Hello. My name is Joy Poe. I am currently enrolled in ENT 600:Entrepreneurial Planning. I’d like to introduce Ruth Harris. She is a retired Manufacturing Engineer from Boeing. She worked with Boeing for 25 years and is currently a Lean Management Business Coach in Transylvania County, NC.
Can you tell me a little bit about your long history with Boeing?
Well, I started off with a psychology degree. I was actually planning to be a school psychologist, but as part of that training, I was trained in statistics. In graduate school, I started working part time for Boeing in data analysis. When I got out of graduate school, I worked one year as a school psychologist and didn’t really like it. My friends at Boeing called and asked me to come back to work full time at Boeing. So, I did. And that was the beginning of my career there.
Over the years, I did a lot of statistical activities and then ended up going back to school to get an Engineering degree at the University of Missouri at Rolla. It was in Manufacturing Engineering.
What does that degree entail?
Manufacturing Engineering looks at manufacturing processes and optimizes those processes. A lot of work in controlling through-put, determining how much equipment you need. Kind of like Industrial Engineering but also process capability, which is where the statistics came in.
At some point you transitioned into working on the Chairman’s Innovation Initiative?
Yes. That was a program that was begun by the CEO at that time. He was interested in taking the intellectual property patents that we had developed as part of out military work, like in aerospace, and applying those patents commercially. Then they would spin that out as a company. Boeing would take an investment interest in the company, but not a controlling interest. They did not want to be managing these spin off companies. They just wanted to invest in the company and use the intellectual property.
My job was to take the patents (that usually had a scientist or engineer that was associated with it) and develop the patent to create a business. The Engineers I would work with were typically not going to be your good CEO. They were very into the technology, so often times they would be a Chief Technology Officer in the spin out, but not the CEO. Our job was to take that patent and that person and build a company around them, identify a market, and create the business model for that patent. We would help that company get funding, including venture capital funding because Boeing was not doing venture capital. So we would take them around, help them with their pitch, and then ultimately they would spin out.
Were these relatively young engineers?
It varied. And I have to say, some of them were very good at it, and others we would have to abort. If we had tried to spin it out and the scientist was not really spin out material, we would change plans and try to sell the technology to some other company. We were trying to harvest the value out of those patents. And we did start up some companies that did really well. There was the under water autonomous vehicle that we developed for the Navy that was applied to cable maintenance, as cable companies have all kinds of underwater cables. We also had a patent on a fire wall system that we used for Boeing that was excellent. We took that and spun it out. But you would start maybe twenty projects and maybe one would end up getting out. It’s hard, really hard to set up a company and get it going. There was this foam from the NASA program. When the space shuttle would take the parts up to the space station, they had to be packed. Because of the vibration of the space shuttle at take off, they would have to pack these parts in precision foam. Foam that had been cut out with 3D modeling, so that the part fit the foam perfectly. It was a particular type of foam and process. So that application ended up being applied to surfboards.
I’m curious what made some of your scientists and engineers poor choices for CEOs?
Well, that’s an easy question. CEOs need to be very big-picture thinkers. They need to be very strategic. They need to be very public facing. They are the ones that go on TV. They have to look down and manage at a very high level. And a lot of the engineers that had the patents were often our tech fellows, which were people who were being rewarded for being very detail oriented, very into their own research. They were more than happy to be in a lab somewhere working on a science project, as opposed to being up at this high level, hiring and firing. A lot of them did not have the personal or social skills required to be at that level either. They were engineers and they were perfect for what they were doing. They were really good at coming up with technology.
How did you help the spin offs find teams? Were they within Boeing, too?
It varied. Oftentimes we would work with venture capital firms to identify CEO or COOs or whoever it was that we needed to put together. And then the engineer would be the Chief Technology Officer. Some of them did not want to leave Boeing because they were so well compensated by Boeing. So they might temporarily go out with the new company and come back once they identified another CTO.
But, as I mentioned, the program didn’t last. I was involved in it for about five years. it was ended when a new CEO came in to Boeing and recognized that these engineers that were leaving the company were like gold. You couldn’t just calculate that all we were losing out on was what they created for this one patent. A lot of them were the creative force. Boeing invested like ten million dollars in the program and ended up making like 300 million dollars, which sounds great, but the CEO came in and said, “what we are not taking into account is that I am starving for engineers over here on my billion dollar government program. I cannot find them and we’re spinning them out. We’re playing around in the sandbox over here!”
So he basically just shut it down.
When you retired from Boeing, you moved to this small town Brevard, NC, a town that is struggling economically in some respects after a couple larger manufacturing companies left the area about ten years ago. They left a lot of people in Brevard without high paying jobs. So, you are currently on the board at the Transylvania Economic Alliance and coach small businesses in their startup phase. In essence, you are translating all of this corporate work inside Boeing to very small businesses. Do you find that it is very different coaching small business?
