In a verified publicly available email, Tesla CEO Elon Musk revealed his thoughts on corporate silos and hierarchical information flow. Here’s the email:
Subject: Communication Within Tesla
There are two schools of thought about how information should flow within companies. By far the most common way is chain of command, which means that you always flow communication through your manager. The problem with this approach is that, while it serves to enhance the power of the manager, it fails to serve the company.
Instead of a problem getting solved quickly, where a person in one dept talks to a person in another dept and makes the right thing happen, people are forced to talk to their manager who talks to their manager who talks to the manager in the other dept who talks to someone on his team. Then the info has to flow back the other way again. This is incredibly dumb. Any manager who allows this to happen, let alone encourages it, will soon find themselves working at another company. No kidding.
Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company. You can talk to your manager’s manager without his permission, you can talk directly to a VP in another dept, you can talk to me, you can talk to anyone without anyone else’s permission. Moreover, you should consider yourself obligated to do so until the right thing happens. The point here is not random chitchat, but rather ensuring that we execute ultra-fast and well. We obviously cannot compete with the big car companies in size, so we must do so with intelligence and agility.
One final point is that managers should work hard to ensure that they are not creating silos within the company that create an us vs. them mentality or impede communication in any way. This is unfortunately a natural tendency and needs to be actively fought. How can it possibly help Tesla for depts to erect barriers between themselves or see their success as relative within the company instead of collective? We are all in the same boat. Always view yourself as working for the good of the company and never your dept.
Thanks, Elon
There are sooo many great points in this email. Let’s break them down:
500 Startups, one of the world’s leading startup accelerators, recently released a report on how large companies can best work with startups. Given their unique position in the market, 500 Startups surveyed executives at companies like General Motors, Simon Ventures, Embraer, and more to learn what they’re doing to drive collaboration with startups.
The 500 Startups Corporate report has tons of useful takeaways for both startups and corporate innovation teams. Here are their best practices for corporate innovation teams and my take below:
“Get good grades in school. You’ll have more options when choosing a college.” -Parents
“Pick a major that applies to many different industries. That way you’ll have more job options.” -College Counselor
“Consulting is a great field. From there, you can do whatever you want.” -Career Advisor
While this advice isn’t necessarily wrong, very rarely do we take a step back and examine what exactly we’re collecting all these options for. Perhaps at the beginning of our careers, we have some vague idea of a goal or accomplishment we want to reach but we’re not quite sure: a) how to reach the goal and b) if we even want to reach the goal in the first place. So naturally we choose the path that keeps the maximum number of future possibilities available to us. Unfortunately, this fuzzy goal mindset is often carried through to adulthood and leaves us grasping for optionality with all of our major life decisions. And over the course of a lifetime, this optionality maximization mentality turns us into habitual option collectors and prevents us from reaching our goals.
But I’m getting ahead of myself. Let’s start with the basics.
I recently had the pleasure of joining Nat Eliason on his podcast ‘Nat Chat’ to discuss Antifragile by Nassim Taleb, which if you don’t know, is one of my all-time favorite books. During the podcast, Nat gave an example of a “naive intervention” that’s been percolating in my mind ever since: In response to children being distracted in class, doctors have, for years, been liberally prescribing Ritalin to “help” students focus. Instead of examining and redesigning the distractions and flawed class structure that leads to almost 20% of American boys being diagnosed with ADHD, the education and medical industries have decided to drug students into submission. And this naive intervention leads to long-term issues, as there seems to be a link between taking Ritalin and cocaine addiction later in life, due to the similarity between the two drugs. Nat referred to this overprescription trend as “trying to fix the terrain, instead of fixing your map”, the terrain in this case being children and their attention span while the map is the solution to capturing their attention.
To put it more broadly, your map is yourmodel of the world while the terrain is the actual world. Models are always, always, always (I can’t stress this enough) an approximation of reality. When models are effective, there is very little difference between the model and reality. When models fail, there’s a large difference. And because the world is constantly changing, models require continual feedback loops and updates to remain effective. Changing the model is much more in your control than changing reality, yet many notable screw-ups (like the ADHD example above) happen when humans try to re-shape reality instead of re-shape their model.
