Introduction
As I continue to attend networking conferences and meet new people, I find myself discussing my career and what I do for companies. Nearly every time, I wind up discussing my work at Tesla as a foundational element of my professional experience that drives my personalized approach to scaling any business. While I was there, Tesla grew it’s headcount by 50x from a base of 1K employees and it’s revenue 100X from around $100M per year (yes I was there before Model S production and so this was purely reservations revenue) to ~$10B.
What’s important to note here is that the work we were able to accomplish during this time from a technology and operations perspective has driven the company to obtain 10X revenues from that point to $100B per year (current). This means Tesla has scaled their organization over that time period by a 10X delta of revenue growth to employee growth ($100B in revenue to now ~100K employees). I suspect that this is actually closer to 15X given how many employees are in manufacturing now vs. when I was there back in 2012. To say this is impressive is a factual understatement for a manufactured good, let alone a car originally manufactured in California.
For a lot of the people I speak with, this scale is very difficult to effectively understand and further so given the limited time frame in which it was accomplished. And yet I often see executives at companies trying to compare their organization to this level of growth as well as new companies being created trying to replicate this (Lucid, Rivian, VinFast, etc). While this is possible, since Tesla has shown to do it, it is quite a different story on how to accomplish this. The next question I get from people is, “How did Tesla do it? What makes them different?”. This is my favorite part of the story and is the reason for this blog post.
The Approach
There are 6 key factors to scale any company quickly and successfully. I’ll go into each of these in more detail with examples, but know that having some of these will get you far, but all of them are essential for long term and sustainable success. I’ve listed these in order of importance because it will take significant time and effort to implement them.
Note that it’s taken me a number of years of reflection, numerous discussions with new people and former Tesla team members, working for multiple companies, consulting for multiple companies, and finally reading about other success stories (I love to read business books) in order to come to this conclusion. Now let’s dig in to better understand each factor and how it can help you with scaling your business.
#1 - Talent density is critical in all areas of your business and your vision needs to be your recruiting and retention strategy
While the idea of having high talent density is not new (thanks Reed Hastings), it’s rarer to see this throughout every business unit. Oftentimes I see this missing in the operations / service parts of an organization and management uses the framing of “dummy proof” a process which leads to the company choosing to hire less talented people. What this leads to is a lack of continuous development from the people doing the actual work and a further gap in understanding of what is easily accomplishable.
I also see a lack of development of the team and progression in continuously improving not only that area but others within the organization. This ultimately leads to team members not motivated in taking risks and team members set in the ways of “that’s how we’ve always done it”. This can oftentimes lead to organizations that stagnate and have issues with change management initiatives when necessary. A lot of time then gets spent on explaining the vision and the WHY to do something as opposed to having a team that’s dynamic and moves towards more optimal ways of working while knowing how to show this progress.
Speaking of the WHY, this is also something ingrained typically in the vision of the company on how to be differentiated. It’s one of the key motivators to show up every day and put in your best effort knowing that it’ll have an impact. With Tesla in mind, this was such a great motivator that attracted people to want to work 70-90 hour weeks without even being asked to do so most of the time. It was appealing to be surrounded by hardworking and intelligent team members who were all focused on Elon’s vision. Did it help that we were in the Bay Area and a feeding ground for some of the best talent in the country, of course! More on this later.
I remember when we were finally delivering on Model S, any new role was getting around 2K applications for it from very qualified people. Personally, I had to contact a friend there every day for 3 straight months, and only after I showed up at their doorstep on my own accord, did they finally interview me for an internship role before I was eventually hired (less than 48 hours later…). If I hadn’t truly believed in Tesla’s vision, I would have given up much sooner. Your vision needs to create excitement for new team members and withstand the daily grind to keep current team members engaged and doing their best work. Without this key first step, it’ll be hard to move quickly, reduce time spent on gaining alignment and adoption, and solving difficult challenges that exist in every area of a business as it grows and changes.
