Before becoming CEO of VC firm DVx Ventures, John McNeil served as president of Tesla and chief operating officer of Lyft. He helped take Tesla's revenue run rate from $2 billion to $20 billion in 30 months and doubled Lyft's revenue ahead of its IPO. He also serves on the boards of GM Cruises and Lululemon. So when he gives advice on how to build innovative companies, startups listen.
At the World Business Forum in New York City this week, McNeil shared his insights into building innovative companies, a method Tesla CEO Elon Musk calls “algorithms.” This approach, featured in Walter Isaacson's biography of masks, focuses on radically simplifying both goals and processes.
McNeil's key lesson: Start by identifying the problem you're trying to solve, then move toward large-scale (rather than incremental) goals. “It's orders of magnitude bigger,” he said.
He detailed the “production hell” of 2017, when Tesla, facing bankruptcy, tried to increase digital sales of its $100,000 Model S by 20 times. Tesla has reduced buying a car online from 63 clicks to 10 clicks, simplifying both the process and the supply chain.
What are McNeil’s lessons for startups?
“The answer is not 'no' or 'crazy.' In the innovative community, the answer is 'I don't know what to do, but let's try.' ”
Five steps to subtractive innovation
1.Ask any requirements
The only requirements McNeil said are really important are the legal requirements and the physics requirements. Everything else can be poked and prodded.
“As your organization grows, what starts out as a good idea can become a rule, and then those rules become a requirement,” McNeil told TechCrunch. “And it's almost like a tribal myth or a message game, etc. [Musk] “I really want to understand whether this is a real requirement or something that someone thought was a good idea and over time it was codified as a requirement.”
2. Eliminate as many steps in the process as possible.
McNeil advises companies to track all processes in spreadsheets so they can identify only the steps that bring value to customers. Everything else should be removed, but note that you can always add these steps back if you wish.
“You can’t say you’ve cut deep enough until you have to add 10% of the steps,” he said.
For managers to be successful at this, he said, they need to spend 20% of their time on the front lines. If you're the CEO of Starbucks, you're doing everything in your power to not only understand how to make a cup of coffee from start to finish, but also to understand why customers are dissatisfied with the process. means.
3. Simplification and optimization
In 2018, as Tesla was looking for ways to increase Model 3 production, Tesla executive Jerome Guillen realized that Tesla was over-automating production. The company needed to get back to basics, he said, and for him that meant building a giant tent where his team could assemble cars by hand.
McNeil said the Model 3 was built this way by hand over several months, and when the team eventually moved the line back inside the main building, Tesla was able to further simplify the production process. .
“We were able to eliminate over 50% of steps because we simply manually optimized the process,” says McNeil.
4. Apply speed. Maximize cycle time
“Simplification and optimization can really come into play in the fourth step, which is applying speed,” McNeil says. “Speed reveals all weaknesses in the process.”
McNeil says speed is more important today than ever.
“When the cost of cash is 5%; [simplification] It speeds up cash generation,” he said. “Cash velocity is truly an indicator of elite performers.”
5. Finally, automate
Companies should only move to automation after simplifying their processes and truly understanding their product and customer journey.
“Automation is like a bolt in the floor,” McNeil said. “Once you start writing code, it becomes very difficult to solve the code, and it becomes difficult to replace the code.”
“You automate to make it repeatable, you automate to make it scalable. You only do that if you have a process that is repeatable and scalable.”
McNeil's three secret ingredients
In addition to the five lessons, McNeil offered three additional cultural principles.
The first is that companies need to broaden their perspective to include the entire customer journey and experience. for example? GM is very good at producing cars, and that includes EVs. But billing is part of the customer journey, something GM didn't understand right away. Tesla did that when it built its Supercharger network.
His second element is to impose urgency and accountability by identifying two or three things that are always important to the company. CEOs should be able to focus completely on those things.
The third element is to experience the product the same way your customers experience it. Or, as McNeil says, “eat your own dog food.”