Use Elon Musk’s 5-step Algorithm to Radically Improve Your Product Returns Process

Michael Kruse Sørensen
March 13, 2024
15 minutes

How would Elon Musk improve your Returns Process?

Picture this:

Instead of walking around SpaceX’s rocket site, he’s walking around your headquarters. Inspecting your products, warehouse, talking to your team. He knows you want to improve your Returns Process with a goal of saving time and improving the experience for your customers.

You look at him and hope for him to say something brilliant. After all he has built commercial rockets, mass manufactured electric cars.

What do you think we would say?

Check out the 2 minute video where Elon Musk outlines his 5 step “Algorithm” for optimization that he has used at SpaceX and Tesla.

Then come back here and we will apply his thinking to help you improve your returns process.

Here’s the algorithm, quoted in full from Walter Isaacson’s biography on Elon Musk:

  1. “Question every requirement. Each should come with the name of the person who made it. You should never accept that a requirement came from a department, such as from "the legal department" or "the safety department." You need to know the name of the real person who made that requirement. Then you should question it, no matter how smart that person is. Requirements from smart people are the most dangerous, because people are less likely to question them. Always do so, even if the requirement came from me. Then make the requirements less dumb.”
  2. “Delete any part or process you can. You may have to add them back later. In fact, if you do not end up adding back at least 10% of them, then you didn't delete enough.”
  3. “Simplify and optimize. This should come after step two. Common mistake is to simplify and optimize a part or a process that should not exist.”
  4. “Accelerate cycle time. Every process can be speeded up. But only do this after you have followed the first three steps. In the Tesla factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted.”
  5. “Automate. That comes last. The big mistake in Nevada and at Fremont was that I began by trying to automate every step. We should have waited until all the requirements had been questioned, parts and processes deleted, and the bugs were shaken out.”

While we don’t know exactly what Elon would do to optimize your process we can do the second best thing and apply his 5-step algorithm.

Let’s jump in:

1. Question every requirement:

According to Musk a classic mistake is “to optimize something which should not exist in the first place” (by the way, we know the feeling). So before we start to optimize we should first question all the steps and requirements in our current process. Probably we do things today which are unnecessary.

Last week we showed how you can start to optimize your returns process by mapping exactly how your returns are handled today. Basically, map your As-Is returns process.

In short, the idea is to spend time on the floor with your returns team, observing the current process and asking questions to map exactly how you handle returns today. The result is a process map of how you handle different types of returns from end to end.

Now, look at the process map and for each step in the process we ask ourselves and our team: Why do we do what we do? Is this step necessary at all? What would happen if we didn’t do this?

Beware if the response is: “Because we have always done it like this” or “Because X says we should”.

One typical example is for documentation. E.g. the returns team may spend a lot of time documenting their work for another department that anyway does not use the information. That’s where a cleanup can be useful.

So, map your process and all the current requirements. Question every step.

2. Delete any part or process you can

Once you have mapped your process and questioned each of the requirement and step you can now delete any part of the process which is not strictly necessary.

“We can’t remove this” is a typical response. And it’s understandable. Probably we have been doing this for a long time. It can be hard to imagine how a process might work if one of the steps were removed. And there is an urge to keep things are they are.

So before we conclude that we can’t remove anything let’s first understand that it is actually very likely that we have too many steps in the process today.

Two ways to help us realize we may have too many steps in our current process:

1) Realize that a step was added in the first place because “we might need it”. Like packing for a holiday. “I’ll bring an extra pair of jeans, just in case”. You end up dragging a heavy and paying for extra luggage and anyway return with half of your clothes unused.

2) Realize that probably 20% of the steps we do deliver 80% of the result. In other words, the Pareto Principle or 80/20 rule is helpful here. In other words there’s probably room for removing many of the actions we take today without drastically altering the result for the customer.

Musk’s advice here is that as a rule of thumb you should rather take away too many steps rather than too few. The benefits will be greater and you can always put back steps later.

So look at all the actions you take, question each of them: Question every step: can we remove this? What would happen if we removed this? Would the outcome still be the same? What would be the impact on our KPIs (e.g. customer satisfaction, handling time, and profits)?

3. Simplify and optimize

Now we have a shorter list of actions in our process map. Since we have removed the unnecessary steps we now only have the critical steps remaining to process the returns.

We now examine the rest of the steps one by one and look at how we can simplify and optimize each step.

