Marketing is not the dark side

By Dick Morley

I am an angel. I invest in certain companies. 

So far, I have helped start more than 100 companies.

Angels are a little different from venture capitalists because an angel uses his wife's money and is only good for about $100K. Venture capitalists use other people's money and invest millions.

As an angel, I try to invest in companies whose president is marketing oriented. That doesn't mean the person has to have a marketing degree. However, his or her concern must be with the outside world, with what the road is, and with where the road is taking the company.

We try never to invest in a company whose ratio is less than 1:1. That is to say, there is a true marketing person for every technical engineer. By this, I mean a marketing person, not just a sales person.

So far, using this yardstick, we've been fairly successful. About 20% of the companies in which we invest have been successful.

Up to now, our investment reasons for the ratio are anecdotal, but Ralph Grabowski, a good friend, took the reasoning to another level. By analyzing companies, he found one could not win unless the ratio is greater than 1-to-1-more marketing people than engineers. 

Grabowski did his ratio study while associated with Massachusetts Institute of Technology (MIT). MIT has more startups than you can shake a stick at, and many of them fail. Grabowski ana-lyzed approximately 100 startup companies, rating them from flaming failures to soaring successes.

True technology companies usually fail with a resounding thud. 

Failure means "not com-mercially successful." There are some companies in the middle. We angels and venture capitalists call them the "living dead."

They start up, get to a small size, and stay there. They are failures or nonentities.

We could also define these nonentities as lifestyle companies, law firms, medical offices, or store front establishments. It does not mean they are bad; it is just they are not worth an equity investment because there is no equity growth.

The y-axis on our graph is the ratio of marketing to engineering staff. If for every two engineers on staff, you have two marketing people, the ratio is 1:1. Grabowski defines marketing as not sales, but a true directional strategic effort to establish a path. His analysis includes about 80 companies. His data suggests there is no probability curve of success related to the marketing/engineering ratio. There is no probability involved at all; it is downright definite.

You definitely will not be a success if you are operating with a less than 1:1 M/E ratio.
This does not necessarily mean that you will be successful if you maintain a ratio of 1:1 or better, but we can sure predict that if the marketing staff is not sufficient, you will fail.
The data presented on the actual curve found in the Grabowski reference indicates that a better ratio might be 2:1 or 3:1.

What to do? Process engineers do not, by themselves, affect the direction of the company. We can, however, look at the fundamental budget and staffing of projects. Most companies, according to Grabowski, have diffuse engineering projects that do not contribute to growth as defined by the facts of market analysis.

If we provide the facts, decisions are obvious. Facts are hard to get; decisions are easy. These facts need to go to the desk of the CEO and Board of Directors.

We can make anything, but we cannot sell anything. Allocation and focus are necessary to our company. Logic and emotion have no place in the market direction. Facts are everything. If we do not follow the facts, we will be out of work. 

Marketing is not the dark side; we are.

Deal with it.

mar22

ABOUT THE AUTHOR

Dick Morley (morley@barn.org) is principal of R. Morley, Inc., a global consulting firm specializing in manufacturing & process controls.