By the end of 2009, Tesla Motors had less than $500,000 in operating cash. Its founder-CEO, Elon Musk, had already put the remainder of his PayPal and Zip2 fortune into the company, was going through a difficult divorce, and had just watched a SpaceX rocket fail during launch. Instead of walking away, Musk raised another $40 million from his brother and other investors and kept going (Serafeim & Migdal, Elon Musk at Tesla, Harvard Business School Case 9-123-044, rev. 2024).
First-Principles Question
Porter's "Blueprint" tells you how to choose a defensible competitive position. Mintzberg's "Craft" tells you how a plan adapts as an organization learns. Neither one explains why a founder keeps funding a venture that a spreadsheet says should die. What is doing that work? What decides which trade-offs are worth the pain in the first place — before any position or pattern exists to defend?
Last session we debated "What is Strategy?" — Porter's deliberate "Blueprint" (Position, Trade-offs) against Mintzberg's emergent "Craft" (Pattern, Learning). Both are theories of how organizations compete once they know what they're trying to become. Today we go one level upstream, to the thing that decides what an organization is trying to become in the first place — and to the discipline that turns that aspiration into a number a board can actually manage against.
Today's question: WHY, and how much?
We'll use James Collins and Jerry Porras's "Building Your Company's Vision" (1996) to name the "why" — Purpose and Values. Then we'll use Robert Kaplan and David Norton's "Developing the Strategy: Vision, Value Gaps, and Analysis" to turn that "why" into a quantified target: a value gap that strategy exists to close. Finally, we'll ask what kind of operating model can survive the years it takes to close that gap, drawing on Martin Reeves and Adam Job's "Operations in an Era of Radical Uncertainty" (Harvard Business Review, October 2023).
Collins and Porras (1996) argue a vision isn't a fluffy slogan; it's a disciplined framework with two distinct, almost contradictory, parts — one meant to stay fixed forever, the other meant to keep changing.
The Collins & Porras (1996) Vision Framework: a balance of preserving the core and stimulating progress.
This defines who you are. It is stable, timeless, and to be preserved.
The 3-5 essential and enduring principles. The "how you act" — non-negotiable even when they are a competitive disadvantage.
The fundamental, never-fully-reachable reason for being.
"The overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution." — Elon Musk, 2006 (quoted in Serafeim & Migdal, 2024, p. 1)
The now-famous, shorter version — "accelerate the world's transition to sustainable energy" — is a later distillation of this same 2006 purpose, not a different one.
This defines where you are going. It is dynamic, time-bound, and to be achieved.
A 10-30 year "mountain" to climb, with a finish line.
Tesla, verbatim (August 2, 2006 blog post, "The Secret Tesla Motors Master Plan"):
Painting a picture of what success looks and feels like.
Tesla example: Musk's 2016 pitch for buying SolarCity — "an electric car, a Powerwall and a solar roof... beautiful, affordable and seamlessly integrated" — a picture of a fully closed clean-energy loop (Serafeim & Migdal, 2024).
Note the founding sequence, exactly as the case tells it: engineers Martin Eberhard and Marc Tarpenning founded Tesla in 2003. Musk joined in 2004, investing $6.3 million of an initial $6.5 million round, and became chairman — not CEO. He did not take the CEO title until late 2007, after firing Eberhard when Roadster production costs had ballooned to more than twice the original per-vehicle estimate. The vision predates Musk's operational control of the company; his contribution was to fund, and later obsessively enforce, an ideology that was already taking shape.
Classic business examples from Collins & Porras (1996), illustrating each component of the Vision Framework.
Defines the enduring character of an organization. It remains fixed while strategies and practices adapt.
| Company | Core Values Examples |
|---|---|
| The Walt Disney Company | Imagination and wholesomeness; No cynicism; Fanatical attention to consistency and detail. |
| Nordstrom | Service to the customer above all else; Hard work and individual productivity. |
| Merck | Corporate social responsibility; Science-based innovation; Unequivocal excellence. |
| Sony | Being a pioneer—not following others; Encouraging individual ability and creativity. |
| Company | Core Purpose |
|---|---|
| 3M | To solve unsolved problems innovatively. |
| Walt Disney | To make people happy. |
| McKinsey & Company | To help leading corporations and governments be more successful. |
| Wal-Mart | To give ordinary folk the chance to buy the same things as rich people. |
What the organization aspires to become, achieve, or create. It is dynamic and time-bound.
| BHAG Type | Company | Example Goal |
|---|---|---|
| Target | Wal-Mart (1990) | Become a $125 billion company by the year 2000. |
| Target | Ford (early 1900s) | Democratize the automobile. |
| Common-enemy | Nike (1960s) | Crush Adidas. |
| Common-enemy | Honda (1970s) | "Yamaha wo tsubusu!" (We will destroy Yamaha!). |
| Role-model | Giro (1986) | Become the Nike of the cycling industry. |
| Internal-transformation | General Electric (1980s) | Become number one or number two in every market we serve. |
| Company | Vivid Description Example |
|---|---|
| Ford Motor Company | "I will build a motor car for the great multitude... so low in price that no man making a good salary will be unable to own one... The horse will have disappeared from our highways...". |
| Sony (1950s) | "We will be the first Japanese company to go into the U.S. market... We will succeed with innovations that U.S. companies have failed at... 'Made in Japan' will mean something fine, not something shoddy." |
These terms are often confused, but they form a clear hierarchy. Here is a simple guide to keep them straight.
