“Lessons from Tesla: Revolutionary Production Processes and Innovative Leadership for Companies to Learn”

In no other German company are the production processes so efficient. So what should companies learn from Tesla?

“For years, many German companies have not considered questioning the product and the production processes and fundamentally changing or improving them – this is now beginning to take revenge,” says Thomas Schulz, management consultant, expert and author of the book ” Step by step to the North Star”. The method he uses for this is used, among other things, by Mercedes-Benz applied. He therefore knows exactly what German companies think of Tesla urgently need to learn now.

Tesla brought the third revolution to the automotive industry

Quite a few market observers are surprised at the billion dollar valuation of Elon Musk’s electric car manufacturer Tesla – after all, this exceeds the value of all other car manufacturers combined. But Tesla is far more than a successful producer of e-cars, because the innovative strength of the US e-mobility group goes far beyond mere production. In addition to electric cars, the Texan company under Elon Musk now also produces battery storage and solar systems all over the world, with more and more new product launches and innovative development and manufacturing processes.

The global company has reached such a level of innovation that the competition in the form of the traditional automotive industry will not be able to keep up with Tesla for the foreseeable future. However, the secret behind Tesla’s success does not lie solely in innovative production techniques such as the die-casting process or in the newly created gigafactories – rather, the decisive competitive advantage is the result of Tesla’s leadership and the way of rethinking processes and solving problems and challenges.

How Tesla improved its process flow and productivity

With its innovative approach to production, Tesla has shown that there is a new generation of production processes. The degree of innovation at Tesla is so high that the classic car manufacturers will not be able to keep up with Tesla in the foreseeable future in terms of productivity, employee time per vehicle (HPV) and throughput time.

An important aspect of this is Elon Musk’s First Principle Thinking. This is a method of thinking that breaks down a problem to its basic principles and assumptions. This method enables innovative solutions to be found and production processes to be optimised. One example of such an innovative solution is the manufacture of the underbody using die-cast aluminium. The rear frame for the Model Y is manufactured in a single component. This procedure replaces 171 parts and more than 1600 welds with one component compared to the previous Model Y. This saves an enormous amount of effort and costs in the production of the vehicles.

From the start, the Texas automaker has moved away from traditional paradigms in vehicle construction and instead pursued an innovative approach in which process time is close to lead time. This also includes consistent support and preventive maintenance of all manufacturing and production systems in order to increase system availability to almost 95 percent. After reducing the losses, Tesla will gradually reduce the production cycle from the current 45 seconds to 44, then 43 seconds. These are the milestones to reach the number of 10,000 vehicles per week. No Tesla competitor can match these values!

At Tesla, manual processes are constantly and systematically improved

The Tesla strategy is to reduce and simplify the individual vehicle parts while improving product quality. This leads to a constant improvement in productivity (vehicles per employee-hour) and a gradual reduction in automated and manual work content.

The entire potential of the employees is used by actively involving them in the continuous improvement process. This is done by constantly looking for the greatest waste in each process and by finding solutions that reduce waste such as unnecessary movements, excessive distances, idle times and, in the best case, eliminate it. The key success factor here is management that constantly encourages its own workforce to identify waste and losses and to contribute their own ideas.

Tesla, for all we know, has decentralized decision-making and has cross-functional, self-organizing teams known as the “full-stack.” These teams have all the necessary expertise within the team and can bring in additional experts if needed. Decisions are made without central coordination, allowing teams to act quickly and flexibly without having to wait for manager approvals or approvals.

At Tesla, neither middle nor top managers have to make decisions in areas in which they do not have the necessary expertise. There are no lengthy meetings or compliance processes to approve the budget. If feedback or approval for a new product is required, a response from management is guaranteed within the hour. Additionally, Tesla encourages all employees to share their ideas and concerns directly with management, including Elon Musk. There are no restrictions on communication with managers and any restriction would be grounds for termination – a leadership culture that has remained largely alien to many German automakers.

How Tesla became so successful with its high pace of innovation

Another important reason for Tesla’s success is the rapid implementation of software and hardware optimizations. In contrast to traditional car manufacturers, who often only carry out a facelift of their current model after several years, Tesla has chosen an unconventional approach when developing its vehicles: Tesla installs technology in the vehicle that continuously improves the car through software updates.

This requires an integrated and centralized IT architecture and an approach where vehicles are built around a computer. This approach has a major advantage for the consumer, as they always own a nearly new vehicle, regardless of how many years they have been driving it. It’s almost as if the vehicle just doesn’t want to age – a Dorian Gray of the automotive world with many mysteries. For this reason there are no Tesla model names and no year of manufacture, but each car has a specific software version that describes how up-to-date it actually is. The software version describes what the car can and cannot do, and not the year it was produced or the hardware and software it had on that day.

Tesla has thus proven that not only can production be continuously improved in this way, but that emerging customer requests can also be integrated into production at any time without having to go through lengthy adjustment processes – an approach that not only German companies are currently a long way from.

Conclusion

In summary, Tesla after flow production (Henry Ford/ first revolution) and the Toyota production system (second revolution) with the Tesla Gigafactory production system (process time equals almost throughput time!) implemented the third revolution in the automotive industry. However, the innovative power of the company goes far beyond mere production. The company has not only proven that it is possible to continuously improve the product and production processes, but that it is also possible to stay innovative and flexible in a highly complex and regulated field like the automotive industry through a decentralized leadership culture.

Tesla has also shown that flat hierarchies and the promotion of employee participation in decision-making processes can be a successful approach. German companies should therefore be inspired by Tesla, especially in the areas of production processes, management and goal orientation, in order to maintain and expand their competitiveness in the long term.