Compartments

Walfer X Working drawing for elfa component shelving

Walfer X Working drawing for elfa
component shelving


I would use the word “Chaos” to describe the current business environment. We are in a period where emerging innovations are changing many of the ways that we do things. As humans we need to operate in defined compartments. There is a big business in selling the things that you need to organize your closet. Stuff that you keep is only useful if you can find it when you need it. Our employment and business lives also only work if they are sufficiently organized into compartments.Monopoly
Board games like monopoly can be a lot of fun. Having all of the pieces makes them even more fun. This is why they are sold in a box which serves as a compartment for holding the wide variety of pieces. Many compartments like that exist within my game cupboard so that I can easily gather everything in one go.
Quoting is one of the important tasks in making a profit in business. In a period of stability the customer already has a fairly detailed idea of what he can afford to purchase and what it will cost. This knowledge is based on accumulated experience of the buyer and the people he knows. In a period of rapid innovation it become hard for the customer to determine what belongs in the compartment of goods and services he wishes to buy. “Future Shock” applies when the supplier suggests that the buyer should know the cost of the stack of goods and services he wishes to buy.
Most kits of components contain a wide variety of items.

Most kits of components contain a wide variety of items.

As companies embarque on the difficult task of evolving. They find themselves in unfamiliar waters. Most new ventures involve requests for quotes for new products and services. It would be nice to find suppliers who are already familiar with providing those items. In a time of rapid innovation that is less likely. Most customers want a fixed price quote. This is impossible for the estimator to accomplish if the customer cannot determine a fixed amount of items to include within the compartment. Wishful thinking sets in. “I want you to quote whatever it takes to get the job done” I can assure you if the estimator knew how to quote a “turnkey” profit he would no longer be working as an estimator.
We are all creatures of habit. Business owners are dismayed that they can no longer find buyers for the unchanged products and services that formed the backbone of their companies. Employees drop out of the work force because they cannot find anyone who wants to hire someone to do the job that they have always done. These are only symptoms of the marketplace chaos that is out there. This chaos will continue until the emerging startup businesses invent the new compartments that will restore stability.

Take Off

plane -waiting for take off

plane -waiting for take off


Every time I visit an airport I marvel that it is possible to lift 100 tons of metal into the air. As an engineer I also know that in most cases the engines are operated during take off at 110% of the power output that they can deliver on a continuous basis. This extra power is needed to accelerate the plane to flying speed in a reasonable runway length. When I fly it is comforting to know that this is not the first time that the plane successfully managed a take off. I am also not surprised that flegling aircraft are tested on much longer runways so that the pilot can choose to abort and try again if the indicators are not favorable.
The same approach is used to get a business to take off. Yes, it is going to take much more effort to get it started than will be expended keeping it going. As “The Lean Start-up” teaches us, we will need to abort some take off attempts and pivot to new strategies. This is why venture capitalist describe the cash flow of a start-up business using a J Curve. Most successful start-up companies will require input capital to fund these aborted take off attempts
Private Equity Start-up J-Curve graph by URBANRENEWAL

Private Equity Start-up J-Curve graph
by URBANRENEWAL


Even though the concepts taught in “The Lean Start-up” were honed in the software community they have relevance within the manufacturing community. In manufacturing it is less possible to obtain the same rapid customer input and testing that is enjoyed by software creators. Just because it might not be possible to evolve as fast, improving time to market has major benefits. The advent of tools like 3D printing and computerized finite element testing have made it possible to substantially shorten the time to pivot to more acceptable customer offerings. Historically the 3D CAD designers could work at a leisurely pace because they were faster than the down stream tooling builders. In the emerging new economy the leaders have discovered that they can get a jump on their competition by putting the systems in place to accelerate the creation of 3D CAD definition.

Chasing Unicorns

Unicorns take on a mythical aura because most people have not seen one

Unicorns take on a mythical aura because most people have not seen one

“We are looking for the best and brightest talent to join our unicorn hunt. Our compensation package is north of 6 figures and we offer the standard start-up percs of free pizza, gym, air hockeym ping pong etc.” Other offers to the starting engineer read “A career with our firm as a manufacturing engineer starts with an unpaid internship. Those people who progress (read survive) to the point where they have senior talent can look forward to a $50,000 salary with unlimited overtime.” Mind you, unicorn hunting is not easy. It requires that you are flawless in writing the latest code. can pivot on a dime when you hit a dead end, and can spot a path where others cannot see one. Surprisingly a tiny number of engineers pick option B. I suspect they are the ones who do not understand financial profit. The legacy companies continue to follow their stodgy path because they choose not to acquire the top flight talent needed to grow. The employees in those firms become mired in a system of layoffs, pay cuts, cost cutting, reorganization etc.
Gold rushes are not a new phenomenon. The first prospectors who worked the California gold fields in 1849 could earn 10 to 15 times what east coast wage earners made at the time. This level of financial incentive motivates many people.
panning for gold is profitable for the first people who work the claims

panning for gold is profitable for the first people who work the claims

Unicorn hunters are in the same category. The success of the original “Facebook” entrepreneurs launched many copycats. Just as the late arrivals to the California gold fields discovered, the big financial success is enjoyed by the pioneers. Currently there are about eight million apps offered for sale. Fewer than three percent of those apps had enough sales to recover the $100,000 investment needed to create the app. This herd mentality sets the stage for the next gold rush. The big salaries funded by venture capitalist have siphoned away the engineering talent that normal companies need to survive. A persistent talent vacuum sets the stage for a big disruption in unexpected sectors.
Napoleon Hill in his book “Acres of Diamonds” did a great job of explaining how this happens. In his book a farmer sells his land to search the world for diamonds. He returns 20 years later to discover that his land is now a diamond mine. Similar stories will be told about today’s unicorn hunters. After a string of unicorn hunts in regions where all of the unicorns have been harvested, searchers will return to discover that the best opportunities are in places that have not been trampled by the herd.