How do you create a new basis of competition? How do you discover an orthogonal path, totally different from all the trajectories of your competitors? How do you move from building on speed to building on velocity, where that elemental direction associated with velocity is the pulse of market perception? The empires of the future must NOT just serve the needs and the expectations of customers, but most importantly, serve their perceptions of the future. It goes beyond volume. It goes beyond balance sheets. It goes beyond assets quality. It is about building Organic Profitability.
Organic Profitability is a profitability system where products and services earn income throughout their lifespans. Generally, software solutions on subscriptions have an element of that. But most hardware solutions struggle. Once you pay for that radio, no extra money goes to the maker.
But one guy and his pals invented a new way of making hardware earn organically. Yes, Tesla is the world’s largest automobile company, not because it makes the most cars; it makes about 500k when Toyota ships close to 11 million yearly. But each of those 500k cars Tesla has made will likely earn income until they are decommissioned from roads. Yes, you buy Tesla, you have to pay some subscriptions for software, and when you sell that car, the new owner has to re-license the software.
Also, besides the software, those cars keep earning as Tesla resells the emission credits it has gotten on them. The biggest innovation in Tesla is not the cars and batteries but a business model that delivers compounding leverageable factors, creating a virtuous circle of accelerating returns. Because of that, Tesla is bigger than the world of cars!
The most profitable unit in Tesla is selling emission credits, not cars. But for the emission credits business to thrive, Tesla has to make cars to earn those credits. Because it makes electric vehicles, it earns credits for not polluting the world. Then, it resells those credits to other car companies which make fossil-fueled cars to stay in compliance.
Think differently in your sector.
1. Advance your career with Tekedia Mini-MBA (Sept 13 – Dec 6, 2021): 140 global faculty, online, self-paced, $140 (or N50,000 naira). Click and register here.
2. Click to join Tekedia Capital Syndicate and own a piece of Africa’s finest startups with a minimum of $10,000 investment.