Eric Hiller

Eric Hiller is the Managing Partner of Hiller Associates. He is an experienced corporate executive and consultant, specializing in operational / process improvement, software and hardware product management and customer insights, and design-to-value (DtV), should-cost, and product cost management.

Mr. Hiller was a senior expert and engagement manager at McKinsey & Company, delivering over half a billion dollars of savings to the tens of clients he served. Internally in McKinsey, he was the leader in of the firm’s internal global data sharing strategy and on the executive board of McKinsey’s Cleansheet cost management software. Before McKinsey, Eric Hiller ran his own consulting firm serving Fortune 500 companies in cost management, product development, purchasing, sourcing, and supply chain. Eric Arno Hiller was the founding CEO and then Chief Product office of two start-ups: Tada.today, an online supply chain design and dashboard solution, and www.aPriori.com which is the world leader in automated feature-based CAD-to-cost analytics and product cost management software.

Mr. Eric A. Hiller holds an MBA from the Harvard Business School and a MS of engineering from the University of Illinois Urbana-Champaign.

Where did the idea for Hiller Associates come from?

I had spent almost a decade as the Founder, CEO, and then Chief Product Officer of aPriori. I was always trying to help people improve product profit, by providing the world’s first and still most cutting-edge 3D CAD-to-cost software and Product Cost Management solution to purchasing and product development.

I realized that although organizations did severely lack a good product cost management tool like aPriori, the real factors blocking success were the large deficiencies in our customers process and culture that would enable a product cost management tool to work. Since aPriori was a software vendor, and not focused on the process and culture, I could not adequately address those needs.

My goal with starting Hiller Associates was to solve the problems with culture and process surrounding product cost management, should-cost, design-to-value, etc.

What does your typical day look like and how do you make it productive?

I get up, play with my infant son, and then I often make breakfast for our family. I check on the latest happenings and needs of my clients and put together a plan for the day if I had not done so the previous night. I might spend all day working on client work, but often I have calls talking to people in my area of expertise, either for thought leadership work or business development.

I will spend half an hour on the rower, or maybe take my son out for a five-mile walk. I try to stop working by 6 pm in the evening, but I do not always meet that goal. I think it is important to regularly spend time with your family and friends, and even devoting some time to prayer, reading, and reflection. Work is a very important part of life, but at the end of the day there are other vocations and responsibilities we all have that are more important.

How do you bring ideas to life?

I find myself always trying to envision what the answer or multiple answers to the problem could be in a strategic way and thinking at the highest level. Then I try to bring my data-driven side to bear, backing up each idea with data and facts that helped me better understand it and prove or disprove each hypothesis. Finally, I typically hammer the alternatives for the idea or problem, sometimes combining or synthesizing options into a better solution.

Due to my extroverted nature, I typically like talking to others about my initial hypotheses. I tend to share my ideas very early on, to get general feedback and to help me clarify my own thoughts at times by talking them through. I find that it is very helpful to get other people’s perspectives, because they tend to approach the problem from a different path and might see flaws or opportunities and solutions to the idea that just escape me.

After that, I try to go graphical, that is I am a big believer in the idiom, “A picture is worth 1000 words.” Maybe it is some of the McKinsey & Company experience left in my blood, but I think I had a lot of that already, before I joined McKinsey. I like to show things in slides, graphics, and graphs. Often when I am thinking of an idea, I will explain it in a graphic framework or in a few words from a strategic point of view, showing the opportunities for success and risks that need to be overcome.

Then I will typically continue to drill down to the tactical side (often also graphically) by creating a plan of what needs to be done, a timeline, and who can help. Once again, I will typically be talking to a lot of my colleagues or my client as I go along to “correct to the curve” of their expectations.

At the point, we begin a project or a workstream within a project, it is about executing to that plan, while being flexible to check that it is working and pivot quickly if it is not. I am also a big believer in metrics and key performance indicators. If I can quantify something, it is a lot easier for people to understand if we are making progress or have had success.

What’s one trend that excites you?

The trend of additive manufacturing, automation, and on-demand manufacturing is one I find very exciting. I remember reading once that there are only three ways to actually add what economists call “economic value” to the world. Firstly, you can mine it out of the ground, secondly, you can grow it out of the ground and lastly, you can manufacture it. I define manufacturing broadly, not only to include physical products, but software and other digital products, as well. Everything else is services which do have “value,” but they are not the economic backbone of an economy. At the end of the day, services exist to service mining, agriculture, and manufacturing, not the other way around.

