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Elon Musk’s Top Secret Masterplan: Part 2

by | Jul 12, 2016 | Archive, Future Trends, Leadership | 2 comments

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Markets reacted positively yesterday to Elon Musk’s tweet that he would reveal a second Top Secret Masterplan for Tesla this week. Shares for Tesla Motors responded strongly and closed 4% up. Here’s why.

Elon Musk is a quester leader. His quests have inspired NASA to use his SpaceX rockets and thousands of people to buy his Tesla cars and thus joining him on an exciting adventure. Here’s the thing. People are attracted to leaders who want to make a difference, to improve the lives of others. We find their quests inspiring, we are eager to discover how they will overcome seemingly impossible challenges and because leaders on a quest can often be the underdog, we will them to win.

Using Tesla Motors as a conduit, Elon Musk’s central purpose is to “change the world from a mine-and-burn hydrocarbon economy towards a solar electric economy.” In order to achieve this on the 2 August 2006, Elon Musk revealed his first “Top Secret Masterplan” in a blog and summarised it as a plan to:

  1. Build sports car
  2. Use that money to build an affordable car
  3. Use that money to build an even more affordable car
  4. While doing above, also provide zero emission electric power generation options

Elon Musk’s Top Secret Masterplan provides a great example of how a quest, strategy and purpose can be combined to forge powerful business results.  My research reveals that quest have 3 qualities: Firstly, they have an inspirational outcome focused destination. Secondly, quests challenge the impossible; and, thirdly, they deliver meaningful benefits. Let’s explore this further using Elon Musk’s Masterplan:

  1. A clear, inspirational outcome focused destination. Elon Musk’s quest revealed in his Masterplan was for Tesla Motor’s to build a Roadster “designed to beat a gasoline sports car like a Porsche or Ferrari in a head to head showdown.” Quests are powerful because they provide a clear target destination that act to focus and empower those who heed the leaders’ call. Elon Musk’s quest is very clear there is no ambiguity. His team had a very identifiable and quantifiable target to adventure towards – a battery powered sportscar that can beat petrol guzzling supercars. His quest is also hugely inspirational and it would be very clear when the team at Tesla had achieved this quest.
  2. Challenge the Impossible: When Elon Musk announced that he wanted to build a battery powered car capable of supercar performance, people thought he was just being eccentric and crazy. But he challenged the paradigm of the day and proved the impossible, possible
  3. Deliver meaningful benefits: Quests deliver meaningful benefits to the people who matter most. For Elon Musk and Tesla this was not only their customers but also the broader society and world economy addicted to a hydrocarbon economy.

Many of Musk’s critics argued that an expensive roadster was hardly going to have a beneficial impact on reducing demand for fossil fuel energy, creating a more sustainable economy or even ultimately saving the world. But as Elon Musk said, these critics, “missed the point.” Elon Musk explains that his strategy was to “enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”  The quest to create a Tesla Roadster gave life to Elon Musk’s purpose, empowered his strategy and contributed towards achieving his purpose. Once achieved a new quest continues to inspire and empower creating a virtuous circle of success driving  closer and closer to achieving the higher purpose.

As you can see from the diagram below, each successive quest builds on the success of the previous one. Each quest continues to re-inspire the now 13,000 strong employees working at Tesla (Elon Musk started with 3 employees) and the 400,000 people who have paid up to a £1,000 deposit for the Model 3 which has yet to be manufactured. This has raised Tesla over $400 million in pre-order revenue, an unprecedented success. By striving and achieve the impossible, taking on and disrupt the existing motoring big brands Elon Musk is achieving a lot more than just selling another car in an already saturated market.

Tesla's purpose quest and strategy

Ever the opportunist, as are all good quester leaders, Elon announced the Tesla X, an exciting electric SUV, the same week the VW emissions cheat scandal was uncovered. Each quest has contributed towards bringing Elon Musk’s strategy and purpose to life.

Part One of his Masterplan is now drawing to a close. What can we expect from Part Two? The purpose is likely to remain the same but new quests will most certainly be unveiled. The quests will appear impossible and crazy. They will inspire and empower. They will take Elon Musk closer to achieving his purpose  of changing “the world from a mine-and-burn hydrocarbon economy towards a solar electric economy.”

Elon Musk and Tesla benefit from what I call an organisational questing culture. Embarking on quests means that what you are working on:

  1. Contributes to a better working world
  2. Accords meaning and purpose
  3. Attracts & retain talent
  4. Fosters an innovative culture
  5. Empowers teams
  6. Attracts loyal customers
  7. Builds competitive advantage

Building a questing culture is an immensely powerful leadership approach. A questing culture is something competitors can not copy, it’s why Tesla and Elon Musk are separate and ahead of the pack.

Elon Musk’s Top Secret Masterplan Part 2 will be revealed this week. Don’t tell anyone.

2 Comments

  1. Liz Carver
    Liz Carver on July 15, 2016 at 9:54 am

    The difference seems to me to be that Elon Musk actually wants to work towards a cheaper family planet friendly version.. he had to start at the top end in the Porsche/Ferrari market where there is serious money and people willing to be first adopters and the cache that brings. This is the only way he could generate enough cash to fund the Rand D necessary to generate the next versions. Where did the money come to generate the first version? with I guess huge R and D costs…..
    To get 400,000 pre orders at £1k a time is impressive though… Tesla as the new iphone must have? With all this doom and gloom there is still a lot of money at the top.

    ps Have we sorted the actual benefits of electric over fossil fuels in toto?

