How to Start a Successful Business

B Y MILTON C H A N G

I 'm w r i t i n g th is ar t ic le to p r o v i d e a f r a m e w o r k that desc r i bes w h a t

bus iness is a l l about . A w a r e n e s s of y o u r bus i ness e n v i r o n ­m e n t c a n be h e l p f u l , n o mat te r w h a t y o u d o . A n d once y o u k n o w that s ta r t ing a b u s i n e s s is no t d i f f i cu l t o r r i sky , y o u ' l l b e m o r e l i k e l y to c o n s i d e r e n t r e p r e n e u r s h i p as a c a r e e r o p t i o n . W h i l e b u s i n e s s is no t fo r e v e r y o n e , y o u c a n start a success fu l bus i ness if y o u w a n t to. I took the p l u n g e m o r e t han 20 years ago , a n d I h a v e abso lu te l y n o regrets.

O u r t echn i ca l t r a i n i n g p o s i t i o n s u s w e l l to s u c c e e d i n bus iness . R a p i d change i n t e c h n o l o g y b r i n g s abou t o p p o r t u ­n i t ies . F u r t h e r m o r e , t echno log ies are c rea t i ng n e w g e n e r a ­t ions of too ls that c a n p r o v i d e a c o m p e t i t i v e a d v a n t a g e for a n y b u s i n e s s , e v e n n o n - t e c h n o l o g i c a l c o m p a n i e s . W h o i s better e q u i p p e d to take a d v a n t a g e of these too ls t h a n p e o p l e w i t h techn ica l t r a in ing? If w e l o o k at o u r t echn i ca l t r a i n i n g as e n a b l i n g sk i l l s , o u r o p p o r t u n i t i e s are u n l i m i t e d .

S m a l l c o m p a n i e s are cata lys ts for c o m m e r c i a l i z i n g tech­no log ies . T o d a y they h a v e access to soph i s t i ca ted t e c h n o l o g y w i t h the t rend t o w a r d m o r e co l l abo ra t i on b e t w e e n indus t r y , a c a d e m i a , a n d g o v e r n m e n t l abo ra to r i es . It 's far m o r e e f f i ­c ient to incubate a t e c h n o l o g y i n a s m a l l c o m p a n y because o v e r h e a d is l ower , p e o p l e t e n d to be c o m m i t t e d , a n d d e c i ­s ions c a n be m a d e qu i ck l y . These c o n d i t i o n s are necessa ry for success, espec ia l l y w h e n sales v o l u m e is s m a l l .

F r o m a na t i ona l p o i n t of v i e w , the h i gh - t ech s ta r tup is a u n i q u e l y A m e r i c a n p h e n o m e n o n , a n d it c a n be one of o u r m a j o r c o m p e t i t i v e a d v a n t a g e s . W e h a v e the c u l t u r e , the f i nanc i a l i n f ras t ruc tu re , a n d n o w s y m p a t h e t i c g o v e r n m e n t f u n d i n g agencies o n o u r s ide . W i t h m o r e success fu l s tar t -up c o m p a n i e s i n the op t ics i ndus t r y , co l l ec t i ve l y w e w i l l be ab le to attract m o r e i nves tmen t cap i ta l to g r o w o u r indus t ry .

P R E P A R E Y O U R S E L F

Y o u m u s t n o t reject b u s i n e s s . B u s i n e s s is m o s t l y t r a n s a c ­t ions , p e o p l e d e a l i n g w i t h p e o p l e . E v e r y bus i ness is b u i l t o n a f o u n d a t i o n of m u t u a l t rus t a n d r e l a t i o n s h i p s . A s e n g i ­neers , w e are t r a i ned to be spec ia l i s ts , to d o th ings r igh t . To succeed i n b u s i n e s s , w e m u s t k n o w the r i gh t t h i ngs to do . W e n e e d to take a n in terest i n soc i a l sc iences a n d l e a r n to d e a l w i t h p e o p l e .

