Isegoria

Joshua Davis of Wired explains how Elon Musk turned Tesla into the car company of the future:

In September 2007, he flew to Stuttgart, Germany, and met with a group of Daimler executives, who listened skeptically as Musk told them how great his technology was. They weren’t sold.

But two months later Musk got an email from Herbert Kohler, Daimler’s head of advanced engineering, saying that he and some other Daimler execs would be in California in six weeks and would be willing to look at Tesla’s technology.

It was all Musk needed. He immediately called JB Straubel, Tesla’s CTO.

“We need to make an electric Smart car in six weeks,” Musk said. “Can you do it?”

Straubel pointed out that it would mean he’d have to pull engineers off the Roadster at a time when they were still desperately trying to solve production problems. It was a tough call, but Musk believed that if they could prove themselves to Daimler, they could win a valuable contract. In addition to the much-needed cash, it would validate Tesla in the eyes of the world. They had to try.

Straubel had another question: Where was he supposed to get a regular, gas-powered Smart car to retrofit? At the time, Daimler didn’t sell Smarts in the US.

With a bit of research, he discovered that the cars were sold in Mexico. He made a few calls and located a dealership in Tijuana with stock on hand. He hurriedly decided to send someone to fetch a car. A Tesla engineer suggested a friend who was fluent in Spanish, and, after a quick call, the guy agreed to make the trip south.

Straubel walked over to the finance department. “I need $20,000 in cash in a bag right now,” he said. “We’re sending someone to Tijuana to buy a Smart car.”

The finance person noted that a lot could go wrong with that scenario but got Straubel the money. Three days later, the engineer’s buddy showed up at Tesla headquarters with a brand-new Smart car.

Straubel and his team removed the 83-horsepower gas engine and set to work building a custom battery pack that would fit in the tiny car’s engine compartment. Next, they refashioned a Roadster motor to power it. When they got too tired, they napped underneath a staircase, but the pounding of feet overhead made it hard to stay asleep for long.

Finally, at one o’clock in the morning, five and a half weeks after setting to work, the reengineered Smart was fully assembled. Straubel got in the driver’s seat and switched on the power. He goosed the accelerator and rocketed out of the garage and into the parking lot. When Straubel floored it, the front wheels lifted off the ground and the back tires left marks on the asphalt.

Straubel called Musk and told him the car was ready for the Germans.

The Daimler executives sat down in Tesla’s conference room midmorning on January 16, 2008. Musk walked them through a PowerPoint presentation that explained the advantages of the Roadster’s technology. Kohler wasn’t impressed. He wasn’t here to talk about a flashy, limited-run show car. He wanted to know if Tesla could mass-produce battery packs quickly for the Smart. His frosty demeanor indicated that, in his opinion, it didn’t seem likely.

“We’ve actually got something to show you,” Musk said and asked the Daimler execs to follow him.

Kohler spotted the shiny new Smart sitting in the middle of the garage and didn’t smile. It might have seemed like a gimmick at first—Musk managed to get a Smart into the US. Big deal.

“It’s electric,” Musk said.

“What do you mean?” Kohler asked.

“We put in a Tesla battery and motor.”

Kohler examined the car. Straubel had been careful not to alter its shape or interior, so it was impossible to tell that it had been modified.

Kohler got behind the wheel and Musk hopped in the passenger seat. When the German stepped on the accelerator, the car bolted out of the garage and disappeared. Straubel waited nervously with the other Daimler executives. After 15 minutes, the Smart tore back into the garage. Straubel noticed that the normally taciturn Kohler was trying hard not to smile.

“Let’s explore a partnership,” Kohler told Musk.
[...]
In January 2009, Daimler finally felt confident enough to buy 1,000 battery packs for the Smart in a deal worth more than $40 million for Tesla. Then, in May of that year, Daimler agreed to buy a nearly 10 percent stake in the company for $50 million, giving Tesla a valuation of more than $500 million. More important, a pioneer of the internal combustion engine was vouching for the tiny electric car startup.

First-Mover Advantage is an idea that just won’t die, Steve Blank says:

The phrase “first mover advantage” was first popularized in a 1988 paper by a Stanford Business School professor, David Montgomery, and his co-author, Marvin Lieberman.[1]

This one phrase became the theoretical underpinning of the out-of-control spending of startups during the dot-com bubble. Over time the idea that winners in new markets are the ones who have been the first (not just early) entrants into their categories became unchallenged conventional wisdom in Silicon Valley. The only problem is that it’s simply not true.

The irony is that in a retrospective paper ten years later (1998), [2] the authors backed off from their claims. By then it was too late. Using this idea to differentiate themselves as the hot new Silicon Valley VCs, some of his former business school students made this phrase their rallying cry. Soon every other VC was using the phrase to justify the reckless “get big fast” strategies of dot-com startups during the Internet Bubble.

In fact, a 1993 paper by Peter N. Golder and Gerard J. Tellis had a much more accurate description of what happens to startup companies entering new markets.[3] In their analysis Golder and Tellis found almost half of the market pioneers (First Movers) in their sample of 500 brands in 50 product categories failed. Even worse, the survivors’ mean market share was lower than found in other studies. Further, their study shows early market leaders (Fast Followers) have much greater long-term success; those in their sample entered the market an average of thirteen years later than the pioneers.

James Hague offers some advice to all those aimless, excited programmers, who want to make something using the latest technology that has caught their eye:

Stop and think about all of your personal interests and solve a simple problem related to one of them. For example, I practice guitar by playing along to a drum machine, but I wish I could have human elements added to drum loops, like auto-fills and occasional variations and so on. What would it take to do that? I could start by writing a simple drum sequencing program–one without a GUI–and see how it went. I also take a lot of photographs, and I could use a tagging scheme that isn’t tied to a do-everything program like Adobe Lightroom. That’s simple enough that I could create a minimal solution in an afternoon.

The two keys: (1) keep it simple, (2) make it something you’d actually use.

Once you’ve got something working, then build a series of improved versions. Don’t create pressure by making a version suitable for public distribution, just take a long look at the existing application, and make it better. Can I build an HTML 5 front end to my photo tagger?

If you keep this up for a couple of iterations, then you’ll wind up an expert. An expert in a small, tightly-defined, maybe only relevant to you problem domain, yes, but an expert nonetheless. There’s a very interesting side effect to becoming an expert: you can start experimenting with improvements and features that would have previously looked daunting or impossible. And those are the kind of improvements and features that might all of a sudden make your program appealing to a larger audience.