    Reply
    • Dean van Leeuwen
      Dean van Leeuwen on July 15, 2016 at 11:20 am

      Hi Liz, thanks for taking the time to comment. Yes spot on. Elon Musk actually invested his own money into launching the Tesla Roadster. He made $180 million from his sale of PayPal. He put $100 million into SpaceX, $70 million into Tesla and $10 million into SolarCity. After investing everything he had and risking it all he’s actually been quoted saying: “I had to borrow money for rent.” How is that for a display of a committed quester!

      Regarding the benefits of electric over fossil fuels, I will let Elon Musk provide a very detailed summary of the benefits:

      “Now I’d like to address two repeated arguments against electric vehicles — battery disposal and power plant emissions. The answer to the first is short and simple, the second requires a bit of math:

      Batteries that are not toxic to the environment!
      I wouldn’t recommend them as a dessert topping, but the Tesla Motors Lithium-Ion cells are not classified as hazardous and are landfill safe. However, dumping them in the trash would be throwing money away, since the battery pack can be sold to recycling companies (unsubsidized) at the end of its greater than 100,000-mile design life. Moreover, the battery isn’t dead at that point, it just has less range.

      Power Plant Emissions aka “The Long Tailpipe”
      (For a more detailed version of this argument, please see the white paper written by Martin and Marc.)

      A common rebuttal to electric vehicles as a solution to carbon emissions is that they simply transfer the CO2 emissions to the power plant. The obvious counter is that one can develop grid electric power from a variety of means, many of which, like hydro, wind, geothermal, nuclear, solar, etc. involve no CO2 emissions. However, let’s assume for the moment that the electricity is generated from a hydrocarbon source like natural gas, the most popular fuel for new US power plants in recent years.

      The H-System Combined Cycle Generator from General Electric is 60% efficient in turning natural gas into electricity. “Combined Cycle” is where the natural gas is burned to generate electricity and then the waste heat is used to create steam that powers a second generator. Natural gas recovery is 97.5% efficient, processing is also 97.5% efficient and then transmission efficiency over the electric grid is 92% on average. This gives us a well-to-electric-outlet efficiency of 97.5% x 97.5% x 60% x 92% = 52.5%.

      Despite a body shape, tires and gearing aimed at high performance rather than peak efficiency, the Tesla Roadster requires 0.4 MJ per kilometer or, stated another way, will travel 2.53 km per mega-joule of electricity. The full cycle charge and discharge efficiency of the Tesla Roadster is 86%, which means that for every 100 MJ of electricity used to charge the battery, about 86 MJ reaches the motor.

      Bringing the math together, we get the final figure of merit of 2.53 km/MJ x 86% x 52.5% = 1.14 km/MJ. Let’s compare that to the Prius and a few other options normally considered energy efficient.

      The fully considered well-to-wheel efficiency of a gasoline powered car is equal to the energy content of gasoline (34.3 MJ/liter) minus the refinement & transportation losses (18.3%), multiplied by the miles per gallon or km per liter. The Prius at an EPA rated 55 mpg therefore has an energy efficiency of 0.56 km/MJ. This is actually an excellent number compared with a “normal” car like the Toyota Camry at 0.28 km/MJ.

      Note the term hybrid as applied to cars currently on the road is a misnomer. They are really just gasoline powered cars with a little battery assistance and, unless you are one of the handful who have an aftermarket hack, the little battery has to be charged from the gasoline engine. Therefore, they can be considered simply as slightly more efficient gasoline powered cars. If the EPA certified mileage is 55 mpg, then it is indistinguishable from a non-hybrid that achieves 55 mpg. As a friend of mine says, a world 100% full of Prius drivers is still 100% addicted to oil.

      The CO2 content of any given source fuel is well understood. Natural gas is 14.4 grams of carbon per mega-joule and oil is 19.9 grams of carbon per mega-joule. Applying those carbon content levels to the vehicle efficiencies, including as a reference the Honda combusted natural gas and Honda fuel cell natural gas vehicles, the hands down winner is pure electric:

      Car Energy Source CO2 Content Efficiency CO2 Emissions
      Honda CNG Natural Gas 14.4 g/MJ 0.32 km/MJ 45.0 g/km
      Honda FCX Nat Gas-Fuel Cell 14.4 g/MJ 0.35 km/MJ 41.1 g/km
      Toyota Prius Oil 19.9 g/MJ 0.56 km/MJ 35.8 g/km
      Tesla Roadster Nat Gas-Electric 14.4 g/MJ 1.14 km/MJ 12.6 g/km

      The Tesla Roadster still wins by a hefty margin if you assume the average CO2 per joule of US power production. The higher CO2 content of coal compared to natural gas is offset by the negligible CO2 content of hydro, nuclear, geothermal, wind, solar, etc. The exact power production mixture varies from one part of the country to another and is changing over time, so natural gas is used here as a fixed yardstick.

      Becoming Energy Positive
      I should mention that Tesla Motors will be co-marketing sustainable energy products from other companies along with the car. For example, among other choices, we will be offering a modestly sized and priced solar panel from SolarCity, a photovoltaics company (where I am also the principal financier). This system can be installed on your roof in an out of the way location, because of its small size, or set up as a carport and will generate about 50 miles per day of electricity.

      If you travel less than 350 miles per week, you will therefore be “energy positive” with respect to your personal transportation. This is a step beyond conserving or even nullifying your use of energy for transport – you will actually be putting more energy back into the system than you consume in transportation! (for more see https://www.teslamotors.com/en_GB/blog/secret-tesla-motors-master-plan-just-between-you-and-me?redirect=no)

      Reply

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