"Erratic leadership will always bring erratic results, but distracted leadership is guaranteed to bring even worse" - Futurist Jim Carroll
Jim Balsillie wanted to buy himself an NHL hockey team and wasted away precious time with his company RIM - the home of the Blackberry - while Apple was busy redefining the future with the iPhone. Elon Musk went and bought a once-popular social network so that he could feed his ego and pursue some grandiose ideas about free speech, all the while ignoring the fact that Tesla was going from being the world's most advanced car company to becoming, potentially not far away an industry afterthought.
Did you see the Tesla quarter? Missed sales targets, declining revenue, stalled innovation, lower demand despite ongoing rebates, and an absentee CEO? All in the face of a forthcoming Chinese EV juggernaut with new models that are more than just competitive on price, feature set, range, and more.
History is littered with the remains of companies where the CEOs took their eye off the ball, lost the plot, or failed to show up. You can be an erratic leader of a company, moving from crisis to crisis, situation to situation, shiny new object to shiny new object, strategy to strategy, and still recover. But once you become distracted, the future becomes a whole different animal.
It's all a part of the dread disease of CEO Hubris, a topic I've covered here at length - you can find my main post at https://hubris.jimcarroll.com - along with my research that outlines the problem.
I need to add 'distracted leadership' to this list - but check the last item. "A belief they will never fail - until they do."
Distracted leadership matters most when a runway to certain success is quickly becoming a goat path to potential ruin. I used to think that Tesla had done such powerfully innovative stuff that it would be able to maintain a long-term lead in the automotive industry - but I no longer believe this to be the case. It's not just that other auto manufacturers are slowly catching up in the car-as-a-technology platform business, where the vehicle becomes a big battery on wheels. It's not the fact that the EV industry is going through the twists and turns of fast growth and short, sharp shocks of demand decline as the industry barrels into an inevitable future.
It's the fact that it is becoming pretty evident that Chinese EV manufacturers are pretty likely to own the global automotive industry in but 10 short years. The level of innovation, the quality of the product, the price point, the feature set - if you track what these organizations are up to, you will come to realize that a massive industry shift is well underway.
In the coming years, you are going to hear a lot about automotive brands like Xaimoi, BYD, and Huwai. There will be raging trade wars and political initiatives as the North American auto industry, unions, and politicians try to fight against an inevitable future - one they perhaps lost a long time ago through inaction. Today, the situation has become even worse as the issue of electric vehicle technology has become a flashpoint in our current political insanity. The North American automotive industry will decline simply because people have decided that they might be able to win more votes by cheering on the buggy-whip industry when the horseless carriage has arrived.
The result? There will be much gnashing of teeth as people come to realize that a once-dominant industry is in obvious and permanent decline. And there will be great consternation as folks realize that perhaps the worst thing was that a once heroic CEO managed to become a zero through massively distracted leadership.
Yesterday, I read the most recent Lefsetz Letter, Tesla sales plunge. Bob Lefsetz is a fellow I've been following for almost 30 years. His main focus has always been coverage of the music and entertainment industries, but he also regularly dives into the larger issues that surround us. He's one of the most brilliant writers - and one of the most realistic individuals I know when it comes to disruptive change. He just provided his views on Tesla, and I'll share his post in its entirety below.
The future can survive erratic leaders.
But when they become fully, completely distracted, it's another game altogether.
“Tesla sales plunge far more than expected”: https://t.ly/1FSIB
A first mover advantage only gives you a head start, to maintain it you must continue to improve to stay ahead of the pack.
Tesla is selling old vehicles in a world where the new is everything. Elon Musk wants you to buy a Model T when the competition is selling spaceships. That’s Detroit’s core competence, exterior design. As for interiors and engineering, the Germans dominate here.
Needless to say, Volkswagen bumbled its early start in electric vehicles by not getting software right, by approaching its development like physical items. Software needs a single team and oftentimes fewer developers are better. VW had multiple teams, had to change overseers and its first autos had to be shipped sans features because they couldn’t get the software right.
