What Tesla Tells Us About Product- vs. Experience-based Differentiation

Posted On January 17, 2019
By Tim Douek

What truly differentiates a company? Lots of things. Products come immediately to mind. Great products have helped create many great brands. But is that enough? Is it sustainable?

Take Tesla, the pioneer of mainstream electric vehicle technologies and scrappy challenger to the industry status quo, as an example. The company started with a very disruptive and cool product, but today, it no longer has quite the product advantage it had just 12 months ago.

Setting aside the recent shenanigans surrounding CEO Elon Musk in the Twittersphere, the company has shown signs of a weakening position. For example, it recently recognized that mass production of vehicles isn’t quite as straightforward (or as profitable) as anticipated, and a recent Consumer Reports survey revealed that the company no longer represents an obvious “gold standard” in automated driving systems. Add to this the 100 or so electric and advanced hybrid vehicles that consumers will be able to choose from by 2025, and the facts become clear: rapid technology advancements in every industry are resulting in increased product parity, which, in turn, erodes product-based differentiation quite quickly.

This means companies need to look to other sources for sustainable advantages.

Perhaps the only thing that any business can control and enhance every day is the experience it provides to its employees and its customers. Yet, when you look at the actual investments that companies are making in their growth, the “people” part of the equation is often among the lowest items on the list in terms of real dollars and time invested.

Why is this?

For starters, digital “band-aids” are a pretty attractive alternative. It’s always easier for companies to focus on the elements of their delivery model which feel easier to manage and control. People are unpredictable, and they require constant attention. You can’t set and forget people.

In addition, lasting behavior change takes time and requires that an organization digs deep to understand and genuinely address what created old, entrenched behaviors in the first place. This takes honesty and commitment. Looking at the companies that have taken on this challenge—Delta Airlines comes to mind as an example—the rewards have had a lasting impact, much more so than a new app or product feature that competitors can quickly copy. For Delta specifically, this has helped not only with customer loyalty but also with employee demand. In 2018, Delta had 22,000 applicants for 1,000 flight attendant positions, yielding a bunch of benefits for the organization.

Technology is reshaping every industry, from auto and travel to industrial manufacturing and even the arts. In a fundamental sense, this isn’t really new. It’s just happening faster now and leaving more organizations gasping for air. In this disruptive time, the highest performing and most sustainable organizations are those that strike the right balance between the digital and the human.

For the organizations that are willing to embrace the human factor, the good news is that the results are big, controllable, and sustainable. When few others have the courage and commitment to do the human thing, fortune favors the brave.