Before Jon McNeill became CEO at the venture capital firm DVx Ventures, he served as President of Tesla and Chief Operating Officer at Lyft. At Tesla, he played a pivotal role in increasing the company’s revenue run rate from $2 billion to $20 billion within 30 months. At Lyft, he doubled the company’s revenue ahead of its IPO. Additionally, McNeill is on the boards of GM’s Cruise and Lululemon, among other companies. With this impressive background, when he offers advice on building innovative companies, startups pay close attention.
During the World Business Forum in New York City this week, McNeill shared insights on fostering innovation, referring to a method Tesla CEO Elon Musk calls “the algorithm.” This approach, highlighted in Walter Isaacson’s biography of Musk, revolves around radically simplifying both goals and processes.
McNeill’s key lesson: Begin by defining the problem you aim to solve, then target ambitious, transformative goals. “Order of magnitude big,” he explained.
He recalled Tesla’s “production hell” in 2017, when the company faced bankruptcy and needed to boost digital sales of the $100,000 Model S by 20x. Tesla streamlined the online car-buying process from 63 clicks to 10, simplifying both the user experience and supply chain.
McNeill’s message for startups?
“The answer isn’t ‘No,’ or ‘It’s crazy.’ The answer in innovative communities is: ‘I have no idea how to do that, but we’ll try.’”
Five Steps of Innovation by Subtraction
- Question Every Requirement
McNeill asserts that only the requirements of the law and the requirements of physics are genuinely essential. Everything else should be examined and challenged.
Jon McNeill highlights the dangers of unexamined processes in large organizations, where ideas that begin as helpful can evolve into rigid “requirements.” Elon Musk’s approach at Tesla encourages questioning these assumptions, discerning real needs from inherited rules. McNeill’s process for innovation emphasizes five core steps:
- Question Requirements: Confirm which steps are necessary by scrutinizing if they’re essential or simply customary.
- Delete Non-Essential Steps: Track processes meticulously, removing steps that don’t add value for the customer. If you don’t cut at least 90%, keep refining.
- Simplify and Optimize: Go back to basics when necessary, as Tesla did by hand-assembling Model 3s to identify improvement areas before reintroducing automation.
- Prioritize Speed: Once simplified, apply speed to stress-test the system, revealing inefficiencies and increasing cash flow.
- Automate Last: Only automate a fully refined and scalable process to ensure it remains adaptable.
McNeill’s additional principles are cultural touchstones: a holistic view of the customer journey (like Tesla’s Supercharger network for EVs), a focus on urgent priorities, and a commitment to experiencing the product firsthand—ensuring alignment with customer needs. Together, these principles lay a foundation for streamlined, customer-centric innovation.
