Taking Tesla into the black

The good news: Your company produces an exhilarating, super-attractive, zero-emissions car that soundlessly moves from 0 to 60 in under three seconds.
 
The bad news: Sales are low because of battery limitations and high production costs that put the sticker price around $100,000. You must increase profits by $100 million in five years.

The company is Tesla Motors. And this fall you're in Skidmore's introductory business course, MB 107, which culminates with strategic presentations to actual business executives who provide immediate feedback and a grade. It's intimidating and invigorating, and it's a great introduction to the business world. [More and MB 107 video]

It's 9:40 a.m., and MB 107's team #13—Roman DiPasquale '19, a probable business major from Buffalo, N.Y.; Fortune Zindi '18, an economics major from Zimbabwe; Luke Gallagher '19, an art major from Belmont, Mass.; and Isabelle Fischer '18, a government major from Boulder, Colo.—are in a hotel conference room in Saratoga Springs, pitching their five-year plan for Tesla.

Across the table are Peter Morgan (VP and CVO of PB Heat), Anne Davison (SVP for strategic planning at JUICE Pharma Worldwide), John Schwallie (CEO of Lumetric Lighting & Controls), George Morris (partner at Oliver Wyman), Andy Hughes '92 (founder of HD Advisors), and Laura Alpert (managing director of marketing at Pivotal Point Communications).

As these judges see it, team #13 hits the ball out of the park, with a "rock-star" PowerPoint, engaging introduction, "out-of-the-box" strategy, "grad-level" research, deep product and industry knowledge, and team chemistry. They have an A going into the Q&A portion, and they leave with broad smiles.

Peer coach Josh Brown '16, a theater minor, says they did at least six or seven run-throughs earlier in the week. Fischer says, "Our coaches interrogated us and made us do it over and over again, until they believed that we believed." The night before, they did one run-through and nailed it, says Brown.

For executive Hughes, "It was immediately evident-from the peer coaches (Brown and Cassie Fishkin '16) to the presenters-that they were confident but not brash. When asked if they were ready to go, they said 'Very ready.' That truly got my attention."
 
Alpert was impressed: "The team chose to tackle Tesla's 'elephant in the room'-the limited range of the lithium-ion battery." The students identified a private Israeli company that has developed a greener and longer-range aluminum-air battery, and they sought to either partner with or buy that company.

What about the bottom line? PowerPoint slides authored by Zindi said it all: a battery cost of $2,800 per vehicle reduces production cost by $12,000, so with a $68,000 production cost and $80,000 ticket price, and with selling 45,000 units, net profit by 2020 should reach $600 million.

Keys to the team's success? "Developing a strong strategy and sticking with it the whole time," says Fischer. "Whenever we encountered holes in our strategy or our case-and Roman played devil's advocate at every turn-we filled them. We countered each negative that came up."

 Brown agrees: "When we were critical, they told us to criticize them more so they could tweak things and improve. As coaches, Cassie and I couldn't have asked for more."

The team also used an "extremely effective story-telling approach," Alpert recalls. "Luke told us about the first time he drove in a Tesla-how cool it looked, the wow factor. That was the setup."

In fact, Gallagher didn't come up with this story until the night before. He says, "The coaches kept telling me that I had to grab the attention of the judges, and it was keeping me awake. At 3 a.m., I hit on the idea to say something personal."
 
At the end of the session, the executives handed out toy Tesla cars. And now, Alpert says, "My red Tesla sits happily on my desk."