Elon Musk – Stakeholder Engagement = Good Business

Image Source: https://www.theodysseyonline.com/elonmusk

Elon Musk is changing the face of business. His Tesla line of electric vehicles is pushing the automobile industry toward driverless vehicles. Add the fun-factor of adding an ‘insane mode’ by software update, delivering almost 30% more power and better handling, and it looks like Tesla is leading disruptive innovation. By making electric cars fun, cool and inspiring, Tesla has turned the automobile industry’s wisdom on its head, moving electric vehicles from niche (think Toyota’s diminishingly-popular Prius range) to mainstream.

But Tesla is not the most interesting of Elon Musk’s businesses. His forays into solar power and batteries show how he is taking a systems approach to the business of transport. By listening to all the barriers to adoption of electric vehicles, and then setting about fixing all of them, Musk is showing how business needs to think differently. His new range of batteries that are designed to fit into wall cavities within houses (and be charged by rooftop solar energy) show commitment to rejecting traditional notions of fossil fuel reliance. It’s no mistake that Musk has businesses for each of those parts of the electric vehicle chain, so his approach isn’t altruistic, but it recognises that business success relies on the success of a vast range of stakeholders too easily forgotten.

His vision for a connected humanity means redesigning how energy, energy storage and transport work as part of whole system. Although it isn’t clear yet whether he will be able to finance the scaling that many now anticipate (especially given global distribution issues) and keep quality control in check, it looks like many of his innovations are likely to survive. Individuals will be able to generate the energy needed for transport requirements, and also for other energy use. By combatting one of the world’s biggest risks, climate change (the fossil fuel industry now universally recognises this in their annual reports), Musk is inspiring people and reinventing business.

There are a few really important lessons from Elon Musk’s approach to business for anyone seeking to better understand stakeholder engagement.

Image Source: http://www.visualcapitalist.com/how-elon-musk-built-his-empire/

Suppliers as Stakeholders

Musk’s systems approach to business shows that the success of suppliers is a key driver for success. Traditional race-to-the-bottom approaches (relying on driving down costs in supply chains and wages) all too often results in supply issues such as stability, decreasing quality and commoditisation of products and services. By working closely with suppliers Musk is able to bring about better results for all businesses concerned.

Companies increasing engagement with stakeholders report that significant value results, including through sharing of good practice. The real value-creation opportunities come when both parties are actively listening, sharing their expertise and working together to solve issues. Arguably all of those things are part of any good supplier relationship, but it seems as though extra value is created by deliberately scheduling some time to listen and engage.

Stakeholder Engagement and Innovation

Engaging with stakeholders leads to greater innovation. That’s true within supply chains, but also with other stakeholders. Customers are an obvious example, as demonstrated by Tesla’s levels of customer satisfaction and insights. Business can gather greater insight and plot a path to success by listening to critics of the company. In one of Elon Musk’s TED Talks, he recalls painful examples and how listening to criticism (including some spiteful negative feedback) led him to change his thinking.

“I think it’s important for people to pay close attention to negative feedback and … you have to listen to it carefully.

Ignore it if the underlying reason for the negative feedback doesn’t make sense, but otherwise, people should adjust their behavior.

I’m not perfect at it, for sure, but I do think it’s really important to solicit negative feedback, particularly from people who have your best interest in mind.”

Several of Musk’s businesses have been days away from insolvency, but his knack of learning from mistakes, including by listening to stakeholders, has resulted in some remarkable turnarounds. Traditional wisdom dictates that Tesla’s target customers are early adopters, but instead Musk pursued people who said they would not buy such products (never, ever!) and made them advocates for the brand by listening to the reasons why they wouldn’t buy and what they wanted in a car.

It’s also no mistake that Musk put much of Tesla’s legally-protected patents and designs into the public domain to allow anyone to add to the body of knowledge for the benefit of the whole sector. In doing so, and emulating Mozilla and Linux, he has created a community of low-cost innovators that produce more and better innovation than paid staff.

Common Mistakes

There are a few stakeholder engagement mistakes that are made all too often, especially by slower moving or highly profitable companies.

“We already do it”

Virtually every business has some level of stakeholder engagement. Whether it’s a complaints line, PR department, or a client management team; business engages with the stakeholders it considers as critical to success. But it can be too easy to conclude that an existing strategy is good enough, or generating insights that are good enough for the future. Stakeholder engagement processes need to flex over time and accommodate different forms of engagement.

There is also a danger that companies underestimate the value of the stakeholder that isn’t currently critical, but who might be with the passing of time. That includes the sort of customer who, when disappointed, was previously not able to garner significant levels of action against the company – one lost customer is usually not that important to business. But now one upset customer can quickly mobilise support for their cause.

Just like any other strategic aspect of business, stakeholder engagement needs to have a deliberate plan with continuous improvement as part of the focus.

Push Messaging isn’t Listening

Some stakeholders want to be kept in the loop – so regular and clear push messaging can be a really useful way to create trust and engagement, especially if you give them an opportunity to share their thoughts (or your tweets). But some desire much more – active engagement on issues that they care about. If you tell stakeholders that you will listen, then you had better do so, and use the channels of communication that are relevant to the kind of conversation that they want to have.

One Size Fits All

Because stakeholders have different concerns companies need to embrace a variety of communication strategies. The same category of stakeholder may have several concerns that are not easily reconciled. Vodafone has had some success with in reducing opposition to construction of mobile phone towers in rural areas by engaging directly with opponents. Some members of local populations simply want to be kept informed and reassured about safety concerns, but NIMBYs (Not In My Back Yard) needed to be convinced by educating them about the limits of radio technology and efficiencies gained by using top-of-the-hill strategies.

Casting the Net Too Narrowly

Business needs to include all stakeholders that can help or harm the business, not just the top two or three stakeholders. Underachieving in identification of stakeholders will lead to lost market share, higher input costs and reputation damage. Engaging well with critical stakeholders should be a priority, but once that relatively rudimentary task is done, there is merit and profit in understanding the additional value that could be created by more stakeholder engagement. By including non-traditional stakeholders at Tesla, Musk is now a significant player in renewable energy, inter-city / international transport, public transport, space travel, motor racing, interplanetary mining, smart homes, batteries and automotive sales. Without understanding the systemic relationships, he could not have cast his business interests so wide.

Elon Musk has been building his empire for more than 15 years – that’s a lot of stakeholder engagement and a lot of refining his approach.

What do Customers Really Want?

Successful companies have assumed that they knew exactly what customers wanted. The automotive industry assumed that people wanted to buy cars powered by fossil-fuels, and peddled the mantra (supported by fossil fuel companies) that electric vehicles were unreliable and/or didn’t have the range needed. Customers don’t always know (or articulate) what they really want unless they are grilled. Simple questions and lack of relational capital will lead to suboptimal results.

Customer engagement is too often limited to reactive metrics – either customer complaint reduction or customer satisfaction scores. While such measures have an important part to play, they are commonly only a small part of an effective customer engagement strategy. That kind of thinking also applies to other stakeholders – getting the correct metrics is difficult, but important if companies are to effectively achieve a return on stakeholder engagement.

Good Stakeholder Engagement

Stakeholder Engagement as a business discipline has changed dramatically since Acocuntability first identified what has now become the only Stakeholder Engagement Standard (https://www.accountability.org/standards/). But the changes are really in application and sophistication, not of the basic premise or promise of the discipline. Companies that regularly practice it are stronger and more profitable as a result.

Elon Musk shows us what we should have already known; stakeholder engagement (especially approaches that avoid box-ticking) isn’t about CSR, shared value, responsible business or ‘sustainability’ – it’s just good business.

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