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EPISODE #16 | Oktober 1, 2022

Technische Innovation, Überwindung der Kluft und Vermeidung der Analyse-Lähmung

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SiliconExpert Podcast Episode 16 with Matt Sweitzer of Boston Engineering - Transcription

Host: Eric Singer

Producer/Director: George Karalias

[00:00:00] Matt: Scalability is absolutely paramount in order to be able to cross that chasm and you likely wouldn't be able to cross that chasm, if you will, if you don't have all of the components you've drawn out in a comprehensive manner that can be handed over to manufacturers so that they can start really producing things.

[00:00:23] Eric: Welcome to the Intelligent Engine, a podcast that lives in the heart of the electronics industry, brought to you by SiliconExpert, SiliconExpert, is all about data driven decisions. With a human driven experience, we mitigate risk and manage compliance from design through sustainment. The knowledge, experience, and thought leadership of the team partners, and those we interact with every day expose unique aspects of the electronics industry and the product life cycles that live within it. These are the stories that fuel the Intelligent Engine.

[00:00:58] How does a startup go from innovative genius design to profitability and scalable manufacturing efficiency? This is the make or break question for most companies that wanna get past that initial phase of exciting development and buckle down to the nitty gritty and the real work of having a sellable product.

[00:01:19] Joining us today to discuss this is Matt Sweitzer from Boston Engineering. He's spent a large part of his career working with startups to get them through all of those key phases. Matt, thanks so much for joining us.

[00:01:31] Matt: Thank you very much for having me.

[00:01:34] Eric: Before you were with Boston Engineering, you were doing some really interesting work with Greentown Labs, and I'd love to hear a little more about that.

[00:01:41] Matt: Well, a little bit of background, it's the largest clean technology startup incubator in, It was just a really fascinating place full of absolutely brilliant humans who are working on some of the world's toughest challenges. And so the technology there that was being designed was incredibly diverse and interesting.

[00:02:03] So one of the organizations is working on essentially developing a hydrogen gas station. So one thing that's really fascinating is how, how the technology already exists right now to have 100% renewable transportation. We have the technology right now. Sure. There's some bugs. We need to work out how to effectively design these products so that it's manufacturable and manufacture, it manufacturable at scale sales needs to figure out how to, um, how to tell the story so that we can somehow convince oil and gas companies in the, and policy makers in order to switch to renewable source. Of course, it's so much easier said than done.

[00:02:50] But the technology, I can't emphasize enough already exists today that can allow us to be on 100% renewable grid in transportation, of course. But some of the technologies that were coming out of there were absolutely mind boggling from hydrogen powered cars where there only emissions is droplets of water.

[00:03:10] To, to even satellites that don't require like jet fuel or anything else like that. There's just some really fascinating technologies there, again, that everything exists, but it's just kind of difficult to commercialize. But one thing off of that point is this S B I R program. That is just really interesting.

[00:03:34] So for some of you that that may not know, S B I R stands for Small Business Innovation Research. It's essentially a grant program that the federal government, that a lot of different branches within the federal government provide. To help early stage startups get their feet wet within designing these technologies.

[00:03:53] Because some of the technologies that we were just speaking about are so far out there technologically that it's going to be really hard to commercialize within 1, 2, 3 years. Right? The government comes in, provides a quote unquote sort of, uh, seed for these startups to start researching these technologies, and that's what we call this kind of tough tech sort of industry that the government actually really helps fund through these S B I R program. And a lot of the startups out of Greentown Labs and most of the really tough tech startups that exist today either apply run off of S B I R grants or, or at least aware of them to really get their foot going through the door.

[00:04:36] So I was a part of, through the National Science Foundation a S B I R and S TT R sort of advisory board program. And just looking through these applications, each application, all in all, like all pages, there were like a hundred pages each, but the technologies that we were reviewing, you could tell were not necessarily attractive to most investors.

