Tesla & Value Management: Part 1: Practices

• Part 1: How Tesla embody Value Management practices
• Part 2: How Tesla really are led by Value and have shown that it works
• Part 3: What the rest of us can learn from Tesla’s example

Last month, Chris wrote an article about a series of podcasts he’d come across about Tesla (covering everything from HR to product development, via finance, strategy and even catering).

Whilst billed as “Agile @ Tesla” – and “agile” is a recognised discipline in its own right – Chris felt from the podcast series that:

“Tesla absolutely embody and display everything we’re saying about being Complexity-Aware, People-Centred and Value-Led. In this way, they may well be the first organisation to achieve and be driven by simplicity the other side of Complexity.”

As that’s a bold claim, he then invited readers to:

“Read around some of the concepts in this article, listen to the podcasts and then judge for yourself: are Tesla the first company to fully embrace Value Management via the Things That Matter?”

Having taken up that invitation from Chris, I’m sharing my thoughts with you in this three-part series, beginning with looking at how Tesla operates.

How Tesla embody Value Management approaches

At the foundation of Value Management is a recognition that the world is Complex and that this requires totally different ways of operating from the ones typically adopted.

Tesla certainly “get” this on both counts – Complexity provides the basis for what they do, and it drives the specifics of what they do.

In terms of the basis, the podcasts from the outset specifically contrast Tesla’s approach with – and present it as a corrective to – the fact that “Humans are humans! We want to build hierarchies and kingdoms. We like that!” (Episode 1), which is what lies behind so many failed approaches.

There were then lots of specific ways of operating described that seemed fully consistent with the implications of working to harness Complexity – we’ll come back to them shortly.

But the clincher as to the basis of these specifics came in Episode 6, which made clear just how fully understood Complexity is at Tesla, and the quote bears-out repeating in full:

“[We] have this concept of Complex Adaptive Systems… The scientific definition of a Complex Adaptive System – which all life is a Complex Adaptive System; it’s the most successful willful organisation we know of in nature; right, so you want to be a Complex Adaptive System. You can overcome adversity in what we call Complex Adaptive Systems better than any other system, so it’s what you want… to be that, you need to have a common goal across all elements of your Complex Adaptive System. … The elements of that system need to be able to make independent decisions in real time, aligned with that goal. That’s what makes it a Complex Adaptive System as opposed to a single identity, which is less robust. To be more robust, you have independent thinking entities but they share one common goal.”

There’s lots of detail to come back to here.

But the key point is that the foundational role of Complexity is not just consciously understood at Tesla, but used as the basis of how to operate.

Operating for Complexity

So what does that look like in terms of the specifics of what Tesla does?

Well, pretty much like what we describe in our own page on what it means to be Complexity-Aware in terms of reconceiving Control, Teams, Leadership and Measurement.

Measurement

Significantly, this begins with Measurement – one of the biggest emphases in the podcasts – and how it provides immediate, relevant and clear information that powers action and that shows what works, such that it can be encapsulated and reused:

• Episode 1 explained how, at induction, each employee downloads 28 apps to their phone which provide all the information needed – immediate metrics on what’s happening, captured learning in the form of role descriptions, and so on.
• Episode 4 describes how anything that is in operation for more than 3 hours is automated by AI such that it can then generate metrics and information for people to review.
• Episode 5 talked about how such metrics allow for “Rapid validation of the impact of your decision” and how “A lot of people underappreciate Tesla as an AI company“.
• Episode 8 explains how there are dedicated teams for pushing real-time data instantly, ensuring that the current working version is in front of people within seconds.

It makes perfect sense that Measurement is the starting point when considering the extent to which the situation for Tesla is “constrained” – Tesla are making a physical product, where challenges are principally around innovation and efficiency, and where hard numbers are particularly relevant – but whilst this won’t apply everywhere, what Tesla have done is nevertheless unprecedented.

Control

This radical transformation of Measurement – from being a retrospective and controlling activity into a forward-looking and enabling one – is what has in turn enabled Control at Tesla to also be transformed:

• Episode 1 explains how employees take responsibility for their own contributions, with the 28 apps being “…what makes self-management scale“, such that “your manager is replaced by your phone“.
• Traditional hierarchies are therefore dispensed with and replaced with a totally flat structure. As Episode 1 explains: “There’s no ladder; there’s simply “here are problems to solve… if you’re able to contribute to that in a meaningful way to that today we really would like you here“.
• Additional traditional methods of planning and monitoring are also set aside: Episode 1 describes how “There are almost no meetings” (it is explained in Episode 10 how spontaneous and constant in-context interaction takes their place), Episode 10 says that “Mature teams shouldn’t be planning tasks“, and Episode 11 talks about the waste of time putting together a business case to a board to approve for spending, etc.

Leadership

In keeping with this, Leadership is also reconceived, now as an in-context role and not as a fixed position in a hierarchy:

• Episode 1 describes how “Tesla is almost perfectly flat. There are things like managers, but that’s largely a proxy for product owner… and it’s largely a role… they rotate sometimes multiple times a day” and how “There is no career pathing: that’s not a thing. That would be a distraction.”
• Episode 2 explains that “The people doing the work are learning faster than anyone else, so you want good information in front of them. And that solves the leadership dilemma and that’s why you have self-managing teams.“
• Also in Episode 2, we learn how “Anyone can be G[eneral] M[anager]… you can stream the training from your phone…” and that people simply move on from roles as and when they want or need to and someone else step in.
• Episode 8 describes how, when it comes to judging when to work on customer feedback versus when to develop new features, “Each person decides… I never had a manager come up to me and said ‘you need to do this’.“

In these reconceptions of Control and Leadership, Tesla therefore truly seems to understand what we have said it means to be People-Centred:

• Episode 2 explains that “you need … to put as much of the meaningful information in as understandable a way as practical in front of the people doing the work so they can make their own decision.“
• In Episode 3, “Humans are the arbiters of what’s creatively useful.” – note that this is in the context of responding to the metrics coming from AI, so this point not only recognises the primacy of humans, but also how AI is a servant and not the master.

[Now, in Part 3, we will discuss some ways in which Tesla may not be an exemplar of the “softer” side of what it means to be People-Centred, but the point here is that people are being truly empowered in their roles in the recognition that they are the key resource in responding appropriately and effectively to Complexity.]

Teamwork

Finally, and as indicated in the reference to “self-managing teams” above, Tesla make Teamwork central in an entirely radical way:

• To begin with, Episode 2 describes how Teams form and reform as often as every 3 hours around problems and opportunities, with employees getting to choose the teams they join or propose the formation of new teams.
• Episodes 7 and 8 demonstrate how Tesla have established that 3-6 people is the right size for teams engaged on problem-solving, but how teams can be as large as 250 when it comes to execution: they’ve clearly fine-tuned the approach over countless iterations.
• Episode 1 describes how teams not only form themselves but also lead recruitment, whether that is to write their own job descriptions for what is needed, to pull from the pool of people already available, or to recruit new employees.
• And this leads to a final key point, which is that anything that can be automated and/or that isn’t central to the mission is “insourced” to specific in-house teams – themselves fluid – such as HR, finance, legal, and catering. As Episode 4 puts it, this is “Company as a service [which] wants to take everything off the team except creative problem solving. … You shouldn’t have to do anything except think creatively…“.

So Tesla do, indeed, embody the Value Management practices we’ve set out as essential to recognise and respond to Complexity.

But what is behind and what powers all these practices?

As we’ll see in Part 2, the answer is Value, such that Tesla really can be considered a Value Management company.