Will Tesla’s Battery Day Reveal Of A $25,000 Vehicle Be On-Time?

Telsa once again touts that it will deliver. After a delayed start at Battery Day this afternoon, Tesla revealed multiple, exciting announcements including plans to slash battery costs and the hopes to dramatically improve sustainable energy generation, e.g. 10 gigawatts worth of energy per year in 2021 — which is 100x more than Tesla’s current production – and 3 terrawatts by 2030. Tesla also expects to have an unnamed, electric, autonomous vehicle on the market for $25,000 by 2023. In a recent interview, Tesla suggested that it keeps beating the competition in electric vehicle (EV) range via its “… stay-in-control approach, in which it builds most of what it needs rather than source items from a supplier …”

Will they deliver on-time? Good question.

Many automotive projects seem to be delayed: slow requirements followed by mediocre project management that spills over into chaotic launches. Every time. If the project manager was Bill Murray or Andie McDowell, this would read like a movie script sans the happy ending. For manufacturing plant managers, though, it plays out more like a horror flick: the audience watches a seemingly sophomoric victim back into a predictably bad situation and then gets viciously attacked for their ignorance. The software has major defects, a supplier cannot ship on time, and the prototypes are non-functional.

Why is this situation so pervasive? A 2014 reviewed 10,640 projects from 200 companies in 30 countries and discovered that only 2.5% of the companies successfully completed 100% of their projects. A 2011 Harvard Business Review study analyzed nearly 1,500 IT projects and found an average overrun of 27% with one in six projects having a 200% budget overrun and an average overrun of nearly 70% of the original schedule. Not so arguably, even the vaulted Tesla with its touted in-sourcing isn’t one of these “best 2.5%” since they certainly have delivered late repeatedly, e.g. the Model 3 arriving two years past projections, the “feature complete” Autopilot still awaiting the beta version (*whatever that means).

In the end, mediocrity in delivering appears to come down to three failures: the wrong incentives, the unmeasured road, and the cumulative inflexibility.

The Wrong Incentives

For the vast majority of sourcing deals in the automotive industry – and, yes, Tesla DOES source some systems — the primary deciding factor is cost. Not total cost, mind you. Just the obviously priced items: piece cost, tooling costs and engineering development charges.

“Tell me how you measure me and I will tell you how I will behave. If you measure me in an illogical way… do not complain about illogical behavior…” —  Dr. Eli Goldratt

Such measurement leads to cost cutting behaviors without considering the costs of on-time delivery, quality and functional safety. Suppliers outsource embedded code, cybersecurity or system qualification and hope for the best. This leads to communication issues across oceans and time zones, uncoordinated scheduling due to unreliable or untrained resources, and a lack of understanding regarding proper engineering diligence.

Yes, some manufacturers require Assessments for various engineering practices within their Terms and Conditions. And some oversee these behaviors throughout Widget Generation 1.0’s life cycle. But only a few exclude or significantly downgrade the egregious offenders for Generation 2.0’s sourcing. And if the switchover costs are too exorbitant, the dysfunctional supplier will be sourced anew. The “low cost” bidder persists without true evaluation of the full costs.

The Unmeasured Road

In days of old, road trips were filled with inquiries from the backseat along the lines of “Are we almost there?” Now we nostalgically chuckle at the parent’s answer of “We’ll get there when we get there” and think how antiquated that answer (and the associated “stay the course” stubbornness within a traffic jam) seems given Garmin
GRMN
or Google Maps. We had no idea when we’d truly get there, and could not easily revise the plan.

This 1980’s bumper-to-bumper hell is perfectly analogous to many development teams. The customer and project manager initially ask the software developer, “How long will it take?” The answer is inevitably some round number such as “two weeks” or “six months”. Then, after some period of time, the customer asks again how it’s coming along and the answer is, “We’re almost there” or “It should be close.” However, frequently the project manager doesn’t understand how to measure progress against the overall effort and gauge both the percent complete and the projected time of arrival.

Yet, there’s always a sincere belief that completion is imminent. Why? Humans (and animals!) have an innate psychological effect called Optimism Bias. As stated well by Kendra Cherry, “[Optimism Bias] leads us to believe that we are less likely to suffer from misfortune and more likely to attain success than reality would suggest … and is a [defense mechanism] that is often referred to as ‘the illusion of invulnerability’, ‘unrealistic optimism’ or ‘a personal fable.’” The team believes the company will succeed because it always has. Except it hasn’t. Only 2.5% have. The executives will just find a way to make Generation 2.0 look inexpensive.

Garmin looks at the roads ahead, calculates the historical efforts on those segments, and continually updates its projection of an Estimated Time of Arrival (ETA). It doesn’t just hope for a desired ETA and inform the driver at the last second that “Whoops, we didn’t make it. In fact, we cannot say for sure how late you’ll be now.”

The Cumulative Inflexibility

To know if that plant manager will be watching the proverbial horror flick, there needs to be an understanding of the revised destination after a prolonged sourcing process and [usually moving or ill-defined] requirements.

Revised? Yes. If that word sounds misplaced – especially in the hours after Offer and Acceptance have just been consummated – it’s probably because there’s a mental model within automotive that “It is what it is, and now we just have to deliver.” However, that’s not what leads to successful conclusions – either for the manufacturer or the end user. Having an understanding of reasonable capability, prioritization and cooperation allows the customer both flexibility and inspection while the supplier gains predictability and order.

The inevitable questions always surface from the executives: “If I accept only what they tell me is possible, won’t that lead to mediocrity? Don’t I have to push them? If the measure becomes delivering on-time, won’t that lead to sandbagging and under-promising rather than stretch goals?” The simple answer: no. There are ways to use Earned Value or Agile Development’s velocity to inform all stakeholders and yet, in the midst of what’s possible, push for competitiveness. The historical, cultural mentality only leads to mistrust issues and team dissolution. Approaching the situation with a lack of trust will, in the end, get non-trustworthiness.

Author’s Note

In another recent Forbes article it talks about three ways to avoid bias in decision-making: decision quality, hypothesis testing and the five why’s. In summary, organizations should break down problems into essential pieces (e.g. all of the hidden costs of Costs of Goods Sold), create a ways to measure success and then adapt behaviors. In the end, they should base sourcing upon the current quote for Generation2 and a multiplier of the hidden overruns from Generation1.

To again quote Dr. Goldratt – although this time from his gravestone – “Every situation – no matter how complex it looks at first – is exceedingly simple … [and] every situation can be substantially improved …”

Will Tesla actually deliver on time? Good question, but that situation can be improved as well.