End of the 3rd Semester

All the finals and papers are completed and done. There is starting to be a glimmer of light at the end of the tunnel as we move from our 3rd to 4th (and final) semester of the WFU eMBA program. This past semester was easily my favorite so far, but it was obviously somewhat biased by the China Trip, which was a life-changing event for me. I developed a completely newfound appreciation for the challenges of international business, as well as a new passion to become much more of an international citizen (for myself and my children).

Following on the international theme was our Global Strategy course (part I...part II is in the next semester), which was my favorite to-date. Strategy is a fascinating topic to me because it requires a combination of structured thinking/analysis and truly creative thinking to be able to plot moves, plan new products/services, and come up with ways to shift the market in your favor.

One of the takeaways I'll have from this semester is regarding the type of people to look towards as we become a more globalized economy and world. While there are literally thousands of business and strategy books written each year, the ones that are beginning to stand out are from leaders that are either from non-US background or heavily embrace non-US markets and cultures. Whether this is people like Ram Baliga and Michael Lord (WFU professors), or C.K. Prahalad or Gary Hamel or Ram Charan or Umair Haque. By looking at the world from a non-US-centric viewpoint, they are able to understand the pace of change better, as well as understand the flexibility and competitiveness that will be needed by any successful person/company in the 21st century. It's a much bigger picture approach that you see in most classrooms or often US boardrooms.

Making Innovation a Process/Culture within your Company

After 13 months in the program, I'm convinced that experience is the greatest enemy of entrepreneurs. People get comfortable. People change their approach to work/life after one bad experience. People constantly seek balance, or risk mitigation. People get cynical.

This weekend was an interesting microcosm of how E-MBA's see change. It wasn't completely surprising, because the older you get the more data you have to reference, the more past successes you try and emulate.

Dr.Baliga showed us a video (circa 1998) of Gary Hamel giving a presentation at Stanford. The focus of the talk was how business cycles are radically compressing. If companies want to survive they need to stop thinking about innovation as the next great project/product, but rather learn how to make innovation a core part of their business culture. In essence, re-engineer their process for fostering innovation just like they spent the 1970s-1990s re-engineering their operational processes to reduce costs or streamline efficiency.

A couple of quotes from Hamel stood out to me (paraphrased):

• Speaking with a hotel CEO, he asked why they didn't allow people to rent the rooms in a more flexible manner. The CEO responded that Hamel didn't understand the hotel business. Hamel responded, "And that's exactly why I have a valuable viewpoint on this subject". He explained that in this new economy, 90% of all innovation will come from outside your industry. Companies have to be willing to look for non-industry analogies.
• Following up on those comments, which might have been considered a "dumb question", Hamel stated that, "It's only from "dumb" questions that new value will be created. That new rules will be created. And new rules are what allow companies to gain advantage in any industry."

Following the video, the class discussed the concept. Asked for their thoughts, they responded with things like:

• He didn't give out the "how to do it" answers because he's a consultant looking for new business.
• He dismissed operational efficiency, but that's still a valuable way to create better profits for a company.
• I could never go ask my CEO to start a project like the ones he recommends, I'd get ridiculed for going against the grain.

Granted, Hamel did point out that maybe 3% of businesses today (circa 1998, although probably still true today) have the type of culture that he discussed, so it's not surprising that so many people responded with skepticism. Most companies still attempt to compete in a model that defends their existing business, extends their current models, and exploits their past loyalty from customers. People don't comprehend this because they don't believe they have experienced it. But the reality is they have experienced it, just from the other side of the fence. Their company's competition have implemented it in banking, telecommunications, manufacturing, media, consulting and high-tech.

It's difficult to be a mid-level (or even executive-level) manager and listen to people like Hamel speak, because you can see the future and yet it feels so difficult to obtain because of all the change needed (inside your company) to get there. It might impact your current role, it might impact your future salary/bonus, it might impact your status within a group. But more importantly, and this is the difficult concept to grasp, is that it's not a matter of "if" but rather a matter of "when" a lack of action will result in value destruction by your company. It's a near certainty that failing to implement an innovation culture within your company will result in failures on a massive scale. So if people are worried about risk, this isn't the risk to be worried about (it's almost 100% certainty - "no risk"). The risk to manage or exploit is how to become part of the upside when the innovation culture (that you're driving) takes off and your company starts creating new value for your customers.

As Hamel points out, sometimes it's good to take an "outside the company" (or industry) viewpoint on change. Here's a good quote from VC Fred Wilson's most recent blog:

"Bliss McCrum, one of the two VCs who taught me the venture business early in my career always said, 'if you are going to put more money into a company that is not working, make sure to change the strategy, team, or cost structure, or all three'. It's good advice. You will not get a different result doing the same thing."

Paying More for "Something" Better

One of the interesting things about MBA programs is that the later stages tend to produce the best thinking. You've been exposed to more concepts, new ideas and new ways of thinking from smart classmates. Here's an example of how many concepts start coming together:

I wrote yesterday about the innovative concept of "Plenty" currency in Pittsboro, NC as they look to encourage local business. In this case, it's local residents making a conscious decision to support the local economy. Whether that is motivated by discounted pricing, or local pride would need to be investigated, but I suspect it's a combination of both.

But what happens when you'd be asked to pay more for something, where the that "something" might not be a physical attribute. For example, take this discussion on Fair-Labour iPod costs from Umair Haque. Initially he lays out some calculations for how much price is affected by an element that some people disagree with, namely Chinese labor*. While not exact calculations, he highlights roughly what the cost differences would be if US labor was used. Then he poses the difficult question, "Would you be willing to pay more for the iPod to give yourself the peace of mind that it was 'built in America'"? In essence he's asking if you're willing to sacrifice you're near-term wallet for the potential of longer-term prosperity (not guaranteed) in the area where you live?

