baby bottle warmer

A one act drama tenuously based upon a real life happening. Scene: a shambles of an office, crammed with boxed and partially assembled household appliances, presided over by John Highbrow, the VP of research for said products sold by a 50 million dollar subsidiary of the Gigantic Corp. Seated comfortably across the desk was Tom Bottomline, the Gigantic corporate MBA. Both men were in their forties, classmates, and old friends.

Tom: You probably heard through the grapevine why I am here. My boss, the Gigantic CEO, has demanded that this year's annual revue of profitability will hew to his guidelines or else ! I am required to verify and compile the figures on this list that he went to the trouble of personally composing. First and most important item, do you earn more than 15% on capital investment? Keep in mind that Gigantic needs to earn a safe margin over the cost of money which runs as high a 12% these days. Secondly, the gross margin over cost of materials and labor should always be in excess of 40%. Thirdly, the proper target for net profit is 6% of sales.

John: Hey Tom, give me a break, I run an R&D department with 10 scientists at a budget of 1 million, servicing the appliance division. That is only 2% of sales, a low figure for research, and besides we help out the factory when they encounter the occasional theoretical roadblock.

Tom: Your department can and should be measured by the number of new products you deliver each year whose contribution to profits is measured by a percentage of sales, usually 5% of the items covered by patents. Of course, any license income from other entities is included.

John: Before we talk about today's stats let us review the history of the appliance division. Before Gigantic picked us up, we had a forty year history of introducing new products for the home, including the popup toaster, the steam hand iron, and the electric hair curler, to mention a few. Competition was only from other US companies with similar cost basis and we prospered. Now we are underpriced by the world and the quality of new product research abroad is obsoleting all our staple items. Fortunately, at the time we were added to Gigantic's stable, Jim Dropout, our star engineer and inventor, came up with the Mini-Microwave Baby Bottle Warmer which quickly became the top performer in our line of household gadgets. Millions of the Warmers were sold and even today this patented item is the preferred choice of the American housewife. But trouble appeared in Paradise. The glass bottle of yesterday is no more! Plastic has taken over and our warmer is no longer convenient and safe to use. We are frantically trying to come up with a new version that includes a scanning temperature sensor and a companion variable strength, focused and scanned microwave beam that together will insure that the baby bottle of milk is safely kept at the exact temperature that daddy wants. No more testing the temperature on the back of the hand.

Tom: What a terrific idea for a new product! How lucky Gigantic is to have the Highbrow engineering team in place.

John: Not so fast, my old friend Tom. The technical complexity of focusing and scanning the microwave beam is too much for my present team. We need...

Tom: What about your resident genius, Jim Dropout?

John: Well, first of all, he retired and won't even come back as a consultant. Second, Jim never did get his college degree because he claimed school was too boring, but his lack of solid math kept him from a lot of the new technology. Maybe he could not handle this project. But Jim was a real inventor and I'll bet you he would have done the job. However there is no Jim and we haven't been able to replace him.

Tom: The sad fact is that your output of competitive new products is too low to meet the Gigantic guidelines of profitability. This leaves me no choice but to recommend to the CEO that if your output doesn't take a sudden upturn, your outfit is kaput.

John: How does shutting down research benefit Gigantic? What about my future and that of my friends and fellow workers?

Tom: You, my old friend, will have a new title -VP corporate development. Your chief task will be to search out and acquire new growing firms with new products in the appliance field, naturally meeting our CEO's profit targets. As for your employees, Gigantic is always looking for engineers and there should be jobs for all, but not in research.

John: Thanks, as usual, for looking after your old friends, but I have this very uneasy feeling that a dam is about to break and drown us all. If every US enterprise follows The Gigantic footprints, how can America prosper as research moves overseas, and our factories are noncompetitive worldwide.

(Yes, my friends, how indeed?)