R e a d Business Week a n d Forbes m a g a z i n e s , as w e l l as the " M a r k e t p l a c e " sec t i on of The Wall Street Journal. I s t a r t ed r e a d i n g these p u b l i c a t i o n s as a n e n g i n e e r i n g s tuden t i n 1965 a n d h a v e ra re l y m i s s e d a n i ssue . A t the b e g i n n i n g , y o u ' l l f i nd i t 's h a r d to r ead t h e m , b u t i t gets easier. If y o u p i c k ou t one bus iness concep t each w e e k , y o u ' l l l e a r n a lo t o v e r t ime. Y o u ' l l l ea rn h o w bus iness w o r k s a n d h o w the b u s i n e s s c o m ­m u n i t y l o o k s at t h i n g s . M o s t i m p o r t a n t , y o u ' l l d e v e l o p a sens i t i v i t y to the bus iness e n v i r o n m e n t a n d to t rends. Y o u ' l l l e a r n to co r re la te a p p a r e n t l y u n r e l a t e d e v e n t s tha t af fect w h a t y o u d o .

It's also impor tan t to par t ic ipate i n c o m m u n i t y act iv i t ies. Y o u ' l l fee l g o o d abou t y o u r s e l f fo r c o n t r i b u t i n g , a n d y o u ' l l deve lop a n e t w o r k that can be ex t remely h e l p f u l to y o u .

W H A T IS BUSINESS?

Bus iness is the eff icient d e l i v e r y of p roduc ts a n d serv ices peo­p le need . Le t us examine the key w o r d s i n their l og ica l order.

P e o p l e t end to t h i nk f i rst abou t products. Y o u r bus i ness c a n p r o v i d e services, too. In fact, s m a l l c o m p a n i e s that se l l p r o d u c t s t end to be se rv ice d r i v e n , because the i r c o m p e t i ­t i ve edge is b e i n g ab le to c u s t o m i z e p r o d u c t s a n d cater to p e o p l e ' s needs .

W h a t e v e r y o u p r o v i d e m u s t se rve a rea l o r p e r c e i v e d c u s t o m e r need. U l t i m a t e l y , y o u m u s t m o t i v a t e a c u s t o m e r to c o m p l e t e a t ransac t ion . To d o so , y o u m u s t u n d e r s t a n d h i s needs a n d e v e r y t h i n g abou t h i m .

"Delivery" m e a n s c o m p l e t i o n of the t ransac t ion . U n t i l a c u s t o m e r i s h a p p y i n e v e r y r e s p e c t , n o m o n e y c h a n g e s h a n d s , so there is n o bus i ness . A t the b e g i n n i n g , y o u h a v e f e w resources . Y o u n e e d to focus t h e m o n c o m p l e t i n g a p r o ­ject so y o u c a n d e l i v e r a p r o d u c t a n d get p a i d . R e m e m b e r , the m o m e n t y o u r u n ou t of m o n e y , y o u ' r e ou t of bus iness .

"Efficient" refers to the entire cha in of events f r o m conce iv­i n g the p r o d u c t to p u t t i n g it in to the cus tomer ' s hands . Y o u have to address costs a n d speed i n every aspect, i n c l u d i n g the w a y s y o u des ign , b u i l d , a n d se l l it. That means the entire o rga­n i za t i on m u s t be m o b i l i z e d . Fo r examp le , d e v e l o p i n g a c lever d is t r ibu t ion channe l can have just as b i g a n impac t o n pr ices as i ngenu i t y i n eng ineer ing a n d manu fac tu r i ng .

B u s i n e s s is no t d i f f i cu l t ; y o u just n e e d a lot of c o m m o n sense. It 's abou t hass les ! If y o u r g o a l is to h a v e a hass le- f ree b u s i n e s s , c h a n c e s are y o u ' r e g o i n g to h a v e a v e r y s m a l l bus i ness . T h e m o r e y o u ' r e ab le to hass le , the b i g g e r y o u c a n g row. T h e secret is to t u r n hass les in to r ou t i ne , then go o n to reso l ve m o r e hass les as they occur .

CHOOSING A B U S I N E S S

It 's no t p a r t i c u l a r l y i m p o r t a n t w h a t y o u choose as y o u r f i rst b u s i n e s s , because a b u s i n e s s c a n e v o l v e . Y o u c lea r l y d o n ' t w a n t to enter a d e a d - e n d i ndus t r y . O n the o ther h a n d , y o u m u s t a v o i d the t r ap o f m a k i n g p r o j e c t i o n s b a s e d o n t o p -d o w n m a r k e t s t a t i s t i c s . A s a s m a l l b u s i n e s s , y o u m u s t d e v e l o p a c lear p i c tu re of h o w y o u w o u l d c o n v i n c e the f i rst f e w c u s t o m e r s to g i ve y o u o rders .

