Engineer to Entrepreneur: Making the Career-Enhancing Transition
by Michael J. Arnold
On the surface, engineers and entrepreneurs might appear to have little in common. Mention the word entrepreneur and it conjures visions of larger-than-life empire builders who create high-risk business ventures that promise either intoxicating wealth or wretched bankruptcy — and very little in between. The word entrepreneur is derived from a French word meaning to undertake, and is defined in Webster’s dictionary as one who directs a business undertaking, assuming the risk for the sake of the profit. Entrepreneurs seem to thrive in chaotic and uncertain climates far removed from the orderly and methodical world of engineers, where calculations and data are applied to design solutions that eliminate uncertainty and risk. Even our universities separate the engineering colleges from the business colleges.
The scenario changes, however, as soon as you graduate and take your first professional engineering position. Regardless of your job description, from the outset you have begun transitioning toward entrepreneurship. Consider this as an example: your employer is engaged in a business to produce a return on investment for shareholders. Your compensation package is an investment made by the company. What you produce is your contribution to your company’s overall return on that investment. And whether you’re the CEO in charge of the entire corporation, or a new engineer overseeing a single task or project, you are responsible for producing a positive return on the investments you manage. So, really all engineers engage in entrepreneurship. But only those who deliver the best returns on the investments they manage will be in the best positions for advancement when such decisions are made.
Engineering Principles Parallel Entrepreneurship Concepts
Fortunately, engineering education provides an excellent basis for understanding entrepreneurship concepts. For example, the principles of conserving mass, energy and momentum can be applied directly to money. Engineers who understand and apply the key driving forces of business in their sphere of influence are tomorrow’s best management candidates. Reaching top corporate management requires years of experience and additional business education. However, those who manage their engineering careers as entrepreneurs from the start will enjoy a higher probability of advancing within the company.
Return on investment is a relatively simple concept, and most engineers are exposed to it in at least one college course. The simple ratio of profits to investments is the measure of success that drives the corporate world. Your salary may be a small percentage of your company’s total annual expenses, but your work is expected to produce an individual return that meets or exceeds your employer's minimum requirements for justifying your salary and benefits.
A company’s return on investment is the sum of all its incremental returns over all of its incremental expenditures. When you were first hired, your job description probably didn’t include any discussion about investment or expected return. More likely, you were hired to perform specific engineering functions, and your performance reviews reflected how well you accomplished those tasks. Because new engineers may not initially see their direct link to company financial performance, they may become complacent and assume that their job is somehow exempt from the world of investment returns. The reality is that someone in the company has justified the new engineer’s position financially. Engineering entrepreneurs understand how their work contributes to the company’s financial goals, and work to ensure a good return.
Ensuring Favorable Returns On Investment
What can you do to ensure that your employer realizes the return needed to ensure your continuing employment growth? Understanding the following key business principles will help you make the transition to engineering entrepreneur:
Understanding your employer’s investment in you is necessary before you can consider returns on that investment. Salary is an obvious component of investment; engineers generally receive a payroll statement of earnings for services rendered about every two weeks. Some less visible direct employment costs include taxes, benefits and insurance. In addition, indirect expenses, such as office space, computers, equipment, and utilities are significant and can push the annual cost for employing engineers to more than double their salaries. Entrepreneurs are aware of the fully burdened cost of their engineering position, and they know the company expects a substantial return.
One level up from you is the return from the next smallest economic unit in your company. Often described as a team, group, unit, cluster or task force, entrepreneurs view this local unit as a profit center, where their skills are leveraged with others’ skills to produce a return that exceeds individual contributions. Entrepreneurs understand the cost structure of their local unit, and direct their efforts toward optimizing the return of this larger economic investment. Your personal return to the company cannot be optimal without understanding how your engineering efforts can maximize the return of your group.
Your return to the company is the incremental contribution toward profits from your engineering work. While the investment the company makes in your engineering salary and supportive environment is reasonably apparent, the return is somewhat elusive and more difficult to calculate. The difficulty stems from assessing individual returns on collaborative projects, and the fact that returns from engineering work often take time to materialize. Unless you're Nostradamus, predicting the future is no simple task. And yet, companies must forecast returns well into the future to satisfy shareholder demands. Likewise, engineers need to develop their ability to forecast how they will deliver the high returns that employers demand.
Forecasting and gambling may appear to have a great deal in common because of the apparent risk involved. But unlike gambling, taking a risk implies some chance tempered by knowledge and careful planning. Engineers are taught to allow for contingencies and to compensate for unknowns through conservative design. Sometimes, newer and less experienced engineers are too conservative in forecasting project time estimates, which can result in reduced projected financial return. Underestimating time to completion can be equally detrimental to a good return. Accordingly, it is critical to estimate time requirements accurately.
All returns on investment involve some degree of risk. Low-risk investments (think treasury bills) come with low returns. Your employer could have invested in treasury bills but instead chose to seek a much higher return by assuming the greater risk of operating a company. Engineers take a risk every time they commit to a project deadline. Project slippage from missed deadlines mercilessly erodes return on investment and can ultimately have an adverse impact on employment. Entrepreneurs attempt to identify every opportunity to reduce risk, thereby improving the probability of achieving the desired return. They diligently pursue any and all available information that will help them forecast accurate timelines and allocate resources appropriately. Further, entrepreneurs understand the old adage time is money and strive to minimize projected completion time without sacrificing quality. The engineer-entrepreneur's primary goal is to find ways to improve returns while simultaneously minimizing risk.
By nature, engineers are problem solvers who take great pride in designing comprehensive solutions. Software engineers are especially vulnerable to falling into the trap of over-engineering a project. Unless they add the potential for increased financial returns or improved safety elements, embellishments and features that reach beyond project specifications may jeopardize the project completion time and generally should be avoided. It's far better to craft a careful design that meets current specifications — one that can be easily modified to include additional features — than to add bells and whistles without knowing what future needs may or may not be.
Engineers Have the Tools to Make the Transition
Entrepreneurship is a state of mind, where investment, risk and return are all factored into the duties you perform for your employer. Engineers already possess the analytical tools necessary to succeed in business. By augmenting those tools with business knowledge and strong communication skills, engineers can deliver optimal returns to their companies and also to themselves.
Michael J. Arnold is Vice President for Client Services, Tucson Technology Incubator and a member of the Industrial Advisory Council for the College of Engineering and Mines. He was the founder and CEO of Modular Mining Systems, Inc. and the former Associate Director of the Entrepreneurship Program for the College of Business at the University of Arizona.