The automobile industry is discovering it needs a master plan

The Apollo 9 rocket on March 3, 1969.
The Apollo 9 rocket on March 3, 1969.
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In 1962, US president John F. Kennedy set a course for the moon, initiating the grandest master plan in modern American history. Not that JFK (or anyone else) knew how they would do it, exactly. At the time, the US had logged just 15 minutes of human spaceflight. Yet over the next seven years, the Apollo space program directed $288 billion (in today’s dollars) and the energies of 400,000 people to put the first human on the lunar surface.

Far from command-and-control, the effort was inventive and improvisational. Engineers and managers had to scramble over unmapped terrain and solve unprecedented problems. On July 20, 1969, just over seven years from the day of Kennedy’s speech, they succeeded.

A new order was emerging, as a perceptive newspaper article (pdf; p 5) in the Denver Post captured that year—not just in government, but in industry. “American management has learned the value of planning five or 10 years in advance, whereas one year used to be the rule,” wrote the author. “Formerly many managers simply looked at the past and then projected on a straight line basis into the future.” Technology, they argued, had rendered that moot. Organizations needed to anticipate, and shape, accelerating trends.

Thousands of such master plans have followed since. One of the most famous is the 2006 “Secret Tesla Motors Master Plan.” It wasn’t much: just four short sentences. But it predicated a transportation future dominated by electric vehicles and clean energy, and Tesla’s catalyzing role in it:

  • Build sports car
  • Use that money to build an affordable car
  • Use that money to build an even more affordable car
  • While doing above, also provide zero-emission electric power generation options

As anyone watching the company knows, Tesla’s execution was a hot mess. It blew deadlines, burned billions chasing grandiose schemes (the “alien dreadnaught” factory), skirted bankruptcy, and provoked US regulators until they sued Musk. But its “secret” master plan never changed—and it paid off.

Elon Musk’s knack for drawing a line between physics first principles and popular products has allowed it to leapfrog a century-old industry and build the world’s most valuable car company. In July, Tesla’s market capitalization eclipsed Toyota’s for the first time. Tesla is now working on “Master Plan, Part Deux.”

Tesla’s roadmap, like Kennedy’s space race, conveyed certainty about the destination even when the details of how to get there were missing. Yet that is often the most effective response to short-term uncertainty and change, says Nicolaj Siggelkow, an economist and professor in the Wharton School at the University of Pennsylvania. Long-term planning around a vision liberates teams to change tactics without losing sight of the goal. Vision and planning is what separates the rhetoric from the real thing. “That’s what a master plan is,” says Siggelkow. “The genius is in both.”

Not that it’s easy. Most CEOs report feeling whipsawed by Wall Street’s obsession with short-term quarterly outlooks. In response, argues the consulting firm Deloitte (pdf), ”companies tend to hedge their bets by deploying resources in multiple areas with the hope that at least one bet will prove fruitful,” usually unsuccessfully. Even when companies do engage in the rhetoric of master plans, evidence suggests only a minority actually engage in meaningful long-term planning. “There’s no systematic research, but the feeling is that short-termism is rampant,” says Siggelkow. “When push comes to shove, it’s the short term that wins rather than the long one.”

And few industries are undergoing as much change as the auto industry. Electrification, autonomy, and shared transportation are all barreling down the road. Any one of those could reshuffle the industry’s top players. All three at the same time means it’s unlikely all the major car companies will emerge from this transition in their current state.

Within the auto industry, management already appears to be changing gears. For the first time since at least 2005, Toyota and GM executives have mentioned “master plans” during calls with investors, according to transcripts from the financial research platform Sentieo. GM’s response to this threat, said CEO Mary Barra, has been to plan long beyond its typical time horizons.

“We stepped backed [in 2015] and looked at kind of the major trends that were going to impact this industry, not only in the next one or two years, but over a longer period of time,” she said during a call last January. “We realized that General Motors, over its history, had in essence tried to be everywhere for everybody with everything and that was not a winning recipe.”

So far, GM has committed $27 billion to build 30 new electric vehicle models by 2025. It launched (and later shuttered) the car-sharing platform called Maven. Cruise, acquired by GM in 2016, is already patrolling the streets of San Francisco in cars without drivers.

But Barra admits GM still doesn’t know exactly how it will figure out the new transportation industry. “I don’t know if it was a complete master plan that we had step one, step two,” she said on that call. “But that’s what guided us through all that because, as you know as well as I do, it’s been a very dynamic industry.”