Sustainability, Innovation and the lesson of Elon Musk

Julio F. Campos

 What can we learn from Elon Musk to have more sustainable business models?

"Sustainability costs dear"

"Innovation costs dear"

Cost. The first word we hear from companies when it comes to sustainability and innovation.

Elon Musk is today the most well-known and envied example of success in innovation.

Paving the roads of three major breakthroughs, electric vehicles, autonomous vehicles, and their revolutionary rocket generation, will be listed in history books at least as a new Von Braun, this one responsible for putting the man on the moon while Musk is the name that will take us to Mars.

Many entrepreneurs want to know the secret behind their success, but few actually look for the information that explains it.

As we shall see, it is simpler than it seems. But what is the relationship with sustainability? What can Musk teach? Before we understand this, let's talk about two problems concerning the driving of companies, which unlike him, others are not seeing.

  Sustainability is a personal issue.

Unless you are completely inattentive and believe that when working for a particular company you have gained superpowers that make you immune to the environmental damage caused by the corporation. You should know that your family, children, grandchildren, relatives are also affected by the unsustainable consequences of their actions.

Ignoring the problem, perhaps preferring a salary that covers a good health plan or traveling to untouched places to clear conscience, is the extreme of disconnection with the reality that one can reach.

It does not matter if you're the CEO who picks up the helicopter to spend the weekend at the beach house.

The beach is polluted, its food is contaminated by agrochemicals, its air dirty from the exhaust of its helicopter. And if you live in some big capital, I'm sorry to inform you, but the air you breathe 24/7 is dirtier than the smoke of a cigarette.

So the first problem is simple. If you treat the issue of sustainability as something necessary for the financial benefit of the company and not for your own health, well, think better.

Standards, certifications and the like.

The basis of sustainability in companies is focused on meeting the standards defined by the government or seeking certifications that show society that it has a serious role in the area.

Is it expensive to fit the normative demands? Yes, after all, today's business models are not designed for sustainability and investments are needed in the area. As direct consequence companies will do the bare minimum to avoid losing profitability.

Pay attention because the detail is now complex.

When a company meets the standards, or whatever, what is the direct return on investment? Increased profitability by reducing production costs.

Now the detail: This increase in profitability is proportional to how much investment is made. Obvious. So it should be obvious that the bigger the investment, the bigger the future returns !!!

What part of "the greater and better investment the greater and better the return" could not one understand yet?

If you only break two eggs, you will have a two egg omelet.

And what does Musk have to do with it?

Musk learned from the lessons of giants of the past.

The great lesson of Ford was not the production line, but rather the understanding that its system would be useless if its employees could not buy its products.

Edison's were not his innovative inventions (most stolen from others such as Tesla), but the need to keep trying.

Musk, as said, is the current major reference in the business world, also has something to teach but few are paying attention to. And it is not his attention to innovations and willingness to take risks.

It is his willingness to accept losses.

This is his disruptive innovation.

None of its key companies, Tesla and SpaceX, are profitable. All operate in the red (Tesla started with net profits of -560% in 2008, and today it is at -9%). But Musk knows that this is the price to be the leader, not the follower.

SpaceX lost hundreds of millions of dollars to get its place in aerospace history with the Falcon Heavy earlier this year. But that is still being improved, so no big return is expected in the near future.

Musk invests in a wide range of companies. And he does not care about the losses because he knows that the return will be greater than if he stays in his comfort zone.

Yes, his base company, Paypal, has allowed him to start his fortune and investments in these areas. And the confidence he was able to get from the market and his investors as to the future returns of his contracts were central to his "experiments" in innovations.

Musk does not sell profitability. It sells a new future, with a new form of profitability, which is already seen as a model to be followed. Is he concerned about the sustainability of the planet by focusing on clean energy? No, he just saw a niche market and radically decided to dive into it.

Yes, his "experiments" are expensive, so expensive that they are not profitable yet. But Musk understood that to make an excellent omelet he would have to break more than the minimum number of eggs needed.

Unfortunately in sustainability, many confuse breaking more eggs with killing the chicken.

Tailoring sustainability to business is expensive. Tailoring business to sustainability is seen as suicidal.

However, the future returns of the latter option, social, environmental and economic, by shifting the business model to sustainability will favor those who, like Musk, see the cliff as the opportunity to build bridges and explore new frontiers rather than as a barrier to be feared.

Was this article interesting to you? 
Please, share your experience with us bellow. 
Want to write with us? Get in touch.