Why Would Tesla Make a Smartphone?
If the rumor comes true, it could help build one of the largest business empires ever — all because of a young boy who dreamt of Mars
There have been a number of rumors about Tesla making a smartphone. Many of the details frankly sound like wishful thinking. But is there actually a case for Tesla making a smartphone?
As crazy as it sounds, I believe it has merit. The reason is that Elon Musk is really big on full vertical integration in all of his business ventures. Let me give some examples of what Tesla builds:
- Custom alloys for the car body
- Electric motors
- Their own charging network
All of this is extremely unusual for the car industry. Most car makers buy all of these things from suppliers. Making your own alloys is downright crazy by auto-manufacturing standards.
Musk’s rocket company, SpaceX, is exactly the same. They make their own rocket engines and control software, building everything from scratch themselves. By contrast, NASA buys software from a variety of suppliers and integrates the different pieces together.
We know the Musk mindset from other companies such as Apple. The idea is that tight vertical integration allows you to offer new value and innovate faster. For example, I remember reading that Tesla could change the icon of a dashboard indicator in under an hour by tweaking their in-house software. A traditional automaker needs three months to make such a change. Yes, that sounds insane. Why does it take such a long time? Because the icon is part of software in a dashboard module provided by a supplier. Any change to this module will require a lot of paperwork because such a change is a business transaction, not an internal development process. This requires rewriting specifications and documentation.
People who work at Tesla and SpaceX have remarked on how both companies produce far fewer specification documents. Other companies have much larger bureaucracies of paper pushers to create thousands of pages of specifications, which have to be handed over to suppliers. But Musk’s companies tend to follow a “hardware-rich”…