April 29th, 2011 by Stephen Huie under Leadership and Managing Human Capital, Professional Development, Reflections. No Comments.
Yes, this novelty box is actually sold in stores.......and yes, there is actually something inside it.....
A couple of weeks before I left for Smith, I joined my neighbor – who trained as an economist and has worked for years as a consultant – for a stroll around the neighborhood. He knew of my desire to go to business school and he told me he wished I would focus on a different degree such as a Masters of Public Policy, for which I’d also applied as a joint program.
I was surprised by his response. I had been so excited that I might finally be able to understand what the heck he was saying whenever he told me about his work in transfer pricing (and thanks to Prof. Chen’s Managerial Accounting, I now know).
Having worked in industry for many years and been trained with an economist’s eye, my neighbor expressed his profound disappointment that market forces and failures were pushing the earth to environmentally and economically unsustainable positions. He recently published a book about this, which is unfortunately only printed in Japanese, so I am unable to read it.
My neighbor further commented that companies don’t really see the value in an MBA, graduates of which, he said, come a dime a dozen.
I considered what he said, yet knew that I wanted to forge ahead regardless. Like most people who are going to pay substantial sums and enter debt to improve their human capital, I knew I wasn’t going to spend two years of my life (opportunity cost) without a purpose. I had my goal (to learn the business knowledge to leverage market forces to create social value) and I was willing to keep an open mind to other opportunities or interests that develop.
Debate on the Value of Business Education
Recently, I’ve found myself thinking about my neighbor and his statements.
In the past two weeks, a number of articles have been written questioning the value of the undergraduate business education. In a collaboration between the New York Times and the Chronicle of Higher Education, the authors report that half of undergrad business majors spend 11 fewer hours studying as their counterparts in the humanities and sciences. The authors also note that business education is seen as a quick pathway to high paying careers and networking. Joseph Arum, a professor of Sociology at NYU writes:
In recent decades, students have been able successfully to exchange their college credentials, and in particular their business degrees for early career employment success. While there are a particular set of reasons for this historical phenomenon, the question of the moment is: will such economic returns persist? The jury is out on this, as U.S. businesses faced with increased global competition turn to outsourcing not just manufacturing, but also white collar employment.
Arum and his co-author Josipa Roksa also write that undergraduate business students improved less on standardized writing and reasoning assessments through their college career than students from other disciplines.
The Quality of Pedagogy and The Caliber of Student
Speculations abound as to some of the root causes. Some researchers attribute this to an over-emphasis on team work and verbal communication over written communication. In contrast, defendants of the team method’s focus on collaboration and collective problem solving argue that the real world crises and opportunities are solved and unlocked, respectively, through effective group management.
Besides considering the quality of the education itself, business school deans and students are quick to point out that business school students themselves are of high quality and face rigorous courses and high gatekeeping standards. More general arguments suggest that the business education is, in fact, the most broad and liberal of them all, affording its students a wide worldview with which to pursue their goals.
Other observers attribute the decline in student quality to a fundamental change in the character of the faculty, who have shifted from management practice to a research orientation. According to Harvard Business School Prof. Rakesh Khurana:
If students do not regard their faculty as legitimate authorities on business practice, do not see business schools as the stewards of business ideals, and see their faculty or university administrators put short-term expediency — like boosting their position in the media rankings — ahead of their core educational mission, is it any wonder that they regard discussions about effective management of organizations and people as peripheral to their education?
Given this state of affairs, we should not be surprised when students graduate with not only a narrow perspective about the purpose of education, but are also indifferent to the ethical and moral obligations of managers as stewards of society’s economic resources.
Scott Adams (creator of Dilbert) encourages schools to teach entrepreneurial skills and thinking to the “B students” (as in B grade) who he conjectures aren’t “brainy” enough to make it thorugh physical sciences and humanities. Adams advocates experiential learning that develops the abilities to synthesize distinct skills sets into a unified whole, speak publicly, use influence tactics, and write directly (I’ll take this opportunity to remind readers that I choose to write in journalistic prose on this blog platform).
What about Business Education for MBAs?: Unpacking the Debate
As I said earlier, I came to business school with a very clear goal in mind – and while I might get a little confused and uncertain along the way about what functions or sectors are right for me, I know that in the end, I came here for skills. I still know exactly why and how I am spending my energy and tuition money.
My classmates also have goals, those that: drive them to switch careers; move them across oceans; encourage the pursuit of deeper understanding; or expand their networks. We are generally older, so the opportunity cost is higher. Although age does not necessarily beget wisdom, nor skills, nor knowledge, it does provide perspective.
Henry Mintzberg, a business professor of McGill University, said that it’s a “travesty” to offer vocational fields such as finance or marketing to 18 year olds. He also writes that “the object of undergraduate business education is to educate people, not to give them a lot of functional business stuff.”
