Posted by: malstott | April 5, 2016

Trickle-up: A Path to US Manufacturing

fountain2This is not a political post. It is a call to personal reflection and action. Politicians and policies can help change the rules but we are the change agents in our companies. We have gutted our manufacturing prowess here in the US. We can blame trade agreements, tax burdens, short term quarterly reporting or politicians. But we also need to look at executive leadership. I am guilty. I’ve been a manufacturing executive during the biggest downturn in manufacturing…ever. Since the 90’s we have been shuffling manufacturing off-shore at an amazing rate. We have lost over 8M manufacturing jobs since the peak in 1979 with most moving to Asia since 1999. While this trend has slowed and there is some evidence of a reversal (~800K net increase in manufacturing jobs returning since 2010), it isn’t enough and we need to take action. The economics are just about there. What isn’t clearly showing in the numbers yet is the longer term benefit of having a return of the manufacturing base. I call this a trickle-up effect.

Trickle-up is not a new term but is new in this context. The trickle-up effect or fountain effect is an economic theory used to describe the combined demand of middle-class people to drive the economy. The theory is credited to John Maynard Keynes early in this century. Because each manufacturing dollar supports $1.33 in output from other sectors, it creates a trickle of economic value. Manufacturing has the largest multiplier of any other industry sector. Reshoring is a way to multiply jobs and economic value for our country. In addition there are intangible business benefits like increased creativity, faster time to market and increased customer responsiveness.

The late Andy Grove said in a 2010 New York Times essay, that what creates tech employment is scaling. “Scaling is hard work but necessary to make innovation matter.” And now scaling is not happening in the US. The big tech legends like Intel, Tandem, HP, Sun, Cisco all scaled in the US when they started. Then we shifted manufacturing to Asia. Now, companies like Foxconn and Flextronics build our electronics products with millions of engineers, technicians and managers located in Asia. Let’s tune our innovation engine to include scaling. Tools such as additive manufacturing, collaborative robotics and IC manufacturing equipment are developed here. Let’s use them here.

If we agree that it is best for our country to bring these jobs back, how can we accelerate? We need to examine our decision criteria. In some cases the numbers are in our favor already. In other cases we need to take action as leaders to change the equation. Here are some practical actions to take:

  • Calculate the total cost of manufacturing before deciding where to build. Labor costs have increased in Asia and have decreased in the US. Energy costs are competitive. In some parts of the country the real estate is less expensive and local governments are interested in attracting industry by offering tax breaks. Automation can be used to increase quality and increase efficiency further. The Reshoring Institute has developed a Total Cost of Ownership (TCO) estimator that is free to use.
  • Assign a value to time. Manufacturing close to a development team accelerates time to market. Learning quickly through rapid prototyping and iterating designs based on real manufacturing input will shorten your time to volume manufacturing and that in turn gives you an edge over the competition. If your product goes to market 1-2 months faster, what is that worth?
  • Value Superior products. New technology needs an effective ecosystem in which technology accumulates. This happens between functional areas and between inventors and makers. We are missing an element of the creative process if we don’t include manufacturing in the cycle. It can be done with Asian partners but it often isn’t. Designers often don’t even see their product being built. They don’t interact with the builders of the product and they learn only through second-hand feedback.
  • Consider the cost of quality.  Ideally when there is a failure early in a product launch, it is quickly understood and either the product or the process changes to avoid that failure the next time. Tight feedback between design and build is the key to this rapid improvement process. Proximity matters. It doesn’t guarantee the close interaction between design and build but it takes down an obvious barrier.
  • Lower inventory levels.  Do this by moving manufacturing closer to the demand. This has been called “next-shoring” or “right-shoring”.  Companies can respond to changing demand because there is less inventory on its way. The need to commit to next season’s fashion a year ahead of time goes away. Colors, fabric, quantity, sizes can change as demand is better understood.  Inventory is expensive to store, ship, scrap and obsolete. The money saved by placing build close to demand can be taken to the bottom line. Companies like Nike, GE and Brooks Brothers are working on “next-shoring”.
  • Train. One of the biggest gaps we have is the readiness of our workforce for this strengthening in US manufacturing. As business leaders we should be readying our workforce to take on manufacturing jobs through apprenticeship programs, on-the-job training, internships, partnerships with local colleges and universities and funding for skills training.

Increasing our manufacturing base in the USA will trickle up jobs and prosperity. The jobs are good ones and they are multiplicative. Job creation matters. We have an financial obligation in business to sustain the society and infrastructure on which we depend. It isn’t altruistic. It is a long term fiduciary obligation. Our children will be better off. What kind of world will this be if we only have highly paid professionals designing products and the rest are unemployed or serving those who are highly paid? We need to take action to bring manufacturing jobs back to the US. It is the right thing to do.

