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Engineers Should Study Finance: 5 Reasons Why

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Great_White_North
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Specialization
Great_White_North   9/12/2014 7:41:51 PM
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As mentioned earlier in the comments...

"There is a reason for specialization and why some people are into finance, and some are into management."

The reason is the result of a type of intelectual "fractional distilation".  The heavy brains sink to the bottom while the mostly empty ones float to the top and are directly transfered into government.

Larry Desjardin
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Re: Area under the curve?
Larry Desjardin   8/12/2014 11:08:45 PM
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Thanks for your question.

Yes, "area under the curve" would lead to the correct result, as long as the area we are measuring is the Gross Profit (Revenue - Manufacturing Costs). The chart I had showed revenue. If the two are related by a simple ratio, your math is still valid. If the feature changed the gross margin (the ratio of gross profit to revenue), then the gross profit curves would be needed as a substitute.

And yes, going for the change would be correct if my handdrawn figure was accurate, as you stated. However, I just drew the chart to illustrate the concept, any given project will be different.

You aren't missing anything. I think you have it.

C VanDorne
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CEO
Area under the curve?
C VanDorne   8/11/2014 3:17:44 PM
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@Larry, for question number two your math seems overly complicated.

"Here's how I would look at it. Calculate the increased gross profit over the original lifetime due to increased sales volume. Then subtract an entire quarter of the new gross profit. Ouch."

Wouldn't a simple area under the curve analysis work?  Using the overlapping graphs you provide, subtract out the common area and then compare the area above that ccommon area to the area to the left of it.  In this case I'd say go for the change - the top's much larger.

What am I missing?

And, btw, I do love this statement: "...since the death of the product is defined by the marketplace, and is fixed."  Not only does that remined us all who's boss, it helps put urgency into perspective.

 

Quickembed
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Re: Engineering and Economics
Quickembed   8/2/2014 7:10:05 PM
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a smart phone here sells in very good price and win success, later it turns out that it sells in "expect" price 6 months later, as electronic components prices are usually going down.

so it is very important for engineer and product success for knowning some finance knowledge.

 

Meet embedded computer and smart automation robot machine.

--www.quickembed.com

Etmax
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Re: Engineering and Economics
Etmax   8/1/2014 12:32:48 PM
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Thanks for your article, never was a truer word said. So many engineers know there craft but don't understand time to market and margins etc.

Duane Benson
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Re: A contrarian view
Duane Benson   7/29/2014 1:45:19 PM
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David - The big difference between finance folks and engineers is that engineering creates things that are new. As such, a broader knowledge base, even outside of the field leads to a broader perspective, which leads to more practical designs.

Finance people track what's already been created, or already specified.

I don't think engineers need to be able to do detailed financial analysys, but an understanding of the principles can be helpful.

Larry Desjardin
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Re: A contrarian view
Larry Desjardin   7/29/2014 12:15:07 PM
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David,

 

Thanks for spicing up the debate. I'm surprised that no one has replied to your contrarian view.

Of course you are right: All employees do not need to know everything about a business. But knowing some things outside of your specialized domain can be advantageous- for your company, but especially for you. A lot of innovation occurs at the nexus of business and technology. 

In my own case I took single semester cousres on intellectual property and industrial engineering. Those legal and financial courses laid the groundwork for me to contribute at a higher level than pure engineering, especially when combined with engineering.  I've also noted that top engineers in development centers I've managed have a nice handle on the business as well, and are the ones most likely to become thought leaders in their organizations and advance either on technical ladders or management ladders. That's why I recommend engineers knowing the basics of business and finance. 

But if you're happy with a pure technical focus- go for it!

 

zeeglen
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Re: I have my MBA and....
zeeglen   7/28/2014 9:55:54 PM
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@Karen

Title is "...5 Reasons..."

You have just related an excellent Reason #6!

kfield
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I have my MBA and....
kfield   7/28/2014 3:06:05 PM
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I think the biggest benefit is that "knowledge is power." It minimizes the potential for me to be hoodwinked by finance guys!

krisi
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CEO
Re: NPV or ROI?
krisi   7/25/2014 10:30:05 AM
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regardless which metrics you use they are close to impossible to be predicted on advanced R&D products...in my 20+ years carreer I have seen hits and missed on ROI and break even points by 10x in each direction to the point that I consider them largely useless in the decision making process

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