The Bucket Test

Donald Bertke is a retired systems engineer with more than 30 years experience in the electronics industry. On Monday, Dec. 6, Bertke posted his first comment to a blog here on EBN and sparked a thought in my head about how the need for continuous innovation drives success in the high-tech sector.

Apparently, this is an industry where no company, product, service, or individual is irreplaceable, and also where someone right now is trying to find a way to do what you do better, faster, and at a much lower cost.

Bertke came to that conclusion early in his career and has since then been asking people — and companies — to subject themselves to the “Bucket Test” anytime they think their service or product is irreplaceable:

    Every time you think you are irreplaceable, fill a bucket with water and put your hand into the water up to your wrist. Then as fast as you can, pull your hand out of the bucket and observe if you have left a hole in the water. If you do, then you are indeed irreplaceable. However, if you do not, like nearly all of us poor mortals, then you can be replaced.

It's a lesson worth remembering, especially by companies that make components used by some of the more successful manufacturers in the industry. The only way to win and keep a design socket in a product manufactured by {complink 379|Apple Inc.}, {complink 1544|Dell Inc.}, or {complink 2470|IBM Corp.}, for instance, is to have the best and most cost-effective components in the market.

Even that may not be enough, however. When OEMs plan an upgrade of current products, the iPhone 4, for instance, they also review their supplier lists and shop around for replacement components that offer improved and cheaper functionalities that can be easily designed into the new equipment. Typically, suppliers who didn't make the grade the first time would have been busy working hard to offer what the OEM now needs on better terms.

How should a supplier respond? A long-time semiconductor industry executive gave me a tip while talking about his company. Rich Beyer, CEO of Austin-based {complink 2134|Freescale Semiconductor Inc.}, told me his company periodically reviews its operations to determine its position in the market versus the competition. During Freescale's latest 30-day review, concluded sometime in the third quarter, the management concluded “there were no glaring weaknesses, but we still identified areas of emphasis, including automotive and networking.”

The lesson from that is this: Pick areas you can compete in carefully and do not try to be everything to everyone. It's impossible for any component supplier in today's market to serve the entire spectrum of OEM equipment. To be the best it could be in automotive and networking, Freescale exited the wireless IC market and, though still saddled with huge debts, is in much better shape today than before.

{complink 317|Analog Devices Inc.} CEO Gerald Fishman, too, wasn't satisfied with the success his company had achieved and believed it could do better. He introduced a complex, multiyear reorganization plan to ensure the firm wasn't stuck with commodity components that would drive down margins and erode profits. Fishman said ADI's goal was to keep creating value for the customer and, by extension, itself:

    It's about having products with the technology that makes your customers' products better, cheaper, and more innovative. You've got to separate value from price. If everything you've got is commodity items, then they can whip you over the head. There's a lot of training, development, science, and art in how you do this so that you create a lot of value for the customer but yet reserve some of that value for yourself.

If the value your company offers customers does not pass the bucket test — and it most likely won't — then you must stay vigilant and keep the innovation engine cranking.

4 comments on “The Bucket Test

  1. SP
    December 7, 2010

    First of all I really admire this article. There is lot of learning that one can take away from it especially the bucket test. Everything and everyone in the industry is replaceable. Some are very easy to be replaces and some take time to be replaced. But yes being innovative and bringing continous changes to the product and organization as per the consumer's demand would keep one on the top of the game always.

  2. Mydesign
    December 8, 2010

       Bolaji, you had given us a good insight through the blog. When we are all working in different sectors and across different hot technologies, majority of us have a feeling that, we are the all in all.  But when it comes to the practical level, many high talent peoples are available around us and hence can be replaced very easily. So whoever plays the best role may get survived

  3. t.alex
    December 9, 2010

    Another observation from the bucket test is if you are irreplaceable at some point, you will soon be replaceable. Companies have to keep the innovation fire burning and that is the major challenge.

  4. prabhakar_deosthali
    December 16, 2010

    It is true that innovation is the buzz word in todays life and it is believed that no business can survive without innovation. However there are certain sectors or businesses who survive on keeping their originality. This is especially applicable to Food industry where over generations people have liked a product from the company because its taste has not changed, like McDonalds or KFC. If these comapnies offer something different even though it may be innovative it may not be acceptable. When Mcdonalds shop for potatoes, they have very stringent standards because they want to maintain the same taste for their fries which is known to have not changed over many generations.

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