You have your revenue target, and maybe an upside goal beyond the target—and then you have your BHAGs.
Normally, an organization wants to at least meet its revenue target, and typically has an upside revenue goal in mind, as well.
In our corporate world these days, particularly when you’re talking about a publicly-traded company, the target is almost always for quarter-over-quarter, and year-over-year growth.
So, for example, if the organization had $1 billion in revenue in the third quarter last year, it might realistically think it can grow its revenue five percent in the third quarter this year. Its stretch goal might be for six percent year-over-year growth.
In that scenario, a BHAG might be to focus on organizational efficiencies that will reduce the cost of doing business by four percent, thus realizing potential year-over-year growth of 10 percent for the third quarter. Usually, the BHAG will be based on some clever plan in which everything will have to go right to have any chance of success. And, for real success, there might have to be one or two minor miracles, as well.
Tesla’s future rests on this
Now you have some context for what might be described as a BHAG on the part of Tesla, the luxury electric car manufacturer. I think it’s even bigger—a moonshot.
On March 31 of this year, Tesla announced the much anticipated Model 3, its entry into a more affordable market for luxury electric cars.
The Model 3 is to start at $35,000, and will begin mass production in 2017. To date, Tesla has reportedly received over 400,000 pre-orders for the Model 3.
Because those pre-orders required customers to shell out $1,000 each, that’s a cool $400 million added to Tesla’s coffers.
What is the moonshot of which we speak? It is Elon Musk’s announcement that Tesla is going all in to ramp up production of its automobiles to 500,000 per year by 2018. Tesla’s original plan was to ramp up to 500,000 by 2020.
To put things in perpective, Tesla has been manufacturing and selling cars since its founding in 2003, and, according to its latest 10-Q, has shipped fewer than 200,000 vehicles to date.
Let’s give Tesla its due. For a young car manufacturer to have established itself firmly in the luxury car manufacturing space in 13 years is impressive.
Not to mention the buzz it has received along the way. And the leading edge technologies it has developed.
But to ramp up to manufacturing 500,000 cars annually within two years can only be described as a moonshot. A big, hairy, audacious moonshot.
Can it be done? Well, that’s another matter entirely. And there is no shortage of skeptics.
But there are believers, as well. One is Ron Baron, billionaire leader of Baron Capital, which has built up a $300 million investment in Tesla stock, and predicts that Tesla will grow to one of the largest car manufacturers in the world.
Those are bold words, given that GM, Toyota and Ford are each manufacturing millions of cars worldwide each year. Toyota, the leader, sold over 15 million cars in 2015.
Can Elon Musk do it? He’s a brilliant guy, there’s no doubt. He built SpaceX from the ground up, founding the company in 2002. NASA awarded the company a huge contract in 2006, and SpaceX now regularly launches commercial rockets into space and lands them back on barges in the ocean.
Tesla is also building its battery-production facility, dubbed Gigafactory, in Nevada, and expects to be fully operational by next year, building lithium-ion batteries for up to 500,000 Tesla automobiles a year. It is the single largest building by capacity in the world, and will be completely self-powered by a huge solar array in its roof.
Elon Musk clearly likes to think big. He has a history of setting massively big hairy audacious goals for himself and his companies. Whether Tesla can ramp up quickly and produce 500,000 cars a year by 2018 is anyone’s guess. But I wouldn’t bet against them.
And, by the way, have I mentioned that I really want a Tesla Model S? (Although I’d settle for a Model 3.)