Tesla’s agile obsession and how software principles are eating car manufacturing
This was first published in my newsletter, Velocity Agile. Subscribe to get new posts and interviews about agile every month, direct to your inbox.
Did you know that Tesla uses agile principles? I did not, until I came across a number of interviews with Joe Justice, who was hired to help Tesla improve its agile approach. He offers a fascinating insight into how agile and software thinking more generally has been applied to manufacturing at Tesla, a company that has brought such innovation to car making. It has many lessons for all of us working with Agile.
First, why are Tesla doing agile? Ultimately, as with everything else at Tesla, the goal is to increase the pace of innovation. Musk believes that the pace of innovation is the only thing that matters in the long run for companies, and is always at risk as a company scales up. As a result, this is what he optimises Tesla for in terms of processes.
How is the pace of innovation measured? Joe Justice tracks it as the speed at which you can deploy changes to the product that will reach customers. Interestingly, this is what he refers to as a sprint, rather than a timeboxed event. At Toyota, this cycle is approximately two years. This is because of the vigorous quality testing cycle and the effort to complete this, meaning they are extremely careful about making changes, and only implementing them after lots of manual testing. At Tesla, this is now a matter of hours. That’s right — every few hours the Tesla being produced is different from the one before it.
This is a monumental feat that most software companies would be proud of, nevermind producing hardware. So how do Tesla do that? Firstly, the car and the factory is architected with software principles in mind to allow for complete modularity. This stops dependencies getting in the way of making changes to either the product or the factory.
Each car is built to be able to be changed individually too, rather than batch processing. Each car has a digital twin, making it a unique item that can be individually tracked. This prevents the challenges around only being able to make changes between batches that may otherwise be experienced.
With different parts of the car and factory able to be changed individually enabling quick changes, the key is to effectively test any new changes to ensure safety and regulatory compliance as quick as possible. This I believe is Tesla’s real competitive advantage.
Tesla has invested so heavily in automated testing to cover all regulatory and safety requirements, except for physical impact testing. Rather than having a human involved in the test, running these as automated tests means feedback can be provided in a matter of minutes, rather than days or months. This testing suite, known as factory mode, allows for incremental changes to be pushed to production quickly as the cost of testing is so small. It also means that quality never slips in pursuit of speed.
Coincidentally, factory mode was so effective as software that it became the basis for the self-driving AI that Tesla uses today. The automated testing suite became a product itself!
Tesla also offers a radically different way of organising its people. When going to work at the Tesla factory, according to Joe Justice, there are no set teams for the engineers to be part of. Instead, there is the ‘Law of Two Feet’ — which means that you stand whether you are most valuable. Every day, teams form around the critical issues that need to be solved with whoever has the relevant skills and experience. The team continues to work on the problem until it’s solved and changes are pushed to production, before disbanding and moving on to new challenges. This ensures that people don’t get stuck in silos and are always working on the most important issues.
There is also very little hierarchy with the company. Essentially all engineers are at the same level, and all report to Musk, the flat emperor. This prevents bureaucracy and layers of decision makers forming, which gets in the way of being able to solve the problems at hand. Even Musk famously gets his hands dirty with solving the critical problems for the company.
The way Tesla builds cars is radically different to any other method that I have seen, particularly for hardware in a regulated industry. It’s something I will be looking to borrow from when working at Babylon. Let me know whether you’ve been inspired to bring any of these methods back to your company!
A special thank you to Joe Justice for sharing his experience so openly in numerous public interviews, which has formed the basis of this newsletter.