Engineering Entrepreneurship – Part II
Teaching at Duke this fall, one of my objectives is to showcase different approaches to building technology and a business around it. This week …
Teaching at Duke this fall, one of my objectives is to showcase different approaches to building technology and a business around it. This week I taught the students about positioning. Positioning is basically creating an image or identity in the minds of customers. Given the abundance of products out there, a company has to position itself in order to gain any mindshare with prospective customers.
To illustrate the case of positioning oneself in a vertical market, I showcased the company AeroVironment, aka AV. I had recently read an article about them in the summer 2013 issue of Strategy+Business, and thought the technology they are building would interest the students, plus they have a very cool founding story. It was founded back in 1971 by the late Paul B. MacCready, who himself was atypical engineer, who wanted to build products that could, “Do more with less.”
AV is considered a small firm, compared to other tech companies. It specializes in essentially creating products for two technologies: unmanned aircraft and charging electric vehicles. What I wanted to highlight to students was the following.
A niche product’s makers demand can grow.
Too often we think that being in a niche market means we’ll just be stuck there forever, serving a loyal customer base. AV kept it’s focus on two areas because of MacCready’s passion for flight. Since AV chose to keep it’s focus on two technologies, in the space of 40 years, the interest for them has actually increased tremendously! 40 years might seem like a lot of time for most people to wait. However, given the technology they are building operates in a highly regulated market (aviation) and requires additional R&D, it’s no wonder that it has taken awhile to adopt. Despite being very early into the field, persisting in it’s vision has ultimately benefited AV. It wasn’t a case of “picking the right technology”, instead it was the case of waiting for people to recognize the importance of it.
The other benefit to having kept its focus, is that it has become the market leader in what it does. As the need for charging electrical vehicles has increased and become more mainstream, so too has the demand for AV’s products. Hence this is a great example of how staying niche and keeping the focus can eventually lead to mainstream demand.
There are benefits to staying small.
Most startup tech companies dream of becoming big tech companies. However, we often times witness that when this happens they lose their ability to be nimble in the market. AV on the other hand has stuck by it’s founder’s motto of “more with less”. As a result, it has been able to develop a deep portfolio of successful products.
Of course no success story come about without a strategy. AV’s strategy for staying small and nimble is to outsource the production of it’s products. While it has $200M in cash and investments, it continues to fund major projects with outside investment.
In teaching my students at Duke, it’s important to me, that I showcase a wide variety of tech companies, the products they are building, and their business strategies. Part of the reason is to inspire them to realize they don’t need to follow a particular path to succeed. The other is to highlight that the market needs a variety of technologies. I am going to continue to showcase companies that might not always be in the limelight. For those of you who are reading this, if you know of other companies like AV who would be an interesting case study for my students, please let me know!
