Startups are brutal. According to multiple statistics from Forbes, CB Insight, and other sources, 90% to 97% of startups will fail, and the remaining 70% will not survive more than 5 years. Among the top reasons startups fail are lack of market, running out of cash, team failure, competition, business model (price/cost assessment), and many others.
What makes hardware startups especially hard is the need to work on physical products that need to be prototyped, manufactured, and delivered to customers. Compare this challenge with building software products and you will find an overwhelming list of activities to deal with that can make your life as a startup founder and the team developing new physical products very difficult.
Take a look at 1000 unicorns (listed on Wikipedia). There are not many hard tech startups there. But they exist and work hard to survive. Working with many hardware startups, I collected some thoughts about the intersection of the product lifecycle management (PLM) domain and hard tech (an ecosystem of startup companies developing new physical products).
Last year I published my article – What kind of PLM do hardware startups need? Check this out. In my article today, I want to share ideas about how PLM software can help hard tech startups, what PLM software characteristics are important for you as a hard tech company founder, and what PLM software companies can learn from offering product lifecycle management, product data management, computer-aided design and other engineering and manufacturing software to hard tech companies.
Let me start with a question that many hard tech software founding and engineering teams should be asking themselves – What engineering and manufacturing software should be on the list of priorities for hard tech startups?
Hard Tech Startups: The Ugly Truth About Top Software Priorities
Startups are overwhelmingly complex. Building something from nothing is hard. As a founder or member of a founding team, should you think about engineering software priorities at all? Many founders answer these questions by delegating the problem of engineering and manufacturing software to team members – engineers, supply chain, marketing, and sales. Being on a tough schedule, you don’t think twice and naturally pick something you’re familiar with. For mechanical, electronic, and software engineers, the selection is easy – they just pick the tool they used before for MCAD, PCB design, or software lifecycle management. They know them and they are ready to use them. Each of these works in a silo, even more, some of these roles are outsourced and make a selection of tools by themselves. Because you cannot design and build anything without design tools, they are an obvious top-level priority. Supply chain management for hard tech startups is the internet. There you can find anything you need – from OTS components to custom part suppliers. The last group of people belongs to management, sales, and marketing. The main goal for them is to secure a process of technology validation, prototype building, customer hunting, and delivery of everything together on schedule. This group of people is usually ending up with project management and collaboration tools.
Did you notice, I didn’t mention PLM software until now? You’re right- it is not there. In the beginning, data management, change management, and collaboration software are not on the top list. All tasks are naturally delegated and siloed. And Excel-like software can do the rest of the work. Until problems start to pop up. It comes from multiple directions. Here are some typical examples – wrong CAD files are sent to contractors, and there are no OTS parts (e.g.. literally screws) to finish the prototype that needs to be sent to the first customer or trade show, the project cost is skyrocketing compared to modest startup budgets and project schedule is collapsed because some designs are not finished and some others were forgotten to start.
How PLM Software Can Help?
Here is my simple universal PLM pitch for every hard tech company. PLM software will help you to know what you build, who is responsible for each element of a product (system) you plan to create, and how to find up-to-date information about each element of a product (or system) you’re creating in a timeline context. Knowing what you do is a big deal for every company that is on the survival path to deliver results. The illusion that you know where are your files or you have the most updated spreadsheet with all the information will vaporize with the speed of light once you are stuck with the problems I mentioned above. Let me be more specific or brutal. As a founder or top manager of a hard tech company, you can be terrified if one of the following scenarios evolves:
- You brutally underestimated the cost of building your product
- You sent the wrong drawings set to a CM and will be charged for the wrong batch
- You discovered that some of the components you chose are at the end of their lifecycle, non-compatible with regulation, and/or not available
Engineers, managers, and founders of a startup have different priorities. Therefore you need to dig deeper into the pain of each group of users to explain why PLM software can increase their chances to survive in a brutal startup world.
The time is the most expensive thing for engineers. They must produce the output, make it available for everyone else, and eliminate all possible overhead during this process. Managing file versions can be a tough process, creating STEP, PDF, and DXF files for the design can be time-consuming, and going back-in-forth with a person ordering components or custom parts because of a lack of information can be annoying. Software that solves these problems will win the hearts of engineers and engineering managers looking at their timelines and resources.
