Welcome to the OKR example series inspired by true stories from the business world. In search of an OKR example for a CEO? Here’s one inspired by Tesla CEO Elon Musk.
The Tesla Mission
Tesla was formed in 2003 with a mission that is clear, idealistic, and very ambitious. For the sake of the environment, the plan is to make the internal combustion engine obsolete. Or in the words of Elon Musk, they aim to make driving an internal combustion engine-powered car “feel like driving yesterday.”
But six years later the initial optimism had gone. By 2009 a weak economy, production delays, and severe cost overruns combined to place the company in deep trouble. Outsiders didn’t know it, but bankruptcy was on the cards.
Talking of that time, Musk admitted that Tesla was “operating with maybe one to two weeks of money.” On another occasion, he added. “Every day was like eating glass and staring into the abyss of death.”
Elon Musk becomes Tesla CEO
It was at this low point that Musk transitioned from being Tesla’s lead investor to the Tesla CEO. His quarter-on-quarter, evergreen objective became ensuring the company had enough money to survive long enough to release the Tesla range and sell enough vehicles to reach the promised land of profitably.
To achieve this and build the national infrastructure required for the electric car, Musk needed to raise an additional 500 million dollars of funding. To achieve profitability, Tesla would need to sell over four thousand vehicles per quarter. Finally, Musk needed to make sure outsiders never got wind of how dire the financial situation was for Tesla. If word got out, the storm of negative publicity was sure to scupper any chance of achieving the first two desired outcomes.
Summary of the Tesla CEO’s OKR
Objective: Avoid “the abyss” long enough to achieve profitability
We will survive by
KR1 : raising 500 million dollars
KR2 : selling 4000 units per quarter
KR3 : maintaining a positive PR media score
Musk set about achieving his KR1 by raising 40 million dollars from investors. The sale of 1000 battery packs to Daimler raised another 40 million dollars. Daimler would go on to buy a 10 percent stake in Tesla, which raised a further 50 million dollars. Finally, Musk overachieved on his KR1 by securing a 465 million dollar loan from the US Department of Energy.
Musk achieved his KR2 by taking the highly unorthodox approach of turning every employee at Tesla into a salesperson. He told them to hit the phones with the goal of either securing sales or to make sure customers who had already put down a deposit didn’t back out.
Finally, Musk secured his third KR by ensuring all cost-saving measures were cloaked in secrecy and misdirection. Perhaps the best example was claiming that factories were undergoing maintenance during the periods when they were actually shut due to a lack of funds to cover operating costs.
But did it work?
Musk learned in the expensive school of experience that “it’s hard to stay alive as a car company” – so hard that at his lowest point, Musk seriously considered whether to “let Tesla die” and save himself and others “a lot of grief and pain”. But his decision to believe in Tesla would eventually pay off.
May 8 2013 was the date Wall Street was stunned to wake up to the news that Tesla had posted its first profit of 11 million dollars against 562 million dollars in sales after delivering 4900 cars in the first quarter. From that point on, Tesla would go from strength to strength. Today an individual Tesla share costs over 700 dollars, the company employs over 70,000 people, and has an annual revenue of over 30 billion dollars.
Having gone to hell and back, Musk has the following Winston Churchill-inspired advice for CEOs who find themselves in the same boat, “when you’re going through hell,” he says, “keep going!”
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In this blog series, we will be looking at the potential return on investment from implementing Objectives and Key Results (OKRs). Across 5 articles we will look a how the different characteristics of OKRs drive return on investment (ROI). In this second article, we will review how measurement drives performance.