The right product will provide the cash flow to build the infrastructure needed to establish your business.
Milton Chang
In the first half of this series of articles encouraging engineers to become entrepreneurs, I concentrated on such basics as developing a business plan, forming a team, and finding startup money. In the second half, I'll discuss various hands-on aspects of growing a business from a seat-of-the-pants startup into a systematic organization, moving from manufacturing, marketing, and sales to finance, administration, and maximizing shareholder value. This article deals with the critical step of developing and shipping your first product.
Successful product development requires identifying a product people want to buy, designing it, devising an efficient manufacturing process, then producing it. Your ultimate goals are to make better products for the customer and more profits for your company. What makes the process work? People make it work. Miracles can happen if capable people are excited about their work. All we have to do is provide a supportive work environment and adequate resources. In this article, I emphasize people and organizational strategies as much as productivity tools and methodologies.
When we started New Focus, we didn't have any specific product idea. We decided to concentrate on the market for optics research because that's what we did ourselves. In that market we could identify with our customers, understand their problems, and sell to colleagues! Within six months, we introduced photodetectors with the fastest risetime, optical receivers with the lowest noise, electro-optic modulators with the lowest drive voltage, optical mounts with significantly more stability, and dielectric mirrors with the lowest scattering. Most people were surprised by this "weird combination." The point is that these were products we knew how to develop and put together quickly, and they were better than competing products. The motto "Simply Better Photonics Tools" became a positioning statement to challenge ourselves. We were pounding stakes into the ground to mark the territory where we could succeed!
How do you define products that customers would want to buy? The persons best qualified to tell a product designer what they want are the customers themselves. The person best qualified to make real-time tradeoffs between what customers want and what the company can realistically deliver is an engineer. Therefore it's only logical to establish direct contact between customers and the people in R&D. Once the designers are in communication with the customers, they will intuitively design into the product features that will capture the customers' attention before the sale and meet their needs afterward.
At New Focus, all of our engineers are in direct contact with customers. Many of our product ideas come from our customers, and we make licensing technologies from anywhere in the world an explicit strategy of the company. This approach is realistic because small companies don't have the resources to sustain long-term research. (On the positive side, small companies have a lower overhead cost and also the agility to make development decisions faster than big companies.) By making technology licensing an explicit part of our strategy, we eliminated the not-invented- here syndrome, avoided reinventing any wheels, and encountered many more opportunities.
Creative people need nurturing. You don't want them to be afraid to make mistakes. When you must offer criticism to maintain a high standard of excellence, make constructive comments and direct them to the issues rather than the individual. Another way to nurture creative people is to encourage them to broaden their horizons. They need an ever-increasing knowledge base to create with, as well as ever-increasing wisdom to make better decisions. Encourage creative people to focus externally by attending conferences, reading journals, and participating in the community.
Standards for speed are more subjective; they depend on expectations, opinions, or preconceived notions. Since it's possible to go on improving a product indefinitely, standards for speed also depend on the definition of what's "good enough" for people on the project. Here again, a sense of ownership helps. You will want your people to set their own deadlines. To some extent, we all dread facing the judgment day at the end of a project. I have known bright individuals who refuse to bring any project to conclusion for fear of being judged. In a nurturing environment, people are more likely to say it's good enough sooner, and they're often willing to provide information or make decisions to move the project forward even before they have all the facts. The need to clarify often stems from a fear of being judged.
Subconsciously we all do what we can to avoid pain. So there's a natural tendency to jump into the fun and easy parts of a project for instant gratification. You can get away with it in a big organization because generally there are adequate resources available to solve any tough problems that occur. But that paradigm can be harmful to the health of a small company because there's not enough staying power. You can avoid this pitfall by completing a crude prototype, then tending to the details of refining the design.
Tending to details is an important point for people to consider as they make the transition from research to product development, from science to engineering, or from big company to small company. Creative people will create on their own because that's the part they enjoy, but they may need to be encouraged to pay attention to details. A product must have every knob a customer would want, and the whole thing must work flawlessly before anyone will buy. Your product development team may need a majority of people with patience and tenacity to implement the ideas generated. And because you will require diverse personalities, you must also be sensitive to individual needs.
