Table Of ContentTHE ENGINEER
ENTREPRENEUR
Daniel T. Koenig, P.E.
New York ASME Press 2003
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Library of Congress Cataloging-in-Publication Data
Koenig, Daniel T.
The engineer entrepreneur / Daniel T. Koenig.
p. cm.
ISBN 0-7918-0193-4
1. Engineering firms—Management. 2. Entrepreneurship. I. Title.
TA190 .K63 2003
620’.0068—dc21 2002036668
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To my wife Marilyn and my sons and daughter-in-law Michael, Alan, and
Cindy for once more showing compassion and understanding and
tolerance in supporting my quest to write this book. And to my
granddaughter Alison who may some day read this book and profit from it.
And finally to my late daughter-in-law Deborah, may she rest in peace.
I love you all.
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Contents
Introduction ix
1. A Short History of the Organization of Engineering Work:
Where We’ve Been and Where We’re Likely to Go 1
The Organization Man Concept...................................................................1
The Change in the 1980s..............................................................................4
The Resulting New Role of the Engineer....................................................7
2. The Engineering Education Needs for the Future 11
The Skills Needs Assessment, Then and Now...........................................11
The Skills Philosophy Needed for the Successful Engineer
Practicing in the Early 21st Century......................................................14
Current Training Regime for Engineers While in School,
and Why It Is Inadequate........................................................................16
How the Curriculum Must Change to Be an Effective Training
Mechanism...............................................................................................18
How to Introduce Entrepreneurship into the Curriculum......................26
Summary.....................................................................................................32
3. The Entrepreneur’s First Step: Learning About and Using
the Art of Project Management 35
Enlightened Self-Interest...........................................................................36
The Skills to Bridge the Engineer-Employee to the Engineer-
Entrepreneur...........................................................................................39
A Short Tutorial on Project Management.................................................39
Some Final Thoughts on Project Management........................................69
4. From a Business Team Member to a Business Owner 71
Purpose of a Business.................................................................................71
Vision and Mission Statement...................................................................74
Functions of a Business.............................................................................78
The Basic Organization of a Business.......................................................79
Using the 7 Steps of the Manufacturing System......................................81
The Intricacies of Organization in Applying the 7 Steps of
the Manufacturing System, Using the Basic Manufacturing
Resources Planning (MRP II) System....................................................86
Developing an Organization Compatible to the 7 Steps
of the Manufacturing System.................................................................89
v
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vi • Contents
Differences Between a Small Business and a Business Team..................92
Company Support for Business Teams Compared
with the Entrepreneurial Approach.......................................................94
The Continuing Road Toward Entrepreneurship.....................................96
5. All Communications Are Good, Some Better Than Others 99
The Communications Process.................................................................100
Barriers to Effective Communications....................................................103
Some Guidelines for Effective Communications....................................106
Learning How to Listen...........................................................................109
Communicating with the Customer........................................................113
Summary...................................................................................................122
6. Going from Raw Emotions to a Polished Commercial Offering;
The New Product Introduction Process 125
Using the Scientific Method to Introduce a New Product or Service.....125
Reason for a Business—A Great Idea that Can Be Commercialized......126
The New Product Introduction Process Philosophy..............................128
The New Product Introduction Process Technique................................130
7. Financial Potpourri 157
The Classic Ways of Measuring Financial Status...................................157
Constructing Budgets...............................................................................166
Budget-Related Measurements................................................................174
Some Useful Management Techniques for Maintaining Financial
Viability..................................................................................................180
Keeping Focused on Controlling the Operation.....................................190
Financial Measurements and the Business Plan....................................193
Summary...................................................................................................194
8. E-Commerce and the Virtual Corporation: Opportunities
for the Entrepreneur 195
Imperative of Being Wanted....................................................................196
The Supply Chain Evolution....................................................................198
How to Join a Supply Chain....................................................................201
Introducing Your New Product to the World Using
a Supply Chain.................................................................................203
Being Able to Handle Transactions via E-Commerce.............................204
Some Concerns About E-Commerce Order Entry Systems...................213
Summary...................................................................................................214
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Contents • vii
9. The Business Plan for the Entrepreneur 215
The Content of the Business Plan..........................................................216
Some Final Words on the Structure of a Business Plan.......................225
An Example of the Development of a Business Plan............................227
Summary.................................................................................................268
10. Toward World-Class Performance 271
Introduction............................................................................................271
Basic Truisms..........................................................................................272
Understanding the 7 Steps of the Manufacturing System....................272
A Discussion of Each of the 7 Steps.......................................................275
Why the 7 Step Sequence Applies Even Though a Company
May Be Ignorant of Its Existence........................................................283
Why Understanding the 7 Steps and the Linkages Between Them
Is Necessary for Developing “Communications Excellence”.............285
Why the 7 Steps of the Manufacturing System Are Universal,
No Matter What the Product Is...........................................................286
When a Step Is Not Readily Apparent: Why That’s Dangerous
and How to Find the Missing Step(s)...................................................290
Why the Facts (Data) Need to Be the Same and Cascade from
Step to Step, and What Happens When This Rule Is Disregarded.....291
How to Evaluate Your Company to Determine How Well You
Comply with the 7 Steps of the Manufacturing System....................292
How to Compare Your Results Against Best Practices,
A Gap Analysis......................................................................................297
Defining the Opportunities for Improvements......................................301
Summary.................................................................................................304
Appendices 307
Appendix A: Investigation Points (product company)..........................309
Appendix B: Investigation Points (service company)...........................319
Glossary 329
Selected Related Readings 337
Index 339
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Introduction
Many books are written about starting and managing small businesses, espe-
cially now, with Internet e-commerce opportunities beckoning. You have
many excellent general-purpose references to chose from. This being the
case, another startup book may seem redundant and not worth your time
and resources to pursue. However, few books, if any, focus on how to start
up and run an engineering-based company. If this is what you’ve been con-
sidering, this book is for you.
