Commodotizing the Complements

  • June 27, 2014
  • Scott

Many hailed Elon Musk’s decision to release a bunch of patents around their quick-charge stations (and others).  I still can’t quite tell if he released all their patents or only ones relating to the quick-charge stations.

The stated goal:

At Tesla, however, we felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla. We couldn’t have been more wrong. The unfortunate reality is the opposite: electric car programs (or programs for any vehicle that doesn’t burn hydrocarbons) at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales.

By releasing the patents, he hopes to accelerate production of electric vehicles, a good thing for the environment.

But we can also view this decision through an alternate lens of self-interest.  Why would Tesla rationally release their patents if they didn’t care about altruism and the environment? Several reasons:

  1. By speeding up the commoditization of complements like charging stations, Tesla would hope to reduce the cost of charging stations and enable a greater number of suppliers to build and install them.  The more that get built, the more that price is typically driven downward.
  2. By allowing others to spend money to expand the Tesla-compatible infrastructure, Tesla is shortening the time and expanding the geography in which a Tesla becomes useful in remote locations.
  3. Increased likelihood of the industry settling on a standard that is at least compatible with Tesla. despite it being one of the smallest manufacturers in the world.
  4. Increase the supply of batteries, by releasing patents around those, as well, thereby encouraging manufacturing of said batteries
  5. Tesla is facing a lot of constraints.  They have limited resources. They need to focus on the key areas they believe need their full attention, and attempt to elicit commoditization from the other areas in order to lower the overall cost of the Tesla ecosystem to Tesla and its owners.

Commoditizing your business’ complements is a fantastic business strategy.if you can pull it off.  It’s a good lesson to take to heart.



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