Is Elon Musk using Lean Six Sigma to dominate his marketplaces?
In fact, how does Elon Musk make money?
When Projex Academy first started creating their groundbreaking Lean Six Sigma Masterclass, I was not thinking about Elon Musk.
Sure, I could see Elon was one smart cookie but I felt that also learning how traditional businesses were stuck in the mud, and looking at how their thought leaders turned the company around
I noted in the recent news that “Tesla to cut jobs as Elon Musk aims to make Tesla lean and hungry”.
Please note, Tesla is NOT “just a car company”.
First Principles Thinking – Lean Six Sigma.
Since then, I discovered that Elon Musk advocates First Principles Thinking. A first principle is a fundamental assumption that cannot be deduced further.
This approach involves breaking down complex problems into their fundamental components and building innovative solutions from the ground up. He emphasises reasoning from fundamental truths rather than relying on analogical reasoning.
Musk’s approach is grounded in facts, data, and science.
He questions everything and seeks truths that cannot be doubted or questioned.
By boiling down processes to their foundational elements, he arrives at innovative solutions based on hard data.
Elon Musk became super rich by honing the processes of product and service creation going on to create high-value products (and being paid with stock options rather than a salary!)
That struck a chord with me – Elon was harnessing Lean Six Sigma.
The competitive edge
Successful companies today gain an unbeatable competitive edge using Lean Six Sigma.
From the evidence, it is clear to see:
- “It´s poor processes that bankrupt organizations – not their people”.
- Zero in on your customers and marketplace, gather data on their needs and use that to determine the process measurements and improvements.
- Gather key data with the Lean Six Sigma five-step approach to gather data about your processes then use techniques to interpret it.
- Identify and tackle your current process bottlenecks, improve process flows, and get things done faster with less effort.
First, Think Lean
Lean thinking focuses on enhancing value for the customer by improving and smoothing the process flow and eliminating waste.
Sticking with car manufacturing for a moment. Henry Ford created the first production line, but much of the improvement has come from Toyota who built unfolds production ideas, moving from high volume, low variety, too high variety, low volume.
Although lean thinking is normally seen as a manufacturing concept, many of the tools and techniques were originally developed in service organisations.
You may be surprised to learn that it was a supermarket that helped shape the thinking behind the Toyota production system. Managers at Toyota visited Piggly Wiggly, an American supermarket and noted just in time and Kanban were both being applied.
This innovation enabled Piggly Wiggly customers to buy what they needed at any time and avoided the store holding excess stock. Piggly Wiggly was the 1st to introduce the concept of a self-service grocery shop.
Coming back to Toyota, they defined their lean approach very effectively:
“All we’re doing is looking at a timeline from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that timeline by removing the non-value added wastes”
So you can see that the lean approach is understanding how the work gets done, finding ways to do it better, smoother and faster, and closing the time gap between the start and end points of our processes.
Lean applies to any process – whether in the public or private sector, in service, transactional or manufacturing processes.
So, what is Six Sigma, and what does it bring to the party?
Six Sigma is a systematic and robust approach to improvement, which focuses on the customer and other key stakeholders.
Back in the day, Jack Welch said “We are going to shift the paradigm from fixing products to fixing and developing processes, so they produce nothing but perfection or close to it”
Sigma or standard deviation, is a measure of variation that reveals the average difference between any one item and the overall average of a larger population of items.
The goal here is to minimise variation, and these process Sigma values are calculated by looking at your organisation’s performance against the customer requirements.
Introducing Lean Six Sigma
As the title suggests lean 6 Sigma takes the features of Lean and Six Sigma and integrates them to form a superb set of seven principles which are:
Focus on the customer
The customers critical to quality (CTQs) describe elements of your service or offering but written in a way that ensures they are measurable, giving you the process measures you need to help understand how well you currently perform against these critical requirements.
Did you know that typically only 10% of process steps add value and only 1% of the total process time?
This potential waste is happening right now in your organisation.
By fixing these problems you are likely to win and retain further business and increase your market share.
Identify and understand how the work gets done
The value stream describes all of the steps in your process and by drawing a map of this, you can highlight the non-value-added steps and areas of waste to ensure the process focuses on meeting the CTQs and adding value.
Process stapling is one such technique that involves spending time in the workplace to see how the work gets done, not how you think it gets done or how you’d like it to be done.
In this way, you will be able to analyse the problems that you want to tackle and determine a more effective solution for your day-to-day activities
Manage, improve and smooth the process flow
This concept uses different thinking. Something that Elon Musk has done when advocating first principles thinking.
Also, the concept of pull, not push, links to understanding the process and improving flow. This is an essential element to avoid bottlenecks and overproduction since pushing things through too early creates waste.
Remove nonvalue-adding steps and waste
There are two broad types and seven categories of waste which I will not go into detail here, But the broad types of waste are:
- Overproduction
- Waiting
- Transportation
- Processing
- Inventory
- Motion
- Correction
Manage by fact and reduce variation
Here again, Elon Musk and his First Thinking Principles come into play. Managing by fact, and using accurate data, helps you avoid jumping to conclusions and solutions. You need the facts.
This means measuring the right things in the right way because data collection is a process and needs to be managed accordingly.
Using control charts enables you to interpret the data correctly and understand the process variation so you know when to take action and when not to.
Involve and equip the people in the process
Your people need to both feel and be able to challenge and improve their processes and the way they work. This is the only way if organisations are to be truly effective, but it requires different thinking if this is to happen.
Undertake improvement activity in a systematic way
DAMIC comes into play here: define, measure, analyse, improve and control. DMAIC is used to improve existing processes, but the framework is equally applicable to Lean Six Sigma. Where a new process needs to be designed, the DMADV method is used.
Less is usually more, tackle problems in bite-sized chunks and never jump to conclusions or solutions.
Take a bow Elon Musk
OK, since I’ve introduced DMAIC, I would like to briefly describe it as it forms the backbone of our Lean Six Sigma master class:
DMAIC
This framework begins with the identification of the problem and in the define phase describes what needs improving. Without data, this might be based on your guests of things, so in the measure phase, you use facts and data to understand how your process works and performs so that you can describe the problem more effectively.
Now you can analyse the situation by using facts and data to determine the root causes of the problem that is inhibiting your performance.
With the root cause identified you can now move to the improve phase, where you identify potential solutions, select the most suitable, and test or pilot it to validate your approach using data where appropriate.
You are now ready to implement the solution in the control phase. Here you will implement your solution, checking that your customers feel the difference in your performance.
You will need to use data to determine the extent of the improvement and to help you hold the gains as you don’t want the problem you’ve solved to recur.
With the right measures in place, you should be able to prompt new opportunities.
And this brings us right back to Elon Musk and how he makes his money!
Elon Musk’s leadership style is interesting and shows how he instinctively applies Lean Six Sigma principles to the running of his business.
The first obvious thing here is that Elon has hired the very best specialist individuals. By best I mean they have large brains and are very smart!
It’s a known fact that Elon Musk is not a fan of MBAs but rather heads up his company with outstanding engineers.
He also borrows from Agile.
His development approach certainly mirrors the use of short sprints that embrace continuous change to arrive at the optimal solution.
Looking at how he develops products, it is clear these are done by dynamic open and honest teams. Team members come up with new ideas on the fly.
Elon attends their development meetings sometimes, and when he does, he will ask pertinent questions ending with “show me the data”. If such data proves the point, Elon will enthusiastically agree. No power struggles or politics here!
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