[00:04:59] Because investors, again are looking for that exit. How am I gonna make money off of this? But when you're working on a new kind of technology that clearly has some sort of value but won't be able to commercialize for the next 10, 20, 30 years,

[00:05:12] Eric: it's a tough sell to investors. So now that you're with Boston Engineering, I know you continue to work with startups, but you're also involved with a much wider array of organizations, right?

[00:05:23] Matt: Yeah.

[00:05:24] So throughout my entire career, basically I have been. Working with startups all the way throughout idea phase, napkin sketch, just inventing sort of new products all the way throughout commercialization. So although right now I work for a company that mostly works with established organizations, I, I still love working with scrappy startups and helping them.

[00:05:50] Try to quote unquote, cross this chasm of death. So startups tend to reach this area within their life where they have, they have this idea for commercialization. Every startup in the world thinks that they have the greatest, most groundbreaking technology. And then they go off to investors and raise funding in order to make that a reality.

[00:06:13] Of course, someone, as long as the investor believes in your mission and your vision and the technology area, they'll give you money, and especially if you can prove later on that it's a money making idea. So most of them, the clients that I'm currently working with right now are in the sort of Valley of death area where they've gone off and they've raised Series A.

[00:06:31] All the way throughout Series E, between one $2 million to the hundreds and hundreds of millions of dollars. The trick is where most companies really fail is when they go off and raise hundreds of millions of dollars, and then their investors turn around and say, Okay, you've had, you've been sitting on this large pile of money for a very long time.

[00:06:50] You've reached your technical milestone, X, Y, and Z. Now we need to start seeing revenue come in. We need to start really getting a return on investment, if you will. So as you know, investors make their money back at a liquidation event. So a lot of these startups are thinking of either a strategy to increase revenue so that it can be attractive to go public or get bought out from another company, or just see if they can go public.

[00:07:20] Without any revenue, which I have seen done in the past as well with some of my clients. But this is really the big area that we call the Valley of Death, where you really make it or break it.

[00:07:30] Eric: This valley of death you're talking about, that's the chasm, That's the time period between when early adopters pick up the product and when. What do we call that? The early majority actually starts buying it and it becomes profitable. Is that that area there between those two phases?

[00:07:51] Matt: Yep, that's pretty much exactly what I mean. When I mean the chasm in this value of death, it's essentially just that. So during that time, there is an obscene amount of activities that companies commercializing, any technology, especially in the hardware space.

[00:08:08] Where you need to have sales, marketing, and engineering and manufacturing all working collaboratively in order to get this product not only to market, but get it to market efficiently. So you need to make sure that engineering is designing the products for manufacture ability so that these things are physically possible to be manufacture.

[00:08:31] And not only going off of that, they need to design these things efficiently so you're not loading these products up with tons and tons of components and other things that are. Way too expensive to manufacture. I'm not an engineer myself. I'm . I'm in sales and marketing. So we as sales people, try to tell the story of how much value that this product is going to add, how much value it's going to bring.

[00:09:02] So while we as sales people can, you know, ever the optimist, right, we can always tell the story. It's the best and greatest thing that's ever gonna happen, that's ever gonna be made. Your clients one day will come back to you and start saying, you know, this is, this is pretty cost prohibitive. This is expensive.

[00:09:18] There's a high barrier to entry. And those are the kinds of things that engineering and manufacturing need to work on to figure out as well. So that's the area where a lot of startups end up dying as they've invented this extremely magnificent piece of technology that works fantastically. But it is still way too expensive for somebody to actually purchase.

[00:09:43] Eric: As a salesperson in that phase. You talk about telling a story, so you're of course you're, you're telling a story to customers, potential customers. Are you also telling that story to investors or is that more of a marketing specific role?

[00:10:01] Matt: That's a really good question. Um, so of course in my experience, The entire organization isn't necessarily responsible for fundraising for startups, right?

[00:10:13] That's typically the CEO's job. However, the CEO is heavily relying on data that they collect from engineering and sales, right? And my industry that these startups without any sales historically are relying heavily on. Either simulations to make sure that their product is performing or previous test data from the products that they've been working on.

