Innovation Strategy Assignment Answer

Innovation Strategy and Artificial Intelligence: A Case Study of Tesla

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Executive Summary

Innovations are crucial for a business organisation in order to sustain its position in the market. This report discussed the innovative trends, strategy, organisational environment, value creation, etc., in context of Tesla Inc. A small discussion on making the innovation strategy aligned to the business strategy was done. Moreover, the effect of Artificial Intelligence on the chosen company was analysed thoroughly. The report concluded with some recommendation regarding the clubbing of strategic alignment with the innovation trend.

Introduction

The business environment is closely linked to business capabilities, value creation, and innovation strategy. It is believed that innovation initiatives in a business organisation are initiated by innovation strategies. In this report, the Tesla Artificial Intelligence system is discussed thoroughly. For that purpose, the concept of organisational environment, innovation strategy, trend, and capabilities are defined along with innovation value creation. Furthermore, a discussion on how innovation strategy leads to strategic alignment within a company is also done. In addition, the impact of Artificial Intelligence on Tesla is also analysed. To conclude the report on a high note, some recommendations are given to make sure that strategic alignment to attend the innovation trend.

1. Overview of Chosen Organisation and Innovation Trend

Tesla Inc., (previously called Tesla Motors, Inc.) was established on July 1, 2003. The company develops, designs, and manufactures fully electrically powered vehicles. Along with it, the company also deals in solar and energy storing devices or systems. The company has two divisions: automotive and energy-related segment. The company is known for its marketing strategy as the organisation sells its products via its own sales network. In addition to this, the company also offers financial aids via its local subsidiaries in North America, Asia, Germany, Canada, and Europe. The company stands in competition with all the major player in automobile market, such as Mercedes, Audi, BMW, Honda, General Motors, Toyota, Fiat, Ford, etc.

The chosen innovative trend is Artificial Intelligence system (AI). This automated system demonstrates some of the human intelligence features, such as planning, problem-solving, learning, knowledge representation, reasoning, perception, manipulation, creativity, and social intelligence (Davenport & Ronanki, 2018). Talking about the innovation trend, Tesla is a tech pioneer and is well-known for its autonomous vehicles. The company employs artificial intelligence system. The company has developed its own AI hardware.

2. Define the following concepts and their relationships

Organisational Environment: An organisational environment comprises institutions and forces around an organisation that directly or indirectly affect the organisation’s performance, resources, and operations. This consists of all the components that exist outside or within organisational boundaries that have a large potential to influence the organisation’s working. These can be competitors, government policies and agencies, customers, market pressure, suppliers, and many more. It can be of two types: Internal and External Environment. The former includes leadership style, vision, employee’s behaviour and organisation’s culture. On the other hand, the external environment comprises government regulations, public opinion, economic conditions, competition, etc.

Innovation Trend: Innovation in a business is all about coming up with a distinct or a unique solutions to a problem. It consists of new ways of operating the organisational tasks. The innovative strategy is employed in the business in order to save a large amount of money and time. This can provide a competitive edge to the organisation. Once a strategy comes out as a successful step for an organisation, other companies also start to try the same strategy in their organisational processes. This way an innovation becomes a trend. The innovation trend can help an organisation to strike a chord in the marketplace.

Innovation Capabilities: The innovation capabilities in context of a business are the articulations of expertise, capacity, and resources that are required by the organisation in order to carry out core functions in some innovative ways. Tesla’s architects incorporate the organisational innovation capabilities to demonstrate the over-arching needs of the company. There are four types of innovation capabilities a business can have as given below:-

• Development Capability
• Management Capability
• Operations Capability
• Transactions Capability

Innovation Value Creation and Capture: Value creation is a set of defined actions that increases the value of goods, services, and organisation. Innovation plays a significant role in creating a good value for consumers purchasing the products and services of Tesla. This would also help in making the shareholders satisfied who want to increase their share value. The process of developing value can emphasise on the following:-

• Developing a network effect: Tesla can attract a large number of customers through its AI-controlled electric cars.
• Creating Brand Value: This can be done by a good and sensible marketing and providing a high-quality service to the customers.
• Establishing Efficient Operations: It is believed that if a company has efficient operations, then it can lower down the manufacturing cost. This can give a competitive edge to the organisation.

