Steve Jobs gets a lot of credit -- deservedly so -- for making some of the most iconic tech products of the last 40 years and turning Apple (AAPL 0.51%) into the most valuable public company in the world. His ability to see how Apple could make technology accessible and his obsession in controlling the entire technology ecosystem is uniquely Jobs. But it shouldn't be forgotten that it was really Tim Cook who made the vision a reality.
Jobs' story has a lot of parallels with Elon Musk, who has made Tesla (TSLA -3.40%) into the visionary company upending transportation and energy. He's given electric vehicles a viability they've never had and is now spreading disruption into semi trucks, solar energy, and energy storage. What Musk lacks today is his own Tim Cook, someone to take that vision from Musk's head to the production line. That could be a fatal flaw in disrupting the world.
Image source: Tesla.
Jobs had the vision, but Tim Cook made the iPhone happen
One of the underappreciated reasons the iPhone is the global phenomenon it is today, and the profit machine it is for Apple, is the product's supply chain. Apple designs the iPhone and all other Apple products, but contracts most of the supply chain. Scarce parts like memory and screens are secured from suppliers directly, sometimes years in advance, and assembly partners like Foxconn assemble the components into the iPhone. The complex process is like a symphony of disparate suppliers that are shipping parts around the world -- and Tim Cook is the conductor.
The real genius of Apple's supply chain is that the company can lean on its suppliers to build the manufacturing capacity Apple uses to grow. Cook doesn't have to build a Gigafactory; Foxconn does that for him.
It's hard to appreciate how important Cook's role was in launching products like the iPhone and iPad, which ended up revolutionizing how we use technology. If quality control wasn't right, the products could have gotten a bad reputation. If store shelves were understocked, customers could have gone elsewhere, and if they were overstocked, Apple could have been in a world of financial trouble. Inventory management is a knife's edge, and Cook has been the one walking that edge at Apple for nearly two decades.
Where is the operational excellence at Tesla?
There's no question Musk can design the same kind of amazing products that Jobs once did, but he hasn't proven the ability to produce those products on a mass scale or even industry standard quality. I think that is largely because there's not someone filling Tim Cook's role at Tesla.
Instead of sleeping on the production floor, something Musk likes to brag about, he should be laying out the strategy for Tesla and nurturing its culture and brand. An operational leader should be the one building an efficient manufacturing facility that can churn out cars, batteries, and solar panels with world-class efficiency.
If reporting on Tesla's operations is true, Tesla hasn't done enough of the hard work of building an efficient operation that it can build on. Workers putting parts on cars by hand, raw materials laying around the factory floor, and a production line moving at a snail's pace after the Model 3 is already launched aren't signs of an efficient operation. They're signs that Tesla is figuring out operations on the fly.
Tesla's inefficiency in operations isn't hyperbole, either. Inefficiency can be seen in inventory turns, which measures how many times inventory is turned into sales each year. You can see below that Ford (F 6.10%) and General Motors (GM 1.98%) both turn over their inventory more than twice as fast as Tesla.
TSLA Inventory Turnover (TTM) data by YCharts
Tesla's manufacturing strategy seems to be problematic as well. Rather than planning out the supply chain ahead of time, Musk tends to lean on suppliers to make up for Tesla's shortfalls. Panasonic is the company really providing the technology and expertise to run the Gigafactory, and it was Panasonic that was brought in to save SolarCity's solar manufacturing operations as well.
Tesla's operations need help
As Bloomberg recently reported, Tesla is burning nearly half a million dollars in cash every hour, an unsustainable rate for any company. Its operations have to be improved to become a profitable company and live up to the hype it has generated thus far. I think that means Elon Musk needs his own version of Tim Cook to run Tesla's operations.
It's not unusual for successful companies to have both a visionary leader and an operational guru making the vision come to life. The qualities that make one successful rarely overlap into the other, which is why these relationships are symbiotic.
Today, you could argue that Apple's visionary/operational leadership has flipped from the Jobs days. Cook is an operational guy at the top, and he leans on Jony Ive and Craig Federighi to come up with the visionary products and technologies the company is making.
Tesla has the chance to be one of the most revolutionary companies of the century. If it can't get its operations right it may miss that opportunity, which would be a loss for all of us, not just investors.
