In January 2018, Elon Musk created a stir when he tweeted that Tesla would develop a 50’s-style restaurant at one of the Tesla Supercharger stations.
Musk went on to tweet that the restaurants would show classic movie clips and the menu would even pop up on the dash for Tesla owners as they entered the restaurants. The tweets made the headlines at the time but soon faded away until recently when Tesla filed trademarks for “restaurant services, pop-up restaurant services, self-service restaurant services, take-out restaurant services”. Musk confirmed the strategic move in a recent tweet.
Tesla already sells tequila, apparel, a water bottle, an umbrella and other merchandise. Such products increase customer proximity to the brand, but why would Tesla want to open a chain of restaurants? It seems unrelated to their core business.
To explore why Tesla might venture into restaurants, let us explore a fascinating story from the past, how the Michelin tyre factory got into restaurant guides.
The Origin of the Michelin Guide
(The 1911 Michelin Guide to the British Isles)
The original Michelin star ranking was as follows:
* “A very good restaurant in its category.”
** “Excellent cooking, worth a detour.”
*** “Exceptional cuisine, worth a special journey.”
Note the language used for the second and third star, “worth a detour“, “worth a special journey“. It is the language of travel, the language of mobility. The genius of the Michelin brothers was that they not only recognised the burgeoning trend of travel and mobility, but they understood how to improve an ecosystem to tilt the odds in their favour.
The Michelin tyre company was established in 1889 by brothers André and Édouard Michelin at a time when driving was perceived as a novelty, a hobby for the upper classes. Our guest on this week’s Innovation Show is Felix Oberholzer-Gee. Felix tells us in his book ‘Better, Simpler Strategy‘, that in 1900, France had only 5,600 drivers (but 619 companies that built cars)”. While Michelin had become the exclusive supplier to many leading carmakers of the time, the market for cars was tiny, limiting the company’s growth prospects.
Enhancing the Ecosystem
The brothers understood that they would need to influence consumers, sell a lifestyle and make the use of motorcars easier for the public. To encourage road travel, and boost tyre sales, they created a comprehensive guidebook for motorists. The Michelin Guide listed hotels, restaurants, mechanics and gas stations. In 1900, the Michelins distributed an initial print run of 35,000 copies for free. In time, they charged for the guidebook and extended it to other countries in Europe. The brothers even lobbied to have road signs erected to help motorists navigate the roads of France.
In retrospect, you can see how a seemingly unrelated manoeuvre was a strategic stroke of genius. Not only did it increase customer proximity to a product that they might only buy every couple of years, but it also increased the desirability to “wear out” your tyres in the first place. Now you can also understand why Tesla is set to disrupt the restaurant business.
On this week’s Innovation Show episode, Felix tells us that products and services that raise our willingness to pay for another product are called complements. Think about all the complements that make cars more valuable: roads, parking garages, gas stations, repair shops, GPS, and yes, you got it, drive-through restaurants.
Near my home is an electric car charging station. When I see early adopters of electric cars patiently wait for their car to charge, they are often on the phone, reading a book and may pop into the service station to buy a coffee or a snack to pass the time.
Just like you might buy a pack of gum while you wait in line in a convenience store, perhaps you might order from Tesla’s menu while you wait to charge your car. In fact, your car might even remember your order from the last time, your allergen preferences and more. Strategic organisations understand complements, whether it be their own or the complements in their ecosystem. Gillette manufactures blades and razors. Apple offers portables and iTunes. Nespresso sells coffee machines and coffee pods. Michelin produces tires and guides. Tesla offers cars, charging stations and now restaurants.
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On this week’s Innovation show, we host the author of “Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance” – Felix Oberholzer-Gee