Product Innovation is The Key to Prosperity
The brands with the fastest rate of innovation will win long term.
As I was writing this post I checked my Twitter to find Elon Musk’s net worth is now more than the net worth of Bill Gates and Mark Zuckerberg combined…
Rapid product innovation was definitely an essential key of Elon’s awesome success.
Let’s dive into the details…
The following post is an exerpt from my book Elonology (now on Amazon!)
On a call in 2018 with investment bankers where Elon refused several bone headed comments and told day traders or investors afraid of volatility straight up not to buy Tesla stock because:
“I am not here to convince you to buy our stock...I could care less.”
What Elon does care about is innovation. He shared some powerful insights about innovation on the on the call:
“What matters is the pace of innovation. It is a fundamental determinant to competitiveness...
Let’s say competitors, maybe they come out with something new every six years. We’re maybe every two to three years.
So if our innovation is let’s say twice that of any given competitor…
And this is true generally of companies in any industry...
Whichever company has the highest rate of innovation, unless that company is actively killed by it’s competitors in some way that’s nefarious, or shoots itself in the foot, it will at some point exceed those competitors…
Like this is obvious that this would occur with Amazon and Wal-Mart because wal-mart’s rate of innovation was negligible. And Amazon’s was very high. The outcome was obvious a long time ago.”
In a more recent interview about the AxelSpringer Award (Which Elon ended up winning) Elon echoed similar sentiments saying: “The company with the higher rate of innovation will unequivocally win long term.”
The lesson here is clear: Innovate or die.
Innovate Agressively
Moreover the more aggressively you innovate and iterate the faster you will dominate.
“Innovation per year is what matters. Not innovation absent time. Because if you want to make say 100% improvement in something and that took 100 years, or one year, that’s radically different…
So it’s like “what is your rate of innovation?” that matters and “is the rate of innovation accelerating or decelerating?”
At InvestHK Elon said: Innovation comes from questioning the way things have been done before…
And if in the education system you’re taught not to do that that will inhibit entrepreneurship.
Interviewer: “Being able to question what you were taught?”
Elon: “Being able to say: ‘Is there a better way?”
Elon has innovated with Tesla to the point where multiple sources, and undeniable facts, confirm Tesla has created the best car ever.
That's the game changing level of innovation you need to have a position in the marketplace where you are in a category of your own.
Here are some of Elon's quotes on innovation
"Starting and growing a business is as much about the innovation, drive, and determination of the people behind it as the product they sell."
"Great companies are built on great products."
"Failure is essentially irrelevant unless it is catastrophic."
Although Elon does not strive from failure, he certainly does not hide from it either. And that is why he was able to push on and succeed with SpaceX after their first three rockets failed and he was down to his last dime.
Learning From Failure
Facing failure head on and learning from it is a lesson I learned the hard way. Once I got a speeding ticket and rather than setting the court date in my calendar I shoved the ticket in a folder and forgot about it. Since I missed the court date I got the maximum fine in my absence.
Had I faced that situation head on maybe I would have emerged successful. At least I would have gotten a lesser fine, or perhaps the cop would not have shown up for the court date and my ticket would have been dropped.
These days no matter how difficult the issue I might be facing I deal with it head on because that is the only way to resolve the issue at hand.
Action is the antidote to despair.
As Elon says:
"Failure is an option here. If things are not failing, you are not innovating enough."
“If every time somebody came up with an idea it had to be successful you don’t get people coming up with examples.”
Failure is not to be feared. In fact just the opposite: It should be encouraged!
Because with more experiments, which will cause more failures, you will ultimately end up with more successes and a faster pace of innovation.
Gaining a Competitive Advantage Through Innovation
Innovation is absolutely a vital key to gaining a competitive advantage in your industry…
At MIT Elon explained “In terms of our competitiveness, it mostly comes down to our pace of innovation. Our pace of innovation is much, much faster than the big aerospace companies or the country driven systems…This is generally true. If you look at innovation from larger companies and smaller companies, smaller companies are generally better at innovating than larger companies...because smaller companies would die if they didn't try innovating.”
Innovate or die. And don’t let the small size of your company deter you...small, smart and technically strong often trumps large, clunky and wasteful.
Innovate Faster
Elon is an extremely strong thinker and as such the intellectual waters he swims in and the decisions he makes may appear risky to others but make perfect sense to him.
Almost everything new has an element of fear at first. Consistently realize and overcome the foolishness of irrational fears and you’ll put yourself in a great position to gain strong trust from those who are paralyzed by fear.
Without an element of risk a great reward is rarely found.
Safe is risky and risky is safe.
Innovation is how you win and innovation requires risk. But avoiding innovation is a bigger risk. Innovation requires a focus on what could be rather than what already is.
What Matters is The Rate of Innovation
Elon has said “What matters is the rate of innovation.”
“What exactly is innovation?” you might be wondering. At Tesla AI day Elon explained “In general innovation is how many iterations and what is the average progress between each iteration. And so if you can reduce the time between iterations the rate of improvement is much better.”
Innovating more effectively and rapidly than your competition gives your business the best chance of success...
So always be "risk taking" and innovating!
The faster your rate of innovation the faster your business will rise to power and capture market share.
Tesla has been innovating faster than other car companies and the compounding effect of all of these innovations are an essential part of the reason why Tesla is now the most valuable car company with no signs of slowing down.
Amazon has been innovating more than Wal-Mart and this makes it clear how Amazon has been gaining market share from Wal-Mart.
Innovation is Future Focused
Innovation is future focused and being future focused is key if you want a more fantastic future.
Elon certainly is and says:
“I think within the next five years we will see the electrification of aircrafts. First propeller, then turboprop, then jet engines.”
“What is important is that we establish a self-sustaining city on Mars so the future of consciousness and life as we know it can survive.”
Elon goes on about innovation in an interview with Offshore Northern Seas.
“Establish an expectation of innovation, and the compensation structure must reflect that...there must also be an allowance for failure because if you are trying something new, necessarily there is some chance it will not work. If you punish people too much for failure they will respond accordingly and the innovation you get will not be very incrementalist.”
So keep thinking ahead because the future is where we’ll be spending the rest of our lives.
Want More: Buy The Book!
Buy my book Elonology (now on Amazon!) and get a free version of the 136 chapter audio book when you contact me.