I found that a lot of the issues were the same. For example, it’s important whether you are running a small business or a big corporation, that you are aware of your numbers. You need to know if you are making money. Where is the money going? You need to know your customer. There are a lot of similarities. The big difference was that a big corporation like Boeing has the resources to have people, often giant departments, that address those issues for a manager. So they don’t have a problem getting that data. That is missing in a small business. Oftentimes, small business owners did not go to school to become businessmen. They started out enjoying doing some skill, they got really good at it, and suddenly realize there are all these other business aspects of what they are doing. I noticed there was a tendency for people to ignore those business numbers, to just hope for the best. To me, it was kind of upsetting because I would see people who had been in business for ten years and when you sat down with them and went through the numbers, I would find out that they really hadn’t made any money. Or they made so little money in that ten years, they would have made as much or more if they had gone to McDonalds and been a burger flipper. So, I wanted to find a way to help small businesses with the numbers because they don’t have this big department to compile all that data.
Is that part of what you consider Lean Management?
The whole Lean Management and Lean Startup are two different things. Lean is a process that has been involved with industry for many years. As a manufacturing engineer, I was trained in Japan. I came back to help the Boeing factory to create as pure a value stream as possible for their product, from the very beginning withraw materials to delivery of the product, and the support of the product through out its life cycle. That means as little waste as possible, and as much customer value provided as possible. So that process, was applied to the factory and they also started applying it to office flow, and addressing waste there. Sometimes people are trying to get multiple approvals on a document that doesn’t really need multiple approvals.
When you apply this on a small business level, a lot of the principle are the same. You have a process, and a lot of small businesses do not think in terms of process. They are just performing a skill that they have and they stay in the business versus working on the business. That’s a theory that came out of The E-Myth, which was a very popular book for entrepreneurs. It stated that entrepreneurs get in there an perform their skill and they never think about streamlining the process. Once you have a process, and you document it, then you can hire and train people based on that process in order to grow your business.
So it’s more than just writing a business plan. It’s understanding how your business is moving from point A to point B, thinking about the small steps in the grand picture.
Yes. And Lean Startup is an application of Lean associated with starting a business. A guy named Eric Ries, came up with this idea The Lean Startup. The old way of starting up a business was to gowrite a Gone with the Wind sized business plan. The problem with that, he says, is by the time you have spent a week working on the plan, whatever you did at the beginning of the week has already changed. So, now when I meet with these small businesses, many of them have a business plan that they created, but they don’t ever look at it because it is all out of date. Nothing they planned for happened and everything they hadn’t planned for did happen. So, Eric Ries’ concept of lean start up was that the startup process should be a hypothesis and experimentation process. You want to come up with a theory about what you think is going to sell and the type of market you think it will sell in. You try that out and you pivot based on what you learn from that. You don’t just try your idea in a five hundred page document and then get disappointed when it doesn’t work. Too many people try to come up with a plan in the library instead of in the market place. It is in the market place that you begin to understand the right business plan and the right model to work with.
Does that mean testing a product in the market place?
There are a lot of different ways to test. If it’s an online business, you could try A/B testing. Try several different landing pages and see which one works. If it’s a hard product, you would create twoor there prototypes that vary in certain ways and try them with different groups, see which one they like best. It is very hard to predict what is it that people will like. So you have to be light on your feet and do these things without investing a lot of money or time. Most small businesses when they startup, they have to bootstrap. It’s hard to go out and get a big bank loan. In fact, that may not be good for that business, to be infused with a ton of money, because you are at this beginning stage. It’s like giving a Maserati to your two year old! You need to be in a position where you can feel your way along based on what your customers are telling you.
When you are working with a small business, do you have any words of wisdom for hiring friends and family?
Having been through some horrible experiences myself. I once hired my best friend’s boyfriend. And it was the worst disaster of my career. It would have been great if he had just not been a good employee, but he falsified his entire resume. I try to talk people into being very careful, slow to hire and quick to fire. If you are slow enough to hire, you won’t have to fire. Make sure you very clearly define the skills and responsibilities you need for the job, then do a very detailed search. Don’t just take the first person who comes along who says they can do it. When you get applicants, have a detailed interview process, and for the applicants who match, check like crazy every single reference they have. If you call the references, no one is going to say this person stinks, but you can tell from the tone of their voice. There is a person who says, “OH! Whole heartedly!” versus “um, yeah. I, I think I would recommend them.” That will tell you something big had happened with the applicant.
What is the single-most repeated advice you give when you are coaching a new entrepreneur?
