First They Came for the Electric Vehicles

There is a well-known playbook for disrupting an industry, and it was written by Clayton Christensen in 1997 and called, The Innovator’s Dilemma.

In particular, the book looks at the tendency of disruptive firms to first target the lowest-margin, least exciting parts of an incumbent’s business. This competition might annoy the incumbent, but nobody panics, precisely because that line of business is so low-margin and minor.

Over time the disruptor gradually eats more and more of the incumbents business, until the incumbent is left hanging onto only the most lucrative, highest-margin product lines.

And then those get eaten, too.

This is what I thought about today when Elon Musk announced that Tesla will be unveiling a pickup truck in the next two years.

Ford makes very nice mass-market sedans, and I own a Ford C-MAX Energi hatchback that I love. But Ford’s real profit-driver is the F-Series. Pickup trucks are what make Ford work as a business.

(All of this also applies to GM and Chrysler, but I feel this most personally when applied to Ford, so in this post I’ll use them as the exemplar of the Big Three.)

In 2008, when Tesla entered the market with a super-expensive, high-performance electric Roadster, it was no big deal. Ford barely makes that type of car.

Then in 2012, when Tesla expanded its product line to include a $80,000+ electric luxury sedan, that was hardly any closer to home. Ford makes vehicles for America. Tesla made vehicles for Silicon Valley millionaires.

Same story in 2015, when Tesla launched a $120,000+ electric Model X SUV.

Tesla only really threw down the gauntlet with the unveiling of the $35,000 Model 3 sedan, and that hasn’t even shipped yet.

But today’s announcement that Tesla is entering the pickup market?

That’s not business. It’s personal.

It’s also genius.

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