Automation of “no-hands” capabilities of PLM software is in high demand with hard tech startups. Automate BOM generation, add images and derivative files, and share data automatically – these are examples of how PLM software can help.
For managers, getting a full picture of the product and all information, and the status of the progress of the distributed team is a goldmine. Although every startup is on a 24×7 schedule, people need to sleep and eat. And if you work in different time zones, you need to have a system that is independent and can provide the information needed without slacking or texting people.
As a founder or top manager in a hard tech company, saving valuable money is a matter of survival. If PLM software can save 30% of engineering time and not make mistakes (which also means $$$), you don’t need to think twice before getting this PLM software to your team.
Finding Your Fit: Best PLM vs. Right PLM Software
This is a clear dilemma for each hard tech software I met. The main reason for that is the human factor. Everyone comes to a startup with a different historical background, tools, and experience. It is combined with the formal absence of processes (very typical for any startup) and a lack of resources. this is a very dangerous mix to make a mistake. To avoid dangerous mistakes you need to add people to the equation of benefits I mentioned in the paragraph above. PLM software won’t help you if people are not ready. In most situations, a startup has a very short amount of time to educate people. Therefore your PLM system selection process must include people and hands-on experience.
Here is a possible PLM system selection process I found the most efficient for a hard tech company:
- Start with your design system choice (typically CAD, but sometimes simulations and CAM).
- If you doing contract engineering, decide how to exchange data with design contractors.
- Decide about prototype and production builds (in-house, contract manufacturing, or mix) and gather information about how to exchange data to manage the production process
- Gather online information about PLM software, read online reviews and customer stories
- Ask for a demo and start a free trial for PLM software
- Ask about the training process, how long it takes, and how much it costs
- Check how to export the data out of the PLM system if you don’t like it
There is no best PLM software for a startup. You need to find the right software that can give you the benefits I mentioned above. Your company will change, your product will change, your processes will change. Selecting the best PLM software that will allow you to grow in the future is like choosing the best car for your life. Here is how it goes – you need to have a cheap car to learn to drive, you need a very reliable and efficient car for commuting, you need a space when you have many kids and you just want to enjoy driving during weekends. Finding the right fit at the right time is key.
What PLM Vendors Should Know About Hard Tech Companies?
Selling to startups is a bad choice. This is what every business strategy says. Startups don’t have money, they die often and churn, and they don’t appreciate structured product lifecycle management and product development process management. How you can speak about the value of product lifecycle management with a company that doesn’t know if it will exist in 6-12 months? What long-term value of document management retention you can offer to a company that just started its work and doesn’t have a history of documents? This is a reason why many PLM vendors fail to offer PLM systems to hard tech startups by relying on the experience they have with large enterprise manufacturers.
While the cost is an obvious problem for every startup, just making enterprise PLM systems cheaper (or free) won’t make a deal. PLM license cost is just a fraction of the TCO of PLM systems. A huge cost of a PLM system is related to establishing of product development process and all enterprise PLM systems are tailored to enterprise processes, specific organizational roles, and the way a large company works. All large companies appreciate structured processes, well-defined organization, and enough time and resources for people to manage them. And this is exactly the opposite of what hard tech startups need.
What is my conclusion?
Can PLM software help hard tech companies to succeed? In my experience, all hard tech companies lack three things – (1) well-organized data management integrated with design tools; (2) seamless data handover; and (3) guidance on how to use software to build products faster to survive in a brutal startup race. If you’re a hard tech startup, don’t underestimate the importance of placing data in the center of your business. This is key to survive in a digital world. Excels and folders with CAD files won’t help you to do so. If you’re a PLM vendor, think about how to streamline the experience of your products for hard tech startups by understanding their goals and priorities.
Finally, think about PLM software as a tool that can save you time, save your resources, and help to keep everyone in your company on the same page. Just my thoughts…
Best, Oleg
Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital thread platform including PDM/PLM and ERP capabilities that manages product data and connects manufacturers, construction companies, and their supply chain networks. My opinion can be unintentionally biased.
