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EDN.COMMENT: Taking the long view

Many years ago, I worked for a test and measurement company. It was, as was the norm for the time, a vertically-integrated business. We who worked for it didn’t know it was “vertically-integrated”: as far as I recall, the term had not been coined. It was, simply, standard practice for a medium-to-large enterprise to build all its circuit boards and assemblies in-house from basic-component-level upwards, to construct cases from sheet metal, and assemble its products through every stage of manufacture on the same site where they were conceived, designed and developed

Today’s management practices would regard this structure with suspicion, and would instinctively look for cost savings to be made by contracting-out as many services as possible. The integrated environment laid bare the cost implications of everything you specified; if you requested an unusual cut-out in the casing of your instrument, for example, a skilled tool-room worker would immediately point out the cost of the presstool that would be needed to manufacture it. It saved searching catalogues and requesting quotes for many types of component; if you needed a transformer with exactly X-to-Y turns ratio, and double screens between the windings, then the on-site coil-winding department would set up a machine and make you one.

As the years have gone by, visiting companies and finding vertical-integration on a single site has become very unusual. That same T&M sector in which I once worked has been one of the exceptions; it still provides examples of companies who carry out for themselves, every step of a product’s creation, from initial concept through to final assembly and shipping. One notable example is Rohde and Schwarz, and it is surely no coincidence that it is also one of the few in this industry that continues to be privately- owned, indeed, family-owned. This aspect came to mind recently as I attended the presentation of that company’s new range of oscilloscopes, that you can read about in the Pulse pages of this issue: however, discussions of this new product range highlighted an even more marked contrast to most of the rest of the industry.

As a privately-held concern, R&S executives appear to have an enviable freedom from the quarter-to-quarter management style that now prevails elsewhere. When pressed on what market share the company expects to achieve against the dominant players in the ’scopes market, and in what timescale, managers were relatively relaxed. “We have decided we want to be in this sector…we have made the investment…it’s going to take time to make an impression…we expect to get to double-digit market share but we know it’s not going to be done in few quarters…”

I could not help comparing this with the experience of an acquaintance whose department – in a company far-removed from the T&M sector – has just had a bruising encounter with the opposite management style, that always has at least one eye on the share price and on cultivating the opinions of the New York analysts. “It has,” he confided, “been brutal: it is so hard to do any planning, or take any sort of long view. The horizon is never more than 10 or 12 weeks away.”

In the long run, is one or other approach to running a technology-based business intrinsically superior? These two cases are such polar opposites that perhaps the comparison is not meaningful. It is, however – as far as you can judge from the outside – entirely clear which is the more comfortable environment to work in.