Business  Basics for  Engineers by  Mike Volker

Introduction - The Fun of Business

Preamble....

Over the past 25+ years in the technology business I've learned a lot. There's probably a lot more that I haven't learned! Along the way, I've had some great successes and I've also had my share of so-called "learning experiences". Yes, at times I've looked like a hero and at times I've looked like a real ass. At times I'm sure that I've delighted my colleagues and at times I'm sure I've really ticked off a few people. I enjoy sharing these so-called learning experiences with others. After selling my first company, Volker-Craig Ltd., I decided that, having been successful by my own definition, I didn't need to "do it all over again. Instead, I elected to spend more time "at home" and to conduct business vicariously - i.e. helping and encouraging others to take the trip.

My philosophy is old-fashioned and simple: work hard and honestly, be creative and committed, look for new opportunities, and with some "luck" and a little help from your friends, you'll be successful and maybe even have a little fun along the way.

The Fun of Business

Here are some of my thoughts on why high-tech enterprise in Canada can be such a thrill.

• What is “High Tech”?

My definition is simple: As long as there is an R&D (Research and Development) expense line item in the P&L (Profit and Loss) Statement which is greater than 10% of sales, the company is a high tech company. Put another way, the company invests in R&D in order to create innovative products. This is distinct from simply using technology. The company actually creates technology. Information Technology (e.g. software), electronics, communications, and biotechnology companies are typical examples of "high tech" ventures.
• Still a young industry

Yes, high tech is young. There's more that we don't know than what we do know. The number of new products yet to be invented is far, far greater than anything that has ever existed. As we move away from exploiting our natural resources and move towards exploiting our personal resources (brain power), more opportunities will unfold. Even today, in the late 90's only a small percentage (around 10%) of our workforce is employed in high tech.
• Pioneering spirit

Yes, pioneers do get arrows in their backs, sometimes. But pioneers discover new frontiers, too. Adventure and exploration are not without risks. If you have a pioneering spirit, the high tech business may be for you!
• Rags to riches opportunities

Nowhere else have we seen so many ambitious and bright people become millionaires. We've all heard of the well-publicized success stories like Microsoft, Intel, Apple, Corel and Newbridge and the names Gates, Grove, Jobs, Cowpland and Mathews are well known. But for each of these there are hundreds, maybe thousands of others who have made millions of dollars in high tech. Every time a relatively small and unknown company goes public, like Architel Systems, several new millionaires are born. I'm not saying that you should be in technology to make lots of dough, but it's not a bad fringe benefit. It'll give you the freedom to do what you really want to do.
• Business Success Stories

Silicon Valley is well-known, as is the Pacific Northwest. But what about the Ottawa region? Or Southwestern Ontario or Vancouver? Thousands of companies are growing and evolving. I measure success as those that have identified an opportunity and have seized that opportunity for the benefit of the investors and stake holders. In Vancouver, we're finally starting to see many companies approach or exceed that magical $100 million-per-year-in-sales threshold. Names like MDA, MDSI, CREO, and Spectrum Signal Processing come to mind as do some exciting, emerging companies like Ballard Power, ALI, NCompass, and Hothaus to name just a few.
• Personal Success Stories

It's a good idea to point to successful individuals. These serve as inspiration and role models. When you meet many of these people, you will find out that they are not super-human. And they are often not super-smart. Perhaps they just have a slightly different approach or drive than others. It's also a good idea to see how well these folks have done to point out that it isn't just movie stars and pro athletes that become millionaires. In fact, there are probably more millionaires in the high tech entrpreneur category than in any other! I won't mention Bill Gates - he's always the obvious example - a nerdy guy (who turns out to be a savvy marketer) who's worth multi-billions - arguably the richest man on earth. Consider David Filo, co-founder of Yahoo, an internet company which hit a market cap of $9Bn within four years making his stake worth over $1Bn (US dollars, to boot!), increasing by $150 million in a single day (when Yahoo jumped $26.37 on a single day in July, 1998). Closer to home, i.e. in B.C., there are a great many who have made millions - they are just very shy and we don't really know how much they've made. For example, there's Don Mattrick who sold Distinctive Software to Electronic Arts, Barclay Isherwood who sold MDI to Motorola, Norm Francis who sold his Basic Software Group to Computer Associates, Morgan Sturdy who sold Dees Communications to NICE (Israel), and many others who made millions by owning shares in their companies, e.g. the teams at Ballard Power Systems, Spectrum Signal Processing, Sierra Systems Group, PMC-Sierra and many others!
• New Business Startups are “in”

Yes, it is cool and fashionable to start a company. You will get no end of support from mentors, investors, government agencies, and peers. A plethora of information, advice, and assistance is available. You can find almost anything on the web! Over 35,000 new businesses (all types) were registered in B.C. in 1996 and over one million new businesses were started in North America.
• Great infrastructure in Canada

Well, maybe. Taxes aren't so great. And living expenses in places like Vancouver are causing some problems, too. But we sure have a lot of keeners and supporters and in particular we do have the know-how. We have great R&D organizations. It is a well-known fact that Microsoft relies heavily on grads from the University of Waterloo. Those that stay are creating hot new companies like Hothaus Technologies. If we can get governments to listen a little better and pay less lip service and show more action, we'll do even better. Quebec is certainly demonstrating some leadership in this area.
• Business Failures

What can kill a business? How many fail in their first year? (more than half)  How many fail in their first 5 years? (more than 80%). How many fail in their second 5 years? (90% of those who didn't fail in the first five years). Is it management, lack of capital, or competition? Think about it this way. If a ship goes down, who takes the blame?
• Bootstraps

Companies can "bootstrap" their growth, i.e. reinvest profits and cash to build themselves up. Some good examples of growth through re-investment are Lands' End Hotels and Gateway 2000, both of which were started with less than $10,000. Why mention the Hotel? Note the apostrophe in the name. It's a typo that stuck because the founder didn't have the cash to correct an advertising brochure. And, of course, there's Microsoft, too! For a great story, watch PBS's documentary on "Triumph of the Nerds".
• Now is Best Time to Start

Today is always the best time to start. There's never a better time (except maybe in the past!).
• So, it’s Fun, because....

it’s challenging
it’s "do-able"
it’s rewarding (yes, money!)
it’s a roller-coaster
it gives you CHOICES - you can do because you want to, not because you have to
• Limitations

What can limit you? What is it that Pogo said? "I have seen the enemy and it is me." So, you really only have to worry about yourself. The only other real limitations are, as George Gilder might say, the Span of Life, Speed of Light, Sand and Air. So there you have it.
• Your Advantage

As engineers, you know about the Engineering “Method”. This will help you. It is easier to learn about business than it is for a businessman to learn about software engineering (maybe a bad example) or quantum physics (a better example). Probably the toughest thing to learn about is managing people, learning people skills. After all, that's what a company really is - a collection of people!
• BUT - beware of the E-Myth!

Michael Gerber, a management consultant says it well. Just because you may be good at practicing a profession (auto mechanic, painter, communications engineer) does not mean that you will be good at running a business which does those things (auto repair, painting, phone company). He says that many people are not entrepreneurs. They are just "technicians" suffering from an entrepreneurial seizure! How true.
• Your attitude

In the end, it'll come down to your attitude. If that's right, you'll do just fine!