Focus in the face of adversity

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The setting for ElectroniCast Corp.'s 13th Annual Monterey Conference was the same as last year-a spa/resort hotel right on the ocean, complete with sunshine, sea gulls, and seals. Yet, the ambience this year was decidedly different. There may have been plenty of sunshine in Monterey, but the current downturn hovered like a dark cover of clouds above the industry leaders in attendance.Th Acf56e3

Naturally, everyone wanted to know how long the current gloom would linger. Both ElectroniCast analysts and presenters from a variety of industry segments continued to express the same long-term optimism that has marked just about every gathering of optical industry players over the last five years. Jeff Montgomery, ElectroniCast's chairman, predicted that the spending of digital-centric carriers on communications equipment will continue its downward trend through the quarter that ends this month, level off over the next six months, then pick up again early next year. Spending will increase through 2006 at an average annual growth rate of 25%.

For optical-component manufacturers, that means relatively happy days will be here again next year. But how do you get through the next six to eight months? I came across two sources of advice at the conference whose views I'd recommend.

The first source was Catherine Lego, managing partner of the Photonics Fund, a venture capitalist. Lego recommends a back-to-basics approach-and she doesn't mean technology basics. The whirlwind of last year's money storm may have swept away some fundamental tenets of good business strategy that will now become essential. Some, such as solve a real problem for a real customer, have been discussed in this space previously. Another, work with customers that can actually pay you, will become particularly important over the next few months. Lego says you should favor customers who have "real" money-money they've earned from customers by providing a product-instead of companies with nothing to spend but venture capital. With venture capital becoming harder to find, you don't want to risk your business on someone else's ability to raise a decent second- or third-round of financing.

Similar "business basics" for remaining afloat include knowing the size of your market and your competition, hiring people who have commercialized products before, understanding your business model, and raising money from "smart sources"-organizations that can put you in contact with potential customers or partners.

Michael Lebby, CEO and founder of startup Ignis Optics and himself a veteran of the venture-capital space, represents the second viewpoint that caught my attention. In a conversation at lunch, Lebby said his experience had taught him that one key to success was to focus on what you do best. For example, if your strength is in integration, do that-and let someone else make the components. Such a philosophy requires the ability to choose the right partners or hire the right expertise, but it ensures that the company doesn't stray from its strengths.

While most of the attendees at the conference agreed that there is light at the end of the tunnel, they also concluded that not everyone will make it to the light's source. The companies that come out on the other side will have focused on applying their unique strengths atop a foundation of business basics.

Stephen M. Hardy
Editorial Director and
Associate Publisher
stephenh@pennwell.com

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