As someone who studied sociology in undergrad and worked in non-profit education, community organizing, and social services, this knowledge approach is very appropriate for me and my MBA goals. Perhaps some of my classmates who were business undergrads have different experiences.
Yet, it would be too easy and flippant to say that age and experience are the critical factor that distinguishes an MBA education.
The MBA Value Add: Developing the Capacity for Leadership
Last year, a trio of Harvard Business School professors published a book called Rethinking the MBA, in which they review the educational mission and best practices of top MBA curricula. The authors emphasize that employers hire MBAs because of their potential to become leaders. Developing leadership, the authors continue, requires cultural awareness, a global perspective, communication skills, and critical thinking. MBA’s achieve this through a trinity of practice:
- Knowing – as in knowledge (e.g. DCF analysis using WACC and APV; the marketing mix; Michael Porter);
- Doing – as in skills (e.g. practicing the interactions and techniques involved in leading, engaging, building functional teams, managing performance (p)reviews, and coaching others); and
- Being – as in identity and purpose (e.g. having self-awareness of strengths, weaknesses, communication styles, and a responsibility to multiple stakeholders).
The key here is leadership development. That’s what business schools (at all educational levels) are pursuing when they assign team projects and communications workshops. Leaders are able to manage change, align people to a vision and its urgency, build buy-in, coach, and inspire.
The ability to be self-aware is critical to listening to others and practicing being a leader. Hou-Shiang, a second year MBA, once shared with me a statement that she heard from an employment recruiter: “you don’t necessarily need to know where you are going, but you need to know where you are – who you are and what your strengths and weaknesses are.”
This is the point at which age is often mistaken as a true proxy – ideally, we grow more self-aware with age and in better knowing ourselves, are able to be better focused. Of course, there are many people younger than us who are very focused and drive toward their goals as cleanly as an arrow released from the bowstring. Although we MBAs arrived with a purpose, whether we keep that mission or lose ourselves and readjust is also a natural part of the educational process – that is also the opportunity we are paying for when we go back to school.
Like most things in life, our education is what we make of it. For me, the driving questions are, whether I can keep my speed up, continue reaching for my goals, and slow down enough to reevaluate whether those are even the right goals at all. My ability to manage my ambitions, stretch my limits, and keep myself from breaking will determine the value of my MBA.
April 18th, 2011 by Stephen Huie under Marketing. 2 Comments.
David Godes is Associate Professor of Marketing at the Smith School of Business. Source: Smith School
It Was Worth Getting up at 6AM for This
Last Friday, I attended a really informative lecture by Smith’s Prof. David Godes, at our DC Campus in the Ronald Reagan Building (you can also watch some of the highlights on video!).
I had Prof. Godes for my Marketing Management class and like many of my classmates, wanted to hear more about his research and how to use social media effectively.
Prof. Godes’ talk was part of Smith’s Thought Leadership Series, a set of breakfast workshops that attract working professionals, alumni, and current students. Besides learning how to leverage cutting edge research in our firms, the breakfasts are also great opportunities to network. The room was packed with people from consulting, finance, home services, and durable goods retailers.
Basic Insights for Using Social Media
Prof. Godes addressed three basic firm-level questions that communicate insights from his own work and from other basic research:
- (How) can we use online conversations to predict social outcomes? Track Dispersion of the Conversation!
- In a study of whether the number of online conversations about a TV show could predict that show’s TV ratings, the number of keywords relating to the show and the number of conversations about the show was not significant at all.
- However, there was a strong connection between the number of different conversations in different networks and the show’s future ratings. This dispersion or “entropy” (do you remember your chemistry?) is a measure of the liklihood that the information will spread.
- The Significance for the Firm: we want people in different networks to know what’s going on so that the information becomes more spread out.
- Why do people talk about what they talk about when they talk? To Enhance their Image!
- Much previous literature assumed a “Giving Tree” Theory of word-of-mouth: people readily give information and are generally altruistic so they give more positive reviews than negative ones.
- In contrast, Image Enhancement Theory posits: people don’t care about information itself, but they do care about what the information they spread says about themselves. People want to be viewed as “experts” and will usually give positive recommendations because it’s a more positive reflection on them than a negative opinion. This holds in sitautions where people are identifiable (i.e. Facebook, but not necessarily yelp!)
- The Signficance for the Firm: if we want to influence people on a large scale, we need to identify self-perceived “experts” who are more likely to give positive reviews. Choose people who see their reptuation in that category as important and feed them information, which they will be more likely to share in a postive light. Identify influencers as a proxy for identifying self-perceived “experts.” For example: favor people who originate posts as opposed to replying; or by using surveys to understand peoples values, goals, and self-perception; or by tracking the number of tweets that are retweeted.
