"When you're an entrepreneur and your last dollar is on the line, but you still believe you have a good product and you're laying there in bed at three o'clock in the morning with the sweats, you get up every morning and you push forward."
Robert Kay ran a successful engineering firm that has solved some of the most complex challenges that exist today for a wide range of clients, but then he and the team were blindsided when his wife, a co-founder in the firm, passed away unexpectedly.
After regrouping, Kay doubled down on his mission to, with the help of his team, provide world-class engineering expertise to its clients, ranging from individual inventors all the way up to Fortune 100 giants like HP, develop the products and tools their businesses need to achieve their goals and create real impact in the world.
Today, the team behind Elite Engineering remains committed to leveraging its expertise to help clients develop the products they need quickly, effectively, and efficiently, and to do so in a way that would make his late wife proud.
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Table of Contents
Thank you for joining us today. Please introduce yourself to our readers. They want to know you, some of the background story to bring some context to your interview.
Robert Kay: When I was in sixth grade, my grandfather gave me a crystal radio set and it had a total of four parts, one of which was a coil you had to wind yourself around a toilet paper roll. The thing that was most amazing to me was late at night, I would put the headphones on and I could listen to the local radio station without any batteries, and that’s what really got me interested in building things and in understanding things. And from that led to my career in engineering and that same bent of building things myself and understanding how they worked. It wasn’t just about buying a kit that was already put together, but putting it together. And then my parents and grandfather bought me a chemistry set, and I learned how to make gun power of all things. It was that wonderment of exploration, learning new things, and being able to do things yourself.
My very first job out of school was working on disc drive systems, and I got the opportunity to work on the very first optical data disc system. Because I had that hands-on experience now tied with what I learned in college, I could run equations that explained the things I used to put together by hand. I tackled every task thrown at me regardless of what I liked to do. What happened then was every time they had a new challenge or problem, I was first in line to be considered to be the guy to work on it. For example I got asked to work on testing the new optical media. I discovered things that resulted in significant progress for our company at that time and as a result, this project became the world’s first data disc optical system and it went up against some very big competitors at the time.
But I got the chance to play a lot of lower level engineering roles as well, which contributed to the science because I had that combination of skills. I found a mentor there and stayed with him for several years. At that time, he had a small engineering company that ultimately became a missile company, which ultimately led to me starting my own. And I built it with people who had both the hands-on experience and the engineering background so we would be able to explore new things, to challenge the ordinary, and to change the way they think to explore new things, and solve problems for people.
Originally while at college I started out focusing on drafting at a time when the space program was big. I worked for a company that was making the little transmitter that went on the backend of the lunar rover, and I had to modify a drawing for its new version. Unfortunately, I made a couple of errors, resulting in a couple of holes in the wrong places. So my claim to fame is that I got to work on the lunar land rover that went to the moon despite the fact that the holes were in the wrong place. The good news is the thing still worked. And let’s just say that my boss reamed me pretty good for it, but by the same token, he has a smile on his face because he knew it still worked and we made the delivery.
You are a successful entrepreneur, so we’d like your view point, do you believe entrepreneurs are born or made? Explain.
Robert Kay: I believe you’re born with it. I can tell you that in my family, entrepreneurship goes all the way back to my great-grandfather. Part of the reason I believe entrepreneurs are born, not made, is that the challenges that you face as an entrepreneur and the required dedication and steadfast perseverance, toleration of pain—you either have that or you don’t. You either believe that you can do this or not. You can’t be taught some of these things.
When you’re an entrepreneur and your last dollar is on the line, but you still believe you have a good product and you’re laying there in bed at three o’clock in the morning with the sweats, you get up every morning and you push forward. You’re going to solve it. I think those are things that are in you. They can be honed, you can be taught how to use them, but if you don’t have that inherent courage, aggressiveness, perseverance, dedication, tolerance of pain, those are the people that give up along the way.
If you were asked to describe yourself as an entrepreneur in a few words, what would you say?