Be courageous. I have seen many depressions in business. Always, America has emerged from these stronger and more prosperous. Be brave as your fathers before you. Have faith! Go forward. Thomas Edison

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Posted by: malstott | March 8, 2016

Step It Up

Image result for international women's dayOn March 8, 1917 women in the city of St. Petersburg marched in the streets to end WWI, food shortages and the rule of czars. This International Women’s Day event was called a march for “bread and peace” and it kicked off a revolution. In 1965, March 8th was declared a national holiday in the Soviet Union, meant to recognize the heroism and selflessness of women and to celebrate the contribution made by women toward the establishment of peace and freedom. Since then the holiday has been adopted across the world and is now a day to reflect on progress made by courageous and inspiring women in all walks of life. Google’s doodle  today is a montage of the many roles and the many possibilities for women. And what wonderful possibilities there are!

This year the United Nations called for Gender Equality by 2030. At the rate we are currently going we will not achieve parity across the world until 2095. We need to step it up.

Some key targets of the 2030 UN Agenda:

  • By 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and Goal-4 effective learning outcomes.
  • By 2030, ensure that all girls and boys have access to quality early childhood development, care and pre-primary education so that they are ready for primary education.
  • End all forms of discrimination against all women and girls everywhere.
  • Eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking and sexual and other types of exploitation.
  • Eliminate all harmful practices, such as child, early and forced marriage and female genital mutilation.

Let’s join in to support these goals and step it up to achieve gender equality. You can pledge your support here: PLEDGE SUPPORT. You don’t need to pay anything, leave an email address, sign your name. You just have to say you will participate in change.

Let us devote solid funding, courageous advocacy and unbending political will to achieving gender equality around the world. There is no greater investment in our common future.  UN Secretary-General, Ban Ki-moon

 

 

Posted by: malstott | March 3, 2016

Hire a Learner

When I was 20 years old I worked at GM as a co-op student in their tech center in Michigan. While working on the engine dynamometer, I met Bob and Hank. They were technicians of the highest caliber. Both were Cessna pilots. I tagged along a couple of times and for my birthday at the end of the summer Bob asked his instructor (he was getting an instrument rating) to give me a lesson. I couldn’t stop there and when I had my own funds a couple of years later I got my pilot’s license in California where I moved after graduation. There was nothing quite like the challenges of reading maps, mastering the radio, understanding the plane and knowing that controlling that airplane was in my hands. The learning curve was steep and worth it.

Years later I’ve mastered much that has involved starting from nothing and ending with taking control. The skill of learning something new is the most valuable arrow in my quiver. Nothing beats the adrenaline around figuring something out especially when the stakes are high. While I continue to learn even after decades in the working world, I see others in the workplace who are not so willing to jump into something new.  Often, managers and recruiters bias toward hiring those who have been there and done that. Some proven skill is necessary but not sufficient. The best employees are those who are curious, unafraid and driven to learn. When hiring, look for and ask about these things:

  • Adaptability – Ask your candidate to tell stories of transition. Dig when you hear about something that was tough to overcome. What did she or he do when placed in an unknown situation? International travel, cross-functional projects and joining companies involved in a new technology are fertile grounds for stories of adaptability.
  • Growth – An exceptional candidate will show a track record of jumping into new challenges. There is value to longevity in companies and roles but be careful when someone has only moved on when forced. A curious learner will look for ways to stretch and will not be satisfied in a stagnant job. When relating accomplishments, a learner will enthusiastically talk about the journey. Ask questions. (e.g. What challenged you in that job? What skills were mastered? How are you better prepared now because of your history? What attracts you to this job?) Answers should point to a growing set of skills and experiences and an aptitude to learn and change.
  • Emotional Intelligence (EQ)- This term was developed by Daniel Goleman in 1995. The book by the same name describes EQ as an ability to recognize one’s own and others’ emotions and to use that knowledge to guide thinking and behavior. This is closely correlated to learning agility especially as it relates to how you react to your own emotions. Fear can be an inhibitor to learning. Recognizing those butterflies in your tummy as something you’ve felt before and have worked through keeps you going forward. It is easy to let those feelings of uneasiness slow down your growth and learning.
  • Curiosity – The most valuable colleagues with whom I’ve worked have an insatiable curiosity. They aren’t stuck in their pay grade or functional slot. They reach outside of their comfort area to ask questions and to understand context. They sit at the lunch table with others in the company and learn about projects, technology, marketing launches, financial challenges. They combine their EQ with their curiosity to pull out information from others. They sincerely want to know what is going on outside of their cubicles. Hiring someone with this trait will land you a cross-functional connector. That person is worth her weight in gold.

