It is amusing how polarizing Elon Musk is.  People either love him or hate him, for a variety of reasons on each side.  I’m in neither camp, but I have been quietly studying Mr. Musks’s businesses for two years now, reading every public description of his companies that I can get my hands on.  What I have found there is a distinct and unconventional pattern that has led to substantial commercial success in some of the most difficult market sectors (automotive, aerospace, AI, banking, and transportation infrastructure).  He seems to fly in the face of most of the conventional strategy wisdom that the gold-plated consultancies espouse.  Divergent viewpoints are always good to know.  Divergent viewpoints that create extraordinary success deserve an even closer look, and perhaps creative adoption in your own organization.

This is not to say that his businesses have not undergone challenges.  Quite the opposite.  It appears that almost every one have gone through multiple dumpster-fire, nuclear meltdown, seconds-from-impact style crises, only to emerge, intact, from the smoke to become a better, stronger firm.  Some of these were self-inflicted by an acid-bath management style that frankly defies description.  Musk’s firms will continue to make both positive and negative headlines in the media.  Again, none of this is the point.  The point is this: do Musk’s firms and the way that they are structured give us lessons on what all 2000-era industrial companies need to survive?

Let’s be honest about where we are now.  Most industrial firms are still run with a post-war blueprint, the primary difference today being the amount of information technology used to manage and optimize the firm.  Otherwise the methods, the strategies, the org structure, the operating principles, and the economics are the same as were prevalent in our grandparent’s day.  What does Musk do differently?

It’s a question that deserves a lengthy and detailed answer (that I am working on!), but here are some highlights to roll around in your brain in the meantime:

Vertical integration

In many of Musk’s businesses, he has brought core, critical parts into his captive manufacturing sphere.  In effect, he has shortened his most important supply chains to 0, all while improving quality and retaining design control.

An inter-connected conglomerate

Musk’s firms are 180 degrees opposite from the whole core-competence, stick-to-your-knitting philosophy.  He moved from Zip2 (online retail directories) to PayPal (payment services and banking) to SpaceX (aerospace) to Tesla (automotive) to The Boring Company (infrastructure) —all seemingly disparate firms in disconnected industries.  Yet he adapted cost efficiency from automotive to aerospace, then materials technology from aerospace back to automotive.  Hundreds of beneficial connections were made between and among the firms, many of them accidental at first, but later recognized and institutionalized by Musk and his management teams.

The Machine that Builds the Machine

Someone working for Musk made this very quote to describe the importance that he places on the processes and specialized equipment that is brought to bear on the making of the product.  Said another way, the factory and its design is just as important as the widget that comes out of that factory.  It is the reason that many of his manufacturing plants are in the US, close to his observing eyes.  Even his Tesla plant in China was done without a local joint venture partner, in a notable departure from common practice (and Chinese law).  Musk himself is very closely involved in factory design, layout, automation, and location.

Problem-Solving in the DNA

Musk is legendary for asking pointed questions in real time of company leaders and workers alike.  This was not to embarrass or one-up anyone, but rather his inquiries were all directed to solve various problems, even problems that were not yet recognized (”Why do we do it this way?”).  He is systematic in his quest for optimizing every facet of a company, applying a factory-like zeal for efficiency and throughput even in areas that are not factories (Twitter).

A Flat World

Musk clearly does not yield to hierarchy, titles, and job descriptions.  It is not unusual for him to gather a group of people—engineers, operators, managers, whatever—and march with them to the shop floor to fix a given problem of the day.  While that is an admirable “can do” character trait, the more important point is that he became adept at forming multi-disciplinary problem-solving teams in realtime.  Most firms that I observe are terrible at this, falling back on the Director of this, or the Manager of that to solve some pressing problem (or more commonly, ignore it).

In Closing…

I anticipate two reactions to my thesis here: 1) Isn’t this a return to the 1950’s, 1960s era management style of many companies of that period?  2) Can companies not run by Elon Musk adopt these kinds of approaches?

Yes to the first question, which I myself find a bit amusing.  Companies like ITT, Ford Motor Company, and IBM built vertically integrated manufacturing and service conglomerates that then fell out of favor with the capital efficiency crowd in the 1980s and 1990s.  But I will argue that the difference with Musk’s companies is that he more deliberately connects the firms together in intelligent ways that create a symbiotic supply and talent network that those firms were incapable of building.  Perhaps it is time to give “conglomerates” another look.

As to the second question, Elon Musk has the advantage of massive amounts of near-costless capital that he can throw at his businesses in creative ways.  Very few firms have that luxury.  Yet, if you look carefully at my list above, you will come to realize that these approaches do not necessarily require vast amounts of capital—rather, they only need deliberate and thoughtful design, coupled with an engineering mentality applied in a business context.

To my good friends in the Private Equity world, I have a special message for you.  Of any space in the world economy, Private Equity probably has the greatest opportunity to implement this new blueprint.  Good PE firms are thoughtful about their portfolio companies, and actively seek to manage it for value.  Truly great firms don’t simply passively rely on their management teams to devise innovative ways to run their firms.  Exceptional firms wire connections across the portfolio for a superadditive value effect.

There is much more to come from me on this subject of future blueprinting, as I go deep into firms that are teaching us the way there.  Stay tuned.