While a custom engineering group with small manufacturing capability provides a significant value for its customers, it does not allow the business to easily scale and grow. And while customers are prepared to pay for custom engineering projects, this alone does not offer the financial return necessary to establish a worldwide manufacturing, sales, and support infrastructure. Custom engineering groups or companies typically remain local small businesses.
On the other hand, leveraging the organization's engineering talent could develop products to be sold year after year to multiple customers. This would allow forecasting of returns, which can be used to establish the infrastructure required for growth.
Both business models have conflicting cultures. The custom engineering model minimally invests in sales and marketing and depends on creative design engineers that intimately understand the customer's application. Close customer partnerships are critical. This is in sharp contrast to the product manufacturing model where investments in sales and marketing are much higher, market research defines the product direction, and engineering is focused on designing the product with minimal customer interaction during development.
The financial models for both types of organizations also are quite different. For example, with a focus on custom engineering, product engineers often are taken away from new-product design programs to solve an interim customer-application problem. While this may generate short-term returns for the organization, it removes those resources from developing new market-driven products that may be a key element to acquiring future business. However, by moving those engineers who have the ability to develop custom solutions to product development, the organization shifts short-term returns to long-term investments and spreads those returns over multiple years.
Although a custom engineering group or manufacturer of low-volume products can create a great small business where customer requirements for specific products fuel cash flow, this organizational model is difficult to grow above the $5M mark. The culture within a company at this level is centered around designing products quickly, without focus on documentation and processes required for long-term or high-volume product manufacture.
When business is slow, and income is low, the company takes on multiple design challenges, often overloading engineering to achieve financial stability. Many times, this overload makes it difficult to fulfill customer requirements and meet delivery commitments because of lack of resources.
For VTI, the challenge was to determine how to develop market-driven products with long product life cycles without abandoning the custom engineering service we currently were providing our customers.
The first challenge was to change the corporate culture within the company and invest in instituting an infrastructure in which we could develop those long-life products. We needed to reduce the time required to design a custom product as well as create documentation and a design process that could scale for high-volume manufacturing. We recognized the importance of developing a corporate culture that would provide the service and consulting relationship of a custom engineering facility while possessing the engineering depth and infrastructure required to market, support, and produce standard products.
Creating a Centralized Mission
We started the transition by expressing our corporate philosophy in a mission statement that would drive a culture change and become the focus for every part of our business. This corporate philosophy, 15 years later, still is the driving force in determining the markets we engage; the attributes of the personnel we hire; and the innovations, products, and services we offer to our customers.
So what is it, and why? In words, it is deceptively simple:
Measurement Integrity
Measurement integrity drove the focus of the company, its products, and its customers. It also defined the type of engineers, sales, and marketing personnel we would hire and the processes we would put in place.
Modularity and Density
Modularity and density provided an underlying philosophy for every aspect of our business, which included the manufacturing processes, documentation, and product developments that enabled us to provide scalable test solutions with extensive feature sets. Standard products then could be customized to provide optimum solutions.
Product Longevity
Product longevity drove the need for us to standardize, or create, platforms and technologies that would have broad market acceptance. That, in turn, drove our internal business strategies to leverage developments over a long period. The result gave our customers the confidence that we would provide test instrumentation that could outlive the products they were testing.
Total Cost of Ownership
Every capital asset created or acquired, infrastructure developed, or tool selected needed to match our top three objectives and, in turn, provided the best total cost of ownership. This also culminated in the product offerings we developed.
The Strategy and Focus Created by the Mission
The mission drove the decision to focus on specific business disciplines and develop standard and custom products only for that discipline. We selected functional test and data acquisition, and our engineering group was tasked to develop a strategy where we could produce market-driven and custom products and create an infrastructure to support both. It also required us to hire the right personalities in sales and marketing—those who could sell and support both standard products and custom solutions.
We created a corporate strategy to modularize our internal hardware and software products so that we could leverage engineering in a building-block manner. This required engineering to document designs in greater detail and create processes to support the volume manufacture of standard and custom products, allowing us to develop products quicker and more cost effectively.
Within the organization, we hired team members who had customer application domain knowledge as well as product development knowledge. All key contributors had to have the abilities to multitask and think outside the box.
As the company grows, this becomes more difficult but still is an underlying attribute of our team. This allows us to work very closely with customers to define standard products that can be cost-effectively customized. A customized commercial-off-the-shelf solution provides our customers with a more efficient test solution.
Every product we introduce has the same market differentiators that are driven by the mission of our company—measurement integrity, modularity and density, product longevity, and total cost of ownership. They are the basis of our overall business objectives. The culture created by a simple but well-thought-out mission statement helps drive the corporate business strategy and ultimately benefits our customers and the company.
About the Author
Paul Dhillon is CEO and president of VXI Technology. He has been involved in test and measurement for more than 22 years and instrumental in bringing industry standards to the VXIbus and LXI markets. Prior to joining VTI, Mr. Dhillon led product development and sales teams at Racal Instruments (EADS). VXI Technology, 2031 Main St., Irvine, CA 92614, 949-955-1894.