself with doing anything but slightly adjusting the dial. They may improve their existing processes to make their production more efficient, the production of their existing (though improved to some degree) product.

Then a new entrant comes into the field. A new entrant that can pretty much be ignored. (Or so it seems.) That’s because they’re in a space that isn’t particularly valuable (e.g., low margin). Or they provide a product that underperforms the existing. Or they are providing a product that no one has asked for.

The concept, and the title of the book: The Innovator’s Dilemma.

Actually, the one who has a dilemma is the one who isn’t innovating but trying to continue the existence of the status quo.

No one ever got fired to trying to improve margins on an existing product, so that’s pretty much what executives do: invest in improving the existing product. After all, there are all of those sunk costs in equipment and process and knowhow that have to be taken into account.

But then, not immediately, but eventually, the product that could otherwise be ignored, is transformed such that it becomes something to be reckoned with.

Case in point: Tesla.

When it introduced the Roadster in 2008, a essentially a Lotus Elise with an array of lithium-ion batteries that were otherwise found powering laptop computers back then, a two seater that had a price of over $100,000, Tesla was pretty much considered to be a company that was a niche of niche: after all, roadsters don’t have a whole lot of demand, and in 2008 a roadster with an electric powertrain was simply ridiculous.

As time went on, the incumbents looked at what Tesla was doing and didn’t think much. Yes, the Model S may have had remarkable performance, but what about the build? The Model X had doors that were visually impressive but functionally not up to snuff. The Model 3 was impressive, but as everyone knew, Tesla wasn’t profitable, so anyone could build unprofitable vehicles. The Model Y had interior fits that were not the sort of thing that one would expect from a vehicle with its price point.

But also as time went on, more and more OEMs began to realize that not only was Tesla immensely popular among consumers in a way that was beyond the wildest dreams of anyone in the car industry, but that it wasn’t going away.

So they began to roll out an EV here and an EV there, all of which were claimed—publicly or implicitly—to be “Tesla fighters.”

Seemingly that hasn’t worked out.

The innovator’s dilemma in action.

Jeff Stout is executive director for Yanfeng Automotive Interiors and a student of The Innovator’s Dilemma.

On this edition of “Autoline After Hours” Stout joins “Autoline’s” John McElroy, Craig Cole of Roadshow by CNET and me in a spirted discussion that largely focuses on what Tesla does and doesn’t do, which leads to a variety of related subjects including whether electric vehicles will become the dominant type on the roads and whether autonomous vehicles are going to occur in a meaningful way in a bounded amount of time.

And you can see it all here.

Jeff Stout of Yanfeng: The Inside Story

“Exterior design gets them in the vehicle. Interior design keeps them there.”

That may be an old truism, but it is likely accurate.

Consider—what if you’re in the market for a new car and see something that really looks awesome. You know that you’d be proud each and every time you walk up to it in your driveway. You know that you’d be proud to have it in your driveway so your neighbors can see what incredible taste you have.

So you open the door, climb inside, get behind the wheel and—meh.

Nothing special. Maybe underwhelming.

So you figure that this may not be the best choice. After all, while you’re going to see the outside of the vehicle for a minute or two as you approach it, you’re going to be looking at—and using—what’s on the inside for hours on end.

Interiors matter.

A whole lot.

And as the transportation industry moves toward a state where there may be less ownership and increased use of ride hailing, what is going to make the most difference between using Service L and Service U may be the interior execution and amenities.

Yanfeng is a global supplier, with more than 240 branches and some 64,000 employees networked around the world. It specializes in interiors, seating, cockpit electronics, passive safety and more.

Yanfeng XiM 20 concept model: determining the elements of the interior moving forward. (Image: Yanfeng)

Jeff Stout leads global research into technology and mobility for Yanfeng. (To the point of the wide span of the company’s operations, he has an office in Holland, Michigan.)

One of the areas that he and his colleagues are most interested in is what electrification and automation are going to mean vis-à-vis automotive interior development.

For example, in an EV, where there is certainly a consideration when it comes to using stored energy, they are looking at improved thermal management approaches, such as using large interior surfaces—from door trim panels to headliners—as heat sources rather than relying on the blower of a conventional HVAC system.

When it comes to autonomous driving, there are a range of considerations, from monitoring driver awareness for Levels 2 and 3, to how do you assure that the interior of a vehicle is sanitized in shared vehicles so that people are willing to climb in one that someone has climbed out of. (In this case, one of the answers is UV light.)

Stout talks about these and other topics on this edition of “Autoline After Hours” with “Autoline’s” John McElroy, Pete Bigelow of Automotive News and me.

It is an hour-long, wide ranging discussion that goes from the inside of vehicles to the market at large, to an analysis and assessment of what’s happening now and what could happen in the not-too-distant future.

And you can see it here. —gsv