Robert Kay: I would describe myself as a renaissance entrepreneur. My old mentor had a term that he called renaissance engineering, which was where you combined creativity and discipline together in the way Leonardo DiVinci had. This is what we based our company on. It’s a way of thinking that you use whatever resources you have, you look at things in a different way, you try to see that maybe sometimes the best way to solve the problem is going through the back door, not the front door, or walking across the ceiling. And I think as an entrepreneur, those are the things that lead to big breakthroughs and success because you’re not doing the ordinary, you’re doing the extraordinary. In order to do that, you have to think differently. You can’t think in the cookie cutter, in the box style that you often get taught at school.
Tell us about what your company does and how did it change over the years?
Robert Kay: Our basic focus, at its heart, is that we solve problems for people.
Throughout my entire career, I’ve always viewed it that way, whether the problem is any kind of engineering, or manufacturing, or figuring out if something will work from a business perspective before you even invest money in it.
What we’ve always been driven by, even from the very start, has been to not be ordinary, to instead, do something different. Like working on the optical memory system—there were a lot of new things you had to tackle and the idea was, or the drive behind that was that there are ordinary things people can do, but if you really want to be an extraordinary person to change the world, you have to take risks. So risk taking became a very important part of what we had to learn to do, but how to combine that with operating a successful business. That’s actually been quite a challenge.
That’s not necessarily about being financially successful—it’s more about helping people, doing things that benefit others by thinking about things differently and being fearless and exploring some of those new things. So along with that comes the risk of failing. And the question is, “How do you avoid failing?” Through the years as the company has evolved, we’ve never shied away from trying something new knowing full well that it may crash and burn. The challenge is for the customers, they can’t tolerate it, right? I mean, they need their product to launch. So what we’ve learned is to always have a plan B and a plan C laid out so that if we showed some particular approach didn’t work, we always had another one in our hip pocket that we could pull out very quickly. And that’s been a bit taxing, but it causes people to think sort of multi-dimensionally on the challenge.
Managing an extraordinary team is more about supporting and teaching them how to grow as engineers. So an important part about all of this was for me to learn that I’m not necessarily supposed to be the problem solver—my job is to nurture, grow and teach the team so that they can do it. And it’s important because the team is looking for good leadership, but you really have to be a good leader. There can’t be any BS.
Now that the company is 30+ years old, and with the loss of my wife, who handled the marketing and finance, we’ve had to strategically reposition a number of key players on the team. One of the most important things that has happened in the past year is that I have created what I call the steering committee, which is made up of four people who are long-term members dedicated to the company, and that was really exciting because now everybody believes that we’ve created a culture worth maintaining.
What I would mark as one of the best accomplishments I’ve made over all the years is that the steering committee is now not just guiding decisions, but they’re also making decisions, and they’re contributing to strategies on where we’re going and what we’re doing. It underscores what was very important to me, what I’ve said all along to the team—this is not the Bob Kay show, this is about the team. So to me, that’s probably one of the biggest accomplishments in my career.
Thank you for all that. Now for the main focus of this interview. With close to 11.000 new businesses registered daily in the US, what must an entrepreneur assume when starting a business?
Robert Kay: People often miss how important the validation stage is before you start a business. During the validation stage, you have your concept and then you go verify that it pencils out to be a business. There are customers who you are solving problems for.
The biggest pitfall I’ve seen over the years is that people pick how something should look, what color it would be, what functions it would have, and what they think the problem is, but what they think doesn’t matter. It’s what their customers value. Sometimes they don’t really care about the color or certain functionality…they don’t care about any of that kind of crap. I would estimate that probably half of all the people that come to us miss how important it is to do that validation, which replaces their assumptions and ego with real data.
It’s worth noting the impact of ego is a double-edged sword because while it’s necessary for entrepreneurship, it can also create blindspots.
I’ve seen this as a failure point numerous times. So you have an idea, you have validated it at least to some degree, identified that there is value to people who would be your customer base, and it’s big enough to make it an interesting deal. But then you need to know what people would be willing to pay for the product. For example, people would not buy an iPod for 10,000 bucks, but they would buy it for a couple of hundred bucks.