I guess its to make sure you are going to actually be able to make money. Know what your expenses are, and manage to that concept. When I came here from Boeing, and I asked myselfhow I could help these small businesses, I came across a book called Profit First by Michael Micalowicz. To me, it’s the best book I’ve read for how a small business should make money. What he recommends is that you set up five different bank accounts, and that you have all of your income come in through one account. Then you periodically distribute that money into a profit account, a tax account, an owners pay account and an expenses account. So basically what you are doing is taking your profit first. Initially, if you haven’t been making much of a profit, you’re not going to take 10%. You’ll take maybe 1% and then you are going to grow that as you become better at managing to your expenses. His theory is that a lot of small businesses come in and look at their bank account, see money, but what they are not seeing is out of that money is going to come taxes, payroll, rent. Typically the business owner will take whatever is left over at the end of the month and call that their profit. The problem is that there is often not much left over. By taking the profit first, and then owner’s pay… many owners work in their business and never pay themselves. They pay their employees, but not themselves. They don’t even understand that profit and owners pay is not the same thing. The profit is what is used to invest back into the business, or you distribute the money out to the different shareholders. The business should have the kind of margins that can provide not only for the owners pay and all the expenses of the business, but also profit.
If a small business has a handle on their numbers, how do they know when to scale up?
That’s a good question because you can continue being a one person show for a long time. A lot of businesses do that because they are afraid to hire. As far as I’m concerned, the most important thing is that you are ready to scale up when you have a way to systematize your process. Obviously, you have reason to scale up when you have proof that there are customers out there that you are not serving yet. You don’t want to scale up on a business that is not profitable at that level. Assuming you have a market that is underserved, and you can make money, then the question when scaling up would be if you have the ability to reproduce what you are doing, to structure the work so that a new person can come in and has a process to use. I think too often people scale up thinking all they have to do is just hire a new person or several people, but they don’t have that process in place. If you think of it like franchising, nobody goes out and franchises a business unless they have a package that they can turn over to the new owner and say, here’s what you do. If you are going to buy my franchise, then on day one you are going to have a process to use, a logo, and you set up shop and implement my process. When a small business has a new hire, they need to have the rules set up, employment policies, so they know what they should and should not be doing, understand the pay scale, understand what avenues of growth there might be in the future, they understand the training process.
My first blog assignment for this class was to write about the concept of being rich or being king of your business, the idea of wealth versus control in running a business. I like that you bringup the concept that a business must make money, because why else would we be doing this? But, often people don’t want to let go of their control when it comes to making more money or maintaining that control. So they don’t scale up because they are afraid to hire.
Yes. Largely, that is because they don’t do the homework to create an environment where a new employee can come in and thrive. A really good leader, whether small business or big business, is about creating environments for people to be successful. If you’re not familiar with how to do that, it can be really scary. Because then you are just praying God send me a person with a really good work ethic, or send me a telepathic person who knows exactly what I want them to do because I won’t be training them! You have to understand that doesn’t get you good employees. So, if you put in the homework before you hire, saying you’re going to be ready for this person, from day one when that person walks through the door, they are going to be surrounded by a system that will structure their day and train them through policies. I’m really big on checklists. I love checklists. Here are the things you need to make sure you do.
The other thing, tying back to the Lean management, is you want to give them the power to change that process based on what they’re learning. But only through a formal process. They can’t just change it without telling you because then your process is ruined and they can do what ever they want. But together you can update the process and it will get better and better over time. That kind of mindset is hard for entrepreneurs because they are used to flying by the seat of their pants.
I remember when I started this program in entrepreneurship, I read an article that questioned, what is the point? Isn’t an entrepreneur is the kind of person jumps into this thing headlong, that bootstraps and takes things into their own hands. I don’t know that that is always the best case for everyone.
I think a lot of businesses get pulled along by the force of their product offering. If you have something that people really want you can go a long way without being terribly organized. But there will come a point where you will be waking up one morning and realize you are completely overwhelmed. It has gotten out of control.
That is exactly what happened to me with Heartfelt Flowers. I said, I don’t think I can do it like this anymore. And if I can put this much energy into something that isn’t working, but people want to buy, what if I put my energy into something I really wanted to do, and grow something I have a passion for.
Exactly. It requires a certain amount of self-discipline. And that’s probably why so many businesses flame out. They grow really fast and then overnight they are shut down. I think a lot of that has to do with the fact that they are not using the disciplined process to manage their expenses, to hire and train employees, to manage their customer relationship. There are a lot of aspects in a business. It’s kind of overwhelming at first, but if you look at it, it’s just little pieces of the pie. Tackle each one as it comes along. Think in terms of systematizing. Make sure you understand the key characteristics of what your customer wants. You define what your customer has to have and you drive toward those things. And those things will change over time because you’ll learn and pivot, learn and pivot. That’s all I know!
That’s fantastic! This was a great interview! Thank you so much, Ruth!