#2 - Trust must be continuously earned and will lead to transparency across the organization, but once there it must only be monitored
When team members start at a company, because the interview process is assumed to be successful, there is a method of immediate trust being placed in that team member. Without the right structure of checks, this can be foolish. Adding in new team members to a network of people without understanding the impact of trust of the new team member can lead to failure on multiple levels. How I see this currently implemented at companies is a lot of meetings or a semblance of micro-management. These tend to lead to a lack of efficiency and a long-tailed onboarding process. What I find easier to implement is creating structure around small and immediate projects to get a better understanding of capabilities and feedback that will inevitably solidify trust or a lack thereof. This allows trust to build up over time and enhance the accountability structure as opposed to the traditional reviews at year end and a somewhat big surprise. Feedback early and often is critical and it gives both sides a better understanding of what is expected. It also enables key factor #3 to work synchronously in the larger approach.
Add to this point, transparency across the organization which allows for quicker action and new opportunities from where you least expect it. The companies that play the team game first and the individual game second, are the ones that survive the difficult times and thrive everywhere else. A great example here from my time with Tesla is that we had numerous televisions all around the factory with dashboards that anyone could view. In addition to this, our reports were published for any viewer to access in order to see how the business was performing. What was a method for transparency turned into an interest for understanding as well as the willingness to help others. At no other organization I’ve worked for or supported have I seen anything to this degree. This was our performance metrics across all areas of the business, available to anyone in the organization. It meant that if you’re going to publish a report, the information was expected to be correct. Trust led to transparency which led to alignment and understanding. All of this related to the vision, more on this part later.
For me, I helped build out the analytics stack at Tesla and numerous reports being viewed by the executive team daily. I was part of a team that helped nurture this philosophy of trust and transparency so that Tesla could succeed daily and team members would have access to this knowledge to help them in their daily work lives. They held me accountable to the information as they relied on it to make informed decisions and I learned from them on what mattered to their success. It exposed me to the constant evolution of the why and how to succeed as a company in a mature industry desperate for change.
#3 - Support comes in many shapes and sizes and must be nurtured
I’ve personally relied on having a strong out of work personal network to provide me with support and that has served me well in my career and within my personal life. Without the right people around you, constantly putting you in situations to succeed, it becomes that much harder to get where you want to be quickly. Sure, there are plenty of success stories out there where people have overcome something in order to be successful, but the point often overlooked is the learning surrounding that experience and how they’ve adapted. This applies to business just the same, you need to be surrounded by people willing to nurture your success and give you time to learn from your mistakes. I think Steve Jobs said it best, “...I now take a longer-term view on people in other words when I see something not being done right my first reaction isn’t to go fix it.. It’s to say we’re building a team here and we’re gonna do great stuff for the next decade not just the next year and so what do I need to do to help. So that the person that’s screwing up learns versus how do I fix the problem?”
Companies tend to focus too much of their time and resources on short-term issues and thus set up their organizations in such a manner. Further, they tend to put a lot of emphasis on immediate results as opposed to your ability to problem solve. And if you aren’t succeeding at something, it’s easier to cut ties and move on to the next person. To me, this is much more disruptive to your business than thinking through the dynamics of why you hired the person, whether they fit well into the key factors mentioned, and an inward look at how you’ve supported them. To me the problems tend to be that the evaluation criteria (feedback loop) for people is too infrequent and improperly scoped, and the level of transparency is too limited. Add to this, that most organizations lack the willingness to make time for learning independently and through making mistakes.
Where you can succeed is a strong network for open feedback and communication through the ability of the company's transparency which allows for team members to provide perspectives where assumptions usually are. It’s about confronting the WHY in every situation to get down to the root of the issue and solving it once and for all. And there cannot be layers of approval needed before a decision is made, when the expert with the right set of information should make the decision and then monitor its success. My personal success at Tesla is deeply rooted in this type of design, by having lunch with colleagues and discussing their issues openly. Often times when I was stuck, it was easy to walk over to a trusted colleague and pick their brain on the topic (for me, it was learning SQL). Other times, I was their trusted resource depending on the topic of discussion (where is the data coming from in the process). All in all, buy in is necessary throughout every level of the organization with an understanding that part of your time is spent learning new skills and/or working with other team members as an SME on their project work.
