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MGMT20001 Organisational Behaviour
On March 10th 2020 Elon Musk, the South African-born American entrepreneur tweeted to
his 32 million followers “Congratulations Tesla team on making our 1,000,000th car!!” The
tweet, including a picture of a team of workers surrounding a bright red car, celebrated the
company becoming the first manufacturer to pass this electric car manufacturing milestone.
It was a momentous moment for Musk and Tesla, the culmination of a 17-year journey and
part of a broader aim to revolutionise the world’s relationship with sustainable energy and
transport.
Tesla is only one piece of 48-year-old Musk’s suite of companies aiming to radically reshape
global manufacturing. Making his fortune in his 20s developing and later selling online guide
Zip2, Musk went on to be one of the early creators of PayPal. An engineer, inventor,
technologist and social media provocateur, Musk’s life goal is to transform humanity into a
‘multi-planetary’ species. Bringing together sustainable approaches to energy production
(Solar City), automotive development and production (Tesla) and space transport (Space X)
Musk plans to turn humans into space colonisers. “I would like to die thinking that
humanity has a bright future” he has said, “If we can solve sustainable energy and be well
on our way to becoming a multi planetary species with a self-sustaining civilization on
another planet – to cope with a worst case scenario happening and extinguishing human
consciousness – then... I think that would be really good.”
Entrepreneurs with grand visions are not necessarily news. However, Musk’s overcoming
hurdles to achieve massive success, a propensity for bold goals, coupled with a radical
reshaping of manufacturing trends has captured the attention of the media, the public and
many world leaders. His audaciousness is illustrated by the 2017 bet he made with
Atlassian’s Mike Cannon-Brookes. Musk claimed he could install and have operational
100mega watts of battery storage in South Australia within 100 days, thus addressing major
power concerns that had caused significant outages in the state. Not only did Musk win this
bet, building world’s largest lithium-ion battery farm in 60 days as opposed to 100, but two
years later it has significantly increased the stability of the State power supply.
While Tesla and Space X have emerged onto the global stage, Musk himself has become a
public figure of renown, and his leadership style has sometimes been seen as controversial.
Musk has helped Tesla and Space X to become a major force to be reckoned with in the
automotive and space industries, while also embroiling them in lawsuits and a public
backlash over his polarising ways of conducting business.
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Tesla and SpaceX: accelerating the world toward sustainable energy and new frontiers
Tesla
Tesla Motors Inc was incorporated on July 1st 2003, by two engineers, Martin Eberhard and
Marc Tarpenning (the name itself was inspired by inventor and electric motor pioneer
Nikola Tesla). Tesla began with the idea of developing a fully electric sports car, one that
was not only fast but was also aesthetically pleasing. The two engineers sought external
investors to turn their vision into reality. Well connected, and cashed-up with his recent
$180 million earned from the sale of PayPal, Musk became one of Tesla first investors,
contributing US$6.5 million. He then was appointed Chairman of the Board of Tesla in April
2004.
Tesla builds all-electric cars that not only push the limits of technology but are objects of
beauty. For Tesla, being a start-up full of Silicon Valley engineers predominantly experienced
in software rather than hardware design, it was important for the company to start small
and learn along the way. Eberhard described the thinking behind this strategy as follows:
“Cell-phones, refrigerators, colour TVs, they didn’t start off by making a low-end product for
the masses. They were relatively expensive, for people who could afford it.” Tesla entered
the market in 2008 with a high priced, low volume luxury product, the Roadster. Tesla
followed with a mid-priced sedan, the Model S (launched in 2009) and the lower-priced
vehicle, Model X (launched in 2015).
Tesla’s path was not always even, but in 2010 Tesla became the first US Auto car maker to
go public since Ford Motor Company in 1956. Then on January 22nd 2020, it became the
second most valuable automotive company in the world, reaching a market value of
USD$102.7 billion.
Space X
SpaceX designs manufactures and launches advanced rockets and spacecraft. Founded in
2002 to revolutionise space technology, with the ultimate goal of enabling people to live on
other planets. Musk formed SpaceX after immersing himself in the space aeronautics
industry in California. At first, the collection of ex-NASA and academics were just happy to
have a rich guy around who would give them money, but they soon realised that he not only
had the funds to pursue his goals, but he had the drive and the capacity to achieve them.
It began in a 75,000-foot factory in a suburb of Los Angeles. Musk soon transformed the
space into his signature factory aesthetic; gloss epoxy over the concrete floors, white colour
scheme designed to make the space seem clean and cheerful. Desks were interspersed with
machinery, so the ivy-league educated scientists and engineers were mixed in with the
welders and machinists building hardware.