As the company grows, however, the need to specialize tends to make the company compartmentalized. Because various parts of the company are interdependent, delays grow exponentially and provide negative feedback that slows things down even further. Your solution is to reduce the number of steps, shorten the time of each step, remove the bottlenecks, reduce the number of interfaces, and do everything possible to make the interfaces seamless.
To achieve better "conductivity" at the interfaces as the company grows, you can simulate a superbrain company by seeding different functions of the company with the founders and early employees who know the culture and understand how the company works. When different parts of the company understand and trust each other, they are much more likely to be responsive and to take action quickly with less precise information.
People will give you their best efforts only if you respect them and make them feel that their work is important to the overall success of the company. You can also employ techniques that big companies find useful, such as cross training, formal meetings and reports, interdisciplinary project teams, and people performing multiple functions. For sure, you want to bridge the interfaces by stamping out any negatives, from unnecessary approvals to not-invented-here syndromes. There's no easy way to keep everyone working at a high level of excellence; you have to be constantly on the lookout to guard the culture.
We didn't want to be just another small-company startup that operates in a chaotic mode, so we also spent a great deal of time figuring out a parts-numbering system and documentation procedures that would help us avoid confusion. Those decisions paid off handsomely as we grew. Soon we were able to build prototype iterations quickly and have everything fully documented at each step.
We found modern CAD and simulation tools to be very cost effective. They speed up design time and also minimize costly, time-consuming mistakes. Better visualization can eliminate intervening steps, sometimes even eliminate the need to build some prototypes. Computers can also help you make the interfaces more seamless by providing communication tools such as e-mail to keep people informed. You want to take advantage of all the modern conveniences to expand your reach.
The outside world, too, can be helpful during the development stage of a new product. Consultants, for example, can help you solve specific problems quickly. Most universities are cooperative so long as what is produced in their laboratories does not get shipped to a customer. The new trend is for national laboratories and big companies to be cooperative as well. That trend allows you to focus your precious limited resources on developing internal capabilities you cannot reliably get from outside.
At New Focus, we couple product development with manufacturing from the start by not having a strong demarcation between them. All of our product-development engineers are deeply involved in manufacturing and vice versa. Some engineers in product development have taken classes in manufacturing at local colleges to learn documentation and materials management, and others have actually assumed manufacturing responsibilities. All engineers are involved in the early production phases, not so much to fight fires but to develop manufacturing processes. Over time, they learn to design products for manufacturability from the earliest stages in the development cycle.
Once we have shipped the product, the engineer who designed and developed it becomes the product line manager responsible for that aspect of the business, providing guidance to the people responsible for our advertisements and our catalog. When a problem occurs in the field, the engineer who designed the product usually winds up talking to the customer directly, refining the product as necessary on the basis of customer feedback. What the engineer learns this way will benefit future products as well.
The message is clear. For the product development team to be truly successful, its members must develop an intrinsic understanding of the business and participate in every aspect of the company. Given the close coupling between technology and business competitiveness, an even more efficient business model is to have engineers permeate the entire company and participate in making business decisions.
A logical extrapolation is that more people with a technical background will become business executives and start their own companies. That's happening now, but perhaps not fast enough. In managing a business, you'll find your research background tremendously helpful. You can apply technologies to give your business a competitive advantage. You can evaluate technology opportunities rationally without getting overly excited or rejecting them out of hand. You can also foster a culture that gives engineering the roles described in this article. That's going to make technology commercialization more efficient and ultimately make technology development more efficient as well. We all win in that process.
FURTHER READING
Robert Kelley and Janet Caplan, "How Bell Labs creates star performers," Harvard Business Review, July/Aug. (1993), p. 128.
H. Kent Brown, Kim B. Clark, Charles A. Holloway, and Steven C. Wheelwright, "Development projects: the engine of renewal," Harvard Business Review, Sept./Oct. (1994), p. 110.
Reprinted from and Copyright © Laser Focus World--September 1995
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