Tesla’s Secret Sauce: Startup Leadership Style

Human organizations tend to have two stages. First, they are fueled by inspiration. There is a small group of individuals who draw their organizational vision from instinct and personal experience. In modern business literature, this stage is better known as startup phase. Later, organizations inspect successful endeavors and extract the learning from those experiences. They write that knowledge into a code and create rituals and traditions to perpetuate the successful actions that lead to success in the first place. Thus, creating a bureaucracy.

Bureaucracies

The problem with bureaucracy lies in the fact that it is a rigid way of dealing with a changing reality. Bureaucracies expect reality to conform with rules, but usually it works better the other way around.

Companies don’t become a bureaucracy and then come back to being a startup again. There are some notable exceptions like Apple (AAPL), but even that’s a very specific case where the founder came back. Usually, companies go through a succession of leaders that are more or less capable of updating the rituals and traditions in order to keep their organization close to reality.

When the leadership is not capable of updating the company bureaucratic DNA, things get ugly (i.e. the organization fails to adapt and eventually dies after a prolonged and painful decline). Since rituals and tradition are by rigid by definition, companies relying too much on them tend to suffer in the long term.

Tesla is still pretty much a startup

Tesla (TSLA) is still Elon Musk’s baby and he has proved to be a savvy business man by uncovering unexploited markets. Much of Tesla’s existence has been a discovery about what works and what doesn’t. Several mistakes were made during Tesla’s initial years, but the company has been agile in changing course when needed.

This is one of the best skills the company has right now. More than anything, the ability to adapt to reality has brought dividends and explains why Tesla seems to maintain an edge over everybody else.

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Gary Anderson 2 years ago Contributor's comment

I don't like electric cars. But there is a vocal minority that loves them.

Nelson Alves 2 years ago Author's comment

Hi Gary,

Like EVs or not, the truth is they Tesla has demand for them and so far it still lacks the capacity to cover all the orders.

This is a new market that is gaining traction and cannot be disregarded going forward.

Gary Anderson 2 years ago Contributor's comment

Yes, #ElectricCars are gaining some momentum. However, 70 percent of millennials will not buy electric cars and 66 percent think self driving cars are bogus. Those numbers will go up when people realize that self driving cars do not have the ability to merge, nor do they have the ability to spot motorcycles, nor do they have the ability to navigate construction zones: www.thedrive.com/.../millennials-arent-interested-in-electric-cars