Striking a Balance in Capex Decisions
Exclusively staying ahead or behind the technological curve can lead to misfortune.
OVER THE PAST decades, it has been my experience that there are two basic categories of technology: “cutting-edge” and “behind the curve.” Electric (rechargeable) automobiles, for instance, would be considered cutting-edge while hybrid (gasoline and battery) automobiles are behind the curve.
Interestingly, when it comes to technology adoption, there also seem to be two types of users. There are those who must be ahead of the curve, always first with the latest technology regardless of how well it may work or how much it costs. And there are those who use only proven technology that is reliable, cost-effective and offers value.
Back in 2013, a friend took delivery of an early Tesla Model S. He was so excited to finally have an electric car, and it sure was a beauty. I remember asking him how it drove. “Like nothing else I have ever driven,” he responded. But when I asked how far it could go between charges, he replied “I do not know.”
“There are no charging stations yet,” he continued. “I have to do it at my house, so I’m afraid to take it too far.” When I asked how long it took to fully charge, he responded, “All night in my garage.” As one of those “ahead of the curve” users, his pursuit of cutting-edge technology meant putting up with the possible inconvenience and paying a premium for the honor.
Meanwhile, several friends bought Toyota Priuses because they wanted better fuel economy without being limited in driving range or worrying about finding a charging station. These are my “behind the curve” friends who want only proven technology. Both the “ahead of the curve” and “behind the curve” friends adopted technology and were satisfied by the type they embraced, but did so in very different ways.
Our industry is at the epicenter of technology, running the gamut from cutting-edge to proven technology that is reliable and cost-effective. We contribute to the development of all technology types and levels, while also buying from companies that develop and sell all technology types and levels. Over the years, I have known owners of printed circuit board companies who must be ahead of the curve with the technology they invest in, as well as those who want only proven technology when investing their money.
At the end of the last millennium, some managers of printed circuit board companies would invest only in the cutting-edge technologies of that time to ensure they were ahead of the curve if or when that technology became mainstream. I also knew managers of companies who would not invest in any new technology until it was so tried and true that the next generation was about to be introduced – at which point they would again wait to see how that panned out.
Regrettably, those investing to be exclusively ahead of the curve as well as those doggedly behind it both ended up in the same situation: out of business because of their singular, albeit different, approaches to technology investment.
Most people tend to be either more comfortable being ahead of the curve or more comfortable behind it, waiting for more proven options. The trick to achieve greater success is to find a balance between the two.
Most of the capital investment in a manufacturing company goes into technological assets that help it operate and build products. Even tried-and-true “manual” processes, such as printed circuit board plating, now utilize sensors and other technologies for better control and monitoring. In other cases, cutting-edge innovations such as direct imaging were a distant concept a couple decades back, but today are proven, cost-effective technology.
Investment in any business needs to be a disciplined process. It is easy to go to an industry event and be wowed by a new process or machine that looks and sounds swell but may not have a practical application in your business or for your customers. Indeed, sometimes those unglamorous pieces of older equipment are the best fit because they have a proven track record to accomplish what is currently needed. The time to be ahead of the curve is when replacing older technology with an emerging one, where the new one will not only fill the role of the older one but also adds considerable capability or throughput that you currently need. That’s where spending a premium may be a shrewd investment.
As with any type of investment however, staying clearheaded about the need, being open to what is new and available, and matching it all to your budget as well as your immediate and anticipated needs is essential to maximize long-term financial success. Don’t fall for the desire to be ahead of the curve. Being in businesses that are at the center of technology requires that much more focus on ensuring the right technology for the situation is deployed, and long-term success can be achieved by embracing the balance between cutting-edge and proven.
Peter Bigelow is president and CEO of IMI, Inc. (imipcb.com); email@example.com. His column appears monthly.