W h a t ' s i m p o r t a n t i s that the b u s i n e s s y o u c h o o s e be cons is ten t w i t h y o u r pe rsona l i t y , y o u r l o n g - t e r m g o a l , a n d the r e s o u r c e s y o u c a n a s s e m b l e . P e o p l e o f t en ask , " W h a t d o e s i t t ake to star t a b u s i n e s s ? " S i n c e b u s i n e s s takes a l l f o r m s , a bet te r q u e s t i o n i s , " W h a t k i n d o f b u s i n e s s c a n I start that su i ts m e ? " P e o p l e i n v a r i a b l y d o w h a t they d o w e l l o r l i k e to d o . Y o u r b u s i n e s s is rea l l y a n e x t e n s i o n of y o u . T h e w h o l e o r g a n i z a t i o n w i l l take o n y o u r p e r s o n a l i t y ; it w i l l b e c o m e a r e f l e c t i o n o f h o w y o u t h i n k a n d w h a t y o u d o . Take a d v a n t a g e of y o u r s t rengths. A s k you rse l f , " W h a t a m I rea l l y g o o d at? W h a t c a n I d o bet ter t h a n the nex t p e r s o n ? " O f t e n i t 's h e l p f u l to l i s ten to o ther p e o p l e ' s obse rva t i ons , to u n d e r s t a n d w h a t they pe rce i ve y o u to be. E g o is y o u r w o r s t e n e m y because i t ta in ts y o u r j u d g m e n t . In te l lec tua l d i s h o n ­es ty is a sure cause of d e m i s e .

42 OPTICS & PHOTONICS NEWS/NOVEMBER 1994

In general , the advantages of s m a l l compan ies are speed a n d f lex ib i l i ty . O n the o ther h a n d , they d o n ' t h a v e a lot of " m u s c l e " ; that is , resources s u c h as m a n u f a c t u r i n g capac i t y a n d d i s t r i b u t i o n c h a n n e l s . Y o u w a n t to c a p i t a l i z e o n y o u r strengths, a n d that usua l l y means creat ing a bus iness that i n i ­t ia l ly can serve a s m a l l g r o u p of peop le pa r t i cu la r l y w e l l . In short, y o u w a n t to ident i fy a pos i t i on i n the marke tp lace w h e r e y o u have a u n i q u e advantage. M a k e sure y o u can susta in that compet i t i ve advantage even after a coup le of m o v e s b y c o m ­peti tors. "I can m a k e a w i d g e t at l o w e r cost " is usua l l y not a sustainable compet i t i ve advantage.

A LOW-RISK BUSINESS M O D E L

B i g successes l i k e A p p l e a n d S y n O p t i c s o c c u r ra re ly , a n d mos t p e o p l e aren ' t e q u i p p e d to pa r t i c i pa te i n t h e m . I w a n t to descr ibe a l o w - r i s k m o d e l that 's m o r e a p p l i c a b l e fo r m o s t p e o p l e , one that a l l o w s y o u to h a v e f u n a n d re ta in c o n s i d e r ­able o w n e r s h i p .

M y m o d e l is to ra ise a l i t t le m o n e y , take s m a l l s teps , a n d b u i l d v a l u e i n each step. W h e n y o u r b u s i n e s s is o n l y a g l e a m i n y o u r eye , y o u can ' t get m u c h v a l u a t i o n fo r it. Y o u deserve o n l y a s m a l l pe rcen tage of o w n e r s h i p fo r a n i d e a , because i t 's necessary to es tab l i sh m a n y aspects of the b u s i ­n e s s b e f o r e i t c a n s u c c e e d . A f t e r e a c h s u c c e s s f u l s t e p , i nves to rs c a n bet ter v i s u a l i z e a n d share y o u r v i s i o n a n d are therefore w i l l i n g to p a y m o r e for it.