Value capture is about retaining a fraction of the value offered to every transaction. The more an organisation capture value, the lesser attractive a product or service becomes (Lee and Jay, 2015).  

3. Describe how the creation of an innovation strategy ensures strategic alignment within organisations and why it is important.

In the automobile market, Tesla knew that it would be very tough to compete against the giant competitors, such as General Motors, BMW, Mercedes, etc. Tesla knew that it is pointless to compete with it by increasing the advertising budget and by developing a huge dealer network. Tesla didn’t choose the traditional target communication methods, such as TV, radio, print, or outdoor. The company experimented with behavioural targeting. They targeted the mind-set of the customers by downgrading the business of General Motors.

The company came up with an idea of developing a product that speaks for itself. Tesla developed electric powered cars operated by Artificial Intelligence (Davenport & Ronanki, 2018). For any innovation strategy to succeed, it is crucial that it must be aligned with the organisational strategy. An innovation strategy turns out to be successful when the senior management takes key responsibility of leading the innovative initiative. If there is no innovation strategy in an organisation, then there can be many conflicts within the organisation. It has been seen that even after investing a large amount of time and money, innovative initiatives fail and the company could not sustain its performance (Dietterich, 2017). Tesla regularly working on defining its overall business strategy that focuses on the operation, marketing, R&D, and finance.

It has been noticed that companies barely articulate their innovation strategies with the business strategies. Researchers believe that without aligning the two strategies, an organisation's all efforts are ineffective. Even if a company has a well-sounded business strategy, it cannot guarantee a conflict-free environment within the organisation (Lee and Jay, 2015). The development of an innovation strategy should articulate the business objectives in order to achieve sustainability. Aligning the business strategy with the innovation strategy or vice versa can help in strengthening the organisational operations, increasing efficiency, and setting up the priorities.

4. Analyse the impact of the selected innovation trend on the selected organisation.

With its AI hardware, the Tesla is revolutionising the world with its tech-savvy strategies. The company has also been criticised for employing automated machines in car manufacturing as they may cause a significant reduction in jobs and can trigger the World War III. The company is taking strong measures to make the AI-based cars safer than ever. The customers are looking forward to getting those self-driven vehicles at a lower cost. In addition to this, Tesla is making use of AI in storing and processing big data (Dietterich, 2017). This data can be used to produce data-operated maps that will guide the customers about the traffic jams, traffic speed, accident-prone locations, etc. This uniqueness in the product offered by Tesla has helped the company in acquiring the larger share in the automobile market. Using automated machines in car manufacturing, Tesla has achieved great efficiency in performing operations, thereby reducing the cost of manufacturing. This has given Tesla a competitive edge over its rivals.

The company worked for product development instead of spending millions of dollars on advertisement campaigns. With its AI-based electric-powered cars, the organisation compelled the customers to recommend, research, and advertising for Tesla by word of mouth and that too free of cost (FiveFifty. 2018). Tesla develops the e-Cars, opened the stores, customers visited their stores, and they posted. This way Tesla beat the rivals in the automobile industry.

5. Recommend how the organisation’s innovation strategy best responds to the innovation trend

Tesla and its AI-based cars have revolutionised the automobile industry. No doubt that the company was the first one to use the big data in enhancing the driving experience. Here are some recommendations that respond to the best use of this innovative strategy.

