Before Jon McNeill was CEO of venture capital firm DVx Ventures, he was president of Tesla and chief operating officer at Lyft. He helped Tesla grow its revenue from $2 billion to $20 billion in 30 months, and he doubled Lyft’s revenue before its IPO. He is also a board member of GM’s Cruise and Lululemon, among other companies. So when he gives advice on how to build an innovative business, startups listen.

At the Global Business Forum this week in New York, McNeill presented ideas on creating innovative companies, a method Tesla CEO Elon Musk calls “the algorithm.” This approach, discussed in Walter Isaacson’s biography of Musk, emphasizes radically simplifying both goals and processes.

McNeill’s key lesson: Start by identifying the problem you’re solving, then aim for massive (not incremental) goals. “A huge order of magnitude,” he said.

He recounted Tesla’s 2017 “production hell» when the company, facing bankruptcy, sought to increase digital sales of the $100,000 Model S by 20 times. Tesla has reduced the 63 clicks to buy a car online to 10, simplifying both the process and the supply chain.

McNeill’s takeaway for startups?

“The answer isn’t ‘No’ or ‘That’s crazy.’ The answer in innovative communities is: “I have no idea how to do this, but we’ll try.” »

Five Steps of Subtraction Innovation

1. Question every requirement

The only requirements McNeill considers truly important are those of law and physics. Everything else can be pushed and pushed.

“When you have a large organization, things that started out as a good idea can become a rule, and then those rules can become requirements,” McNeill told TechCrunch. “And it’s almost like a tribal myth or a telephone game. And so (Musk) really wants to understand: Is this an actual requirement, or is this something that someone thought was a good idea and over time was codified into a requirement?

2. Remove every step from the process that you can

McNeill advises companies to track each process in a spreadsheet so you can identify only the steps that add value to the customer. Everything else they need to remove, with the caveat that they can always add some of these steps back if necessary.

“Until you have to add 10 percent more steps, you haven’t cut deeply enough,” he said.

To achieve this, managers must spend 20% of their time on the front lines, he said. If you’re the CEO of Starbucks, that means rolling up your sleeves and understanding not only how to make a cup of coffee from start to finish, but also understanding why your customers are frustrated with this process.

3. Simplify and optimize

In 2018, when Tesla was trying to find a way to speed up production of Model 3s, Tesla executive Jerome Guillen realized that Tesla had overautomated production. He said the company needed to get back to basics, and for him, that meant building a huge tent in which the team could build the cars by hand.

McNeill says Model 3s were built this way, manually, for months, which helped Tesla further streamline the production process when the team finally moved the line inside the main building.

“They were able to remove more than 50 percent of the steps because they had just optimized the process manually,” McNeill said.

4. Apply speed; maximize cycle time

“Simplification and optimization can really work in the fourth step, which is then applying speed,” McNeill said. “Speed ​​reveals all the weaknesses in the process.”

McNeill says speed matters more than ever today.

“When cash costs 5%, (simplification) accelerates your cash generation,” he said. “Cash velocity is truly the measure of elite players. »

5. At the very end, automate it

Only once businesses have simplified the process and truly understand the product and customer journey can they move to automation.

“Automation is like bolts in the ground,” McNeill said. “Once you start writing code, it becomes very difficult to unwind and replace it.”

“You automate to make it repeatable, and you automate to make it scalable, and you only do that when you have a repeatable, scalable process.”

McNeill’s three secret ingredients

In addition to the five lessons, McNeill provided three additional cultural principles.

The first is that companies should broaden their vision to include the entire customer journey or experience. An example? GM is really good at producing cars, and that includes its electric vehicles. But charging is part of the customer journey, something GM didn’t immediately realize. Tesla did this when it built its Supercharger network.

Its second ingredient is to inject urgency and accountability by identifying the two or three things that matter to a business at any given time. The CEO should be allowed to focus entirely on these things.

The third ingredient is to experience the product as your customer experiences it. Or as McNeill says: “Eat your own dog food.” »