" B u i l d i n g v a l u e " m e a n s s o m e t h i n g d i f fe rent i n each sit­ua t i on . It c a n m e a n b u i l d i n g a p r o t o t y p e , ge t t ing a paten t , ge t t i ng c u s t o m e r s l i n e d u p , o r bet ter yet , b u i l d i n g a s m a l l bu t g r o w i n g bus i ness . W h a t ' s m o s t i m p o r t a n t is a c q u i r i n g a n d h o n i n g the sk i l l s of r u n n i n g a bus i ness .

O n e d o w n s ide of th is a p p r o a c h , p e o p l e w o u l d a rgue , is that y o u m a y s p e n d a great d e a l of t ime r a i s i n g money . M y exper ience is the oppos i te . O n c e y o u get i nves to rs i n v o l v e d , t hey ' re m o r e l i k e l y to p a r t i c i p a t e i n f u n d r a i s i n g . Y o u jus t h a v e to m a k e t h e m a par t of the t e a m to h e l p t h e m u n d e r ­s tand w h a t ' s h a p p e n i n g a n d d e v e l o p a sense of o w n e r s h i p .

T H E BUSINESS P L A N

T h e bus iness p l a n is y o u r f i rs t s tep i n c rea t ing v a l u e . It c o m ­m u n i c a t e s y o u r v i s i o n a n d a s k s p e o p l e to b u y i n t o y o u r d r e a m . T h e better y o u c o n v e y the v i s i o n i n the b a c k of y o u r h e a d that m a k e s y o u exc i ted , the m o r e t h e y ' l l p a y y o u for it. T h e bus iness p l a n is a lso y o u r c a l l i n g c a r d ; i t m u s t c o n v e y a sense of exce l lence i n eve ry respect .

O t h e r p e o p l e w i l l j o i n y o u a n d i nves t the i r m o n e y o n the b a s i s of t he i r b e l i e f i n y o u r b u s i n e s s p l a n . Y o u m u s t be l i e ve i n i t , too. T h i n k of the b u s i n e s s p l a n as a con t rac t a n d a p e r s o n a l c o m m i t m e n t . T h e b u s i n e s s m a y e v o l v e i n a w a y that d i f fers f r o m y o u r p ro jec t ions , b u t y o u s h o u l d never in f la te the n u m b e r s just to m a k e the o p p o r t u n i t y l o o k g o o d . It's no t fair , a n d i t w i l l c o m e b a c k to h a u n t y o u . If n o t h i n g e lse , y o u r i n v e s t o r w i l l e x p e c t y o u to execu te y o u r p l a n . Tha t m e a n s y o u m a y be f o r c e d to s p e n d m o n e y at a ra te faster t han the bus iness c a n s u p p o r t . R e m e m b e r a lso , d i s a p ­

p o i n t m e n t s a n d c o n ­f l i c t s a r e c a u s e d b y u n m e t e x p e c t a t i o n s .

W o r k t h r o u g h sev­e ra l scenar ios . S p r e a d ­sheets he lp y o u quan t i ­f y t h e s c e n a r i o s a n d f o r c e y o u to t h i n k t h r o u g h t h e d e t a i l s . Th i s though t process is equ iva len t to eng ineer­i n g m o d e l i n g . T h e m o r e t h o r o u g h y o u r m o d e l , the less l i k e l y y o u w i l l b e c a u g h t s h o r t . T o a p o t e n t i a l investor , y o u r ab i l i t y to c o n c e p t u a l i z e a n d v i s u a l i z e says that y o u c a n d e a l w i t h a w i d e r a n g e of b u s i n e s s ou t ­comes a n d cont ingenc ies . It's a lso impo r tan t for y o u to c lear ly def ine h o w y o u ' d l i ke to exit the bus iness . E v e r y o n e i n v o l v e d has a r igh t to k n o w , s ince it impac ts t h e m personal ly .

K e e p the b u s i n e s s p l a n shor t a n d to the po in t . Inves tors are b u s y p e o p l e . A s k s o m e o n e e x p e r i e n c e d to r ead the p r o ­p o s a l . A s e c o n d o p i n i o n m a k e s i t bu l l e tp roo f . A s k a l a w y e r to r e v i e w y o u r bus i ness p l a n . A n o u n c e of p r e v e n t i o n is bet­ter t han a p o u n d of cure .

