Software as a Core Competency

Techies like writing about Tesla. Beyond the perhaps oversimplified comparisons to Apple, the company also feels like it’s a disruptive force, one taking on the old establishment of major car companies and their dealership cartels. It embodies the startup ethos and story, even if the “startup” featured is already a public company with a market cap north of $30 billion.

The mythology, though, is complete when Tesla is framed as yet another technology company using clever software — and hardware — to take over an incumbent industry. A former colleague from Square voiced phrased it this way:

And he’s right: the software and technology in cars, outside of the work done to control the many moving parts of the engine, were miserable experiences. Sure, car accessories have always been marked up, but paying way more for simple hardware didn’t even guarantee they’d work as well as the cheapo hardware that just plugs into PCs or smartphones or any other piece of modern electronics. Software, particularly end-user work, was seen and treated as an afterthought.

Tesla uses this software advantage mercilessly against other car manufacturers; they update frequently, painlessly, while adding new features to old cars and fixing annoying bugs here and there. Like other modern consumer electronics, there’s an implicit contract for Tesla to keep their products’ software updated after the sale, sometimes for years after it has rolled off the lot. Techies love upgrades, both for the added functionality and that feeling that the developers are active in improving their sold products.

There aren’t enough Teslas on the road to tell whether this type of devotion to technology will eventually shift the car industry entirely1. If there is some merit to the idea of core software as a differentiator, then the question becomes about whether other car makers can develop that kind of culture and expertise in-house. It’s going to be very difficult and many won’t ever reinvent themselves as technology-first companies, but there’s already earnest attempts to start acting like one.

  1. That said, the 400k preorders the Model 3 is garnering should be plenty scary for every other manufacturer as it is.

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