This terrain/map concept is so powerful and broadly applicable. Through the work I do, I see a ton of parallels with both corporate innovators and startups trying to force the landscape to adapt to their expectations instead of adjusting their solutions to the new reality.
Retail: Legacy Brands vs Adaptive Brands
In retail, the vast majority of legacy brands still base their strategy on a terrain that existed pre-Internet and pre-social media: namely, the supply-driven retail business model. Spotting these companies is fairly simple: they are the ones who are late to the game on almost every trend. Why? Because trends now emerge organically through “the public” (sometimes influencers but often just the dregs of the interwebz) instead of through corporate tastemakers.
The old model for retail was for a buyer or tastemaker to decide which products would be released in a given season. These buyers were/are extremely skilled at understanding consumer preferences and the model worked well for a long time. But now that we’re able to access products from around the world, taste has simply become too complex for any single human being (or in my opinion, an algorithm alone) to control or predict. Instead of a top down model of tastemaking, trends now generally emerge from the vast pool of humanity, without an easily determined reason – though people will try (and fail) to analyze trends in hindsight.
Brands that have embraced this new model (like Zara) are able to identify emerging trends through rapid piloting, kick the design and supply chain processes into action for successful experiments, and get products in-store before the trend has really taken off. Equally important, they can economically halt the process and respond to the next trend when the current one is over. Brands that have built processes like this to adapt to the new retail environment are exemplifying the idea of “fixing their map” to adapt to the new terrain.
Startup Sales Process
Likewise, over the years, I’ve seen plenty of startups miscalculate just how long and involved the enterprise sales process is, how many stakeholders there are, and the risks involved when a large company works with a small one. The startups who successfully navigate this process are the ones who, often through trial and error, develop an accurate model for the organization they’re selling to. This includes knowing who the key decision-makers are, what they are being judged on, what their top priorities are, and most importantly, how your startup fits into the picture.
The startups who get frustrated in this process are usually those who come into it with unrealistic expectations of how quickly a deal will get done, simply because of how much sense it makes…on paper. While mapping a deal on paper is important, it isn’t nearly enough to move things along.
To successfully close a deal with a large company, it takes an understanding of who in the company is actually buying your product, what that person or department is tasked with, what they’re succeeding and failing at, and so much more. All of this deep, detailed knowledge can only be gathered through research and many interactions with the target company. And this knowledge is then used to build and iterate on your map (i.e. model) for how to get the deal done.
But if a startup runs into a wall during the sales process and attempts to change the procurement process (i.e. change the terrain) – good luck. Those processes were likely created by a painstaking process involving dozens of people and months of debate. Most importantly, you – a little startup – don’t have the leverage to demand that the large company change their process. If the startup has a ton of leverage, it’s possible (though unlikely) that the large company may volunteer to fast-track the deal. But I have never seen a startup successfully demand that the large company change their process.
Conclusion
When things aren’t going right or are more difficult than expected, it’s easy to look externally and blame outside forces. But more often than not, it’s our model that’s flawed, driven by expectations which don’t match the reality of the terrain. Taking a step back and evaluating our map is often all we need to do to correct things. An even better tactic is to build in opportunities to check and adjust your map as you go along, for example interacting with customers often to continuously test your assumptions. These feedback loops are the only way to make sure the map you’re using is an accurate representation of the terrain and not a forced fit “solution” that has little connection to reality.
I’ve been going through the Jocko Podcast archives over the past few months. While listening to Episode 47, one of the listener questions really got my attention. The listener asked Jocko if he did anything ritualistic to get himself mentally prepared before his Navy Seal operations. Pretty innocent question and one that I’d imagine many listeners have thought about.
Jocko’s answer was both powerful and counter-intuitive. I highly recommend listening to the full answer here. Here’s the most relevant section:
“I hate to spoil the romantic vision of the mindful warrior poet but that actually, that idea is just not what happens. Here’s the reality: first and foremost, when you’re in combat and preparing for an operation – you are freakin’ busy…there’s so much planning and preparation that needs to be done…you’re not just sitting around trying to figure out your mindset.