I think a lot of people especially in the United States have forgotten this fundamental idea. They think that the whole economy can be based on services or “high tech.” High tech certainly is manufacturing, but it inherently just does not employ as many people, nor does it employ the full range of capabilities of people like mining, ag, and traditional manufacturing.

I am excited about additive manufacturing, automation, and on-demand manufacturing because these technologies may enable a return of manufacturing to the United States. As you start to get more automation in your processes, the effect of direct labor cost is much smaller. People who work in manufacturing can still make living salaries and benefits, but when you look at the Total Cost of Acquisition (TCA), the difference between a low cost country and the USA or Europe in labor cost, may be no greater or even less than the other TCA costs, such as; shipping, geo-political risk costs, and the friction in the system of dealing with the global supply chain. There will always be good use cases for manufacturing certain products at certain volumes globally. However, I think we are seeing a more balanced view of global sourcing, especially after seeing the effects of coronavirus and the problems caused by extended supply chains.

What is one habit of yours that makes you more productive as an entrepreneur?

I think that continuously sharing your ideas with other people is very helpful. It can be scary and sometimes lonely to be an entrepreneur, and when you talk to others, it tends to give you energy and encouragement. Although, the opposite can be true if you are getting rejected but even in that situation, you can gain valuable information. You may learn the idea does not resonate with everyone and you need to change how you pitch it or change what the idea is fundamentally. Also, it can allow you to better understand how developed the idea is or if you need to build on the product before you show other people. You have a vision that seems clear to you, but it may not be coming through in the product or the service yet.

What advice would you give your younger self?

It is important to learn what else is around to do beyond the traditional jobs for which your official college major trained you. I grew up in a time and received an education where we were very much funneled and pointed toward one type of career: in my case, being an engineer at a Fortune 500 company. It is a good career path if it is what you want to do. Amongst society and in the United States it is deemed essential. However, there are a lot of other ways that one can apply an engineering degree from a top school. That was something I wished I had been better education about and should have took some of that research into my own hands. That may have uncovered different options and might have accelerated my career by 5 to 10 years.

Tell us something that’s true that almost nobody agrees with you on.

One of the things that I think is absolutely true, but a lot of people don’t understand or understand but don’t agree with, and even if they agree with, find it difficult to execute: Businesses should focus on developing and sourcing the lowest cost product to begin with, that is to do “cost avoidance”, rather than trying to do cost reduction, after the product is already launched.

Most people that have been in product development, purchasing, or manufacturing are somewhat aware of study done by DARPA in the ‘60s which talks about how 70 to 90% of the cost of products is actually locked in by the decisions made by the product development team in the first 10 to 20% of the design cycle.

Anybody who has worked in the space knows this to be intuitively true. However, we all know 90%+ of the effort spent on controlling cost is spent after the product is already launched in manufacturing. At this point, there is a lot less one can do to save cost. Maybe you can eke out 5-10%, which is a really big deal to profit, but not the kind of savings you could have had earlier.

This is very difficult problem, and it starts with the culture of most companies. People in most companies, especially manufacturing and purchasing, are rewarded for delivering year-over-year improvements to cost, not avoiding them to begin with. So, you can understand the perverse incentive this sets up. If you are incentivized on reducing cost every year and you design and source a product that is highly efficient to begin with, how are you going to meet your year-over-year reduction goals? In fact, you may even “pad” the product cost a little bit so that you have some fat to cut off later and make your life easier.

This also affects product development, although probably to a lesser extent. They have a different incentive that drives them away from spending time thinking of a lot about cost early on. They are incentivized primarily with time to market and quality / performance goals. Those are very important things, and arguably more important than cost, but there is not enough balance. Typically, cost is the thing that gets sacrificed to get to market quicker.

I think a lot more effort should be spent early on focusing on cost, and that companies should dispose of or greatly reduce the incentives of year-over-year cost reduction. However, I would guess most leaders that have grown up in the current system would disagree with this.

As an entrepreneur, what is the one thing you do over and over and recommend everyone else do?

I would say balancing your optimism with reality. We live in a world of 24/7 news cycles, where very successful entrepreneurs are glorified almost to a god-like level. However, people forget that companies like Google, Facebook, PayPal, etc. are really Six-Sigma or Black Swan events, meaning they are really a one-in-a-million business successes. It is true that most businesses fail, and if they do succeed, they make a modest profit. It might take years to grow the business to the point that it is a nice lifestyle for you and your partners in the business. People need to keep that in mind before heading down the entrepreneurial track.

What is one strategy that has helped you grow your business?

I not only network a lot, but I also have published a lot of thought leadership in my areas of expertise. Magazines are not limited by print on the internet; they also require a lot more content to continuously publish. It really opens opportunities for people that may not be as famous to publish things that show how well-versed they are in a certain subject.

