Tesla’s self-driving AI technology is not a competitive advantage

Tesla's autonomous car technology is impressive but has no competitive advantages. That being said, they are winning the game anyway. Here’s why and even better - Here’s what AI companies can learn, from what Tesla is doing right.

Tesla just announced that their autonomous car technology is almost at level 5. Level 5 is “completely autonomous is any situation”. That’s really impressive, but not a big thing when competing for market share.

So why is level 5 not a big thing?

That’s due to the way AI development works. The underlying technologies that are used are very available for everyone to at least get inspired by. So my expectations are clearly that other car makers and even other big techs will be ready with an almost just as good solution as Tesla. That’s all the competition needs to do. Make an almost as good solution or maybe even just “good enough”. As in most other AI problems the benchmark is not being perfect or best. It’s about beating the right benchmark. In this case the benchmark will probably be government regulation. So autonomous cars will shortly be a commodity and not a big lead.

But isn’t being first a big enough advantage? Wasn’t that exactly how Apple won the smartphone market? In markets with a big network effect being first is very important. By being the first, Apple's App Store was the place to launch your apps. That made Apple the more useful product and in turns making the App Store the place to launch your app. A classic positive feedback loop. Tesla will not see the same effect with the same power.

So why are Tesla winning anyway?

Tesla has two main advantages here. They have the infrastructure for autonomous cars in place and they have their data operations in place. And that’s how you win in AI-competitions. It’s not only about having the technology. It’s even more important to have the strategic position to utilize the technology and that’s exactly what Tesla has done right. 

Tesla has been building their infrastructure by making all their cars ready to drive autonomously, simply by sending out a software update. They will hit the ground running while all other manufactures are still tying their shoelaces Tesla will as a result quickly get market share that sticks and can get valuable learning and insights before anyone else. They also have manufacturing in place and have been practising making almost the complete product for years. This will make it way cheaper for Tesla to produce the cars that any other car maker can do.

They also have the right data operations. Right now Tesla is collecting insane amounts of data at a very low cost. As explained here, having low cost, high quality data operations are the true competitive advantage of AI.

So Tesla might or might not be technological superior compared to other car makers or big tech but they are definitely strategically superior. And strategy counts in AI.

The AI lesson

So to sum up the AI-lesson to be learnt here: You do not have to have the perfect AI-solution or be the only one with a functional AI. Both are impossible to achieve anyway.

It’s important to build a solid infrastructure around your AI to enable it to utilize it’s capabilities.

Lastly, you should aim for a business model that includes the best data operations. That will provide you a lasting lead on your competition.