This is where some people fall down again because the ego comes into play. Often said to me, of course anybody can build things for 10 cents because we can buy it from China, right? Well, the answer is “No, that’s not always possible.”
So you need to do a little bit more homework, which is basically drilling down into what is in it, what technologies are required, what kind of manufacturing is needed, what kind of parts you need, how you will put it together, and these sorts of things. And then of course you have to see if you have the ability to enter the distribution channels that are required. We developed a children’s CD ROM game a while ago. My wife started up a separate company called Cherry Stone Productions for it, and what we discovered was that she had a great product, she could take it to trade shows and sell a good number of units of trade shows, but had to penetrate the distribution channels, which at that time, were modeled after the movie industry, so it was impossible for us to break through the silos to enter that market. So although she had a good product, we really couldn’t get it to go any further. People often overlook that it’s not just about the design. You have to actually noodle out how the sales and distribution work.
Once you get past that, you need to build your minimum viable product, or MVP, and therein is where people often totally underestimate the cost. When you go to engineers and you ask them, “How long will it take to build something?” “How much money will it cost?”
What most people don’t realize is you’re asking them to be a fortune teller. You’re asking them to predict the future, to see the dragons that are around the corner that no one else can see yet and this is why most development projects go over budget and over schedule. There are surprises that nobody can predict. If that weren’t true, then one would have to explain why Wilbur and Orville Wright always had to take multiple sets of spares with them every single time they went out to test an airplane. If they knew the exact answer, they would’ve built it once and it would’ve flown.
People underestimate that. So regardless of whatever you believe or whatever someone tells you the cost and time will be, you should multiply it by at least by three and approach that as another potential failure point. We see that a lot—people either run out of time or they run out of money, and it’s usually because discoveries are made that nobody could see until they start working on them.
If you think of electronic engineers, when they want to verify that a circuit works, what do they do? They take a voltmeter or in an oscilloscope that’s been calibrated by a trusted reference, so if it reads 2.7 volts and what they need is 2 volts, you can’t argue with that. But the problem is with a lot of customers, the questions that they’re asking aren’t as simple to verify as what you can do with a voltmeter and finding somebody you trust for an answer is on the same order as finding a trusted mentor. And I use the word mentor because my mentor was one badass son of a bitch. And let me tell you, if I brought him something that he sniffed any BS in, I’d get reamed.
But when he told me, yeah, this has a chance of working, I believed him because he gave no technical BS back. So the trick is to find your advisors and your mentors and make sure that either their very nature is that they’re not going to sugarcoat or BS you. They’re going to tell you, “You can call this blue, but it’s really black.” They’re going to tell you the straight truth and you have cultivated the relationship with them such that they understand that you absolutely need the truth regardless of your ego.
The trick there is finding the advisors that will do that tactfully. My mentor was never that tactful. You get it wrong, and he’d hit you with a proverbial baseball bat. But the flip side of that was when you got through a successful design interview with him, there was a 99% chance that what you were working on was going to be successful because he was very good at finding all the little things that would go wrong and leveraging his experience—and he wasn’t going to lie to you.
So the challenge in being an entrepreneur here isn’t just pushing your ego aside. It’s actually owning the entire process. You’re going to have to accept when somebody tells you this isn’t going to work, that doesn’t mean you’re going to fail. What that means is, “Crap, I can’t go out the front door. Maybe I have to drill a hole under the roof and then go out through the top.”
That’s what being a renaissance entrepreneur is all about. If I can’t go left, I’ll figure out what directions I can go, but I’m not going to be stopped.
Did you make any wrong assumptions before starting a business that you ended up paying dearly for?
Robert Kay: Absolutely. As a matter of fact, I’m proud to say we did at least three times and survived them all.
The first one was cash flow. It was a good thing my wife, Pat, was with us. But even so, she generally deferred to me on a number of things, and given that I did not understand the importance of cash flow, I thank God that she figured out how to get us back on our feet when my flawed thinking came back to bite us, and as a result of that, there was more than one occasion when we went into significant debt. I wasn’t sure whether we were going to be able to pay it back, but that ended up motivating us to do something different and that’s how we were able to pull our behinds up and out of those kinds of holes. The second area that we screwed up on was people.
