When a key executive leaves or steps down, most companies are incorporated to continue seamless and without interruption. This is certainly true of Fortune 100 firms which have a right of succession clearly demarcated and publicly known. However, in the case of Tesla Motors, with the recent ‘demotion’ of its founder, Elon Musk, the brand was synonymous with the man. This announcement has left many speculating. As of this posting both the business and the brand’s future remain unclear.
It is not the first time a major corporation has been closely associated with one person. There have been many precedents. A decade ago, Howard Schultz returned to Starbucks (the company he had led to major achievement) when his successor took the multinational brand to the brink of extinction. Policies Schultz presumably cast in stone had been discarded as executives eager to create their legacy overextended the brand’s reach. Starbucks exponential growth spawned the observation/joke that there was a Starbucks on every corner. Despite a dismal ROI, Starbucks stores proliferated like bunnies until the economic downturn of 2008 all but shuttered the chain. On the brink of bankruptcy, Starbuck’s board returned to the past to find its future and reinstated Howard Schultz as CEO.
Schultz returned to perform necessary housekeeping. He closed thousands of stores, and reined in the product lines which now included a line of less than popular ice creams (but they were delicious). Schultz refocused the business away from self gain to selflessness. The customer and the grower/suppliers were to be treated like gold, because they were the heart and soul of the Starbucks enterprise. A less dilute product line starring, would you believe, coffee was instituted. In addition, Starbucks initiated the paradigm shift towards providing superior customer service. Slowly, then in legions, customers came back.
Reboot What Worked
Customers returned to environments that were spotless, and ideal for socializing. The stores were now gathering places where everyone would be welcomed and treated as individuals with each and every beverage hand crafted one at a time. And what beverages they were! Exotic coffees were sourced across the globe and their growers were paid fairly. The massive, espresso machines with their precise, chrome-plated gauges cost if not a king’s ransom, then more than anyone’s first car. Attention was paid to the last little detail, and every customer complaint was addressed immediately. Within a year Starbucks stock had recovered, realizing gains of 143% YoY in 2009.
Schultz stayed on through 2017, but shortly after he passed the baton yet again, a racial bias incident once more caused consumers to question the brand’s sincerity. Following the public’s outcry, it was Schultz, not CEO Kevin Johnson, who appeared at a press conference to both apologize and set out steps to remediate bias across the chain. Schultz mandated that all the stores be closed for a day and the staffers ‘retrained’ to become aware of and sensitive to ‘unconscious bias’. He may not punch a clock, but to many Starbucks loyalists, Howard Schultz is Starbucks.
Did you think we were straying off point? The point is that Elon Musk is Tesla, Tesla is Elon Musk. This past week Musk agreed to step down as Tesla’s Chairman, yet is allowed to remain as the Company’s CEO. For those readers who are unaware, Musk was fined $40 million by the Securities and Exchange Commission (SEC) for a Tweet (yes, you heard right) that stated he was taking the company private and had the funding to buy out stockholders at $420 a share. When in fact, there were no plans in place, no investors, and no funding to buy out anybody. Both sides reached an agreement for Tesla/Musk to pay the fine but not admit wrong doing. This move ensured that Tesla stock, which dropped a significant 14% after the announcement, would eventually rally, and in effect, “the farm would be saved”.
Maybe Not Such a Bad Move…
As with Starbucks, Tesla Motors has had to step back from the way it performs daily operations, take a deep breath, and regroup- for now. Also as in the Starbucks scenario, Tesla had been teetering on the edge of the precipice for some time. The firm has not made a dime in 15 years, despite Musk’s repeated insistence that it is on the verge of doing so. This could actually be true in the near future. Across the globe there is keen interest in Musk’s Tesla Model 3 sedan, an electric car for the masses. Unlike Starbucks, however, where Schultz is the mastermind who guides and directs his former enterprise to greater success, Musk’s genius needs to be reined in at times. He is idea, not process-driven, and employs any means to achieve his intended end. Some of his upstart ideas, such as announcing what was essentially a hoax buyout, will not fly with the U.S. government not the SEC. And, for the public to buy the Model 3, first there must be a Model 3 in production. In short, the fines were seen as essentially a move to harness Elon Musk and to save him from himself. Don Quixote-like, the man does appear to tilt at windmills.
What happens next at Tesla Motors? Still in the picture at Tesla (he is the majority stockholder), but moved to the background, Musk is free to settle any stockholder lawsuits resulting from his Tweet. If this allows him any free time, he can continue to commandeer his vast technological empire, dividing his time between Tesla and SpaceX, his San Francisco Bay area enterprise which designs, produces, and launches rockets and spacecraft. Its goal? To enable people to ultimately reach and live on other planets. Clearly, Mr. Musk is not the entrepreneur next door. Back at Tesla, the goal for all concerned is for the Model 3s to roll off the assembly lines sometime in 2019. For a few years now,there have been charging stations at Interstate rest stops bearing the name ‘Tesla”. However this author has not yet observed a line of cars waiting for their turn to recharge.
Tesla always seems to be a company poised on the brink. From electric vehicles, and driverless cars, to SpaceX’s rockets to Mars, Elon Musk’s mind appears so diversified, that his two enterprises suffer. We propose that he continues as the resident genius at both or either, and allows new management to direct ONE project to completion. This way the enterprises associated with Elon Musk would leave the world of Buck Rogers and enter the stratosphere that the rest of us occupy daily: reality. If it takes a staggeringly high fine to mandate him to put on the brakes, then so be it. As for moi, I’m living for the day I can pull off I-95 and recharge my Model 3 -at a Tesla station of course!