Neither Apple nor Tesla invented their great products. Apple redesigned smartphones with a unique feature of the multitouch user interface. Similarly, Tesla redesigned automobiles with new technology cores like electric battery and autopilot. Similar to Apple’s success in the smartphone industry, why cannot Tesla take over the automobile industry? If it happens, the creative wave destruction effect in a four trillion-dollar industry would be by far greater than whatever happened in human history. Hence, Tesla has emerged as fantastic world-changing money-making speculation. However, neither their products nor their competencies in core technologies are similar. Such reality creates both hope and desperation. To some, Tesla’s stock price is a bubble. To many, it’s a rare chance to grab Tesla’s stock to have an unprecedented multiplier effect on investment. Such suspense inspires us to look into the winning strategy of Apple vs Tesla.
Apple’s emergence as a latecomer to show innovation magic in the matured mobile phone industry
In 1908, the patent office in Kentucky of the USA issued the first wireless telephone. After a long journey of evolution, in the mid-1980s, Motorola corporation unveiled the first mobile phone for the general public. The “brick” weighing two lbs, at a price tag of $3995, started the modern mobile handset industry. In the late 1990s, Nokia took over the leadership position with the aesthetically appealing redesign strategy. Within a span of 10 years, Nokia’s dominance emerged as unsinkable.
At the dawn of the 21st century, Steve Jobs rescued Apple with iPod. iPod emerged as an iconic fashion item for enjoying music and videos. However, he speculated a short life of the rescue due to the uprising of the smartphone. If people can enjoy music and videos on their smartphones, why would they buy an iPod? As a survival strategy, Steve embarked on redesigning the smartphone, making it a three-in-one. He made the iPhone as a combination of phone, iPod, and internet browser with its mighty iOS. He changed the user interface technology core. As opposed to a physical keyboard, stylus, and small screen, he adopted a large screen-based, easy-to-use multitouch-centric user interface.
In comparison to competing products offered by Nokia, Blackberry, Palm, and others, consumers found iPhone far more convenient to use. Moreover, iPhone had a strong aesthetic component. Hence, customers grabbed it with an aha. Furthermore, the willingness to pay for the product was sufficient enough to produce profitable revenue.
Despite initial success, the sale of iPhone within a year came down to virtually zero. It started to experience both externality and competition effects. The competition started offering imitation, and also innovation at a later stage. To sustain in the market, Apple has been releasing successive better versions. iOS, multitouch, and aesthetic designs are Apple’s core winning strategies.
iPhone’s heatwave melted iceberg like competition behemoths
Mobile handsets emerged as electronic and wireless communication technology-intensive device. However, the role of software kept steadily growing. Sustaining competition strategy was largely based on the addition of software-intensive features. Moreover, it also had an aesthetic appeal. However, major smartphone makers like Nokia or Blackberry did not have a strong base in software. Hence, they faced extreme difficulty in responding to Apple’s iOS-based software-centric innovation strategy. Furthermore, iPhone’s killer multitouch technology core was Apple’s proprietary. Apple’s aesthetically pleasant design features were also far more superior to what competition could offer.
Like competitors, Apple was sourcing most of the physical components from the 3rd party suppliers. But Apple’s innovation strategy around iOS, multitouch, and aesthetically pleasant designs were highly difficult for competitors to imitate. The high difficulty of imitating Apple’s proprietary technology core and time killed by attempts to counter it by uplifting existing technology core pushed Nokia, Blackberry, and others at the corner. Although Samsung responded to imitate with Android, imitation was of poor quality for a long time, primarily due to competitors’ weak position in software. Moreover, Apple also slowed down Samsung’s such move with patent lawsuits.
Tesla’s emergence as automobile superstar—creating suspense in winning strategy of Apple vs Tesla
Tesla started the suspense by redesigning existing automobiles with new technology core. The first one is the electric battery as a replacement of polluting gasoline engine. The second one is an autonomous driving or autopilot module as a replacement of human drivers.
