Should I Start a Broad or Deep Product Range Company
A generalist company and a specialist company
I am thinking about this topic for past few days. I’ve worked in company that I would call them the “generalist company”, they make a wide range of product, a lot of them might not be overlapping or share any common technologies. They could be making some kitchen products, some home appliances, and also some industrial products for example.
Another type of company is what I would call a “specialist company”. For example, they make fan products, air purifier, and air humidifier. All products they make has a common fundamentals of dealing with air.
In these two kinds of company, I believe after describing the basic differences of them, you could quickly put up an idea of how that kind of companies would be like. It is like Seiko company that makes watches and clocks only, as compared to hyper market that sells a wide range of products, they sell their own brand of kitchen plates, utensils, hairdryer and vacuum cleaner. Of course there are also companies which are a bit of both, like Canon that makes printers, camera, and also medical equipment. But we shall focus on the both extreme spectrum for illustration purpose.
Let’s look at the two types of companies on different perspectives.
Technical
In a generalist company, if anyone gets to handle all types of products, he would benefit from knowing a bit of all of products the company is selling; In comparison, in a specialist company, one mainly gets to know about a similar type of products. In a generalist type of company, if the company has manpower and financial strength, they could stay in industry for long while they research and experiment in different technologies in the different wide range of product they deal with. My quick guestimation would be that an engineer could handle 3–5 consumer products or kitchen product well (depends on complexity of products too), before quality of product would be sacrificed for dealing with too many products. When an engineer deals with too many projects, he has to constantly decide which portion of the project he could place less priority, and also to consider where to focus on resolving. If one spends a lot of time to decide on projects and tasks priorities, it consumes energy and the engineer would burn out after doing it for a certain period of time, he/she might last 1–2 years before the burnt-out feelings and emotions kick in. As mentioned in the book, Thinking Fast and Slow by Daniel Kahneman, when someone has to use system 2 to consider and to make decisions, it consumes one’s energy, especially when product categories are wide and each day, problems that occur are slightly new or different sorts of issues.
In a company with sufficient resources, leaders could be assigned to each product categories, this would help to avoid the risk of engineers burning out. This would also requires a visionary leader on the top to foresee this, and to assign different category leaders early while the company were small.
For a specialist company, engineers could focus on a few products, and they could go deep in learning the technical knowledge. For example, the engineer could look at a fan, and he/she would have a “sense” of what sorts of airflow that the fan could provide. Any problem solving iterations could also be completed quicker as the engineer are familiar with the bolts and nuts of the product. The cons of this type of company would be that they would not be able to easily goes into making different range of products, or they would need more time and resources, since there will be a initial learning curve to overcome.
Customer service
In a generalist company, either the customer service team needs to be big, or there need to be someone properly trained to know every products, or products could only remain simple and basic without complicated issues. For specialist company, this would be simpler as the customer service team just need to be trained to know about the existing products (which are smaller in sizes and more homogeneous in knowledge base), and also gets new training when there are new product models or when there’s manpower turnover.
Customer service of consumer products would also be quite different from servicing clients for industrial products. Consumer products might be lower in prices, the users are not expected to be professional or trained to use the products, product model changes at faster pace, the customers might also be more concerned with trivial issues like packaging defects, appearance defects, color differences etc.
Sales
In generalist company, similar to carrying out customer service duties, sales team would also need to be at least categorized into consumer products and industrial products. Consumer goods are sold to distributors, specialties stores, online merchants; while industrial products might be sold to specialized distributors or directly to clients. The role and expectations of the buyer in the two different categories would differs too. Consumer goods normally cost less and therefore come in more variations, there are different color variations, different packaging for different distributors, different MOQ for different distributors, etc. Industrial products go through longer product change cycle since the product cost more to develop, there are more tests involved when a new model is developed and launched to market. Since industrial products cost more, there might even be different route employed to distributors them, insurance might be required, packaging design might also be different, more protection might be required for heavy goods. I believe the biggest differences for sales team are the different ways of dealing with the buyer among consumer and industrial products. Consumer goods cost less and therefore sales person would spend less time and effort with each buyer, as compared to sales person dealing with industrial products. Sales person for industrial products would also spend more time preparing promotional material and data to convince his/her clients as each decisions involves big budget and the buyer needs to be more careful when making the decision. I believe by now you could see why a generalist company would need to be large in various resources, or very capable people, and also pays very well to retain the top players.
Planning and logistics
Planning and logistics team would also differs according to product categories. For industrial products for example, a lot of products are built-on-orders, when orders are placed, then the manufacturer would starts arranging parts and work out the schedule, it might take 4 weeks to months to complete making the industrial products. It depends a lot on complexity of the products, an industrial light would be easier to build compared to compressed air supply system.
For consumer goods, due to lower unit price, it makes more economical sense to build in larger quantities, often starting at 10,000 pcs or more. Consumer goods are also affected by season of the year, for example, cooling fans would need to be made 3–5 months before summer comes. The production period might also clash with national holidays of the particular manufacturing countries. US has long holidays in Christmas, while China has long holidays in Chinese New Year.
Starts small and build your teams
I believe by now you could see that it’s easier to start small, focus on few products and build up your team. In the end of the day you do not wish to build a company that runs like factory, while people could come and go without feeling anything about the company. Your employees are the most important asset. How an employee deals with clients really depends on how they feel, how happy they are and how contented they are with their job. I always believe that good product is half of the formula for success, the people is the other half of the formula.
What type of company would you like to work in?
I write about building physical products, and building great team. Hardware engineer is usually seen as being poor writer and there are limited materials to inspire engineers. Hopefully I could inspire one more engineer with this article. Feel free to comment below.