[00:10:43] So, Either way, while the CEO is going off in telling the story from the data they have collected from engineering or product development, the CEO or the person that's actually out fundraising is essentially putting that whole story together to try and prove that they can get an ROI for their investors.

[00:11:00] Eric: Is scalability the central engineering challenge for this phase?

[00:11:08] Matt: I would say absolutely. So going off of that Another part of my job is essentially helping startups get what we call their digital house in order, and so that that goes. Way into the scalability of the product. So we work on what's called Product Lifecycle Management Systems, which essentially is a fancy computer program that helps manage CAD data.

[00:11:40] So computer aided design data. So this tool can keep track of every design change you've ever made. It can estimate essentially how much an assembly might cost. Then that way you can explore with different kinds of components, different configurations, to essentially see like A, how much this would cost a manufacturer, but B, to make sure that you actually have something that you can give to a manufacturer in order to get that filled at, built at scale.

[00:12:10] Part of keeping your digital house in order is really to make sure that you have all of the documentation you need in order to scale manufacturing of a particular product. So scalability is absolutely paramount in order to be able to cross that chasm and you likely wouldn't be able to cross that chasm if you will if you don't have all of the components you've drawn out like in a comprehensive manner that can be handed over to manufacturers so that they can start really producing things.

[00:12:40] Eric: I think that's such an important point and these days. Especially, it's never been more important to get that digital house in order when we're projecting about how a manufacturing process is gonna come together, or a manufacturing run even more specifically, and we start talking about what components are going to be used and will those components be available.

[00:13:03] Tomorrow when that production run starts, will they be available in six months? With the supply chain issues we've seen in the past few years that the ability to, to look into a crystal ball in terms of not just parts availability, but manufacturing processes, availability, raw materials, availability, that sort of thing, never been more important.

[00:13:25] Matt: Exactly.

[00:13:26] And that's. That's quite literally what this whole digital transformation industry 4.0, that's what all of these initiatives really are focused around. Not only, of course, are we seeing Industry 4.0 solve a lot of different problems. So of course we're noticing this massive knowledge gap in our industry and manufacturing where we have a lot of folks who are.

[00:13:49] Within this sort of retirement age. So you have a whole new slew of manufacturers come in that, hey, don't really know what they're doing. So they're having trouble manufacturing products, they're having trouble completing orders that come in. Um, but the other challenge is exactly what you just mentioned.

[00:14:09] Supply chain is becoming, well, not becoming, it's been an issue for quite some time now. We're seeing it more and more often, and that's exactly what this sort of digital transformation initiative is trying to solve is how can I play with the configuration of my product to make sure that the components are available?

[00:14:33] So that's where another tool of this whole concept of simulation, like computer simulation. To make sure that this particular component can do what I needed to do, and if it can't do what I needed to do, is there another replacement component or design or some sort of different configuration that will still have the same performance?

[00:14:56] My description of digital transformation is essentially having your entire product be simulated or digitized in a computer so that you have performance data on every single one of those. Components that are within your build of materials and to be able to easily simulate different configurations. In your computer without actually physically prototyping something.

[00:15:22] Eric: Yeah, certainly speeds up the development process. , we think back to the years where we had to actually make physical prototypes to see if a different component would actually function in the real world the same way the one we're trying to replace. Would we've come a long way and I wonder how much. If at all, that shortens the duration of that value of death between scaling from true startup phase to a more mass market approach.

[00:15:55] Does that phase tend to go by more quickly now, ,

[00:16:00] Matt: I do wish I had the answer to that. Of course. Me as a salespeople person who's working on these tools, I would like to say yes, I do believe that. If you reduce your reliance on physical testing, you can absolutely increase your time to commercialization.

[00:16:15] There are absolutely case studies out there that that prove that very same thing, but to my knowledge, There. I am not completely sure of any statistical data right now that says, this path to commercialization us utilizing simulation will reduce your time to market by X, Y, and Z. Because our industry is so incredibly diverse, talking about simulation as a whole, which touches many different markets.

