PI Engineering

In this two and a half minute segment (download iPod compatible, 13MB), PI Engineering's CEO, Michael Hetherington, describes his long term strategic vision as, "You drive your ship full speed ahead and steer clear of the rocks". This colorful metaphor is meant to convey the level of effort required to stay just ahead of the market in innovation and respond to the feedback the market provides as he hones the product line. More specifically he expects the TrainMaster professional train product under development to emerge as a full fledged product, and he expects x-keys, his major profit generator, to see more uptake in television switching.

In this six minute segment (download iPod compatible, 33MB), Michael Hetherington, CEO of PI Engineering, discusses his globalization strategy. He sells to 40 countries and sources much of his manufacturing from Taiwan. Similarly to Bill Michels' recommendation for how to consider offshoring, Michael looks for best of breed manufacturers that provide quality product cost effectively.

While Michael travels to the Far East once or twice per year, he met his current manufacturing partner at a trade show in Las Vegas. Echoing Jimmy Hsiao's observation that offshoring involves a cultural component as well as the apparent economic components, Michael has a bi-cultural Chinese-American engineer on staff. However, Michael's experience is that his Taiwanese business partners communicate quite well on business matters. His engineer comes into play when there is a need to get across new engineering concepts and designs.

In this 5 and a half minute segment (download iPod compatible, 29MB), Michael Hetherington describes how he has made his business finance itself. RailDriver, the start of PI Engineering's train businesses, is currently its number 4 profit maker. TrainMaster, the professional division, is just starting to mature to maturity after 4 to 5 years of development and $4 to $5 million in investment. Michael expects it to pay back well.

His businesses have a history of paying back. He started PI Engineering out of graduate school with family savings. That cushion gave him the chance to develop an initial product based on his graduate work that was good but could not compete against mass-produced solutions that were starting to emerge. Michael turned the company towards more custom engineered products where he had an advantage manufacturing and has been using that model to keep his business profitable and self-funding since.

In this 11 minute segment (download Quicktime and iPod compatible, 59MB), Michael Hetherington describes how PI Engineering moved from making the RailDriver consumer product to developing training simulators for major railroads. Part of it is pull. Professional trainers see that they can get something that is not that far from what they need for around $200 ($40 software plus $160 controller). Further, the high cost of custom built simulators adapted from the airline industry is prohibitive, frequently costing millions of dollars or about the price of a locomotive.

The opportunity for PI Engineering has been to use their interface hardware design expertise to develop simulators that come in at a tenth the price or less of custom built simulators. That price point makes it worthwhile for railroads to buy simulators for training vs. just doing on the job training with actual locomotives. With simulators, training can also include simulated problem scenarios, something that is not possible in on-the-job training. As Michael remarks, with a simulator, all you have to do is stop a virtual train.

Highlights in this segment include:

• One of PI Engineering's customers is Union Pacific, the nation's largest railway. Union Pacific has 20 custom built simulators but need to train 5,000 people per year.
• Rail equipment lasts for many decades, meaning you have to develop a number of physical layouts to cover it all.
• PI Engineering and our first interview subject, Accuri Cytometers, are following similar strategies: develop low cost alternatives for high cost equipment and dramatically expand the market.