#4 - Culture is created from the ground up and should evolve at critical growth points
Culture is not something pre-determined, but a living thing that needs to change as the company itself changes. At the end of the day, the people that are a part of the company are what drives meaningful change. If they’re the right people, they’ll create the right environment to operate within and define the boundaries needed for success. If there is not an experiential definition to each core value of a company, it is a made up culture. When more team members have those experiences, share in the knowledge from it, then culture is crafted for the masses. This type of approach spreads like wildfire as the stories are told from one team member to another about the WHY they were willing to go the extra mile.
I work with pre-revenue companies and there is often effort put into core values of the organization and then they’re set in stone. While I’m not against identifying differentiators of your idea and business model, I think spending time too early on this may also push people out of your business that should be in it. I also see companies that use these as critical benchmarks of their organization and move on from people without asking the right set of questions. It’s worth understanding the context and then asking the question of the business, “Do we have the right core values?”. If the team member fits all the other key factors mentioned before, it’s likely time to re-evaluate.
Culture is….tricky. It’s even more so as your business grows. What was good for the team when you were 25, 50, 100 people, is not always good when you are 1,000 people. And that’s not always a bad thing, because a business runs into different challenges as it scales…this is normal. Do not get stuck thinking your culture will always be a singular thing. The way around this is continuous feedback and understanding of what matters to your team members. Making sure they feel heard and understood is CRITICAL. This doesn’t mean do everything they say, but it does mean that you need to consider it because your people are your biggest asset (sorry AI, you’re still a tool that your people will use).
Ultimately the culture at Tesla changed from the time I was there to when I left. If you know Elon (more on him in a second), he would say, “Revolutionizing industries is not for the faint of heart”. I still wanted to work there, but found the work I was doing at that time different from what I was willing to do 70-90 hours per week. It required more convincing of people to do something, as opposed to doing the thing itself. For me, I made the tough decision to spend less time in this type of role and more time with my family. The equation no longer worked for the both of us and there were plenty of people happy to take over for me. This will happen, just be prepared for it when it does.
#5 - Your leader can be a visionary and in founder mode but not all the time
I’m not here to revisit the entire discussion around founder mode, I’ll simply give you my understanding of it and the applicability to how Elon has involved himself in Tesla. I do believe that regardless of your opinion of Elon, his businesses have predominantly been major success stories.
Elon has not wavered from his vision and he certainly meets the criteria of founder mode (started his own company, is still running his company, gets involved in specifics and works in the trenches, etc). What you likely don’t know though is he misses one of the major criteria because he simply doesn’t run one company and thus runs out of time. Also, he relies heavily on a set of trusted resources to help execute on the problem once discovered. I find this is a critical difference to others who sit around and micro-manage throughout. To me, this suggests a somewhat lack of trust in the team and definitively slows down progress. In order to scale, the team must be able to not only help identify the issue such that it can be solved for good, but also execute on that. This is rarely something an individual can accomplish themselves even through micro-management. Having a talented team, that you trust, and support even when they make mistakes, is what drives growth!
This leads me to the structure that’s important to understand in order to design teams in a way to solve your issues and work collaboratively. This is something very difficult in a CEO led company that believes in overmanagement of their talented team members. Something that I often see that disrupts this progress in sustainable growth is when there’s an expectation of a team member running the business while improving the business. Once you hit a certain scale, they need to work together with one playing the role of the subject matter expert providing feedback and the other improving the business through cross-functional project and program management. The reason being is that there’s just not enough time in the day and independent focus to do both successfully at the same time. Though this may sound counterproductive, it is not when they share common goals and metrics, which inevitably is performance of that area of the business.
It eventually leads to a more robust understanding of key cross-departmental metrics that have correlated impacts to each other. These ultimately are considered aligned incentives that have significant impact on achieving key company goals (revenue growth, along with margin growth, and bottom line growth). I’ve seen this all too often at companies I’ve worked for before and after Tesla, where even within the company's sales teams, they are competing against one another for total business. At times this is merely for the distinction of having the top product and brand within that category, when the outcome of that strategy is counterproductive to the bottom line. Your organization and their departments must stay aligned to your visionary goals, otherwise you won’t achieve them.