I did not realize in the beginning how important it would be for me to step out of the engineering role and into the leadership role. And I don’t mean technology leadership, I mean leadership of the company itself. The understanding that I may be captain of the ship, but if the toilet’s overflow at the bottom level of this 10,000 ton tanker, I’m still responsible and I should never ever point a finger at anybody else. The buck has to stop at my desk that I messed up somehow. I didn’t realize that that applied not just to running the company, but also to motivating people.
One of the very important roles Pat played here at one point in time, was that she told me I have to write a mission statement, and I think that’s when I first realized that the change from technology to leadership was something I didn’t do as much as I should have.
Not understanding my leadership role clearly caused problems with the team. Because of that, we had some good people who left and some bad people who stayed too long. (People I should have let go sooner.) I had good people trying to tell me about that, but I wasn’t listening, so one of the things we do now is regular brainstorming meetings. We have what we call postmortems to review what went right and wrong on each project. I work very hard to listen more than I talk. I still talk a lot. I can’t help that, but I try hard to listen not just to the words, but what’s behind them. Why are they bringing this up? And, oftentimes, if you listen closely, you realize they’re trying to tell you about a problem. My goal is to enable the team to do extraordinary things. That’s their job. I have to guide, provide strategy and goals, but I didn’t see all of that in the beginning, and I think we would’ve been a lot farther along had I seen that earlier on.
If you could go back in time to when you first started your business, what advice would you give yourself and why? Explain
Robert Kay: The first piece of advice I would give myself is to read and own the financials of the company and use that to motivate me to do better project tracking. The problem I had back then was I was focused on the technology or solving the problems for the customers, not realizing I wasn’t an engineer anymore. I was a business person. And so if I had to go back, then I would beat myself up about the head and shoulders to go back and learn about financial management and planning about marketing and sales and manufacturing (the cost and benefit side). And then second, I would want to go back and understand what it’s like to pitch a project to get it funded. Not because that’s what I needed to do at the time, but because it would help me understand the value that the customers want.
What is the worst advice you received regarding running a business and what lesson would you like others to learn from your experience?
Robert Kay: Don’t make the mistake of misinterpreting what things your customer values. I always thought in the beginning that they valued that we made a great circuit board or this or that, and that actually is not true. What they valued is that we solved a problem. It wasn’t the circuit board that was important to them. It was the problem we were solving. And if I looked at it that way, I might’ve realized back in the beginning more about how we were actually helping, we could help on a bigger issue, which would bring more value, larger contracts, longer term contracts. So those would be the two key points I think that I would focus on.
In your opinion, how has COVID-19 changed what entrepreneurs should assume before starting a business? What hasn’t changed?
Robert Kay: I can say we have realized two things. One is I realize now that as much as some people discourage saving money, having a cash reserve, a liquid reserve—more than what we had at the time—should have been a number one priority for us. And that ripples down to push on what type of gross margins you drive for and which ones you’re satisfied with or not.
I would say that one of the lessons that was learned, aside from all the supply chain stuff, is just how to create the wherewithal to survive a significant bump. You always think things are going to be statistically spread out, right? People say, on average, only one bad thing will happen every three months or whatever. Well, I think what Covid showed is one domino fell and suddenly three things that statistically were not supposed to all happen at the same time suddenly did.