SpaceX is the only private company capable of returning a spacecraft from low Earth orbit,
which it first accomplished in 2010. The company made history again in 2012 when its
Dragon spacecraft became the first commercial spacecraft to deliver cargo to and from the
International Space Station. As one of the world’s fastest-growing providers of launch
services, SpaceX has secured over $12 billion on contract with both commercial satellite
operators and US government missions. SpaceX is now working on a next generation of fully
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reusable launch vehicles that will be the most powerful ever built, capable of carrying
humans to Mars.
Musk’s strategy: Build it and they will buy
Musk’s ‘Putting humans on Mars’ talk can sound to some as farfetched and slightly crazy,
but it is a unique rallying cry for all his businesses. This sweeping goal of interplanetary
transformation is a unifying principle for all his companies. Employees are aware that they
are trying to achieve the impossible all day every day. When things are tough, when Musk
pushes them to the limit, it is understood that this is all part of the ‘Mars Agenda’.
One element that sets Musk’s companies apart from others is its approach to
manufacturing. Musk has taken industries, like aerospace and automotive, that were once
seen as shining lights in the American economy, but have recently been thought of as old
fashioned or failing, and has recast them as something new and fantastic. Central to this is
the idea that Tesla and Space X are highly vertically integrated. Whenever possible, Musk’s
companies make things from scratch and try and rethink all that the aerospace, automotive
and solar industry accepted as convention. SpaceX aimed to build reusable rockets, carrying
supplies to the International Space Station. Perfecting this technology has the potential to
push some of the established players out of the market, while making the US the world
leader in taking humans and cargo into space. For Tesla, Musk revamps how cars are
manufactured and sold, simultaneously building a worldwide fuel distribution network.
When researching Musk found that most big automakers don’t even build their vehicles
anymore. The days of Henry Ford having materials shipped to his Michigan factory had long
passed. Where big companies only internally managed engine research, sales, marketing
and final assembly, Tesla aimed to keep all processes in house.
Musk had first shared his ideas on fully automating factories with Tesla staff in a meeting in
2016. He told them that he had recently had a dream where he had envisioned the factory
of the future; factory where machines built everything at superhuman speed, with parts
moving along on a series of conveyor belts, being delivered in just the right place at the
precisely the right time. He would soon come to define this concept as ‘the machine that
builds the machine.’
Tesla has also radically reshaped the sales approach. Instead of selling through dealerships,
they took the non-traditional route of selling directly to car dealerships would block the rich
feedback that would be gained from engaging directly with the end users. For a young start-
up like Tesla, whose sole strategy was based on constant improvement to make each
successive design better than the prior one, feedback was critical. Thus, Tesla decided to
embrace a direct-to-consumer model where customers could inspect and purchase cars
through one if their retail stores usually located in prominent shopping malls or order online
via Tesla’s website.
Musk is an inventor, celebrity businessman and industrialist, able to take big ideas and turn
them into big products. He’s employing thousands of people to forge metal in American
factories, along with global ones, at a time when manufacturing was thought to be a dying
sector.
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Culture at Tesla and Space X: Trust me, it will be worth it
Elon Musk’s assistant, Mary-Beth Brown, was integral to the development of culture at
Space X. She chose key items, like red waste bins that looked like spaceships while
establishing the communication tone. Often heard to say “How are you dear?” to the largely
young male workforce ,she assumed a caring role. She collected the weird and wacky emails
that were sent to Musk, sending out a weekly ‘Kook of the Week’ missive to make people
laugh.
Most of SpaceX’s early employees were young, male over achievers personally recruited by
Musk. Competitive but extremely hard-working, there was an ‘all hands on deck’
philosophy. Musk was often in the middle of it, getting covered in epoxy or oil and he
physically engaged with designs in testing. SpaceX was a small, tight-knight family, that saw
themselves as up against the rest of the world. In 2002 it was one empty warehouse, but 12
months later it looked like a real rocket factory. Engines were being fed into an assembly
line where machinists connected them to the body of rockets. Cranes were on the floor to
move obstacles. It was as if Henry Ford met Star Wars. Preparing to film Marvel’s Iron Man
in 2007, actor Robert Downey Jr paid a visit to SpaceX. He thought it looked like a giant
hardware store, with enthusiastic employees zipping around, white collar and blue collar
workers sharing a genuine excitement for what they were doing.
Musk holds high expectations of himself and of those around him, including a strong vision
about how a company should operate. His emails have become famous, both within his
companies and in the broader media, as he sent off missive defining everything from dealing
with external parties to use of corporate jargon. In one famous example he wrote:
There is a creeping tendency to use made up acronyms at SpaceX. Excessive use
of made up acronyms is a significant impediment to communication and
keeping communication good as we grow is incredibly important.
