Earlier this year Tesla CEO Elon Musk made a visionary move. In June, Musk announced that his electric-car company will no longer enforce any of its patents, effectively making the company's patents open sourced.
While Musk’s stated reason for the policy shift is to promote “ the advancement of electric vehicle technology,” business analysts suggested that it was an economically necessary maneuver for the company. Why? Because the most valuable part of Tesla right now is its battery technology -- not its actual cars. Without widespread adoption of this zero-emission technology, the electric-car industry will remain a niche business and the demand for Tesla’s batteries will never be large enough for the company to scale in a significant way.
As any entrepreneur with a growing business knows, long-term success is all about scaling.
Tesla’s bold move this summer offers a helpful illustration of three key factors that owners of small businesses should pay attention to if growth is desired:
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1. Understand the context the business fits into.
While working for McKinsey, I often used matrices to understand a business problem. One of my favorites had on one axis the quality of a company and on the other the attractiveness of its industry or geographical region. Businesses in the upper-right corner (a strong business in a great industry) will excel and businesses in the lower left (a weak business in struggling industry) will fail.
But the more interesting ones lie elsewhere on the grid. For example, in 2008, someone could have had the best-run real estate agency in the country and still struggled. In 1998, a mediocre dot-com startup could have made millions (for a while, at least).
Musk recognizes this: Tesla's industry is weak. By making a move to beef up the industry, he’s giving his business its best chance at long-term success. Small-business owners should take note: Sometimes the best move is not to improve operations but to market to a new clientele.
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2. Turn to resources beyond in-house staff.
When I joined my current company, Insureon, it didn’t even have a logo, let alone a graphic designer to create one. So the company turned to the crowdsourcing design site 99designs. Too often, small businesses get caught in the trap of thinking that the only resources they have are their employees. But employees are too expensive (and too much of a financial commitment) for many small businesses.
Luckily, the sharing economy means that small businesses have thousands of resources at their disposal (including web designers, IT programmers, call centers and sales resources) on an hourly basis.
Tesla is doing the same thing. Putting the company’s patents out there is akin to saying, “All right, everyone. Show us what you’ve got.” The company is inviting the best engineers and innovators in the world to apply its technologies and help the whole industry grow.
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3. Learn the interplay between metrics and delegation.
Most small-business owners recognize that they can’t grow without delegating but still have a tremendous amount of difficulty letting go of control. Some of that trouble comes from fear: How can an entrepreneur know whether her business is running properly if she’s not running it herself? This is where metrics come into play.
The team at Tesla no doubt spent many hours discussing whether to stop enforcing its copyrights and probably pored over industry data: who was buying electric cars, how much they were spending and how fast demand was changing. When it became clear that Tesla couldn’t grow the industry on its own, the decision to delegate the industry’s growth was likely easy: It was the only thing that would enable steady future growth.
Small businesses have different numbers to crunch when they consider delegating: They need to delegate in such a way that their teams deliver the impact necessary to support the business’s expansion. If a business owner can quantify that impact with five to 10 daily or weekly metrics, it’s much easier to see whether a new leader is delivering.
That’s why using big data is so important for small businesses: Culling and organizing data from the company is a direct way to take the guesswork out of delegating, making it easier to measure success and adjust course as needed.
The bottom line: Launching a business requires laser-tight focus on making the business work. Scaling up, on the other hand, requires stepping back to consider the big picture.
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