As for BMW… It was early, then hit the brakes, but in the decade since the introduction of the Model S, BMW has now turned its efforts around:
“BMW Is a Surprise Winner in Electric Vehicles”: https://t.ly/McKp1
Now in truth, when it comes to luxury vehicles, most are leased. Meaning someone might have started out with a Tesla, but after three years they want something different. And for a long while there were no real options, but now there are. Furthermore, the BMWs and MBZs are far more luxurious, the Tesla interiors are still spartan.
As for software… Musk’s self-driving software has been riddled with accidents and bad decisions, like not using LIDAR. Not everything Musk does is correct. And despite the introduction of a new system just recently, it is expensive and perception of the public is negative and perception is everything, just ask Joe Biden. And you have to pay attention anyway, not to mention that other manufacturers are gaining in self-driving.
And then there’s price. Despite Tesla’s lowering of cost to consumers, in China there are cheaper alternatives. And BYD and its brethren can introduce a new model in less than two years. Meanwhile, Musk over-promises and under-delivers. The new cheap Tesla? Keep waiting. Hell, the Cybertruck few wanted took years to finally come to market, which is like promising new housing and only building a high end needle skyscraper years late.
And then there’s Stellantis, which says its EVs are now profitable. Which is a black mark on GM and Ford, who just can’t get it right.
“Why Stellantis’s CEO Remains All-In on EVs as Others Retrench”: https://apple.news/ASZQPI5ITTF-eHdWaPZab7g
Needless to say, there’s an anti-EV drumbeat, led by the “Wall Street Journal” and the right. But for all those winter charging stories… Turns out most people charge at home and no one ever talks about gas car batteries dying in winter, cars not starting, which you know all about if you’ve ever lived north of the Mason-Dixon Line.
And you can’t fight progress. Remember all the people who said they wouldn’t give up their CDs? That MP3s sounded inferior? That they had to own things?
Change happens, and oftentimes the mainstream customer wakes up last. Worst is when the customer wakes up before the industry, which is what happened in music, with Napster. You’ve got to be a shark in business, never sleeping, always improving.
And in what kind of world can you have your CEO so distracted? Running a car company is a full-time job.
And then there’s Musk’s identity/personality. Tesla was a cult, new cars were sold by old customers testifying. Now you don’t want to testify because you’re going to be inundated with Elon hate. You stay quiet. In today’s multifarious world selling is done bottom-up, not top-down. There are just too many messages for yours to gain traction. What you need are acolytes, spreading the word.
What happens to Tesla? Right now it’s too valuable for another manufacturer to swallow it. Maybe there can be a merger. Because Tesla’s software is still valuable, and could be put to good use by a competitor. Tesla’s core competency has always been software, not manufacturing. Apple doesn’t manufacture most of its products, why should Tesla?
And the bottom line is the U.S. is moribund. While we fight tribal wars, China and the rest of the world are taking great leaps forward. If you think everything starts and grows in the U.S. today, you’re plain wrong. Electric vehicles are surging in China and in Europe. It’s only a matter of when you drive an electric car. Do you even have a CD player anymore?
If you are an industry leader, you cannot rest on your laurels. You must continue to improve your product or others will eat your lunch, especially if there are legacy competitors who are given time to wake up.
We’ve learned this again and again in tech, where what you did yesterday does not matter today. Microsoft fell asleep. But now it has pivoted into storage a la AWS. Suddenly Apple is behind the eight ball on AI. How come Microsoft saw the future and Tim Cook did not?
This applies to all verticals. You might be a leader today, but you must continue to innovate and risk to be a leader tomorrow. And image is everything. You mess with it at your peril.
Futurist Jim Carroll owns a Tesla Model 3. He loves the car and the infrastructure that supports it. The CEO, though, needs to go.