Pursuing a Vision: Elon Musk’s Big Patent Strategy Gamble

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Last week, Musk announced that, moving forward, Tesla’s patents are effectively open source.

Pursuing Your Vision (Seemingly at the Cost of Competitive Advantage)

Great companies are driven by two things: 1) a well-defined and substantiated vision, and 2) an executive team that isn’t afraid to aggressively pursue it. We have seen this time and time again in the public markets and this is one reason that executive pay has reached levels it has. Vision is actually just as if not more important in startups and expansion-stage growth companies, as it rallies a team around a central cause and provides the direction it needs for achieving it.

There is a clear difference between teams with a clear vision. You can tell simply by talking to the employees in these organizations. They are confident and excited about the vision, and willing to surmount large hurdles to help the company achieve it.

Developing a vision is one thing, of course. Sticking to it when the rubber hits the road is another. It can often involve making difficult decisions, especially ones that could potentially be seen as jeopardizing much of what the team has accomplished for a greater goal. That’s one thing that sets truly great companies apart: they have great leaders behind them who are confident enough to make those decisions.

We got reminded of this late last week when Elon Musk made a very bold move. He publicly announced on the Tesla blog that Tesla was inviting its competitors to use its electronic vehicle patents in good faith without fear of a patent lawsuit. In a sense, he had removed the moat that he and his team had worked so hard to erect around the electronic vehicle manufacturing market. Here’s how he defended his rationale:

“Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”— Elon Musk

 

Tesla Patent Strategy: Why It’s a Bold Gamble that Could Pay Off Big

How can this make any strategic sense? It enables Tesla to establish industry standards.

Standard Setting OrganizationsIf electric vehicles are to ever become main stream, there needs to be more supply in the market. Tesla cannot keep up with the current demand on its own and, consequently, the company needs the power of the major motor vehicle manufacturers to help leverage the interest in electric vehicle adoption in America.

By stepping out from behind the protection of its patents, Elon Musk has placed a big bet on the hope that at least one of the powerhouses in Detroit will full-heartedly enter the market, so that he can get his main part manufacturers to start producing larger part supplies. It’s a potentially risky move he clearly believes will benefit his company’s ability to innovate and continue to be the best at what they do in the long run.

This is a bold move because he knows how much capital the largest car manufacturers can put behind manufacturing electric vehicles that are similar to Tesla’s.

But this is also stands as an important strategic lesson. Standard-setting in a market is also a way to assert market dominance. If Tesla is able to open up their approach to electronic vehicle manufacturing and get other market players to adopt it, then Tesla can control the direction of where the market is heading. In highly consolidated markets like the automotive sector, key standard-setting decisions like how to approach an electronic vehicle battery design can lead to a huge advantage for them, as well, from a future design and capability perspective. Above all, it provides Tesla the runway needed to pursue the company’s true vision.

A Vision Exercise for Your Company

Building Corporate Vision

Regardless of how we often like to image it, vision isn’t the result of a sudden epiphany or crystal clear “Eureka!” moment. The truth is it is the product of many vision-building exercises, and it can (and should) evolve over time. That is one aspect that startup and expansion-stage executive teams can sometimes forget. In fact, it can be extremely beneficial for the leadership team to plan regular exercises to re-visit continuously develop the company’s vision.

All executives approach this process in their own manner, but one great way to do it is to periodically call a leadership retreat whereby the executive team members are asked to state the vision for the company, what they think it is today, and how it will achieve what they want it to become in two and five years. Each executive needs to do this independently and is asked to express his or her own thoughts on how the vision can be altered.

Two Things to Accomplish

This exercise accomplishes two things that are critical:

  1. It provides a regular dialogue for vetting the CEO’s vision and helping bolstering it through ideas from other members of the leadership team.
  2. It ensures that all executive team members are in alignment with what they want from the company and how they think the team should get there. If they are not, then the team is probably not properly focused and the vision may need to be re-visited.

Remember

A vision is only effective if it provides direction for a team, and motivates and excites them to pursue the vision with all they have.

Ready to Establish or Further Develop Your Vision?

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Defining Your Company Mission, Vision, and ValuesWhat Really Matters provides you with everything you’ll need to clearly define and realize your company’s mission, vision, values and priorities. Inside, you’ll learn:

  • The business benefits of company aspirations
  • A three-phase approach to the aspiration process
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Photo by: Stephen Shankland

Marketing Manager, Pricing Strategy