• The data is stored in cloud storage, using its machine learning systems, the company can educate its customers during the entire fleet.
• To a company can also update its AI system in the vehicle in order to develop a network with other Tesla vehicles, road cameras, mobile phones, etc. This can be helpful in gathering the data in a more convenient way.
• Since the company is making use of the information of the customers, it should make policy regarding the data protection and security.
• Instead of having an extensive automated manufacturing process, Tesla should partially implement the AI in its operation. This would help in generating more jobs and help in the community development (Smith and Anderson, 2014).
• To provide safety in the self-driving cars, the AI should be regularly updated in order to make autopilot model more responsive.
• There are many cases of AI being hacked. This has negatively affected the brand image of Tesla. Therefore, Tesla should work on building an AI system on a more safe and robust platform rather than NVIDIA.
• In order to gain more value, the company should generate new value. This can be very challenging as it may require a breakthrough in the new sector. Tesla has entered into the space research sector and there are a lot more opportunities for the company to explore.
• The company can deliver more services to the customers without raising the price. It can also reduce the price of the vehicles in order to increase the value.
• In addition to this, the company can also increase the quality of the services it offers instead of increasing the quantity. Creating a better value cast more impacts on the customers.

6. Recommend how the organisation best ensures strategic alignment to address the innovation trend.

In current days, Tesla is leading the automobile industry. Tesla is not the first car company to launch the driverless car, but it is the first one to make use of the big data to assist in the driving experience of people. Strategic alignment is in coordination with the business strategy. To help the company in serving its customer in a better way, certain recommendations are given in here:-

• Tesla should implement those processes that can change the management and develop the vision of the company in accordance with the leadership goals, the company's culture, and staff member's interest.
• Tesla must develop a kind of supportive culture for strategic alignment. For this purpose, the company should pre-define the competence of its resources to check whether the employing AI-based systems have any effect on them or not.
• In addition to this, the company should line up its management, departments, culture, and staff with the organisation’s culture.
• Tesla should modify the processes or factors that can affect the strategic alignment of the company. These factors include communication, decision-making, transparency, trust, and quality of planning (Russell, et.al., 2015).
• Tesla should employ the critical path analysis methods in order to meet the timelines.
• The company must align its management with the strategic alignment. This can be done by developing cultural and performance management system.

Conclusion

In this report, a thorough discussion on how the business environment affects the business capabilities, value creation, and innovation strategy were done. Many researchers believed that innovation initiatives in a business organisation are initiated by innovation strategies. Therefore, one innovation trends were discussed here. In this report, the Tesla Artificial Intelligence system was discussed thoroughly. For that purpose, the concept of organisational environment, innovation strategy, trend, and capabilities were defined along with innovation value creation. Furthermore, a discussion on how innovation strategy leads to strategic alignment within a company was also done. In addition, the impact of Artificial Intelligence on Tesla was also analysed. To conclude the report on a high note, some recommendations were provided to make sure that strategic alignment to attend the innovation trend.

References

• Davenport, T. H., & Ronanki, R. (2018). Artificial Intelligence for the Real World. Harvard Business Review, 96(1), 108-116.
• Dietterich, T.G., (2017). Steps toward robust artificial intelligence. AI Magazine, 38(3), pp.3-24.
• (2018). Real-World Artificial Intelligence. McKinsey Quarterly.
• Lee, M. and Jay, J., (2015). Strategic responses to hybrid social ventures.  California Management Review,  57(3), pp.126-147.
• Mangram, M.E., 2012. The globalization of Tesla Motors: a strategic marketing plan analysis.  Journal of Strategic Marketing,  20(4), pp.289-312.
• (2018). AI, automation, and the future of work: Ten things to solve for. McKinsey Quarterly.
• Porter, M. E., & Heppelmann, J. E. (2017). Why every organization needs an augmented reality strategy. Harvard Business Review, 95(6), 46-57
• Russell, S., Dewey, D. and Tegmark, M., (2015). Research priorities for robust and beneficial artificial intelligence.  Ai Magazine,  36(4), pp.105-114.
• Russell, S., Dietterich, T., Horvitz, E., Selman, B., Rossi, F., Hassabis, D., Legg, S., Suleyman, M., George, D. and Phoenix, S., (2015). Letter to the editor: Research priorities for robust and beneficial artificial intelligence: An open letter. AI Magazine, 36(4), pp.3-4.
• Smith, A. and Anderson, J., (2014). AI, Robotics, and the Future of Jobs.  Pew Research Center,  6.