That being said, mindset IS a part of combat. So how did I get in the right mission mindset? Well the mindset is not achieved in the minutes or even hours before an operation, from chanting a mantra, or breathing, or meditation, or some song that will get you in touch with your warrior spirit. The mindset is achieved in the weeks, and the months, and the years BEFORE that specific operation commences.
We lived in the mindset and that mindset came from the training we went through, the repetition of the fundamental skill sets. The mindset comes from the discipline – waking up early, studying the tactics, understanding the enemy – from all those unmitigated daily disciplines”.
That is such a powerful answer, and one that any large company hoping to innovate should pay extra attention to. Before I dive into this further, a quick disclaimer: Yes, I fully understand that corporate innovation is orders of magnitude more trivial than war.
The Wrong Type of Innovation Culture
That being said (to borrow a classic Jocko phrase), there are SO many companies that think “innovation” can be learned in a single workshop or can be siloed into a department which will invigorate the rest of the company. You see this all over the place. Everyone seems to be looking for a shortcut and there’s no shortage of charlatans trying to sell it to them.
And when companies try to shortcut their way to innovation and fail, they wonder what went wrong. Let me say this unequivocally: things didn’t go wrong because you picked Outlook over Gmail, or because you chose to go to Tel Aviv for your innovation trip instead of San Francisco. It wasn’t because you picked the wrong innovation workshop vendor, or because you don’t have an open office plan.
Companies who try to make their innovation teams look like the cast of HBO’s ‘Silicon Valley’ are falling for the innovation myth equivalent of the “mindful warrior poet”
This focus on appearances and shortcuts is just another symptom of the “innovation theater” mindset. Innovation theater refers to companies (and people) who optimize for the appearance of being innovative instead of actually being innovative.
Without a doubt, innovation in large companies fails because of company culture. So what can leaders do to make their culture more innovative?
Incentives
Instead of trying to workshop innovation, companies need to build a questioning and experimentation mentality into their company culture. This starts with incentives – both positive and negative. Employees need to have some air cover from their superiors to question the status quo and try new things. In most organizations, a failed project can scar your career for life. This type of massive negative risk disincentive is a great way to ensure that employees never try new things. Getting rid of disincentives (or at least reducing the magnitude of the downside) is a good way for companies to get out of their own way.
But it can’t stop there. Employees also need some positive incentives for developing new businesses. Creating new things with proper incentives is hard enough – imagine having to do it in an environment where your best case scenario is earning a year-end plaque? Creating upside – both financial and prestige-based (early promotions, recognition, and more) – is crucial.
How Do You Spend Your Time?
Too often in large companies, employees spend the entire day running from meeting to meeting, with little time to breathe and collect their thoughts or do any “actual” work. This is no way to innovate. Creating new concepts, even non-disruptive ones, is grounded in thought and experimentation. Twenty person meetings typically have very little to do with it.
Google’s famous “20% Time” policy allows (or arguably, used to allow) employees to spend up to 20% of their time on side projects. This policy was responsible for the creation of Gmail, Adsense, and Google News, products which created or disrupted their categories. The biggest advantage to encouraging employees to start these side projects is that companies enjoy a risk-reward ratio that is massively in their favor. If a concept fails, barely any money or time was spent on it. If it succeeds, well, the results of Gmail speak for themselves. This is exactly that kind of low risk, high reward investment that professional investors hunt for all their lives.
While 20% time may or may not be directly applicable to your company’s situation, managers should be more comfortable giving employees leeway to experiment with new concepts. You never know what your company’s Gmail will be.
Added bonus: employees will feel more empowered and engaged, which usually leads to less turnover!
*****
There’s no workshop, partnership, or class that will magically turn a stale company into an agile machine. Creating an effective innovation culture requires months and years of foresight, proper incentives, and vigilance against the innovation theater mindset. And to paraphrase Jocko, an innovation culture is built through unmitigated daily disciplines, not shortcuts.