- (Why do I keep sneezing while typing out this section?!)
- If I could get one more person to talk about my brand, who should it be? Target the Newer and/or Less Loyal Customers!
- In a study of the word-of mouth (WOM) firm BzzAgent, non-loyal customers created more buzz than loyal customers. This is network homophily at work: we generally spend time with people like ourselves.
- The Signficance for the Firm: The most valuable WOM creators are those who know a little bit about the product, but have still not fully experienced the brand. When it comes to spreading information, loyal customers are more likely to be surrounded by loyal customers so that WOM doesn’t necessarily lead to a change in consumer behavior. In contrast, firms can achieve more incremental sales if they target people who are surrounded by others that aren’t that familiar with the brand.
Other Fun Insights
A few other importants points came out from the talk:
- Social Media isn’t a vehicle or channel to target specific communities in the same way that you would put an ad in Cosmopolitan to target a specific demographic. Social Media is different because people use different platforms (e.g. Facebook, LinkedIn, YouTube, Flicker) for different purposes. In other words, Facebook and YouTube are not substitutes; they are complements.
- People want curation to be told what is important to pay attention too
- Identify why people come to a platform and speak to that value.
- There’s a debate over whether to use social media for informative purposes as opposed to persuasive purposes.
- If people use social media for informative purposes, then the value judgement (positive or negative association) of the information does not matter.
- Don’t bother handwringing over whether social media has a Return on Investment (ROI)
- The incremental value-add of traditional media is equally difficult to measure.
- In fact, the same metrics usually work just as well and are just as noisy (i.e. statistically unclear): # impressions; # eyeballs; impact; etc.
- The same tools used to measure traditional media effectiveness also work for social media: before and after studies of brand awareness; split city studies; longitudintal studies; etc.
- From a marketing perspective, what has social media changed the most?
- Promotion content has and the nature of interactions between firms and consumers have obviously changed.
- The long term and less obvious effect has been on changing products themselves. Now that information is more easily shared via the internet and social media, firms must improve product quality and their responsiveness or else lose their reputations.
- No difference in WOM behavior between women and men, although their social networks are different (women tend to spend more time around people different than them; men spend more time around people like themselves)
So What is the Role of the Firm in Social Media?
Firms can use social media at different levels of intensity:
- Listen (passive) – Sit on the side and hear what people think (passive sidelines)
- Influence (uni-directional) – Target important influencers and get them to change their behaviors and those of their network. A great example of this is when Lee Jeans attracted a target demographic of teen boys by seeding rumors that they could find a special code to access a secret video game level if they went inside Lee Jean stores and checked out the back pockets of the jeans there. This rumor got more teen boys in the store and sales from that segment increased!
- Engage (bi-directional reactive) – Accept feedback and crticism and respond respectfully and find out what really bothers people or gets them excited about a product. Then bring something back to them. The Domino’s Pizza Turnaround campaign is a great example of this (used it for an essay in Consumer Behavior too!). Another good example is JetBlue using Twitter to post flight changes and coupons if their flight was canceled.
- Requires a high level of responsiveness
- Sets high expectations -> don’t screw up!
- Curate (bi-directional pro-active) – Don’t just respond to criticism. Actively build conversations around your product in creative ways. This has to be sincere because webusers can generally smell cheezy artificialness immediately.
- The point here is to seed a community that can grow organically as a community of practice (i.e. people who share an interest and are actively engaged with each other). For example Kinaxis, a Canadian Supply Chain managment firm, created a series of comedy videos and blogs that developed its brand awareness and web traffic.
April 4th, 2011 by Stephen Huie under Entrepreneurship, Information Technology, Strategy. No Comments.
Introduced in 1980s, the single serve coffee pod market grew 101% in sales from 2009 to 2010. Photo Source: Gear Patrol
I recently read an excellent post by Michael Schrage about the dangers of “innovation snobbery” – condescending upon products/processes that don’t seem like a huge breakthrough. For example, innovation snobbery might lead us to dismiss Kraft’s Tassimo (2005) single-serve coffee machine as a value-less “me-two” or “me-three” copy-cat of the Nestle Nespresso (1986) or Green Mountain Coffee’s Keurig K-Cups (1992).
McDonald's answer to the Starbucks Frappucino may be thought of as a copy-cat, but it's primarily sold to people who aren't regular Starbucks customers. Source: McDonald's
What we’ve been studying and practicing at Smith helps us to unpack how to analyze and implement innovation.
Blue Oceans and Blood Baths
We can tie the idea of innovation to the concept of Blue Ocean strategies, which we discussed in our Entrepreneurship and New Ventures class. The Blue Ocean school of thought discourages head to head competition (a “Red Ocean” bloodbath) and encourages the creation of new markets.
