I Nearly Retired

Manufacturing Profits you can retire on

I was talking with one of our past clients a little while ago. They told me they had a problem. They said, “Ray, I nearly retired“! So I asked them what that meant. And they explained.

 

We had developed a product for them a decade ago. The total project cost then around $50,000 as it included both the product Electronics Design, Embedded Software and also the Automated Test Equipment (ATE) for Production Test which also had an Electronics Design, Embedded Software and Windows PC ATE Software component to it. And from that product they made nearly $2,000,000 in retained profit. From their perspective, nearly enough to retire on. And since they own the company it is theirs to distribute as they please. Now they wanted to do it again. So we are onto another very exciting Product Development for them. Can’t say any more about that yet.

 

So I though about the value proposition here. The maths says:

 

2,000,000 / 50,000 = 40:1 Return On Investment (ROI).

 

And that ignores the total value of the economic activity and profits their suppliers and customers have made.

 

Return On Investment (ROI)

Return On Investment (ROI)

Manufacturing Spearheads Economic Growth

The Victorian Government estimates that every $1 spent with a business like Successful Endeavours, there is $100 of overall economic value generated for the state. Makes you wonder why they don’t invest themselves? They used to through things like the Technology Voucher Program but all of that is currently shut down.

 

And of course there are the jobs this generates. Again, Victorian Government estimates are that every job in manufacturing creates another 5 jobs around it in the supply chain and supporting businesses. That is the highest ratio of any industry.

 

So what’s not to love about Australian Manufacturing! Let’s look at the benefits:

 

  • creates fundamental value (so the service sector has something to leverage off)
  • creates jobs and then more indirect jobs than any other industry so it is great for employment
  • creates profits

 

And far from being in decline, the Australian Manufacturing PMI has been in growth most of the past  2 years so that is also really positive for the overall economy. Check out he graph below from the Australian Industry Group (AIG).

 

Australia Manufacturing PMI 2015-2017 shows growth the whole way

Australia Manufacturing PMI 2015-2017 shows growth the whole way

The above graph was created by Trading Economics. They provide a a useful way to use the AIG Australian Manufacturing PMI figures to get reports in the format you want. If you explore it more deeply, you can see that we took a hit to Australian Manufacturing during the Global Financial Crisis (GFC) but it has been an upward trend from then on.

 

AIG

AIG

 

Go Australian Manufacturing!

 

Successful Endeavours specialise in Electronics Design and Embedded Software Development, focusing on products that are intended to be Made In Australia. Ray Keefe has developed market leading electronics products in Australia for more than 30 years. This post is Copyright © 2017 Successful Endeavours Pty Ltd.

Visualisation: Part 2

The Client Perspective

What you see depends on which direction you are looking from.

 

What do you see

How many bars?

If you count from the top, there are 10 bars. But there are only 7 bars when you count from the bottom. In this case it is an optical illusion based on how the drawing is constructed. However in real life the same sort of dilemma faces us as engineers when we are looking at Product Development from the technology perspective and the client is looking at it from the Return On Investment (ROI) perspective.

 

Roger La Salle makes the case in his book “Think New” that the problem with most new product introductions is not the technology. In general, we engineers will find a solution. The risk that usually kills the product is the business risk or market risk. So our focus as engineers is on making the client successful by getting the product to work technically through Innovation and our skill as engineers, but the client’s biggest risk remains maximised the whole time. The business risk is only dealt with when the product is finally being sold in sufficient quantities to cover the development costs and now return a profit.

 

Those are 2 very different perspectives. It is worth keeping that in mind the next time you are working on a new product.

 

The image for today’s blog post was provided courtesy of Dr Marc Dussault, The Exponential Growth Strategist who is always on the look out for examples of antimimeticisomorphism, which I am sure you’ll agree this is!

 

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 © 2013 Successful Endeavours Pty Ltd