Live as if you were to die tomorrow. Learn as if you were to live forever.

Mahatma Gandhi

Posted by: malstott | February 22, 2016

Startup Part Three: Forget Your Lessons

skiing in snowstormStarting a company is like skiing in a snow storm. Starting a company is like scraping gum off of your shoe. Starting a company is like riding a unicycle for the first time. Starting a company is the most fun and frustrating thing you can choose to do. If you thought that the process was straight forward and that you could simply use what you know to launch a company, then think again.  It will turn the lessons you’ve learned on their head.

I’ve been part of 3 company start-ups. Each one has reinforced the same hard lessons. The similarities are what I will talk about although truthfully, you can’t count on history or other people’s stories to predict your own start-up experience. Knowing that you can’t know how it will go is the surest wisdom I can share. What I’ve covered below are pieces of advice that ring true to those I’ve talked with in the start-up world.

  • Patience is a questionable virtue – Larry Page did not tolerate debate at Google when the company was young. When discussion came up his typical response was “just do it.”  When you are starting a company it is your baby. It is the most important thing you are doing and of course your product is the best there is. Why aren’t people returning email or answering your calls? Why don’t they see the value in what you have to offer? Whether you are selling a service or a product or an idea, it is important to keep in mind that you are one of many “interrupts” for your potential customer or investor. So patiently and politely waiting for a response is the only logical response. Or is it? Because you are competing with others for attention it isn’t good enough to be one of the crowd. Consider how you can stand out and be noticed. Connect personally with the right people. Use your network to make an introduction. Put a pitch together that “wows”. Go after it each and every day. When a targeted VC didn’t  answer emails or phone calls, we found a connection who made a call. A meeting was set-up. Persistence and impatience paid off.
  • Be a control freak – At Apple, Google, Ford and Amazon the founders were control freaks. They were in the piddly little details. Steve fanatically cared about color and finish. Larry eliminated all project managers to be closer to the engineers. Henry designed conveyor belt production lines and Jeff obsessively intervenes for the customer. While this doesn’t scale easily as a company grows it can be helpful as a company launches. Be a perfectionist and pay attention to the details. I’ve reviewed and rejected PO’s under $100. Enough of those make a dent and the message sent is that every penny counts.
  • Play the short game –  Brian Chesky and Joe Gebbia needed some cash and so rented out their loft during a busy conference week in San Francisco. Instead of using Craigslist they built a site, called it Airbnb and made $240. Then requests came in for more and the company launched. “One day at a time” should be the mantra. Dealing with today in the best way you are able is the key to success for a company just starting out. It is easy to feel discouraged by the daunting tasks in front of you. Step forward and beat those problems down to keep the progress going and you will look back over time and be amazed at what has been accomplished. Optimism is a characteristic that is very valuable when starting something new. There will be naysayers. They can even be family members, customers or investors. Don’t allow the negative inputs to weigh you down. Take the information on-board and look at the glass half full. At my last start-up company we launched a product and then stopped and pivoted to a new product. One day to the next my problems were flipped on their head.
  • Don’t be so analytical – Uber never should have worked. In 2008 Travis Kalanick and Garrett Camp were in Paris talking about how hard it is to get a cab in San Francisco. There were over 1000 taxi medallions issued in SF at the time. Too much competition. Too many obstacles. Nope.  As an engineer and operations executive I’ve always led with analysis and facts. It is good to have the data before plunging forward. It is also impossible to have all of the data when you are talking about a business that is not off the ground in a market that doesn’t yet exist. Sometimes you have to estimate, extrapolate or imagine the future state in order to put a financial plan, cash flow or P&L together. You will be wrong. Acknowledge that and stay light on your feet.  As Dwight D. Eisenhower said, “Plans are nothing; planning is everything.” I’ve modeled a monthly P&L out 5 years knowing that our ability to predict the next month was shaky. It calmed our investors and secured a Series B round.
  • Contradictions do not need resolution – Steve Jobs was himself a contradiction. He was both a hippy /Buddhist and a billionaire businessman. Many creative founders are a combination of genius and awkward. There is usually conflict in the beginning with people, ideas and styles.  What works in a start-up might not scale to a larger company but strong personalities with unreasonable obsessions are what launch companies. I’ve bitten my tongue many a time when my first response was a logical rebuttal to an illogical founder’s request. And then it turns out, the founder was right.

When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.    Henry Ford

Marcy Alstott is an Operations and Supply Chain Consultant with diverse product and technology expertise, multinational management credentials and extensive transformation know-how. She can be reached at malstott@opstrakconsulting.com. Her website is www.opstrakconsulting.com.