[00:16:45] It touches medical device, energy, consumer products, and of course, Some of these different mar markets have massively diverse commercialization timeline. So where consumer products could be designed and then commercialized that very same year. Some energy products can take 5, 10, 20 years to actually, um, to actually commercialize.

[00:17:11] So the valley of Death or this chasm, if you will, is so different. Depending on which industry you're talking about, that really just depends. So as you know, I'm not an engineer, but I live in this engineering world and one thing, That kind of gets me on my, even my closest coworkers naughty list as this term I always use, paralysis by analysis, which I call engineers disease, . Me as a salesperson, historically a business person, I am always thinking about, okay, we have this product and how can we sell it? How can you make money off of it? But on the other end of the spectrum, the folks who I work with are always thinking about how can we. Make this thing work and how can we make it work better? So I've had numerous examples throughout my career from working with startups, even to my own organization where, where we, and they are trying to develop technology. A lot of times, , some of the engineers forget that we need to stop designing, we need to do a design freeze.

[00:18:15] I have been on teams where our goal is indeed to come up with. Come up with a solid idea that has an addressable market that we can sell to and make money from. So often you're in these planning meetings where everyone's just spitting out all of their ideas. Okay, what's this gonna do? Who are we gonna sell it to?

[00:18:37] How long is it gonna take to go to market? And what are the steps we need to take both on the engineering side and the business side in order to make that a reality? Right? So where the business team, my team is looking at, The total addressable markets geography, Which companies are we gonna sell this to?

[00:18:54] If you're going b2b, that's typically been my position is to understand not only the target market, but I like to say, Who are your target customers? Who are the actual companies? Who are the people that you're going to sell this to? What are their names? What are their roles? How are you gonna add value to that?

[00:19:13] Eric: I just, I wanna interrupt for just a second there, because that is such an incredibly mission critical question, and it's one that we almost never talk about in electrical engineering, and it's one that we almost never talk about on this show. The profitability factor, in addition to the scalability that we've talked about already, and the mass market ability is something that as engineers, we often fail to take into account.

[00:19:44] Most great inventions start with an idea. Of course, that is intended to be, Hey, this is, this idea is going to change the world, but. Your description of paralysis by analysis is such a fitting one, because it feels like the farther we get along the path of development and the deeper we go down into the engineering aspect of it, the farther we get sometimes from the initial idea, which was to create a product that we're going to sell like crazy.

[00:20:18] So we need people like you in the room to remind us what we're actually there for. And if we don't sell a product, we're not going to get paid. And it's, it's just, and we're all out of a job.

[00:20:28] We're all out of a job and it's amazing how quickly we can forget that. So I wanna express gratitude from the engineering community who is still continuing to draw a paycheck to the people like you who are actually moving the product off the shelves and making sure that we design products that will move.

[00:20:47] Matt: Oh, absolutely . Yeah. And that's something I need my my engineers to, to say a little bit too. That's so funny. But one thing I really wanted to reiterate on that point was, Of course, whenever you go out and raise funding or apply for a grant, if you're a young startup, there's always that aspect within an application or a pitch that says, What's the total addressable market?

[00:21:11] Which I think is a completely valid question to ask. If you're an investor, of course, Wait, what's the size of the market you're going to, you go after? That's totally reasonable. But me as somebody. Who I've worked with so many startups, and part of the questions that I ask are, okay, you have your target market.

[00:21:33] You understand the size of it, but who are you actually going to sell to? Who are your initial target clients? Who are your target customers? Who is going to benefit the most from the technology you are creating? Because what so many startup founders forget, Is that, yes, you are selling to a target market, but you are absolutely selling to other human beings.

[00:21:57] You're selling to people, and you're not just selling to this number that you projected. When you get stuck, sort of defining your target market, your geography region, you forget who the people that you're actually selling to become. And so the idea is hopefully once you identify your particular clients, Your product works.