Unlike Apple’s iOS, multitouch, and aesthetically pleasing design, the electric battery is not Tesla’s proprietary technology. Moreover, it’s highly inferior and more expensive to the internal combustion engine. Hence, unlike iPhone, the penetration rate of Tesla EV is very slow. Moreover, as opposed to Apple making money from day one, Tesla has been counting loss from the sale of each unit of EV. Public subsidy and investors funds have been sustaining this loss-making journey over 17 years. Unlike Apple, Tesla faces two challenges in this regard.
Battery pack attempts to draw line in winning strategy of Apple vs Tesla
The first one is that battery that should improve significantly so that a $5000 battery pack can let a family Sedan charge in less than 10 minutes to gather enough charge to drive over 500 km range. So far, Tesla has been sourcing battery pack from the 3rd parties like Panasonic. On the one hand, liquid electrolyte-based battery technology that Panasonic has mastered to serve the consumer electronics industry does not appear to meet these price and performance targets. Even if it does, incumbent automobile makers can readily switch to it, as Tesla cannot offer barrier, either through patents or complementary facilities.
More importantly, the commodity battery pack offered by Panasonic, CATL, or others is not amenable to growth to meet $5000 price target for offering 500 km range with 10 minutes charge. Hence, the batter technology core should be changed. As opposed to battery makers, automobile behemoth Toyota has a leadership position in the next-generation solid-state lithium-ion battery. With a very strong patent portfolio, Toyota will likely resist Tesla to switch to the next wave of battery technology.
Moreover, instead of countering the uprising of EV by sharpening the internal gasoline engine, Toyota and other Japanese automakers are at the forefront of both battery technology and EV. Moreover, they have been also progressing with fuel cell to offer the last mile thrust to win the EV. Hence, Tesla’s initial success in EV does not appear to have a strong base to repeat Apple’s iPhone like a triumph.
Autonomous Diving or Autopilot
The 2nd winning strategy of Tesla is software-centric. Tesla offers Autopilot suit for advanced driver-assistance system features such as lane centering, traffic-aware cruise control, self-parking, etc. These features are useful; however, they often cause distraction and lack of human drivers’ attention. The perceived value of these features is not strong enough to show disruptive effects similar to those caused by multitouch type based user interface features of the iPhone. Moreover, Tesla does not have the patent portfolio in the technology suit to create barriers to other automakers to adopt such features, incase their customers demand such features. As opposed to Tesla, Toyota is at the top in Autonomous Car-Control Mechanism, followed by Nissan, Robert Bosch, Honda, and Denso.
Weakness in the underlying science of FSD is posing a challenge to winning strategy of Apple vs Tesla
The full self-driving (FSD) appears to be a game-changing technology. There has been criticism that Japanese automakers are late in the autonomous vehicle party. Despite some initial demonstration, still there is a steep challenge to make FSD superior to human drivers in all driving conditions. Once Uber or other ride-sharing companies can use FSD to replace costly drivers, a major transformation will surface in the automobile industry. As opposed to Japanese automakers’ research in progress, Tesla has a prototype on the road.
However, the barrier appears to be in the underlying science. Upon reaching five disengagement frequency over 1000 km, the neural network-based deep learning algorithm is saturating. Disengagement frequency should fall far below its current level to make FSD safer than human drivers. This is the inherent limitation of the underlying science. Hence, the performance improvement of FSD has stalled. How long will it take to escape this situation appears to be uncertain. The likely roll-out date of autonomous vehicles has already shifted by as far as ten years or so. If it shifts further, whatever the edge Tesla and other technology giants have gained will be left to imitation.
This analysis of the winning strategy of Apple vs Tesla is based on the interpretation of facts and figures within applicable theories. Nobody exactly can say about the unfolding future in the technology space. Let’s keep watching these wonderful dynamics shaping the automobile industry. We all hope to see the success of any attempt to offer us emission-free safer automobiles than what we have today. Let’s wish good luck to all initiatives in offering us a better tomorrow.