Brainstorm vs. Budget
December 12, 2006
Case categories include: Leadership Operations Strategy & Planning
By Robert Sher
A beautiful brainstorm it was – replete with wonderful ideas about making the new machine fully featured and versatile. No one foresaw the bloody hatchet that would carve out the final design.
The Game Ready System is a high tech, computerized ice pack – a medical device consisting of fabric wraps and an adjustable control unit that provides cyclical compression and cold therapy. The original invention proved it could be done, but wasn’t engineered well. The effort to sell it in volume was foiled by its design flaws. But Tom Oliver of CoolSystems had raised the cash to do a quality redesign, and top quality it would be.
Tom hired a medical device engineer to serve as the VP of Engineering, and two outside engineering firms – one to focus on the looks (industrial design) of the machine, and the other to hammer out the mechanics of the system. The plan was to be back out on the street selling in one year, and they had just enough funding for the budget.
The First Hints of Problems
The team worked away. The first hints of problems arose nine months into the redesign, when the VP fired the first outside engineering firm for non-performance. A new firm was hired, came up to speed, and Tom dove into another round of fundraising. But this time, Tom hired a project manager who lived in the same city as the engineering firm, to report directly to Tom (not to the VP of Engineering). The reports from the two men quickly diverged, and it became apparent that the machine, as designed by the VP, was not possible within any conceivable budget.
Tom remembers one of his board member’s advice. He said, “Identify several of the most exciting, substantial features you love about the new machine, and figure out how you’re going to give them up.” That was the magnitude of the cuts needed to finish the design in time to save the company.
Out came the hatchet. Out went the VP along with some of the system’s features, including the padded casing, the dual injury treatment option, and more. After a few weeks of intensive meetings at CoolSystems, the engineering firms received a design they were confident they could build, and build it they did. Eighteen harrowing months after the redesign began, the new machine began shipping.
Real vs. Imagined Benefits
CEOs are visionary, so we see visions. Sometimes our enthusiasm and forward thinking makes those visions diverge from what is possible within time and budget restraints. In addition, features and benefits that are obvious to us might not be perceived as real benefits by our customers. Simply, dreamers often dream up stuff that no-one ends up wanting – but every dreamer believes that every bit of the dream is essential.
Really understanding the gap between features vs. REAL benefits is critical. In Tom’s case, CoolSystems conducted careful customer research to rank which features were most important to customers. While the process of scaling back the design was painful, the team had done its homework and was able to keep the customers’ needs in mind during the process. While still being advocates for taking a leap forward, we must identify high cost features of our new products and services and solicit customer input on their real value. (All that being said, I’m sure glad Steve Jobs didn’t give up on the GUI interface on the first Apple computer.)
With our world growing ever more complex, CEOs hire people with specialized technical knowledge, well beyond that of the CEO’s. We can’t personally validate their advice or skills. Monitoring the REAL progress of “professionals” in technical areas is critical, and we have to build into the budget the cost of oversight. That may mean bringing in a consultant at key points, or as Tom did, hiring a project manager that reports directly. In smaller firms it may mean the CEO has to invest his or her own time to understand the technology. In addition, the development budget must have many frequent benchmarks, and missing any of them means a “technical audit,” just like missing a bank covenant often brings a bank audit.
Technical Experts must accept Oversight
A truly collaborative executive, who understands how critical his role is to the organization, should accept this oversight and accountability. While no-one loves oversight, if they push back too hard against it (claiming micromanagement, having excuses, trying to “hide” the detail), look out! The more they resist, the worse it likely is.
Hiring highly specialized personnel is a challenge. Not only do they have to “fit” and have a good work ethic, but they have to be technically competent and manage well. Sure, they sound great in the interview, and their references (their friends) give glowing reports. If the potential hire has peers in your firm, make sure those peers are heavily involved in the hiring procedure, and include technical tests and challenges as part of the process. If you don’t have technical peers in your firm, then bring in technical experts to assist you as consultants, and be clear to them that they are responsible for assessing the candidate’s technical competence both before hiring and during the first 30 days on the job. Require a report that details what they tested and delved into, and how and what they learned about the candidate. The only thing worse than making a bad hire is keeping the bad hire around for too long.
Just like starting a business, product development usually takes longer and is more costly than planned. Do your best mathematics and forecasting, then add substantial pad. If you don’t have the time and budget for a pad, then endure the pain of reducing the scope of the project immediately, in a planned fashion.
It was only through hard work and tough decisions that Tom at CoolSystems survived the last minute bloody hatchet job on features and benefits. Many great brainstorms that run over budget and miss their deadlines never see the light of day – they just bleed to death.
• Non-technical CEOs must have a way to monitor research and development projects that includes independent oversight by other technical experts.
• Be sure that the features planned for any new service or product have clear demand and interest from the users – not just in the minds of the designer.
• Take great efforts to hire the right people who are team and company oriented.
Robert Sher is principal of CEO to CEO, specializing in assisting CEOs and business leaders as they navigate critical passages. He is the author of The Feel of the Deal; How I Built a Business through Acquisitions. He may be reached at Robert@ceotoceo.biz.
Company and Case Facts:
Person: Tom Oliver, CEO
Alliance Member since: 2002
Business Founded: 1998
Annual Sales Volume: $4 million
Growth Rate: 234% (2003 to 2004)
Service: Accelerated recovery device consisting of patented fabric wraps and an adjustable control unit that simultaneously provides compression and cold therapy.
Typical Customer: Trainers, athletes, physical therapy clinics, veterinarians
Written: December, 2004