[00:22:21] Now there's your product may still be a little bit buggy, but you still have a steady stream of revenue coming in because you're starting to finally sell your MVP to a particular number of clients, and hopefully that run rate will make you either more attractive to investors or you know, you can ramp up engineering and manufacturing activities to make sure that your product can.

[00:22:44] Eric: Matt, you're not an electrical engineer. You're in a sales role, but you clearly have a understanding that's both wide and deep of the electrical engineering and tech engineering in general field. I'd love to know how you first became interested in technology. Was it as a. Was it in college?

[00:23:10] Matt: So my sort of career evolution started off Completely left field and went completely right field. I grew up in a small business. My father owned and managed a construction company, so they, they did a lot of commercial build outs. So we would do office spaces, medical, medical offices, dental offices, that kind of thing. And so when I started college, I had a, a focus in my degree was in business management with a focus in entrepreneurship.

[00:23:38] So I was really, Trying to learn the ins and outs of starting a business so that one day I could take over my father's construction company and start to go down that path. So what changed? Yeah, so I completely changed the fields.

[00:23:54] Eric: I love that. The entrepreneurial mindset. It's often said that can't be taught.

[00:23:59] Matt: Exactly. So when I first started college, if you asked me, Okay, what do you wanna do? What do you wanna do when you grow up, Matt, I would always say, Well, I'm gonna take over my father's construction company and, and figure out what we can do there. But that, that quickly changed as soon as I became a, uh, a sophomore in college where I was actually approached by one of the professors.

[00:24:23] Asked to join this organization called Fuel. It was, it was an acronym for Future Unique Entrepreneurial Leaders. And so the whole idea was it's essentially a, uh, startup accelerator that was ran by students for the, for students at the university. And my job there was essentially to help startups write business plans, figure out their, their market, their path to commercialization. Their sort of engineering process, their manufacturing process, et cetera. And it just ended up turning out that a majority of the startups that I was working with were in this technology space.

[00:24:57] Eric: Mm-hmm. , What year are we talking about here?

[00:25:00] Matt: So I graduated in 2016.

[00:25:03] Eric: Okay. So really this is just after the bleeding edge of crazy tech startups that we had in the early 2000. The market is becoming more mature, startups get more credibility right out the gate. So that's a pretty exciting time to be going into that.

[00:25:20] Matt: Absolutely, and I was really fortunate to graduate when I did, because right after I graduated it was pretty easy to find a job.

[00:25:27] But I would say, The real pivoting moment in my life at college was essentially going through that, that accelerator program. And then I had to write a senior thesis in conjunction with working at this accelerator program, which ended up turning into my internship senior year. So my senior thesis essentially was on the state of technology on the North shore where we were trying to collect data on. Essentially what life cycle, like what stage of companies existed on the North Shore compared to Boston? So like where should we start a technology company? Where are the manufacturing resources? Where is the funding? Right?

[00:26:08] Eric: Yeah. It's a lot of boxes to check. And now knowing what you focused your studies on, I can see why you've devoted so much of your career to working with startups.

[00:26:19] Matt, I can't tell you how much. We appreciate you sharing those perspectives with us today. This has been a, a really interesting conversation for everybody, whether you're involved in startups or not. So many of the things that we've discussed can be applied to businesses, really, of any size. So I hope that you would be open to coming back on the show at some point in the future and continuing the conversation.

[00:26:43] Matt: Absolutely. I'd love to the topic of startups and technology and crossing that, that Death Valley chasm, if you will, is it encompasses so many different topics and we were just barely able to scratch the surface here. So I would really appreciate the opportunity to come back and chat more with you guys.

[00:27:01] So thanks again.

[00:27:02] Eric: Excellent. We're really looking forward to having you back. Thanks again so much for joining us and a special thanks to you, our audience, for tuning into this. Be sure to tune in for new episodes that'll delve into more of the electronics industry and share our podcast with your colleagues and friends.

[00:27:18] You can also sign up to be on our email list. To receive updates and the opportunity to provide your input on future topics, go to SiliconExpert.com/podcast to sign up. Until next time, keep the data flowing.

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