Posted by: malstott | January 25, 2016

Hitting The Mark With Your Consulting Dollars

ElmerfuddAnd then he said, “Your input was spot on and the way you structured your analysis clearly points us in the right direction. The team values your leadership and wouldn’t have made this kind of progress without your help…..It is too bad that we won’t be implementing.”

“Ready, Fire, Aim” seems to be the way many companies approach hiring a consultant. They know that they need help from an expert. They don’t have an internal resource available to move the problem, analysis or team ahead. And sometimes they simply want another perspective that will open their thinking or cause them to look at the landscape or strategy from a different angle. But in many cases the “aiming” of this resource doesn’t happen upfront and an opportunity is missed.

There are many ways to avoid this pitfall but if the following big five are followed, your consulting dollars will be optimized.

  1. Begin with the end in mind – As Steven Covey describes in 7 Habits of Highly Effective People, it is important to envision what you want in the future in order to work toward it. With a consultant this idea is a money saver. Consider what you would like as an outcome before you bring in a consultant. If your objective is something general like “coach the team”, “review and input to strategy”, “assess state of business”, then it is even more important to think through an outcome. If you don’t have time to put this in writing, ask the consultant to do it as a first step or even a step prior to hiring. Getting an agreement about outcome will help you and your staff focus and will give the consultant some momentum when starting.
  2. Shore up internal resources – The best consulting arrangement is when a strong internal team and well-defined sponsor couples with the consultant. There are several benefits to this. The first is accountability. The consultant has a participatory audience who will quickly feed back if the work is on track or missing the mark. The second is synergy. Having internal resources involved keeps the company culture and priorities front and center. The third is long-term results. Internal resources are there to stay and will take ideas, action plans and analysis forward.  If you light a match you will see better but if you use the match to light a bonfire, the heat and light will remain after the match burns out. Leverage your consultant to drive permanent change into your organization.
  3. Pick a consultant who will partner – But sometimes the objective changes. Sometimes external factors change or the consultant will learn more about a situation and that should drive a redirect. If your chosen consultant has the right approach to the job, the new information will be quickly disclosed to you and your team which will in turn drive a conversation about a new way forward. If there is a weekly status meeting between the consultant and her sponsor, time will not be wasted. Don’t be afraid to simply put the work on hold until it is clear what the next steps should be. That is one advantage of having a consultant rather than a full-time employee. The resource can be deployed very surgically and can be removed if not needed.
  4. Invest – The old adage, “you get what you pay for” is true in consulting.  The hourly cost should be considered for the worth and not simply compared to internal salaries. Look for consultants with specific expertise. Look for hands on professionals who have implemented in the past and are steeped in practical reality and not simply theory. While the big consulting firms do have consultants with both theory and practical experience you are more likely to get theory and analysis with the big firms. Whether hiring from a big consulting firm or looking for an individual with the skills you need, you will need to check the backgrounds of those hired. Ask specific questions about experiences in the areas in which you need the help. Look for professionals who can give you examples of change management success. It is one thing to know what works. It is another to get others to change to that new working model.
  5. Course correct – Don’t hesitate to change the direction of the work. If the results are not what you are looking for, ask for a change. If the information isn’t being delivered in a way that can be absorbed, ask for a change. If the cultural match isn’t there, change before investing too much in an arrangement that won’t move the organization forward. Don’t allow a consulting engagement to be “open loop”. Tighten the feedback loop for optimal results.

When a consultant’s work isn’t used at the end of the project it isn’t a total waste because typically something is learned and much is uncovered about the problem. On the other hand, the money spent is likely higher than need be. If the problem is defined in the beginning, regularly course corrected by people within the company who will live with the results and if the right consultant is chosen who will adapt and communicate, you will optimize your results.

“I hope you can hewp me mister game warden. I’ve been towd I can shoot wabbits, mongooses, pigeons, dirty skunks and ducks. Can you teww me what season it weawwy is??!!”       Elmer Fudd

Posted by: malstott | October 29, 2015

Deciding Which Way…

In Rotwo-roads-diverged1bert Frost’s poem, The Road Not Taken, a choice is laid out in the form of two diverging roads. While many interpret this poem as an encouragement to take a less traveled road, the poem doesn’t say this. Frost presents us with two paths that really look about the same. While he would like to have tried both ways, he had to decide and then “way leads on to way”. He won’t return to try the other path. A choice is made and then Frost tells us how he will describe this decision in the future.  He admits that he will likely point to this decision as one that made a difference. “Telling this with a sigh”, how can we make good decisions and then how do we live with decisions we have made?

