Business lessons from an MIT professor
Last week during a visit to SynQor in Boxborough, Mass., I received a lesson on cost-of-ownership by the company founder, who is also a former Massachusetts Institute of Technology (MIT) professor. SynQor makes high-reliability power electronics for demanding environments such as military avionics .
Martin Schlecht, SynQor's founder, president, and chief executive officer (CEO), was briefing me on their DC to DC converter product line and the defense market outlook when he asked if he could go slightly off topic and explain the concept of how long-term cost-of-ownership for a product can be more cost effective than buying the lowest price device.
He jumped up and immediately started drawing charts on the whiteboard in the conference room. I quipped "why don't you have a chalk board, you're a professor right?"
He said he has one in his office and that he prefers chalk boards -- the only draw back being that the "chalk dust always ends up in the cuffs of his pants."
Anyway, Schlect made the argument as he says he has made on many sales calls that products with outstanding mean-time-between-failure (MTBF) statistics result in a lower cost of ownership for the end user over the life of a product.
Schlect made a very persuasive argument with his makeshift graph and had me sold that a component with an MTBF of millions of hours can cost only about $3 to maintain even if it initially cost $3,000.
However, he says no matter how well cost of ownership is explained or understood, many of those in the defense community are under orders to procure electronics based on the product price rather than a cost-of-ownership equation.
Too bad, maybe a greater focus on cost of ownership would help with managing component obsolescence, the dark side of commercial-off-the shelf (COTS) procurement.