Ten years ago, Elon Musk signed off on a blog post by summing up Tesla's company strategy in five lines. In the decade since, he methodically checked each box. Here's what it means to build a company for the long term.
The Master Plan
Tesla's Secret Master Plan (2006):
- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options
Don't tell anyone.
He built the Tesla Roadster, which made way for the Model S (and slightly more expensive Model X) and now the Model 3. Over that stretch, the company developed electric power generation technology not only for vehicles, but also homes, businesses and utilities.
The temptation for a founder is to immediately aim for the level of ambition of Musk's end goal rather than draw guidance from his process for realizing it.
The Definition
Recursive Product Strategy: To work back from an end goal -- five, 10 or 50 years ahead -- until you can hit inflection points that propel your company and its customers to the next stage, while ushering both toward the end goal.
The Four-Step Framework
1. Pick a Universe to Dent
Universes are all different, but dents should always be noteworthy.
What Worked -- Gyft: Gift cards were a $125 billion industry, of which only 0.1% was digital. If we could grow that digital percentage to 10% over five years, we'd have a crack at making a visible mark on a huge market.
2. Swing a Wedge to Make a Ding
Before there's a dent, there's a ding. It takes heavy, persistent swinging to make a dent -- and for that, you need a wedge. It might be an unfair advantage, niche market or economy of scale.
3. Look to Adjacent Markets
One person -- and in most cases, one company -- can't swing hard or fast enough to create a big enough dent. Before starting, map out the markets where others might swing a wedge with you.
4. Each Swing Must Be Valuable in Itself
Your company can achieve incrementally and postpone end-goal gratification, but customers and partners must be rewarded with each swing.
Visibility, Not Just Vision
When building your company, think visibility, not just vision. How far ahead can you practically see?
| Stage | Visibility | Focus |
|---|---|---|
| Bootstrapping | Weeks ahead | Making payroll. Survival. |
| Raised capital | A year ahead | Milestones for investors. |
| Building a company | Years ahead | User experience and retention. |
| Creating an industry | A decade ahead | A new corner of a marketplace. |
| Impacting generations | Beyond your lifetime | People-not-yet-born using products-not-yet-made. |
The Core Insight
A recursive product strategy involves backing into the first step needed to build a long-term company. That is why a founder must identify her motivation from the start -- to determine if "long-term" means ten months or ten years.
The trick is to first pave the right length of runway -- and back down it in reverse.
And of course, as Musk said, don't tell anyone.