  • Gather the facts: It is best to start out in an analytical mode. Understand the financial implications of a decision. Learn about the players already involved. Get information on the product if this is a career decision. Put information about an offer in writing and solicit input from experts on what is fair and appropriate. If you are deciding about a more personal matter the same concepts apply. What is the personal cost of proceeding? What will change in your life and does it matter? Size up the pluses and minuses. Write them down if that helps you get organized.
  • Consider the “way leading on to way”: Many choices we make will lead us down a path. Usually we can tell if the path is a good one. A degree in education will likely lead to a teaching job at lower pay but at great personal reward if this is your calling. A degree in engineering will open up many doors but will likely lead you to a desk job with less freedom to take blocks of time off or to work at home. Deciding to join a more established company could lead you to a number of job possibilities within the company but you will be a small fish in a large pond. Picking a smaller company will give you more chance to lead but you will not learn as much from others as you will likely be the only expert in your area. As you consider how the way will lead to another step, think about whether that path is where you want to be.
  • Heart check: While an analytical approach is a good backdrop for any decision and should shape how you feel, the tie-breaker is almost always the heart. More often than not there are two paths that both look pretty good. Perhaps like Frost one of the paths looks a bit more worn than the other but it is hard to see very far down the path and really there are few paths that haven’t been trod. What alternative feels right to you? Where is your passion. What do you wake up thinking about? Even if the direction you are leaning is the least understood, it might be the best for you if your heart is there.
  • Be brave: When you have weighed facts and honestly reviewed your heart’s desire, it is important to be brave with the decision. Have confidence in your abilities to do a job or make a move or change a career or launch a project. There is little that can’t be figured out with the right attitude and some passion. If we are not brave in our decisions they get made for us. Sometimes the options go away. Sometimes time and resources force our hand. So, when there is a decision to be made, make it and move.
  • Move forward knowing that you will spin the tale: This truth is a bit of a relief. We pick a path and it makes us who we are. When we look back we usually tell the story that our wise decisions got us to where we are. And honestly, we are right in part. If we make our decisions with the facts coupled with the heart and we bravely move forward we are likely to lead a life of adventure and learning. We are likely to be satisfied with what we have become. We are likely to be happy with our choices.

We all have choices to make. Be thoughtful, heart-full and brave and then pick your road. And God bless you on your journey!

The Road Not Taken by Robert Frost

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—

I took the one less traveled by,
And that has made all the difference.

Posted by: malstott | October 12, 2015

The Gordian Knot of Start-ups

gordian+knotThe Legend: The Phrygians needed a king. An oracle decreed that the next man to enter the city driving an ox-cart should become their king. A farmer named Gordias shows up on an ox-cart and got the job. Out of gratitude, Gordias’ son Midas dedicated the ox-cart to Zeus and tied it to a post with an intricate knot. An oracle again prophesied that the one to untie the knot would become king of Asia. Alex showed up and attempted to untie the Gordian knot. When he could not untie it, he sliced it in half with his sword. Apparently that was good enough and Alexander the Great went on to rule Asia.

The Gordian Knot of Start-ups: Every start-up faces at least one unsolvable problem. Every leadership team worth its start-up salt knows that these problems, no matter how insurmountable they seem, have solutions if approached with the right mindset and attitude. Sometimes the solution is to slice the problem in half. In any case the approach needs to include out of the box thinking and acting.

Roadblocks seems inevitable in a new company. These can come in the form of schedule slips, cost overages, performance issues, customer delays and more. With a start-up company there is little room for error and the problems can feel insurmountable. This is the test of leadership. While there is no simple approach, here are some ways to slice through your Gordian Knot.

  • Redefine the problem: See the situation with deep clarity and really understand the limitations presented to you. In some cases a solution or work-around will come up with a calm and studied approach. The key to this work is to not panic and react but to let the problem unfold. Gather the facts. Clarify the obvious alternatives. Dig deeper. This added perception is very valuable and often is overlooked in our haste to resolve. For example, if there is a slip in the schedule due to a delay in supply perhaps there is a way to substitute in another part or delay the addition of that part to the end of the manufacturing process. Maybe a partial ship of the late supply would keep the project on track.
  • Trade-off: Often times you can have it all but not at the same time. If a project is in jeopardy due to functionality or cost perhaps there is a way to trade-off one for the other. Can you spend on a component or transportation mode that puts you back on schedule? Or, can you push a piece of functionality out in time and keep on track with the release? Prioritize and then respond with a trade-off that keeps your values and company goals on track.
  • Lead with confidence: Often an optimistic approach is just what is needed to blast through obstacles. This starts at the top. Even if there are what appear to be insurmountable problems, a great leader will dig deep and project confidence in the outcome. This shouldn’t be an arrogant or dictatorial response but one that reaches into past history and reflects on similar times and good outcomes. There is a time for realism but as you approach a big issue the first approach should be positive and should engender optimism about the future.
  • Lead with humility: Humility isn’t a sign of weakness. Knowing what you know and what you don’t know is a sign of inner strength. If you are open to the ideas of others and realize that the collective wisdom of peers and subordinates often results in a better answer, you will often find a path through what appears to be an impossible situation. If you have hired well and there are people in the organization who are not like you, there is a good chance that their perspective will be different and could help with a solution.
  • Redefine success: There is a point where a problem requires a new definition of success. Alexander the Great decided the successful “untangling” of the knot was a slice with his sword. His success wasn’t what others expected but it was success none the less. In a start-up company this is often called a “pivot”. When the product being developed simply can not get you where you need to go it is time to redefine the company’s success. Perhaps the change will drive a new design or a new market approach or even a new product family altogether. But success can be redefined and the right kind of leadership can rally the troops to this newly defined battle.