Individually, a few acronyms here and there may not seem so bad, but if a
thousand people are making these up, over time the result will be a huge
glossary that we have to issue to new employees. No one can actually
remember all these acronyms and people don’t want to seem dumb in a
meeting, so they just sit there in ignorance. This is particularly tough on new
employees.
12-hour days, six day work weeks were the norm, with many working even longer than that.
Respites occasionally come after 8pm, when Musk allowed everyone to play first-person
shooter video games from their work computer. As the time approached the sound of
electronic gun cartridges could be heard across the factory floors, with Musk himself often
winning games. He was, according to some, “alarmingly good.”
He demanded that people work on Saturdays and Sundays and sleep under their desks till
tasks were completed. And when someone said that they needed to see their loved ones, he
would respond with, “I would tell those people they will get to see their families a lot when
we go bankrupt.” Musk’s belief as summed up in one of his tweets; “There are way easier
places to work, but nobody ever changed the world on 40 hours a week.” When an
employee missed a company event to be present for the birth of his child, Musk allegedly
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notified him via email, “I am extremely disappointed. You need to figure out where your
priorities are. We’re changing the world and changing history, and you either commit or you
don’t.” Another employee, however, was overheard by Musk venting about how he had
lost his glasses and never had time to go collect a new pair. Two hours later, Mary-Beth
Brown appeared with an appointment card to see a Lasik eye surgeon. Musk had not only
booked him an appointment but paid for the surgery. “Elon can be very demanding, but
he’ll make sure all the obstacles in your way are removed.”
Most employees were thrilled to part of Musk’s multi-planetary, world-changing adventure.
But there were times he did push them too far. The engineers often fumed when Musk
claimed credit in the press for designing SpaceX or Tesla products almost singlehandedly.
Musk also hired a documentary crew to follow him around, grating on those who were hard
at work. Employees who sometimes made suggestions about potential design flaws were
ignored. Those who were not ‘management’ felt that they were not seen as assets to the
company, and if they spoke up were forced out or blamed for things they hadn’t done. It
was the ‘kiss of death’ to suggest Elon wasn’t 100% correct.
A former female executive described how Musk berated her before her peers. “He was
shouting that I didn’t know what I was doing, that I was an idiot, that he’s never worked
with someone so incompetent.” A senior engineering executive revealed that those close to
him “called it ‘the idiot bit.’” If you said something wrong or made one mistake or rubbed
him the wrong way, he would decide you’re an idiot and there was nothing that could
change his mind.” A former executive recounted, “If you told him that you made a particular
choice because ‘it was the standard way things had always been done,’ he’d kick you out of
the meeting fast. He’d say, ‘I never want to hear that phrase again. What we have to do is
f*ing hard and half-assing things won’t be tolerated.’” Musk’s managerial style did not suit
all employees. During the production of the Model 3 at Tesla, approximately 36 vice
presidents and other high-profile staff left the company. These included leaders from a
diverse range of departments – finance, engineering, manufacturing, human resources and
communications.
Others liked the camaraderie that this culture fostered. “The best part working for Tesla is
they hired really good people most of the time, and if you’re not really good, you get let go.
You have to believe in what you’re doing in those buildings or you’re not going to have a
spot tomorrow. I think that was the best part because it took me back to the camaraderie I
had in the military.” It wasn’t just the culture that had been cultivated which drew people
in. They also resonated with the vision of the company. "This is the future," said Branton
Phillips, a material handler at the Fremont facility in California. "I like the whole image, what
we're doing, the mission. We're making history."
Management and governance: Not all smooth sailing
Not all staff, particularly engineers, were on board with Musk’s ideas about manufacturing
everything in house. In meetings, if someone questioned the merits of Musk’s approach,
Musk would contact the person’s manager and ask for the individual to be re-assigned to
another project, terminated, or no longer be invited to the meetings. Some senior
executives went out of their way to exclude those who resisted Musk’s ideas. “If you were
the kind of person who was likely to push back, you got disinvited,” noted a former
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executive, “because VPs [Vice-Presidents] didn’t want anyone pissing off Elon. People were
scared that someone would question something.”
Musk personally took to dealing with the challenges with production. He was the one who
favoured the manufacturing process and the idea autonomous technology over human
workers to produce cars and rockets. He spent all-nighters in the company’s Fremont,
California manufacturing plant looking to personally troubleshoot challenges arising on the
production lines. He took to sleeping on a small couch or under a desk, in the corner of a
little office in order to always stay close to the action.