A B O U T M O N E Y

It 's i m p o r t a n t that y o u take m o n e y o n l y f r o m p e o p l e w h o t rust y o u a n d h a v e con f i dence i n y o u . Y o u can ' t be d e c i s i v e i f s o m e o n e is c o n s t a n t l y s e c o n d g u e s s i n g y o u , and y o u ' r e l i k e l y to lose the top p o s i t i o n at the f i rst s igh t of t roub le . It 's n o f u n to be cons tan t l y u n d e r p ressure .

A n o t h e r i m p o r t a n t c o n c e p t y o u n e e d to g r a s p is that c a s h f l o w a n d p ro f i t s are no t at a l l s y n o n y m o u s . Y o u c a n be v e r y p ro f i t ab le b u t h a v e n o m o n e y to p a y y o u r b i l l s . Y o u r m o n e y c a n be t i ed u p i n i nven to ry , rece ivab les , a n d e q u i p ­men t . T h i s s i t ua t i on is l i ke h e a l t h y p e o p l e d y i n g of hunger . To a v o i d it, p a y p a r t i c u l a r a t ten t ion to cash f low.

T h e r e a re f o u r s o u r c e s o f c a p i t a l f o r y o u r b u s i n e s s : i n v e s t o r m o n e y , m o n e y e a r n e d a l o n g the w a y , c red i t , a n d y o u r o w n m o n e y .

V e n t u r e c a p i t a l i s t s are t he f i r s t s o u r c e y o u t h i n k o f w h e n y o u n e e d i n v e s t o r m o n e y . B u t v e n t u r e cap i ta l i s ts g e n ­e ra l l y l o o k fo r c o m p a n i e s that c a n b las t off w i t h a la rge i n f u ­s i o n of cap i ta l . A l t h o u g h a f e w s m a l l v e n t u r e cap i ta l f i rms s p e c i a l i z e i n s t a r t u p s , v e n t u r e c a p i t a l i s t s are n o t a l i k e l y f u n d i n g source for c o m p a n i e s m o d e l e d here. F o r m y b u s i ­ness m o d e l , the m o s t p r o m i s i n g sources of m o n e y are suc ­c e s s f u l e n t r e p r e n e u r s a n d p e o p l e y o u k n o w . S u c c e s s f u l en t rep reneu rs k n o w the t r ia ls a n d t r i bu la t i ons of s ta r t ing a b u s i n e s s , a n d t hey tend to be op t im i s t i c .

"The word entrepreneur is much in vogue today. I did not start out to be an entrepre­neur. I worked for a small company for a time and then, after it was acquired by a larger company, I managed a facility 2,000 miles from the home office. It was like having my own company without the worries of paying the bills. Over the years I became frustrated that management could not see the customers' side of an issue. I left the company for a small company that I owned outright after seven years of hard work.

"What they don't tell you is that along with the joy of decisions you get to pay the bills. But it is a great feeling to mold your own company. My advice: Be aware of all the responsiblities that go with the fun."

Ted Soderlund President Cryogenic Rare Gas

OPTICS & PHOTONICS NEWS/NOVEMBER 1994 43

The Business of Optics

E a r n i n g m o n e y a l o n g the w a y i m p l i e s y o u h a v e a n e m b r y o n ­i c b u s i n e s s t h a t i s e i ther s e l l i n g p r o d u c t s o r s e r v i c e s o r g e t t i n g g o v e r n m e n t con t rac t s . T h i s ac t i v i t y h e l p s y o u b u i l d a b u s i n e s s i n f r a ­s t r u c t u r e b u t i s n o t l i k e l y to p r o v i d e y o u a d e q u a t e c a p i t a l t o e x p a n d s u b s t a n t i a l l y .

C r e d i t e x t e n d e d b y y o u r s u p p l i e r s , p a y ­m e n t s m a d e b y c u s ­t o m e r s i n a d v a n c e o f d e l i v e r y , a n d e q u i p ­m e n t leases are i m p o r ­tant sources of f u n d s to ease c a s h f l o w s h o r t ­a g e s . T h e s e f u n d s a re m a d e a v a i l a b l e to y o u o n l y o n fa i th !