Gordian’s story drives us to think about the impossible problem. It should also drive us to think about creative, out of the box solutions and the idea that bold problem solving defines leaders.

“Sometimes I’ve believed as many as six impossible things before breakfast.” Lewis Carroll

Posted by: malstott | October 6, 2015

Hardware Is The New Killer App

lunarmodulediagramI built a model of the Lunar Module when I was 12. I still remember how building it made me want to climb inside the real one and land on the moon. I was channeling Neil Armstrong and was certain that being an astronaut was my calling. Years later I graduated from Neil’s University, Purdue. I was not bound for space but I was bound for a career in making things. Taking great ideas and transforming them into a real shipping product is a pleasure that, for me, far surpassed bits and bytes or blurbs and spiel.

I’m in love with making things. Even here in Silicon Valley, the home of “dot-com”, there are big and small companies designing and building hardware products to sell to other businesses and to consumers. HW start-ups are the new “killer apps”. Funding for HW start-up companies has taken off over the last five years. Granted the number was low to start with but with this enthusiasm for hardware product companies, we are putting the Silicon back in Silicon Valley.  HW accelerators like Hax Accelerator and Highway 1 give these start-ups a home and help with the challenges of funding, building, importing and distributing products.  Kickstarter campaigns and companies like Bolt have given life to companies that otherwise would have languished waiting for friends and family to help with funding. Companies like Box Clever and MindTribe help these companies with the design itself. Companies like Dragon Innovation and OpsTrak Consulting help companies productize and launch into the market.

Building a hardware company is more complex than a SW only company but shouldn’t be feared. In fact ramping up a HW product is a blast and I highly recommend the ride.  Below are some of the key aspects to consider when building a HW company:

  • Connected: While I’m focusing on HW companies, no HW is independent of firmware, software and/or user interface. As a matter of fact the reason for HW’s resurgence is all about the internet of things. Everything is connected these days. We have moved from connecting on our computers to being connected in our cars, our homes, our clothing and in almost every industrial device. Bring in expertise or contract with the experts to be sure your HW product connects.
  • Concurrent: Small company or large, there is value to designing for manufacturing and the supply chain. Often referred to as DFM, the idea is to think about the manufacturing processes while you are designing the product. Sometimes the best way to get that perspective is to bring people in with the expertise. An easy partnership is with a contract manufacturer (CM) who is lined up to build your product. It is in their best interest to help you design your product so that it can easily be molded, assembled, fabricated, tested, labeled and shipped. If you don’t have a CM in mind yet or if you can’t get their attention due to your volume or company size, you can get the expertise from consultants or companies who have decades of this very type of experience. Bring your expert in before the design is locked in. Hold a design review and take into account the time it will take to make modifications to the design to make it more build-able. Don’t wait until you are on a critical path to release and then consider the ease of building the product.
  • Cost: Cost consideration often goes hand in hand with DFM although they are slightly different ideas. When designing a product you likely have a cost target in mind at which you will make enough money when selling your product to propel your company to success. But if you are off in your estimate by a factor of two or even off 20%, that can be a company showstopper. It is possible to iterate a design to get to a targeted cost but each change in the product costs money and the installed base needs to be considered. Ideally you know what your design will cost and you have taken into consideration the material, processes, labor and OH required to build and ship. If you have some margin in your plan you can survive a decision to quick-turn a PCBA or expedite components as you begin your ramp. Consider your cost of goods sold (COGS) budget. Get real quotes. Estimate labor time and cost. Don’t forget SG&A, material mark-up and profit from the manufacturers. Finally, if there are internal resources assigned to ramping the product their costs should be assigned as well. It is best to have a margin of safety in your model as you start so that the first product out the door can cost more without breaking your business model. That gives you some wiggle room and those costs can be whittled down later as you ramp.
  • Cash: One of the challenges to building a company that ships a product is that you have to invest in inventory, labor, space and sometimes machines to build the product. If you choose to build in-house you will need use your cash to set up a manufacturing process complete with quality and inventory control. You will likely need an MRP system to manage material and control inventory and ship orders. If your demand has its ups and downs you will want to add temporary labor and will need to train prior to the up cycles. With today’s infrastructure both in the US and in Asia, there is no need to develop a manufacturing process in-house. It is possible to entirely outsource your product build, distribution and even return and service process. Outsourcing isn’t free from costs and challenges. A clearly worded Manufacturing Services Agreement (MSA) and a solid relationship with executive management is the first step in solidifying your success. Staying involved in the process is the second step. Be there during builds and participate in the development of the assembly and test processes. The CM partner might be the expert in manufacturing but the product knowledge is in the OEM’s court.
  • Collaboration: This last attribute is wise advice for any kind of company but especially if you are a hardware company. The strength of your company is rooted in the brilliance of your design of course but the other factors that add to longevity, resilience and profitability are the supply chain, distribution channels, customer service capabilities, first customer’s adoption and marketing of your successes. All of these require relationship management. Even larger companies need to partner. A smaller company can be made by its success in partnering. Sometimes the product you are shipping needs to play in an environment that isn’t in your control. System integrators, plant managers, final customers need to be trained to use your product successfully. In the consumer market you are dependent on distribution and visibility of your product to the end customer. Creating a network of partners is a key element to success.

