Elon Musk Book Review (Part 2 of 2): Operations Excellence

My favorite part of the book was all the details of operations excellence.

In the popular media, Musk is branded a “tech” guy. In reality, he knows how to make things efficiently.

He increased the throughput of the Tesla assembly plant from 2,500 cars per week to 5,000 and the Nevada battery plant from 1,800 to 5,000 in less than a year. (This could make for a follow-up to Goldratt’s The Goal.)

He revolutionized the cost structure of the rocket industry. Doing this required hundreds of actions, like realizing the value of reusable rockets or reducing the cost of an engine from $2M to $200,000.

He also paid attention to the details. Taking a cue from toy cars, Tesla figured out how to cast the entire underbody as one part. This replaced “more than a hundred parts that had to be welded, riveted, or bonded together.”

Here are some of the ideas I’ll start using right away.

“The machine that builds the machine.”

Musk realized that a well-designed car or rocket is useless without a well-designed factory to make that product. He claimed that designing the right factory was much more complicated. It is a great reminder of the importance of design.

What techniques did they use? He wanted the design engineers sitting next to the production line— he wanted them to participate in the manufacture of the products they designed. This is like design for manufacturability. Likewise, he spent countless hours on the production floor, reminding managers of the lesson of staying very close to operations.

Of course, I’d like to extend the thought to supply chain design. You need a well-designed supply chain to get the products you need into your factories and your products to your customers.

“The Idiot Index.”

I don’t like the name, but I love the concept. This is the direct result of Musk’s belief that the only laws you have to follow are the laws of physics.

This index compares the price you paid per part with the total cost of all the raw materials that went into that part. The larger the relative difference, the more potential opportunity for savings. For example, if the raw material cost is $1 and you are paying $100, you may have a chance to find a different supplier or make it differently. It is a clever way to benchmark.

I’ve been thinking about how this idea could apply to the supply chain. My idea now is to look at the total energy (there must be a concept in physics that would help with this) needed to get your product from the factory to the customer. Multiply that energy by the fuel cost and compare it to the actual cost. This is only a start; I’ll keep thinking about this problem.

“The Algorithm”

This is his summary of the process. It is a good framework for thinking about operations excellence. Here are the steps (there are more details on ages 284-286).

1. Question every requirement. If the requirement isn’t from the laws of physics, you can question it. Musk likes to add the name of the person responsible for the requirement.

2. Delete parts and processes. His idea is to cut deep. Throughout the book, he says that you didn't cut enough if you aren’t adding 10-20% back in.

3. Simplify and optimization. Do this after deleting parts and processes.

4. Accelerate cycle time. Once you’ve done the first three steps, speed things up.

5. Automate. This is last. Musk readily admits that he initially over-automated and should have done steps one to four first.

Urgency

It takes work to build things well. The more urgency and hustle you can bring, the better off you will be.

To keep up the urgency, he doesn’t let up. He’s quite ruthless about not letting up. For example, when the team should be focused on the present— like waiting for the countdown on a rocket launch— he’ll grill his team on future plans. I’m sure I wouldn’t enjoy working with him, but he keeps a sense of urgency.

These are just a few examples. There are so many other operational tidbits throughout the book.

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(Here is a link to the first part of the review.)