A l w a y s isolate e n o u g h p e r s o n a l assets to assure s u r v i v a l i f a l l e l s e f a i l s . Y o u c a n n o t jus t i f y j e o p a r d i z i n g the secu r i t y of y o u r fam i l y . L o a n s o f a n y k i n d are rea l l y a w a y of access­i n g y o u r o w n m o n e y t h a t i s n o t r e a d i l y a v a i l a b l e to y o u . Y o u b e a r t he r i s k s t o t a l l y .

P r o f e s s i o n a l s c a n h e l p y o u w i t h f i n a n ­c i a l m a t t e r s t h a t y o u a r e n ' t t r a i n e d for . O n t h e o t h e r h a n d , y o u m u s t h a v e a n i d e a o f w h a t t h e y d o a n d w h a t k i n d of i n f o r m a ­t i o n t h e y c a n p r o v i d e

to h e l p y o u m a k e s o u n d d e c i s i o n s . A l s o , y o u m u s t set u p o p e r a t i n g p r o c e d u r e s to s y s t e m a t i c a l l y c o n t r o l a n d m o n ­i t o r s p e n d i n g . Y o u d o n ' t w a n t to t e m p t p e o p l e to w a l k of f w i t h y o u r m o n e y . It h a p p e n s m o r e o f t e n t h a n y o u t h i n k .

FORMING T H E T E A M

M y n u m b e r one focus i n s ta r t ing a b u s i n e s s is p e o p l e . P e o ­p l e m a k e d e c i s i o n s ; a c o m p a n y c a n n o t be be t te r t h a n i ts peop le . T h e k e y w o r d s to k e e p i n m i n d here are t rust , c o n f i ­

d e n c e , a n d m u t u a l respec t . N e v e r f i l l k e y p o s i t i o n s w i t h p e o p l e i n w h o m y o u h a v e a n y doub t s .

T h e c o n v e n t i o n a l w i s d o m is that y o u n e e d to c o m p l e t e y o u r t e a m w i t h e x p e r i e n c e d p e o p l e . T h e r e are three p r o b ­l e m s w i t h th is s t ra tegy: • It 's e x p e n s i v e . • In the b e g i n n i n g , y o u p r o b a b l y w o n ' t be ab le to attract t a len ted a n d e x p e r i e n c e d p e o p l e w h o share y o u r v i s i o n . • Y o u r u n the r i s k s of h i r i n g e x p e r i e n c e d p e o p l e w h o are set i n the i r w a y s .

M y i n t e r i m s o l u t i o n is to h i re " g o o d " p e o p l e w i l l i n g to p e r f o r m m u l t i p l e f u n c t i o n s . Y o u p r o v i d e a n o v e r v i e w , get t h e m h e l p w i t h s p e c i f i c s k i l l s , a n d e n c o u r a g e t h e m to u n d e r s t a n d a n d c h a l l e n g e the c o n v e n t i o n a l a p p r o a c h . T h e leader m u s t p r o v i d e a n o v e r v i e w to m a k e sure a l l the p ieces f i t i n to the b i g g e r p i c t u r e . In th is m o d e l , g o o d p e o p l e are c h a l l e n g e d . T h e y l e a r n a n d g r o w , a n d y o u opera te w i t h ef f i ­c iency . M y N e w F o c u s e x p e r i e n c e c o n f i r m s m y be l ie f . W e w o n ' t h a v e i t a n y o the r w a y . Y o u m u s t h a v e s o m e o n e o n y o u r t e a m (or at least h a v e s t rong c o u p l i n g w i t h someone ) w h o has b e e n i n v o l v e d w i t h r u n n i n g a c o m p a n y . E x p e r i ­ence i n m a n a g i n g o n e face t o f a b u s i n e s s w i t h i n a l a r g e s t r u c t u r e d c o m p a n y is g e n e r a l l y no t a d e q u a t e fo r m a k i n g b r o a d d e c i s i o n s . B e y o n d that , h i r e b a s e d o n a p t i t u d e a n d a t t i tude m o r e t h a n spec i f i c exper ience . Y o u ' r e l i k e l y to f i n d " t e m p o r a r y " h e l p w i t h m o r e expe r i ence a n d c a p a b i l i t y t h a n a n y p e o p l e y o u c a n h i re . T h i s k i n d of t e m p o r a r y h e l p , h o w ­ever, tends to focus o n spec i f i cs .

