Tesla, A Better Nervous System
Our nervous system is managing everything in our bodies for free and unnoticed. The steering, control, and execution of every function in our body is managed perfectly well, but we take it for granted. If it does not work, nothing works. We underappreciate its literally essential service and only become aware of it if it does not work in a proper way anymore. This is a description of having a disease that is because of a systematic failure of a complex system — usually chronic and lasting. Yes, you can have a short-term nervous breakdown, but a systematic nervous system failure is not going away easily, if at all. This is true for our body, and it’s true for an enterprise.
I suffered from a badly working nervous system in the first 20 years of my life and was severely ill during my entire childhood, which was painful, but my life. It took me many years to understand it’s not normal, and later I became aware of what a blessing our bodies are and how grateful we should be for a system most humans do not even know exists, or where it can be found. A system failure expressed itself in many dysfunctions affecting all that I did, anytime and anywhere. It was bad — really bad.
The same happens when a nervous system in an enterprise fails or does not work in a proper way. It is bad — really bad. The nervous system of a company is its enterprise software. It controls, plans, and manages various functions and makes sure everything works together. If it doesn’t, the enterprise will not be efficient and it’s only a question of time until it disappears. Enterprise software is one of the secret functions in a company — most are not really aware of how it works or where it can be found, but if it isn’t working well, the future of the company is at risk.
Because most companies are not software design and development organizations, they try to find solutions they can buy off the shelf that enable them to be successful and grow. Even software companies often buy external enterprise software, because the cost to develop, maintain, and adjust it yourself over time is high, and if you have only one customer for it, your own organization, it’s hard to justify.
Tesla CEO Elon Musk:
“We are not dependent on enterprise software. For those who understand, that is a very big deal. My hat off to the great work of the internal applications team. They write the nervous system, the operating system, the Tesla company operating system. Extremely fundamental!”
The nervous system or enterprise software used in literally all companies of the world is like conventional clothing compared to tailor made. Sometimes it does not fit as it should, and as a result, functionality is limited. If your body is slightly different than the norm, which is a positive in business, it does not fit at all. Most of the world still buys enterprise software off the shelf, because it’s affordable. If you tailor it for yourself, in most cases it will still not fit, because you are not a professional tailor.
Conventional enterprise software is made from companies for companies, thus is called business-to-business (B2B) software. It is big business. In my professional career, I was lucky to be responsible for deals up to $200–300 million in this industry. Money does not necessarily make a product better, but it attracts a lot of interest, people, and inefficiencies. In particular, inefficiencies are a huge issue.
The reason why companies like SAP or Oracle are able to ask for such incredible amounts of money for their enterprise software solutions is because, without a tailor-made nervous system, your company will not work well. Parts of the body will not interact as needed and will fail. That allows them to literally blackmail the largest organizations in the world, and they do it legally. The best of it is not that it’s legal blackmail; the best is they sell you a product that does not really fit your needs because it is not tailor made. Companies buy it anyway because of missing alternatives and try to customize it later to make it somehow fit.
Enterprise software manages the supplier relationship, the financial and goods workflow, as well as customer relationship management and everything else. It does the planning, the execution, and controls what is happening and what should not happen. Without enterprise software, your company will not work.
In 2013, the CIO of Tesla, Jay Vijayan, confirmed that most of the company software is homegrown. With increased vertical integration in recent years, it can be assumed that today almost all operations within Tesla are managed with in-house solutions. 20 years of my professional life, I worked for enterprise software companies, but I have never seen an organization like Tesla that developed everything on its own. Even software companies that develop parts of enterprise software buy external solutions, as the complexity and costs associated with homegrown software are high. It is an adventure and a risk no other company I know is willing to take. The reward, if you succeed, is very high, though, as the flexibility, competitive edge, and intellectual property can’t be copied from anybody else. You create a competitive moat, making it harder for others to compete with, for instance, your pace of innovation.
Why is enterprise software important? Why does it matter at all? Without enterprise software, you have no rules for how a process should be executed, and everybody in the company could invent their own way to run it. That is not necessarily bad, but it is chaotic, like someone who has lost the ability to plan, learn, improve, and remember. Good processes that have proven to be successful will be forgotten and redefined by personal motivation, not what is good for customers and the company. Enterprise software is a memory of what works and an automation to add efficiency to it. It allows employees to focus their energy and brain capacity on parts of the business that software is not yet able to run.
A company without enterprise software is like a country without laws, regulation, and control. Everyone makes everything how he or she likes it, but nothing works. It’s a failed state.
Tesla’s enterprise software is the secret sauce that makes the difference, and no other company is able to copy it. While most competitors of Tesla are automakers, they should be software companies.
Herbert Diess, the CEO of Volkswagen Group, understands how critical it to master software for battery electric vehicles, but for enterprise software, they buy everything from SAP and have to comply with pre-defined processes and enormous costs.
“Are we becoming the provider of some sort of shell, a body equipped and powered by someone else’s computer, or are we capable of turning this exciting, valuable device into a real Internet device?”
Volkswagen and most other manufacturers are on an accelerating path to become the providers of some sort of shell, vehicles, and won’t be able to keep pace with Tesla’s pace, flexibility, and innovation because they do not develop their own enterprise software.
Software eats the world.
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