The importance of having an operational expert in your team – even at an early stage

Most people forgot, but Tim Cook was COO of Apple before he was appointed to be the successor of Steve. This should go a long way to tell you that the Operation Officer job should not be taken lightly in a company that sells hardware products.

What are the main challenges for a top operation guy in a hardware startup?

  • supply chain management, which includes manufacturing
  • logistics management – you have to ship the products to various distributors, retailers and individual consumers who have made purchases on your website
  • inventory management

All three tasks involve many different inputs such as order size, lead time, MOQ (minimum-order quantity), fixed fees, return rates, etc. On top of that, all inputs are time-varying – the inputs change all the time and the operation team has to keep tracking of all available inputs and foresee the near future.

However that's not the most challenging part of it. The most difficult part is: human beings.

Some entrepreneurs think that contracts with component suppliers, manufacturers and distributors would govern everything, which could not be further away from truth. When you work at a large corporate, you can rely on contracts. Your company has the resources and luxury to spend money and time to enforce the contracts, sometimes even by going to the court.

As an entrepreneur, sadly, you never have enough time and enough money.

Imagine a startup who have some hiccups with the contract manufacturers. An entrepreneur's hunch would be to quote the contract in dispute. The project manager at the EMS firm however has other things to worry about first. And if the entrepreneur had never been in the operation role before in other companies, he or she wouldn't have been able to see through this. He or she would be blindly feeling that the EMS firm should "honor" the contract.

Guess what would happen then?

Very simple. There will be endless emails and phone calls back and forth. None of it is going anywhere, simply because the two parties do not understand each other's priority. At some point it'd become emotional and neither side wants to understand each other's priority.

The EMS project manager will be devoting his or her time to other projects that bring in real revenues (and potentially profit). He or she would be telling oneself "Should never have taken this startup project – they don't even have volume!" while reading your 3 emails a day of finger pointing.

So you lose 1 week, then 1 month, then 2 month, etc, all along the way the company is burning cash but not shipping products.

You get the picture.

What's the solution for this? Easy, hire someone experienced in EMS supply chain on your team. He or she would have gone through similar shits for so many times. He or she would be able to read between the lines with Taiwanese, Chinese, Japanese or even American project managers. He or she would be able to take proper precautions to prevent this from happening.

He or she would dramatically reduce the operational risks for you and increase the value of your company.

 

But I don't have money. Where to hire these people?

Mind you: EMS is a very old industry. While operation is not an easy task, there happens to be a lot of experienced engineers or managers who have worked with or are still working with Foxconn, Pegatron, Quanta, Flex, Compal, Jabil, Wistron, New Kinpo, Inventec... etc. Any of those experienced operational expert would have been much more experienced than you are – however high an IQ or however great a sense you have – in manufacturing.

With the right VCs as your shareholders, they should be able to help you find motivated experienced people to join the tea. The location might be in Asia but they have to be going to the factories very often anyway. That's not really a negative but rather a positive assuming you can find autonomous people. 

Similar things with logistics expert. It's not rocket science. There have been more people who've worked in this field for consumer electronics than there have been people who joined Facebook. Why reinvent the wheel?

 

CTO should not be running operation

Look, I was a semiconductor R&D guy for more than 12 years, during which 4 years I was doing my own startup and trying to cover a lot of operation, marketing and sales tasks myself. I know what it's like to be a product- and technology-central person. And let me tell you: it's very different from running operation.

When you lead product developments as a CTO, you deal with internal developers that work under you and outside design firms whom your company pay. You're on the buy side. Yes, there's still a lot of management to do, but you have pretty much all people listening to you. The feedback loop is much shorter and you could keep using your intelligence to move things forward (if not too often too much).

On the other hand, in an operational role you're dealing with a lot of outside corporate people who have many different businesses going on. Their environments are very noisy and your voice is but one of all that's shouting at them everyday. It's inevitable that the feedback loop will be long and more unpredictable.

If you take the CTO approach to product developments to handle operation, you're doomed to fail. You will be cursing at all the delays and lukewarm replies, all the re-dos and non-dos. You'll be shouting all the time, "But that doesn't make sense!" without moving even a needle eventually.

In some sense, CTO is probably the worst person to run the operation because he or she would be thinking about improving the products, but not the overall consumer experiences in terms of timeliness and robustness. He or she could indulge oneself in coming up with new functions and sacrifice schedules.

Letting a CTO run your operation could kill your early-stage startup. The CEO should shoulder the task (especially at the early stage of shipping) if an operational expert could not be hired.

 

Do not outsource operation management

DO NOT, I repeat, DO NOT outsource operation management to consultants or 3rd party services. Consulting contracts are usually defined by duration and deliverables. But no consultant will be signing off full responsibilities for deliverables if part of the outcome depends on the EMS firms or logistic partners. The contracts will almost always come with a lot of "given that" and "provided that". 

Therefore, if something goes wrong, it's worse. Instead of arguing with only one party whose interest is no longer aligned with yours, you're gonna be arguing with two parties whose interests are not aligned with each other and not with you.

And if Apple wasn't outsourcing Tim Cook, why are you?

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