ORGANIZATIONAL PHILOSOPHY A N D C U L T U R E

T h e m o s t e f f i c i e n t o r g a n i z a t i o n a l m o d e l , b u s i n e s s g u r u Pe te r D r u c k e r n o t e d , is a n o rches t ra . A c o n d u c t o r u n d e r ­s tands d i f fe rent i n s t r u m e n t s , b u t he doesn ' t necessa r i l y p l a y t h e m . H e h i res spec ia l i s ts a n d p r o v i d e s a n e n v i r o n m e n t i n w h i c h they c a n p l a y together. H e encou rages t h e m to l i s ten to each o ther a n d p r o v i d e s t h e m w i t h e n o u g h i n f o r m a t i o n to m a k e g o o d d e c i s i o n s abou t w h a t to d o , h o w , a n d w h e n . T h i s m o d e l w o r k s p a r t i c u l a r l y w e l l f o r s m a l l c o m p a n i e s , because p e o p l e u s u a l l y k n o w w h a t ' s g o i n g o n . A s the c o m ­p a n y g r o w s , m e t h o d s or p r o c e d u r e s a p p r o p r i a t e to the c o m ­p a n y ' s s i ze m u s t be p u t i n p l a c e to p r o m p t o r e n c o u r a g e c o m m u n i c a t i o n s .

U n d e r s t a n d t ha t p e o p l e d o n ' t w o r k f o r c o m p a n i e s . T h e y w o r k fo r t hemse l ves a n d for the i r f r i ends i n the c o m ­pany . P e o p l e w a n t to d o a g o o d job so they c a n fee l g o o d abou t t h e m s e l v e s , a n d t hey d o n ' t w a n t to let the i r f r i e n d s d o w n . Y o u r ro le as a l e a d e r is s o l e l y to h e l p y o u r p e o p l e succeed . If y o u h i re the r i gh t p e o p l e , e n c o u r a g e t h e m , a n d g i v e t h e m the r i g h t too ls , t h e y ' l l t h r i ve . S u p e r v i s i o n g i v e s w a y to c o a c h i n g a n d p r o v i d i n g a n o v e r v i e w .

M A R K E T I N G A N D S A L E S

N o one w i l l b u y f r o m y o u un less a l l p e r c e i v e d r i s k s — r e a l or i m a g i n a r y — a r e r e m o v e d . T h a t ' s w h y r e p u t a t i o n i s so i m p o r t a n t to a b u s i n e s s . A l l ac t i ons of the c o m p a n y , f r o m

"The current issues impacting the precision optics industry stem from the U.S. govern­ment shifting its high-tech investments from defense to global competitiveness. Federal programs are focusing on specific industries such as flat panel displays, fiber optic communications, and high-speed computing. The question then is how optical technologies can be best applied to increase industrial competitiveness. The payback for technological development is usually long term, so some creativity and commitment are required for success. Government programs like SBIRs, technolo­gy reinvestment programs, and CRADAs help finance the transition from concept or research phase to commercialization. Many of these programs require the partic­ipation of an established commercial company. Herein lies the benefit for a range of participants from universities to startups to large industrial firms. The critical ingredient for success will be coop­eration among the various partners. If each participant has a clear understanding of what they bring to the party and realis­tic expectations as to the benefits, then everyone has a better chance of profiting from their efforts. While the goal may be increased competitiveness through techno­logical development, success still requires excellence in market research, manufactur­ing engineering, production, customer service, and distribution. The challenge for firms in the optics industry will be to define their niche in the array of emerging oppor­tunities, nurture the appropriate partner­ships, and focus on excelling within this new context"

Richard E. Schmidt Chairman and Chief Executive Officer Newport Corporation

44 OPTICS & PHOTONICS NEWS/NOVEMBER 1994

product posi t ioning to advert is ing, must help bu i l d and maintain your reputation.

Generally speaking, marketing focuses on the strategic side of selling, and sales focuses on indiv idual transactions. That difference often impl ies very different personalit ies. You want to keep this fact in m ind when you hire.

Business takes much more time to develop than you imagine, because resistance to change is human nature, and it takes time to qualify for an industrial application. Pushing a product into the marketplace is very costly. A s a smal l company, you want to create a market pul l . Good marketing people tend to focus their effort on opinion leaders because a market demand is often created by people fol lowing lead­ers. That means advert is ing in a few places and perhaps turning down business that slows you down.