Why is a book on engineering company management needed? Simply
because engineering-based companies focus on scientific principles for their
products and services, as opposed to just providing for the wants and needs
of their customers. A customer may have all sorts of needs, ranging from
entertainment to legal representation to sustenance. Whatever those needs
are, if they require compliance with the laws of science and mathematics,
this puts a significant constraint on the provider. Engineering-based busi-
nesses always have that constraint placed on them. This means that running
an engineering-based business includes elements beyond normal businesses.
If these constraints are not understood, then failure looms.
An engineering-based company has a special focus: always complying with
the laws of the applicable science. This is a constraint that the novice engi-
neer entrepreneur must be aware of and understand how to manage. The
successful engineering-based business is born not simply out of the desire to
have one’s own business, but are equally based on applying sound engineer-
ing principles in providing the product or service. The merging of these over-
riding laws of engineering-based business is what this book is about.
This book has 10 chapters; several present the various phases of setting
up and running a business based on exploiting technology (perhaps better
expressed as applying technical know-how to satisfy customer needs). Each
chapter has illustrations to take you from theory to pragmatic “how to” sce-
narios. I will take you on a journey from contemplation through application
to help you determine whether you should consider starting a business. I
will show you the traits and prerequisites for success.
Several chapters are on the basic skills that are useful for the soon-to-be
engineer entrepreneur. You will view scenarios of what business structures
are evolving into (some say e-commerce and virtual corporations). The last
portion of the book describes the cornerstone of planning—the business
plan and discusses what it means to be “world class.” All segments of the
business plan are fully explained and annotated with examples. Being “world
class” means performing at optimum level; I have explained in much detail
what that means. I also include something near and dear to the heart of any
engineer—many checklist summaries of all the things the entrepreneur
ought to do to ensure a successful startup or continue the growth of an exist-
ing business. Although the book is designed to answer the question, “Should
ix
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x • Introduction
I have my own business?” it will be equally useful for those already running
a small engineering-based business who feel they need help to make it better.
Why am I qualified to write this book? First, I’ve run my own business for
many years. Second, I consult on technical systems, business optimization,
and organizations. Third, I learned my trade by being a turnaround manager
within large, medium-sized, and small companies, not in the ordinary finan-
cial orientation, but from being involved with a combination of heavy opera-
tional corrections activities and implementing financial practicalities. Since
I do a considerable amount of work along the lines of turnarounds—in other
words I fix businesses that have failed or are in the process of failing—I’ve
developed a good sense of the pragmatic do’s and don’ts for actions to take
for success. And since I operate my own technical-based consulting service
company, I’ve had to practice what I advocate.
In addition, I’ve written 3 books on manufacturing management, on man-
ufacturing engineering, computer integration of business operations, and
shop operations work station dynamics. All of these books deal extensively
on the interdependence of an integrated team working toward a goal to opti-
mize profits. I’ve taught at the university level on all of these subjects plus
turnaround management as an expert adjunct professor off and on since
1976. These topics make up the core competencies of running small busi-
nesses. I consider it my avocation to help fledgling businesses and those in
trouble become optimum performers. So, in writing this book I am docu-
menting how I currently earn my living.
I hope after reading the book you will have enough insights to make that
all-important decision: Do I take the plunge? Do I become an engineer entre-
preneur? Or do I continue the safer route of remaining an employee of some
organization, large or small? Do I want security over all things? Or do I take
my chances grabbing for the brass ring? The ultimate decision is yours. I
would like to think that after reading my book, you will have the right infor-
mation to make the decision that’s best for you.
This book has taken almost 2 years to produce, since it has been a labor of
commitment to our profession and has been done between and around busi-
ness assignments I’ve taken on. It has meant time “mentally” away from my
family, and I thank them for having patience with my pursuit and supporting
and encouraging me every time I needed that push to continue with the
preparation of the manuscript. Marilyn, Mike, Alan, and Cindy, I hope you
find the outcome worth the disruptions.
Daniel T. Koenig, P.E.
Lake Worth, Florida
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