As children, we enjoy making things. Watch a five-year old with clay or legos.  Many who are makers inherently like to cook or sew or build furniture or design products. We like to fix things and build things. This same joy can be found in a company that builds product. I highly recommend it.

We don’t value craftsmanship anymore! All we value is ruthless efficiency, and I say we deny our own humanity that way! Without appreciation for grace and beauty, there’s no pleasure in creating things and no pleasure in having them! Our lives are made drearier, rather than richer! How can a person take pride in his work when skill and care are considered luxuries! We’re not machines! We have a human need for craftsmanship!
― Bill Watterson, Calvin and Hobbes author

Posted by: malstott | November 2, 2014

Start-up Part Two: Tipping Point

balancing_actIt is crowded. There isn’t enough wireless bandwidth. Spreadsheets aren’t up to date and are conflicting. Mistakes are harder to recover from. Hallway conversations aren’t inclusive enough. Plans can’t simply be shared over coffee. Two conference rooms just aren’t enough. Your start-up company is not a cute baby any more. You are approaching the terrible twos.

Growth in a start-up company is a tricky process. At some point you will reach a tipping point when things begin to tumble. Then it is all about falling forward gracefully into a new phase. Anticipating this point in your company’s path is the best case. Recognizing it quickly when it is upon you is the second best. Ignoring it or not even seeing this shift can be the beginning of the end.

Growth is surely good but at some point adding feels more like multiplication. Growing past a certain number of employees, products, or customers can feel like a loss of control. What drives this precipitous change in a small company and what should be done to prepare?

  1. From Entrepreneurial –>Expansion: When a company launches it is all about the product. Assuming that funding is in place the laser focus is on getting the product to work. The organization is flat and the decisions are made informally. Each individual wears many hats and individual effectiveness is the key. Assuming that the early stage is successful and the company has a working product, some initial customers and money to work with, there will be a shift to commercialization. Commercialization suggests volume, profitability, scale. It also suggests process which can be a dirty word to some and salvation to others.
  2. Everything Through the Founders –>Delegating Responsibility: When the company is less than 20 people it is possible to let everyone participate to some extent in the decisions. It is still possible to funnel everything through the founders for conversation and agreement. Most of the decisions being made are relevant to the product or to the strategy and of course the founders need to know and approve. When the company passes this tipping point there is just too much flowing through this bottleneck. This can create a leadership crisis if the founding team is not able to delegate to middle levels of management. The executive team should shift to roles of team building, coordinating and strategy. Shifting doesn’t imply full hands-off management. This is still a start-up company and there are many details to drive. But the shift needs to start here.
  3. One Product –>Multiple Products: As soon as the company branches to multiple product development efforts there is a serious shift in the dynamic of a company. There is no longer one agenda for the company. Even the simple act of adding a side project to the team leads to the need to prioritize. Without an understanding of priority the support personnel will not know what task should be done first. Clear priorities are the responsibility of the founding leadership team.
  4. Early Adopter Customers –>Early Majority: Geoffrey Moore made this shift famous in his book Crossing the ChasmGeoffrey’s point is that the greatest peril in developing a high-tech market is making the transition from early visionary adopters in a company to the open-minded yet pragmatic early majority. This new audience is looking for return on their investment and consistency in delivery. They know that there are bumps in the road for new technology but they have a business to run. They will be only so forgiving. A company’s focus on this transition across the chasm is more than a marketing idea, it is a cross-functional shift.
  5. Process slows us down –>Process speeds us up: As mentioned in the first point above, process can be a dirty word in some organizations. Most people will agree that there is a time and place for process but aren’t very happy when that time in now and that place is here. It does slow down a company to put financial, new product introduction, product life cycle management or forecasting processes in place. But it slows a company down even more dramatically if these processes are not in place as this tipping point is reached. The leadership of the company has to anticipate the need for these controls/procedures/ systems and invest before the heat is too high. An example is the need for a product life cycle management (PLM) system. Engineers like to design without being hindered by a system requiring a BOM, suppliers, drawings, etc. But as soon as something needs to be built by an outside company, it is much more efficient to have one source of truth for what is being made. Pain now delivers ease later.

