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Engineers in Business

Monday 26th March 2012

Ideas Worth Pursuing

 

Matt Barrie

Matt Barrie

BRW recently ran an article by Matt Barrie on business ideas that are worth pursuing. If you haven’t heard of Matt Barrie, he founded Freelancer. In the article he wrote about business ideas that interest him, and what doesn’t interest him. In particular he had a sideswipe at us Engineers about our focus on the technology and solving those problems first instead of testing whether the idea has a viable market. As an Engineer who has had to learn about business in order to run one, I can agree with some of what he said. In particular, we can become so focussd on the technical problem that we don’t make sure there is a real business case for the final product or service.

 

Here is the short list of what Matt Barrie doesn’t like in a business:

 

  • Anything that involves selling your personal time – eg. consulting
  • Anything that isn’t scalable – more on that later
  • Anything that requires a technology breakthrough before you have something to sell
  • Small, niche and low total market potential opportunities

 

By scalable, Matt means that the sales potential is not directly proportional to either people or capital investment. Matt wants leverage. In his words “Businesses that are not scalable are bad“. But is this really the case? And what does he mean by bad?

 

Is non-scalable always bad?

I agree that if you want to maximise your income potential, the non-scalable businesses will not give you same ability to do that as scalable businesses will. However my business doesn’t only exist to make money. Making money is a byproduct of a good business that is well run and meets a real need. Businesses should make money, otherwise they are not adding enough value or not well enough run.

 

My favourite business quote is “The purpose of the organisation is for ordinary men and women to come together, and in cooperation with each other, do the extraordinary”!

 

For me, business is a mechanism to make the world a better place in partnership with others. It is too big a job to do on your own. And it should deliver real value.

 

There are many essential non-scalable activities out there. Here is a short list:

 

  • anything to do with the patient side of medical or nursing care
  • most forms of teaching and education
  • personal services
  • mental health
  • government
  • Product Development
  • construction

 

Notice I said activity. For the quote above also covers the “Not For Profit” sector and Government. Both should deliver real value. They just don’t directly derive their income from that value.

 

I’m sure Matt Barrie is not upset if he has to see a Doctor just because the Doctor does not have a scalable business.

 

The final point above is about Product Development. Thomas C. Gale said, “Good design adds value faster that it adds cost“. So I am not advocating development at any cost. It has to have a value proposition. A client of ours recently told us of a product we designed for them nearly ten years ago that they had made millions of dollars from. Given our fairly modest fees for that project, they got a massive bargain there. That was an example of very good value Product Development which they got a lot of scalable leverage out of.

 

Product Development uses a mixture of leverage and personal effort. Leverage comes from using existing technology tools to do the work faster. This includes things like:

 

  • Computer Aided Design and Analysis tools
  • Reference Designs and existing technologies
  • Science and technology understanding already known
  • High Level Design tools and processes
  • Compilers, libraries, components, operating systems, platforms, standards
  • Research findings, existing data, other specialists

 

The above all came from past work that can be used to make current work more productive or more effective. I started my career laying out PCBs using tape. Now I wouldn’t dream of not using a CAD System. We use Altium Designer for Electronics Design Schematic Capture and PCB Layout. This is much more productive than the manual methods. As part of our ongoing Product Development activities for our clients we design and lay out a new PCB every 2 weeks on average and this is only possible with the use of CAD tools and the full leverage of our experience. In general I don’t want to rediscover the wheel, or the technological equivalent of that, in whatever area of Electronics Design or Embedded Software Development we are working at the moment. I want to take as much advantage of leverage as I can, and only apply the personal effort to what I can’t buy at a reasonable price.

 

Likewise we use proven Software Development tools that just work every time. It is not a good use of any of my team’s time to be working out why the latest release of something no longer works or breaks a project we had nearly completed. Of course we shouldn’t do that mid project anyway, but the legacy issue still applies. Clients do want updates down the track. So we use IAR tools for our Embedded Software Development. They work, are well supported, and we almost never have an issue of any kind with their performance.

 

So my conclusion is that non-scalable business activities are essential to modern economies. They just aren’t where the maximum profit potential is.

 

Let’s take manufacturing. We serve Australian Manufacturers by providing them with the new Electronics Designs they need to either remain competitive, become market leaders or bring a brand new product to the market for the first time. The manufacturing side is scalable although the Australian economy primarily supports lower volume or niche manufacturing opportunities. But once a design is in production and the process is running, they can scale up to meet demand within their capacity.

 

But our business activities are not scalable. Each design takes at least some personal effort to produce. But if I stop my non-scalable activities, then someone else has to do it. And if everyone does the same, if all the non-scalable activities stop, guess what – the scalable activities also stop!

 

Freelancer enables the buying and selling of non-scalable activities in a scalable way. It is a great service to those who use it and extremely good value. I agree with Matt Barrie that it is a good business.

 

Personal effort is still valuable

There is an old joke that goes like this, “No matter how many women you put on the job, it still takes 9 months to make a baby“. Some things cannot be sped up by adding more resources. This analogy works well because we all know this is the case for pregnancy. Many other things are also like this. It will take generations to get peace in some parts of the world. Mindsets cannot be undone overnight. And it takes time to create economic frameworks. Successive Australian governments have spent 50 years working toward an uncompetitive Australian Manufacturing industry. This will not be undone with one policy initiative or one statement of a change of approach. It will take time and personal effort, by those with a vision, to make it happen.

 

So my belief is that personal effort is not only still valuable, but still essential, even if there are limits to how much I can scale it. I agree with Matt that it isn’t going to make me as rich as his approach will make him, but I’m not just in it for the money. For me, it is not bad, it is essential.

 

The link to the full article is at Ideas Worth Pursuing.

 

The twin pillars of modern business are Greed and Ruthless Efficiency according to the Harvard School of Business. If this were an organic process, we would call it cancer. Ultimately it will kill. We need a better model and we need better values. Greed and Fear are the enemies of many a good thing.

 

And if you were wondering where my favourite business quote comes from, it is from Aristotle, some 380 years B.C.

 

Want a great career?

And finally, a Ted Talk on “Why You Will Fail To Have A Great Career”! OUCH! But is it true?

 

This is an excellent presentation that challenges many of the common assumptions about careers. But there is hope and Larry Smith explains both the challenge and the solution.

 

 

Successful Endeavours specialise in Electronics Design and Embedded Software Development. Ray Keefe has developed market leading electronics products in Australia for nearly 30 years. This post is Copyright © 2012 Successful Endeavours Pty Ltd

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