If you didn’t have the wherewithal, you were done. That’s why a lot of places closed up. I think the thing that people didn’t realize or didn’t want to see is that these supply chain risks have existed for a long time. Back when we worked on military projects, you had to use parts that you could buy from three different companies that were all the same, so that you had multiple sources for single items. That way you couldn’t be held hostage. The world has allowed itself to move away from that. They’ve endorsed that trend and I don’t think people realized that that’s been a problem, and I don’t think that’s going to change. The competitive nature of the product development market has reduced the drive, I think, for having multiple sources of exact form fit and function. People have to be more creative now, knowing what the risks are. Part of what Covid changed is it brought to our attention what this risk is. What isn’t going to change is the basic nature of the supply chain, not meaning the delivery part, but the types of products, the form fit and function of the products. That single source nature is not going to change, and we have to learn how to cope with it. Now that we know that, each path in a chain for a single product was actually a lot more tenuous than we thought,
It brings up a strategy that we’ve been implementing and we’re pushing even harder on now, that again, is kind of counterintuitive. It’s counter to what a lot of investor-type people will tell you, which is we’re designing our own custom solutions, being vertically integrated more than before. So rather than just buying things off the shelf, if it’s a key component and we can make it ourselves, we’re doing that because that means we have control. I push further back instead of buying the finished product, a gadget or something, we make it ourselves. What I have now is the drive and ability to buy the raw materials. It’s one of the reasons why we bought our own CNC machine. I can’t send out CNC work anymore and count on its quality or timeliness, let alone pay the exorbitant prices being charged today, so we choose to fabricate a lot of those things ourselves. We’ve turned that into an opportunity now by creating those things as highly reusable, reconfigurable modules. We’ve chosen to kind of go counter to what the usual wisdom is from the investment community.
What is a common myth about entrepreneurship that aspiring entrepreneurs and would-be business owners believe in? What advice would you give them?
Robert Kay: That fundraising can happen quickly. That’s probably the biggest myth.
It’s a lot more difficult of a dance than most people think, and part of the reason is that when you’re making a pitch, you have to understand where the value is because there’s a lot of ego involved in the investment community. What entrepreneurs often miss is that tackling this audience is like pitching a movie. It’s not pitching a product development thing. You’re up against an audience that’s got all of the good and the bad ego stuff associated with it just the same as when you’re creating a movie production. You’ve got smart people, the one’s good of heart, and the one’s not good of heart. I think that leads to a lot of bad assumptions on the entrepreneur’s part in terms of who to pitch to, how to pitch to them, and that sort of thing.
One of the things that I do to contribute back to the community is to mentor entrepreneurs, and what I see in over half of all the people that I meet is that they’re very naive about the entire development process. Moreover, they don’t realize how naive they are, which makes them very vulnerable to being taken advantage of. I want them to avoid that, which is why I mentor them with no BS. Some of them don’t know anything about contracts. They’re trying to contract an outside firm to build their MVP form. When I read through these contracts, the terms are terrible and my advice to them is to become educated about contracts. Not just the legal aspects of it, but what’s normal and what’s acceptable. They don’t always realize that they need to build a network in that area as well. That’s probably the biggest issue that I’ve seen in terms of things that they’re naive about.
Some of the development terms are things to be wary of, for instance, things like upfront payments without clearly defined milestone achievements. When I saw that I was like, “Dude, why are you going to put money down on the table without some sort of milestone? You don’t know these people.”
Yes, there’s a right amount, a little bit of upfront fee, but committing to the entire project upfront is an outrageous business proposal. Why would anyone do that? Right? I’ve also seen late fees and so forth, and that’s for payment. When you’re in development, you don’t have a guaranteed cash flow. You don’t want to sign up for stiff penalty fees. That makes no sense.
Probably the other one that’s very important to mention I think is ownership of the intellectual property. I’ve seen contract terms in which the designing firm will own all of the IP. I always counsel people that it’s not fair nor appropriate. There needs to be a proper balance in that. If the other firm puts money in, that’s one thing. But if the other firm is just doing work for hire, you should own all the IP.
What traits, qualities, and assumptions do you believe are most important to have before starting a business?
Robert Kay: You need to have courage. Not just to face the difficult things, but like we mentioned earlier, you need personal courage because you’re going to do things wrong, mess up and fall down in a way that can hurt others. If that doesn’t happen, you weren’t trying something worthwhile in the first place.. You have to be willing to acknowledge and accept failure. But that doesn’t mean you allow yourself to fail. You work hard to avoid it. Having steadfast courage is number one by far.
Really believing in yourself is another. You really have to believe in doing something, and in order to do that, you have to answer in your heart the “why” behind your project. That should power you through the challenges you’ll face. You can suffer all the slings and arrows because you believe in what and why you are doing.