Core Values(Who am I?)
The non-negotiable beliefs and principles that guide behavior and decision-making at all levels.
Core Purpose(Why do I exist?)
Your organization's fundamental reason for existence, its "why" beyond just making money.
Vision(Where do I want to go?)
A bold, inspirational statement describing what the organization aspires to become in the long term. It provides a clear picture of the desired future.
Mission(How do I get there?)
A more specific statement that defines what the organization does, who it serves, and how it differentiates itself. It is the "how" to achieve the vision.
BHAG (Big, Hairy, Audacious Goal)(What do I want to achieve?)
A clear, compelling, long-term goal (10-30 years) that translates the vision into a specific, measurable, and ambitious target.
Value Gap (Kaplan & Norton)(How far do I have to go, in numbers?)
The quantified distance between the value your BHAG implies you should be worth by some future date, and the value your current, unchanged strategy would produce if simply extended forward.
Together, these elements create a framework for strategic decision-making, ensuring that daily activities and long-term goals are aligned with the company's fundamental purpose and values.
A BHAG is inspirational language until someone attaches a number and a date to it. Kaplan and Norton, in "Developing the Strategy: Vision, Value Gaps, and Analysis," argue that translating vision into strategy means quantifying a value gap: the difference between (a) the value the firm will be worth if it simply continues its current trajectory — the "operating plan" — and (b) the value the vision demands it be worth by some future date — the "aspiration." The entire job of strategy, in this view, is to design the initiatives that close that gap.
Tesla's board has, in effect, run this exact exercise twice, in public, using Musk's own compensation as the instrument. In January 2018, when Tesla's market capitalization was about $52 billion, the board approved a package that could pay Musk up to $55.8 billion in stock if the company's market cap climbed, in twelve tranches of roughly $50 billion each, all the way to $650 billion — alongside sixteen operational milestones spanning revenue growth from $20 billion to $175 billion and adjusted EBITDA from $1.5 billion to $14 billion (Serafeim & Migdal, 2024). That entire ladder is a value gap, cut into rungs a board could vote on, tranche by tranche.
Before You Continue
If a "value gap" is just the difference between two numbers, why does it matter how you get from one to the other? Hold that question — Reeves & Job (2023), later in this session, argue the "how" is now the harder problem than the "how much."
Below, you'll build your own value-gap chart for the BHAG Tesla's board is running today — using the Kaplan & Norton logic on 2025-era numbers instead of 2018-era ones.
Collins & Porras argue you don't invent a purpose, you discover it. A powerful method is the "5 Whys."
Your Task: Let's discover Tesla's purpose. Start with what they do, then ask "Why is that important?" five times. Type your answer for "Why #1" to unlock the rest of the chain.
A true BHAG is audacious, energizing, and has a clear finish line. Generic goals are not BHAGs.
Your Task: Read each statement and decide: Is this a true BHAG or just a generic goal?
"We will maximize shareholder value."
"Put a man on the moon and return him safely to Earth by the end of the 1960s." (NASA, 1961)
"We will be the #1 or #2 player in every market we serve." (General Electric, 1980s)
"We will pursue continuous improvement and operational excellence."
Tesla's operational chaos — production hell, bypassing dealers, building its own battery factories — was not random. It was the necessary consequence of its Vision.
Your Task: Drag the "Why" (The Vision) from the left column to the "What" (The Strategic Choice) it logically explains on the right. Why did Tesla have to make that move?
Why did Tesla announce, in 2013, that it would build its own battery Gigafactory in Nevada instead of just buying from suppliers like every other car company?
Why did Tesla spend heavily building its own stores and fighting legal battles instead of using existing franchised dealer networks?
Why did Musk send an "Ultra Hardcore" email demanding families "reduce time off... to avoid divorce," and later push Model 3 output toward 7,000 units a week? Why not just grow slowly and safely?
Tesla's board has drawn a new value gap for a new BHAG. In September 2025, the board proposed — and shareholders reportedly approved that November — a decade-long compensation award for Musk potentially worth on the order of $1 trillion, contingent on Tesla's market capitalization climbing from roughly $1.3 trillion (its approximate level in mid-2025) to about $8.5 trillion, alongside operational milestones covering vehicle deliveries, a robotaxi fleet, and Optimus robot production. (Treat these figures as approximate — they were widely reported in the financial press but this case-note was not audited against Tesla's proxy filing.)
Your Task: Play strategist. Set Tesla's starting value, the growth rate it would achieve just by continuing as a car company ("status quo"), and the BHAG's target value and horizon. The chart shows the gap your strategic initiatives — robotaxis, Optimus, energy storage — must fill.