The entire idea here is that there will be times when your founder is your best problem solver and should get involved in the weeds. It’s also important for them to check in on progress as well as removing roadblocks for execution, especially when growth and formalized processes become unnecessary barriers. Elon often did this, where it was extremely valuable for Tesla to solve a difficult challenge (typically strategic). He would give the premise for how to think about the problem, a defined solution, and then let the team sort it out and check back in. This approach proved very effective (at all of his companies from what I’ve read) and let Elon focus on the externalities that can have an outsized impact on achieving the vision. Play back the prior key factors alongside #5 and you’ll see how this is interdependent relative to scaling quickly and sustainably.
#6 - The location of your business should be highly dependent on the type of your business
I’ve been fortunate enough to work at multiple companies prior to the mainstream thought of remote work that was thrust upon us during COVID. In fact, looking back on my time, I’m confident that Tesla would not have been as successful as they were without being in the office 50+ hours per week. Although I’m not proud of having done this, I’ve set an in person meeting, on Saturday night, at the office. The circumstances of this are important to understand of course, as we released code that needed to be fixed that evening in order to mitigate disruption to the 300+ global suppliers that leveraged this tool. It was time sensitive, very impactful if not fixed, and required an in person whiteboard session in order to appropriately explain. Could we have resolved this if we lived in different cities, and done so via a conference call….maybe but not guaranteed. There are countless examples of this, where being on-site helped solve the problem so much quicker. Tesla at the time was solely a manufacturing company, so this makes sense.
I told you earlier that I’m not confident that Tesla would have succeeded if they were somewhere other than the Bay Area. The confluence of talent in this area, during this time, was overwhelmingly suggestive of multiple scaled successes (Meta, Apple, Google, NVIDIA, etc). Not everyone succeeds of course but the point here is that the talent optionality is much higher there than say Normal, IL (sorry Rivian, nothing against you). This is a very important distinction to me, I’m an avid supporter of remote or hybrid work, when you have the right type of business AND you can prove that it’s benefitting the company as well as the individual. I’m very lucky to have had an opportunity to do both in my career and for the work that I predominantly do now, I can do a lot of it remotely. I travel when I need to understand something more acutely (predominantly operations and manufacturing) and also when having someone's undivided attention in a room. These often lead to aha moments or a deeper connection with the team and I truly believe these are necessary based on the situation.
Now let’s turn the page and think through a different Bay Area company that builds technology, META. I’ve just come off the 6 hour podcast by Acquired (thanks Ben and David) that discussed the history of META and their success story. My evaluation of them during my time in the Bay Area, follow ups with team members who I worked with at Tesla and now work at META, and research suggests that there was a lot of benefit of META being the Bay Area, but not critical to their success in scaling their company. In fact, I believe that because they’ve built up locations all over the world in major cities, that has led to their scale. While the Bay Area is a great feeding ground and supports Tesla’s vertical integration and growth story, the major difference is that needed to feed into a physical product. META on the other hand, while requiring physical locations for their data centers, they need a diverse perspective to stay relevant to their business model and mission (Build the future of human connection and the technology that makes it possible). Tesla has of course expanded since I left (though I was there to help build the first factory outside of the US in Tilburg, NL) this was mainly to support additional manufacturing sites and profitability. This has continued to do so as it relates to their target markets (Gigafactory in Texas) but all relates directly back to their vision.
In summary, in order for sustained and scaled growth, your business needs to evaluate successfully what drives alignment your vision and where your people (your greatest asset) should be in order to achieve success towards your goals. This can very well mean anything from having an entire team work remotely (Zapier), some of them remotely and others in person (META), and then in person and hybrid (Amazon). My recommendation would be to continuously evaluate what makes sense for your company based on what your vision is as it will support the other key factors previously mentioned.
Conclusion
So what’s next? Well, for starters as a business owner and/or executive, take a moment to reflect on these key factors relating to your business and determine where there are gaps currently. From there, it’s always good to include your leadership stakeholders in understanding these principles to get their feedback as well and the conversation started. If you’ve yet to start a business, this is a bit simpler and becomes an outline for your business plan. If you’re already in the thick of it, be prepared to have this become a 6-12 month conversation about the right steps to take and a multi-year change management approach. Best to start at #1 and be as unbiased as you can about whether you have the right team while considering the impact of that decision on the rest of the key factors and then move down the list. Typically there isn’t a quick fix, but this approach is worth it in the long run and will pay off dividends, I’ve seen it happen.