Here we ask questions for each remaining step such as:

  • “How could we do this better / faster?”
  • “What would the 5 star experience look like?”
  • “What would make your (the team’s) life a lot easier?”.

One powerful example for optimization in the returns process is to collect the right information from customers up front. We wrote about that here.

You may look at your current process and notice that your team often asks customers for more information to document their return. Maybe the customer did not append pictures on the first email. This delays the entire process and creates additional steps.

This step could be avoided had we received the right information up front. So how can we make sure we receive the right information up front from customers?

Well, we can make sure to prompt the customer for the right information as they submit their return dependent on what return type they submit.

This creates additional benefits:

The customer is asked a few questions in the submission form to identify the type of return they want to file. Perhaps it’s simply an unwanted product. Or maybe it’s a claim for a broken product. Each type prompts the customer to provide different information. Submitting a claim requires the customer to provide picture documentation.

This implementation means we get the right information up front, always. This reduces the risk of a followup. Now our team does not need to categorize the return as the customer has already done so. And the customer has a simple and clear experience.

We have built this into Claimlane via our B2C and B2B returns portals that make is easy for brands and retailers to set these flows up.

So for step 3, go through each remaining step and consider how it can be simplified and optimized.

4. Accelerate cycle time

Now how can we do this faster?

Why do things take the time it takes today. Is that necessary? Could we do it faster? What would it take to do it twice as fast? 10x as fast?

What would be the outcome if we could do this process 2x faster? How valuable would that be? For customers? For us?

Maybe your goal is to create a better experience for your customer by reducing the Resolution Time, i.e. the total time it takes from a customer first submits the return until it is resolved. To improve the resolution time, look for where the big delays happen. Every time you follow up with a customer by email e.g. asking for more information, there’s a risk that the customer may only respond the next day. Maybe your team is busy for the rest of the day and can’t continue the resolution. The result is a process that may take only 20 minutes to handle but it’s spread over multiple days. This is not great for the customer plus it’s inefficient for your team that needs to come back to the same case multiple times.

Also, we can return to the 80/20 rule to see how else we might speed up the process. In many situations 20% of the mistakes will take 80% of the time to handle. So how can we improve our handling of those difficult 20%? When talking returns, it might be that most returns are unwanted products that are simple to handle and can largely be automated. However, the difficult claims take most of the time. This might be where you need to optimize your cycle times.

Maybe you need to empower your team to make faster decisions. Maybe you notice that your team is confused about how to handle a certain situation or often waits for your approval of how to handle a certain situation. Maybe you need clearer guidelines that let your team decide how to a handle edge cases. Perhaps the cost of making the wrong decision once in a while does not matter compared to the big benefit of your team being able to make quick decisions without waiting for your approval.

5. Automate

Now we look for places to automate. Again, go through the list of actions, can we automate each of the steps?

Automation is powerful, but it also takes great effort to set up. Therefore, as Elon Musk warns, you should only focus on automation as the 5th step after making sure the step cannot be deleted and your process is otherwise simplified and optimized.

Automation is great because we save time. But the hidden benefit is often that things actually get done. Because we are human, if things take just a little bit of time there’s a risk it won’t get done. We know this from our own lives and our to do lists. It’s painful to admit, but many of these small things actually don’t get done. We push them ahead of us because they are not as important and the other bigger things we are doing. Automation can help us get those small things done quickly and right away and help us create magical moments for the customer.

One rule of thumb for automation is “If you know you need to do the same thing more than twice, you should automate it”. E.g. sending the same message. You should automate it.

Send automatic email followups or set up Macros or templates for common responses.

Or integrate your order system with your helpdesk so the returns or support team always have customer and order information right at hand when communicating with your customer.

We have powerful inbuilt automations in Claimlane. On top of automatically collecting the right information up front and automating customer followups, you can automate entire Outcomes. Such as automatically sending a credit note, generating a shipping label, or sending a new product.

Data processing is also automatic with Claimlane. Which means you can now easily do analyses of your returns data.

Give it a try

Once you have gone through all the steps your returns process will be in better shape. Most likely you will be able to save time and money and create a better experience for both your customer and your team.

If you do try this out give us a shout, we would love to hear how it goes. Or if you need help you know where you can find us ☀️

Want to learn more?

We’d love to explore how Claimlane can help you. Book a chat below.

Similar posts

Check our similar posts below written by our awesome team members.