TLAO Newsletter #45: Elon Musk’s Process Improvement Philosophy

The one resource I saw over the past two weeks I can’t get out of my head is this video of Elon Musk describing his systems improvement process. It’s short, only two and a half minutes in length, but incredibly insightful. 

When I think of process improvement, my first thoughts are automation, simplification, and just going faster. That’s the basis of process improvement and we should always start there, right?

Wrong! My lightbulb moment was Elon describing why starting with those steps is a mistake. His five steps summarized from the video are:

  1. Make requirements less dumb. Your requirements are definitely dumb. They are particularly dangerous if a smart person gave them to you.
  2. Delete the part or process. If you’re not periodically adding processes back after having deleted them, you’re not removing enough. Don’t add requirements just in case, don’t hedge.
  3. Simplify and optimize. Don’t optimize what shouldn’t exist, complete steps one and two first.
  4. Accelerate cycle times. Only go faster once the first three steps are complete, don’t dig your grave faster.
  5. Automate. But only automate after completing the prior four steps. Do not complete these steps backwards.

Every single Think Like an Owner podcast guest talks about process improvement in their company. The podcast itself has undergone substantial process improvement, and has a ways to go. I’m testing software that can entirely remove certain steps involved in producing a podcast. It should reduce costs and labor, resulting in a more efficient system.

One process that’s had substantial improvement over the last year is audio editing. Audio editing has been handed off to Mathew Passy resulting in a better process because it: 1) Frees my time, deleting a process on my end; 2) Sends the task to someone with a better process for completing that task; 3) Accelerates cycle time of producing a podcast since he’s faster than I am.

But outsourcing isn’t the silver bullet for process improvement. Sometimes it’s easier to just outsource an unnecessary process instead of deleting it altogether, especially if we’ve been doing that process in our business for a long time. Worse still, outsourcing inhibits our vision into that process, hampering our ability to think critically about the process itself and make improvements.

Perhaps I should be starting with the first step, make my requirements less dumb. Take transcripts for example. The vast majority of listeners never open the transcript, they’re the second most expensive piece of content to produce besides the episode itself, and adding them to each episode is a very manual process. Clearly I should simplify my production process and eliminate transcripts, currently a requirement of mine for producing a new episode.

But on the other hand, those with hearing impairments and folks who enjoy searching through an episode for keywords of topics benefit tremendously from transcripts. Should I be optimizing a process that’s mostly unnecessary for the sake of a few listeners. So far my answer has been yes, but Elon’s thoughts really make me think about what processes I run in my business that should be cut entirely, rather than simplified, optimized, and automated.

What are your dumb requirements? What processes in your business do you need to delete?


Think Like an Owner Sponsors

Live Oak Bank – Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.

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Other Notes

  • I have the video for you if you want to nerd out about the impact of the US Interstate Highway System. The program’s impact is truly incredible. Early in the video they talk about how long it took to traverse the nation without highways. I won’t spoil it, but it was more than 60 days. Today it takes 42 hours. Talk about process improvement on a national scale!
  • If you found an interesting article, podcast, or interview that I missed, please let me know. I’m always looking for great content.

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