Vision tells you where to point the company. Kaplan & Norton tell you how big a gap you must close. Neither tells you how to build an operating model that survives the years between announcing a BHAG and reaching it — years that, per Reeves and Job (2023) writing in Harvard Business Review, look considerably less predictable now than they did in 2006. They argue the strategic job of operations has shifted twice in a generation:
Tesla's own operating history tracks this shift. Announcing Gigafactory 1 in Storey County, Nevada in 2013 wasn't primarily about lowering unit cost — Musk called it "a very green factory" with "essentially zero emissions" — it was a resilience move: refusing to depend on any single external battery supplier ever again. By contrast, unveiling the Optimus humanoid robot prototype in 2022, and launching a limited robotaxi pilot in Austin, Texas in 2025, look like optionality plays: bets made precisely because the core EV business had slowed — Tesla's 2024 deliveries fell year-over-year for the first time in over a decade — and China's BYD had, by most 2024 tallies, overtaken Tesla in total global new-energy-vehicle volume (though a large share of BYD's volume is plug-in hybrids, not pure battery-electric vehicles, so the comparison isn't perfectly apples-to-apples).
Your Task: For each real operational choice below, click the bucket from Reeves & Job's (2023) framework it best fits.
1. Toyota's decades-long pursuit of lean manufacturing to push unit costs down the experience curve.
2. Tesla building Gigafactory 1 so it would never again be short of battery cells, even though owning production cost more upfront than buying from a single outside supplier.
3. Spotify's "Discover Weekly," which mines millions of users' listening and search behavior to build a personalized playlist no competitor's catalogue alone can replicate.
4. Roblox giving its users the tools to build their own games and experiences, rather than the company guessing what to build for them.
5. A manufacturer deliberately qualifying two redundant suppliers on different continents for a critical component, even though it costs more than single-sourcing.
6. Tesla's 2025 push into a limited robotaxi pilot and mass-production plans for the Optimus robot, even as its core car business slowed and Chinese rival BYD's global NEV volumes pulled ahead.
A visionary company must set a new BHAG after achieving its last one. If it doesn't, it suffers the "We've Arrived Syndrome" (like NASA post-moon landing).
Tesla had, by the mid-2020s, largely achieved its 2006 Master Plan. Musk's attention had visibly expanded to AI, robotics, and — after acquiring the platform in 2022 for roughly $44 billion — X (formerly Twitter).
In January 2024, Elon Musk tweeted: "I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can't be overturned." At the time he held about 13% of Tesla's shares and votes (Serafeim & Migdal, 2024).
Your Task: As a board member in January 2024, how do you interpret this? Click your choice.
He's holding the company hostage for a new, personal BHAG ("AI") that has nothing to do with the original purpose ("Sustainable Energy").
The real Core Purpose was always "Solve humanity's biggest problems." Sustainable energy was just the first. AI is the next.
This is the (messy) creation of the next BHAG. The Core Ideology is stable, but he's forcing the company to climb a new, bigger mountain.
This is a governance-first view. It implies the company's Core Ideology is fixed, and the leader's vision has now diverged from it — a classic "Founder's Dilemma" and governance risk.
This is a leader-centric view. It implies the Core Ideology is not Tesla's but Musk's, and the company is the vehicle for his personal Core Purpose — a riskier model that makes leader and purpose inseparable.
This fits the Collins & Porras model cleanly. The "Envisioned Future" (Yang) is supposed to change. The Core Ideology (Yin) of "accelerating" and "first-principles thinking" persists; only the target — the BHAG — is evolving from "cars" to "intelligence."
In January 2024, the Delaware Court of Chancery voided Musk's original 2018 pay package entirely (Tornetta v. Musk). Shareholders re-ratified it in June 2024, but the Delaware court declined to restore it that December. Rather than fight further over the old BHAG (2018's car-and-energy-milestone ladder), Tesla's board went the Collins & Porras route: in September 2025 it proposed an entirely new, decade-long compensation award explicitly tied to a new BHAG — market cap milestones running to roughly $8.5 trillion and operational milestones covering robotaxi and Optimus deployment — which shareholders reportedly approved that November. Read through the framework: the company didn't resolve the governance fight by restoring the old vision. It resolved it by writing a new Envisioned Future and putting a fresh value gap underneath it.
Today we added the layer beneath — and above — strategy itself.
Core Ideology (Values + Purpose) stays fixed; the Envisioned Future (BHAG + Vivid Description) is the mountain a company climbs and then re-sets.
A value gap — the distance between "where we're headed anyway" and "where the BHAG says we should be" — is what turns an inspiring sentence into something a board can fund, track, and govern.
Closing a decade-long value gap under radical uncertainty takes more than efficient execution — it takes resilience against shocks and a portfolio of options, reweighted as the future reveals itself.
A strategy (Porter/Mintzberg) is a plan for winning a game. A vision (Collins & Porras) is the reason the game is worth playing at all. A value gap (Kaplan & Norton) is what makes the vision governable. And an operating model built for resilience and optionality (Reeves & Job) is what keeps the company alive long enough to find out whether the vision was right.
Next session, we turn outward: having established why a firm competes and how much value it must create, we ask what an industry's structure allows it to capture, using Porter's Five Forces.
Test your understanding of vision, purpose, values, the value gap, and operating models. Select an answer to see immediate feedback.