The tipping point in a start-up company is a beautiful sight to behold. It implies that the company is growing and becoming more valuable. It implies a viable customer base and a product with market worth. But it also requires more than a passing awareness of the changes that will soon be required for success. These can be summarized at a high level as:

  • A leadership shift from controlling to enabling
  • An embracing of process to achieve scale and consistency
  • A push forward into cross-functional delivery
  • Inspiring leadership to describe the way through to the next phase

Change is inevitable. Progress is optional.      Tony Robbins

Posted by: malstott | October 5, 2014

Dance in the Workplace

hot partyWarning: This blog post compares business to dance. You have heard football, dating, airplane flying and war analogies to business.  Let’s put our pink on and dance outside of the box.

I love to dance. I like to exercise. Dancing for fitness is a great combination for me.  It is also a window into humanity. I enjoy the music, movement and I like to note the myriad of “types” in a dance workout class. My family doesn’t necessarily like my crazy dance style. I’m a wonderful dancer, in my imagination. I probably should have been a Broadway star because in my imagination I am very good. That says something about me and that is my point.

Dancing styles seem to mirror personality types and tell us something about our fellow humans. Understanding those around us is part of the challenge of building a successful business. Who is out there on the dance floor?

  • Reflection focused, exacting: There are some serious dancers in the front of the room. They are looking into the mirrors because they wanted to get it right. Perhaps they also want to be seen but that is unclear. It doesn’t look like they are enjoying themselves and I suppose that is why they aren’t superstars. They have the technique but not the finesse. They execute but fail to mesmerize
  • Can’t catch the beat, and they know it: In every class there is someone who marches to a different beat. They just can’t get the rhythm of the music and things are moving too fast. They would rather be in a class that doesn’t require anticipation and interpretation. They would shine in a weight lifting class where sheer strength and stamina is on order. Usually these folks don’t stick around. It just isn’t for them. If they do stay through until the end, they clearly don’t enjoy what they do and they do more harm than good.
  • Can’t catch the beat, and they don’t know it: Frankly, these types are my favorites to watch on the dance floor and in the office. They create their own moves. They knock a few people over with their enthusiasm. Sometimes they show up with crazy outfits and the room clears around them. They inspire smiles and sometimes others join in more enthusiastically because of their bold approach. They are flawed leaders with heart.
  • How do they move like that?: There are a few dancers who just have what it takes.  They are superstars and are pulled up front by the instructors. They are naturals but it is true also that they show up at most of the classes offered and they work hard to get the moves right. Most of us are trying to emulate the ways they move hips, head, shoulders. They are charismatic leaders.
  • Moving for the fun of it, in the pack: These dancers enjoy what they are doing and are good enough that they don’t stick out. They fake it until they figure it out. They don’t have the flair of the superstar and are likely not going to be pulled to the front of the room but they will be there until the end and others do watch and follow.
  • Watching with amusement: There are always those who watch from the sidelines. Sometimes they are in the room and hang in the back but don’t jump in. They critique. They judge. They seem enthusiastic about the art form but for aren’t brave enough to really get their feet and hearts in the game.

Do these types sound like the people we work with? I take away these lessons:

  1. You can be a good leader even if you aren’t a natural. Skills can be learned and the most important thing is to enjoy the process.
  2. Good leadership requires a bit of style. Figure out what that is for you.  People want to follow confidence and grace.
  3. Don’t sit on the sideline and criticize. If you are showing up for work, you have some kind of leadership job to do.
  4. If you follow your own drumbeat you probably still have a following. Keep your heart in the right place and the rest will follow.
Dance as though no one is watching you,
Love as though you have never been hurt before,
Sing as though no one can hear you,
Live as though heaven is on earth.

― Souza

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