On the one hand, we usually think something is an innovative gamechanger because it’s something novel, unique, or fascinating:
- New markets could mean creating a product that hadn’t existed before and that solves a problem (think velcro or post-it notes or Google Street View!….I’m throwing the iPod in here as well because even though mp3 players existed before the iPod, Apple developed a product that offered so many great features that it easily took the market (most people would probably agree that when they think product leadership, they think Apple))
Yet on the other hand, innovations don’t necessarily have to be game changers:
- New markets could also mean targeting users who weren’t part of the market before, and thus increase the size of the pie for everyone. For example, McDonald’s McCafe premium coffee line and stores provide premium coffee to many people who weren’t going to Starbucks or Peet’s before.
Disruptive Innovation and Designing Trade Offs
My point with McCafe is that what is innovative doesn’t have to be a “gamechanger” and can actually be more subtle.
When performance attributes fall short of what people want, it may only be used by first-users and niches, but if the product improves to meet demand, it will damage incumbent products. Photo Source: Christensen and Bower
We saw this nuance in our Strategic and Transformational IT course when we discussed Christensen and Bower’s concept of Disruptive Innovation.
Disruptive innovations provide a different set of attributes that people may not appreciate now, but whose performance trajectories will eventually exceed the current demand. In contrast, sustaining innovations maintain a rate of improvement along the same attributes that already existed.
This brings us back to my coffee pod example. Coffee pods have been around for almost 25 years, but the US market didn’t start to really pick up until the mid 2000s. It took a while for the technology and convenience attributes to meet demand expectations, but as they approach demand, consumer and producer interest in the market grows incredibly.
Tassimo’s use of bar codes to adjust the amount of water, temperature, and brewing time improves taste and allows for a more diverse product line. The possibility of creating an espresso or latte from a pod creates “line flankers” as opposed to “line extensions” of different flavors of coffee. This is a completely new attribute compared to the current offerings from other coffee-pod makers. Kraft’s loss of its Starbucks distribution contract may create a product line disadvantage, but Tassimo’s innovations no-doubt create additional value for consumers in the form of premium coffee beverages. As the performance trajectory of Tassimo improves (e.g. improved line of regular coffee pod brands, better customization in its water control, more premium products like iced coffee, etc.), it may have a chance to overtake the products that currently dominate the market (Keurig currently has 71% of the market).
Tassmio distinguishes itself from Keurig in its line flankers, pod shape, and machine design. Photo Source: Kraft
More worrisome is the threat that such brewing attributes may be imitatable by their competition, which would nullify the disruptive effect.
This is where Michael Porter’s concept of strategy, which we studied in Strategic Managment, can be very helpful. Considering the pursuit of operational efficiency as an obvious and imitatible given, Porter views strategy as a choosing a set of trade-offs and differentiation that fit with the firm’s inherent and distinctive advantages. Trade-offs force potential imitators to give something up if they hope to enter the same market or sub-market, thus increasing the barrier to entry.
This is why I think McCafe is a strategic innovation rather than merely a product line extension – McDonald’s is capturing premium coffee sales and customers that Starbucks and Peet’s will never go after. The McDonald’s brand and its products are so defined by their “value and discount” that they don’t fit with the image of more premium stores like Starbucks and Peet’s. The barrier created by this trade-off is what makes McCafe strategic and the fact that it grows the market for premium hot coffee and iced coffee overall is what adds value for both customers and the industry as a whole.
So what’s better, disruptive innovation or sustaining/incremental innovation? Check out the recent Economist debate on the issue.
Acting on Innovation at Smith
I’ve talked about how what we study at Smith class applies to analyzing innovation, but what about actually doing something?
Just yesterday evening, hundreds of students, entrepreneurs, and industry specialists attended the U. Maryland Social Enterprise Symposium where practitioners, including Smith students themselves discussed their work in the field of social value creation. That evening, Smith MBAs competed in the GE Healthymagination Challenge to present solutions for reducing infant mortality.
Today, U. Maryland Students (including MBAs) are competing in the Cupid’s Cup entrepreneurship competition, which is named for the U. Maryland alumnus and founder of Under Armour, Kevin Plank. Plank’s first business on campus was a Valentine’s Day flower delivery service.
We are always applying what we learn at Smith to real world opportunities.
“You Better Check Yourself, Before You Wreck Yourself…”
…is what my friend Gloria would say. Innovation snobbery creates blinders that impede our analysis and innovation. Schrage writes that:
Innovation snobbery is a market signal. Pay attention. The moment that everyone agrees innovation has vanished from “ordinary” products, processes or services — or simply doesn’t matter — is the moment when real entrepreneurs and innovators are best-positioned to disrupt.
At Smith, we learn how to keep an open mind and take advantage of such opportunities by practicing the identification and implementation of innovation.