My goal always is to write articles that are well thought out and intelligent, not just statements of tautological truth that are at such a strategic level but there is not much anyone can take away from them. Writing has helped me grow my business and become recognized in my fields as one of the top thought leaders. It has cost me virtually nothing in money, although it takes a lot of time!

What is one failure you had as an entrepreneur, and how did you overcome it?

The third business that I started was my own consulting firm. When you first start consulting, you are very worried that you just do not have the intelligence or the skill to help people. You find very quickly that is not true at all. You often know far more in your area of expertise than your client does, or at least you have the time to focus on the problem.

The real problem is getting sales. People do not understand how hard that is until they are in that situation. One way that I helped overcome this problem early on was by reaching out to small consultancies or even large ones, that did not have my expertise so that they would hire me on or subcontract me when they had a client that needed senior-level help in my areas of expertise.

What is one business idea that you’re willing to give away to our readers?

When you move, you can submit a mail forwarding request to the U.S. Postal Service but then you also have to follow up with emails to your mutual funds, utilities, banks, etc. asking them to change your address. I think a good business idea would be if everyone had a personal mail code, only used by the U.S. Postal Service that only pointed to a physical address. You could go online yourself and define and update address the code points to. It would be much more secure and people would only have to get your mail code one time in your life, and the system could also give you the option to put a block on receiving mail from certain parties.

What is the best $100 you recently spent? What and why?

As the dad and mom of a newborn child, we got a Dekor diaper disposal system. It is excellent at what it does. It has a continuous flow cylinder of plastic sheeting that you knot at the bottom to make a bag. At the top is a spring-return trapdoor into which you just kind of drop the diapers effortlessly. You will really appreciate the convenience of the system that makes a not at all desirable task easy and odor free. I wish ALL trash cans worked like this!

What is one piece of software or a web service that helps you be productive?

I have found dictation software has really increased my productivity. As, I am a very verbal person, I find it easier to just speak the things that I want to write in an email or even write an article like this.

I am always reminded of the quote I have seen attributed alternatively to Blaise Pascal, Ben Franklin, and Mark Twain: “I apologize that I wrote you this long letter; I did not have time to write you a short one.” That really makes a lot of sense to me. It is a lot easier to be verbose than to be tight and crisp in one’s communication. When you dictate, you can just freeform say what you want to, but when you proofread you can tighten it up before hitting the send button.

The dictation ability on smartphones is really good too. Therefore, I can be using a hands-free device while I am driving or walking down the street and drop my thoughts or email into a note on my smartphone. When I get to my destination, I copy, paste, and proofread. It reclaims a lot of time that might otherwise be wasted.

What is the one book that you recommend our community should read and why?

First and foremost, my answer would be the Holy Bible. Of course, it is a big book, a compendium of books, and can be difficult to initially approach. If people wanted specific recommendations I would start with the Gospel of Luke, then the Gospel of John, and then the book of Romans by the Apostle Paul. All of this could be read in a couple of hours.

As far as why, I think there are a lot of reasons:

First, the most important to me as a Christian is that I believe it is the only true revelation of God of the plan for Salvation. One really needs no reason beyond that. However, there are a lot of other reasons that a secular person or unbeliever should read it as well. When you read the books of the Bible, especially the Pauline epistles, you really start to understand how far the general population has fallen in their ability to reason and use logic, after following Paul’s crystalline, yet passionate arguments. It is a great example of logic and writing of these ancient thinkers.

Second, it is great literature, and far more intelligent in its prose than many of the books and certainly most of the magazines and newspaper articles we have to endure today.

Third, it is the key to reading comprehension of Western literature well into the 20th century. I read once that if you really want to be able to understand Western literature, you have to be very well versed in the Bible, in Greek mythology, and other classic literature. The reason is that these older books are alluded to all the time by almost every writer in a way that assumes the reader has a prerequisite knowledge of these sources.

What is your favorite quote?

“The greatest of all gifts is the power to estimate things at their true worth.” – La Rochefoucauld

“In the valley of the blind the one-eyed man is king.” — Desiderius Erasmus

My addendum to the Erasmus quote that I always say to the analysts and my clients is: “And WE are that one-eyed man, so let’s not be afraid to make a well-reasoned estimate!”

Key Learnings:

• Do not be afraid to share your ideas. Getting feedback can help you to be more productive.
• Focus on bringing the highest value product and services to market and part of that value is affected by the cost to the customer. Customers do not buy the lowest-cost product. They buy the highest-value product.
• Publish your thoughts. They are probably as good or better than anyone else within the area of your expertise.