COMPETITION

Competi t ion prompts progress. Predatory competit ion, on the other hand, provides a wrong focus that hurts everyone involved, including the customers. "Vengeance pr ic ing" is the way people describe the practices of some laser compa­nies in our industry. Low profits l imit access to investment cap i t a l for our i ndus t r y . L a c k of f u n d s to inves t i n long-term strategy results in a lack of breakthrough prod­ucts and an inability to pursue new opportunities.

The response of b ig companies to your actions is an unknown. You don't know what they're doing in the lab or what they're thinking about you. But you must make a d i l i ­gent effort to understand what they're l ikely to do, based on their th ink ing pattern and past actions. Decisions are made by peop le . Ce r ta in l y y o u don ' t wan t to adopt a threatening posture to provoke a fight. Big companies gen­erally cannot afford to go after every "gnat" and ru in their profitable business in the process. That's why it's so impor­tant to incubate and bui ld a business base as described in my model.

M A N U F A C T U R I N G

Low-cost manufactur ing is the key to long-term success because costs set the baseline for prices. Many companies in our indust ry fa l l into the trap of becoming complacent when they have a profitable business that sells in small vo l ­ume to the scientific community. Their products are essen­tially high-priced prototypes. These companies s imply can­not compete or capi ta l ize on the oppor tun i ty w h e n the market develops. It's essential to establish a scalable manu­facturing path. For a company wi th l imited resources, the manufacturing strategy wou ld necessarily focus on manag­ing outside capabilities. A significant amount of effort must be devoted to materials planning and management of infor­mation flow.

Experienced manufacturing people who also subscribe to modern organizational and operational strategy are rare. If you as a leader are committed to creating a manufactur­ing organization of excellence, you ' l l have an extraordinary

opportunity. Manu­facturing is not hard, it's just hard work. Without participation from the top, it would be difficult for any organization to sus­tain the tenacity required to systemati­cally eliminate each bottleneck as it occurs.

OPERATIONS

Y o u ' l l need ou ts ide profess iona l services like lawyers and accounting firms to help you set up and run your business. A lways go for top firms. Their sophistication can be invaluable, and they often give special fee considera­tion to start-up companies. They wi l l not only add credibility but also introduce you to the right contacts. Check references and trust your instincts about whether you can work wel l wi th the individuals assigned. Keep them apprised of your activities so they can help you avoid problems.

You' l l also want a Board of Directors to help you. The Board represents minori ty shareholders and has two main functions: To hire and fire the president, and to make sure the company has adequate capital. By that definition, your re la t ionship can easi ly be adversar ia l unless y o u wo rk closely wi th them as members of the team. To begin wi th, elect capable people who have confidence in you.

Mutua l trust and confidence are crucial in any relation­ship. One of the most difficult situations you' l l encounter is having to fire people. You' l l f ind it easier if you realize that i t 's i n the employee 's best interest to wo rk e lsewhere, because he has no chance to succeed work ing for you if you have low confidence in h im.

S U C C E S S

There are al l kinds of businesses. The secret to success is cre­ating a business that suits your personality and enables you to do what you want to do. If you're truthful to yourself and careful not to run out of money, you ' l l have fun creating your business. In the process, you just might get lucky and come across a really big opportunity.

OSA Fellow MILTON CHANG was president of Newport Corp. until 1988 and co-founded New Focus Inc. in 1990. He sits on the Boards of Euphonix, Gad­zoox Microsystems, Iris Medical Instruments, New Focus, Rochester Photonics, and Uniphase. He continues to incubate new companies, and creates bonsai trees in his spare time. An active volunteer in the optics community, Chang served as the first chair of OSA's Engineering Council and joins OSA's Board in January.

OPTICS & PHOTONICS NEWS/NOVEMBER 1994 45

"The economy is up from a year ago. Worldwide sales are better. Customers are demanding immediate delivery plus a discount. Pacific Rim potential seems excellent, including Japan, where sales are also up from a year ago. The effects of the drop in military funding are apparent in the business. WYKO has not yet approached govern­ment for funding of research projects."

James Wyant Chief Executive Officer W Y K O Corp.