Ironically, another trait is self-doubt. Allow yourself to have self-doubt because that should be the thing that, then, drives you to say, “Well, I have doubt because of something I don’t know. Okay, then, let’s go figure it out. Let’s go tackle it. Let’s go look it up.” I mean, for crying out loud, compared to when we started the company, everybody today is on the internet. You can just Google things, right?
The next is one we’ve already touched on—the ability to push your ego aside at the right times. And probably one last thing would be that you recognize that there is no template to follow. There is no one size fits all at every single step you’re going to take. You always have to be thinking on your feet, whether it’s about business, finance, marketing, sales, engineering, legal, doesn’t matter. It’s important to be able to think on your feet. Doing this across all aspects of the business is what will make you a Renaissance Entrepreneur.
How can aspiring leaders prepare themselves for the future challenges of entrepreneurship? Are there any books, websites, or even movies to learn from?
Robert Kay: One of the things about our family is that we’re really into finding soundbites from specific movies. One of the best was from the 13th Warrior. There is a point where one of the Northmen, Herger, and Antonio Banderas, who’s playing the Arab, were talking. The Arab, of course, is a very logical person, whereas the Northman comes from a bunch of heathens. They’re about to go into battle against this huge terrible army and the Arab asks Herger, “Do we have anything resembling a plan?” To which Herger responds with a smile: ”Yep. Ride till we find them. Kill them all.” I’ve remembered that one line and that’s the inspiration for how not to do it.
Galaxy Quest is the second movie quote and it’s one I live by. It’s, “Never give up, never surrender.” Who would’ve thought such inspirational words would come out of such a corny movie? But they’re very, very true. Those two have been my biggest inspiration.
Probably one of my greatest real business sources that I find very insightful is going back and listening to the Ted Talks by Simon Sinek. He has made me realize how important it is not just for me or for our customers, but also for the team, to answer the question, “Why?” He explained it very well, referring to examples from Apple. And although I’ve worked for people like Steve Jobs—and I never ever will do that again—I believe he had some very good insights and Simon Sinek pointed them out in a really instructive way. So, one of the few people that I do tend to follow, is Mr. Sinek.
You have shared quite a bit of your wisdom and our readers thank you for your generosity but would also love to know: If you could choose any job other than being an entrepreneur, what would it be?
Robert Kay: I would have to say that I would have enjoyed being a fighter pilot.
I had dreams of doing it back when I was in high school. I had decided after talking with my dad that if I did get called up for the draft, I was going to join the Air Force to become a fighter pilot. My Dad had served and saw combat in Europe in the 82nd Airborne Rangers which he joined before he graduated from high school. I wanted to make him proud of me. It turned out my lottery number was 362, so there was no chance in hell that I was going to get called, and I ended up going into engineering instead.
Thank you so much for your time, I believe I speak for all of our readers when I say that this has been incredibly insightful. We do have one more question: If you could add anyone to Mount Rushmore, but not a politician, who would it be; why?
Robert Kay: I would have to say Wilbur and Orville Wright.
I have recently become aware that neither of them graduated from college, and that they were far more insightful about business than most people realize. They started their bicycle business because they saw that as a growing trend that they could make money on, however, they were totally convinced they understood what the problems were with flight. If you do a little homework on them, you discover they weren’t about building airplane engines.
They figured out the real problem with flight was nobody knew how to control the damn airplane. Everybody kept trying to make a very stable airplane. Their argument was, we don’t need to make the airplane more stable. In fact, we want it slightly unstable. We need to know how to steer it. They were the second people on the planet, best as I can tell, to build a wind tunnel to combine the analysis of airflow with their empirical gut feel of what would make it work. And I think their accomplishments, their motivations, and how they did it were just amazing. So to me, that’s the American story.
Jed Morley, VIP Contributor to ValiantCEO and the host of this interview would like to thank Robert Kay for taking the time to do this interview and share his knowledge and experience with our readers.
If you would like to get in touch with Robert Kay or his company, you can do it through his – Linkedin Page
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