[NOTE: *after speaking with some US companies that use Chinese labor during our trip, it's important to remember that those workers are in those jobs to better their lives and their families. Their perception of the low wages isn't the same as what we have in affluent America. Just noting this for completeness of viewpoints on foreign labor.]

Haque then goes on to talk about the multiplicative effect this type of thinking can have on the overall prosperity of an economy that's built on "creating new value". The difficult piece of his argument isn't that its not possible, it's how to convince the everyday person to make those considerations. It highlights the same types of challenges I'm starting to explore on my Environmental Capitalist blog.

To make this change of thinking possible, it starts getting at the types of things my classmate Gregg Lewis is constantly trying to teach me with regard to Environmentally Sustainable architecture.

• It's about trying to break people of the habit of measuring "value" based on 20th century measurements (price/sq.ft, cost on the price-tag, etc.)
• It's about helping people understand the broader impact their consumption decisions have on the economy and environment. What does saving $1 on the purchase price translate into for the overall local/state/national economy? What does it translate into for environmental costs (transportation, disposal, etc.)?
• It's about helping people understand that the availability of "immediacy" consumption isn't really satisfying the true needs of people, it's just satisfying the immediacy impulses.

Changing behaviors is difficult (see "failed diets" and "lack of savings"), but I believe this type of mindset is going to be critical to adopt as we proceed into the 21st century. Consuming more intelligently forces better designs from manufacturers, as well as forcing us to think about the bigger impact our day-to-day decisions have on our role in the global ecosystem.

When will things get back to normal?

In the recent issue of Business Week, in the Welch Way column in the back, a question was asked about when the recession would be over and we'd get back to normal. Jack (or Suzy) responded with an answer, "sometime in 2010."

I understand why they gave this answer. It's vague, but not too vague. It sets reasonable expectations about a foreseeable date in the not too distant future. And it's simple. Unfortunately, it's also terribly misleading. Because what the person is asking isn't, "when will the recession end?", but what they are really asking is, "when will we get back to the normalcy that I had become used to in 2006-2008?"

This is a little bit like a New York Yankees fan asking when things are going to be normal again, with their definition of normal being 1998-2002, when the Yankees were winning all those World Series titles. The Yankees have been over-leveraged for the past few years, just like the US economy. The problem is that the previous normal doesn't exist anymore and probably isn't coming back. Sarbanes-AIG or some other set of new regulations won't allow the uber-leveraging that happened from 2005-2008.

What I can't understand is why so many people are standing still, waiting for the previous normal to return. I suspect it's because they desire to have the comfort and security they had back in 2008. In fact I know it is. But as the old saying goes, "a watched pot doesn't boil". Waiting isn't going to get anybody anywhere expect further behind the rest of the people that are pushing forward, making things happen on their own.

What I'm finding throughout this reseting is that more doors are opening when I go knocking than they might have in the past. People are more open to new ideas and new partnerships, especially if you add some creativity to the relationship (free work for a period of time in exchange for experience; lowering costs via social media; business models that share risk, etc.).

I'm having a lot of fun right now trying to find additional opportunities for classmates. Some of them are simple, such as guest blogger slots on popular websites to gain visibility. Others are relationship building to get new businesses into new markets. I never knew which one will end up being fruitful, but there are definitely opportunities to define the new normal if you're willing to step out and make some things happen.

Follow-Up: Failure & Growth in China

In previous posts, I've written about growth and failure in China and the role that both of them play in their economy and culture. One of the things that Americans tend to do when confronted with the thought that China or India will potentially (or eventually) overtake them as an economic power is to point to their lack of innovation. Mike Lord referenced this during our International Business course this past weekend, but then reminded us that many of the early American settlers made copies of everything they knew from their homeland in Europe. The easiest way to gain expertise in a new area is to copy what others have done. What you do with it from there really determines if you will create a culture of innovation, and hence a culture that can create sustainable value over the long-term.

Maybe another data point to consider is the Israeli technology markets and their level of innovation. He is a highly-educated population, that has expertise in various areas of technology, and considerable need to solve economic and cultural challenges. Put they haven't been nearly as successful as their American counterparts in creating sustainable new businesses. One proposed reason for this is their "failure is not an option" mentality in the Israeli culture. I bring this up not as a way to highlight American success, but to highlight another culture that punishes (or discourages) failure, similar to what has been discussed in the past with China.

The US still has challenges to overcome in their education systems to remain competitive in the global economy, and we should not rest on our past success. But I believe innovation and the culture we have that encourages success, failure and resulting innovation is the strength that we need to enhance. The foundation still needs to be there via math and science and creative thinking, but the culture also needs to be encouraged. It is the strength that we have which gives us the ability to overcome the population numbers that are in India and China's favor (at least in some aspects).

We live in a world of Twitter-time value creation

If you haven't been paying attention, this little thing called Twitter has been generating quite a bit of buzz over the past 6 months. Regardless of if you're a Twitter fanboy, hater or just trying to understand it, it's been incredibly interesting to watch not only the growth of the service, but also the huge range of opinions about whether or not it creates any real value. One day it's a life-changing technology, the next day it's dead!

Twitter has obviously changed the game in terms of how we can now consume information. It's no longer measured in days or hours, but instead it was become instantaneous. But does this create new value? For the average user, it may create more distraction than the value the instant information could bring. But it is starting to bring value to new technologies that are leveraging Twitter APIs to take the feed of information and turn it into something new.

So I have to ask a few simple questions:

• Do we have any sense of what value is anymore?
• Does long-term value exist anymore?
• Is all value going forward going to be measured in Twitter time?
• Is technology moving so fast that we won't recognize that we need additional value, or new value, until the technology is upon us?

On our trip to China, our new friend Joost at Volvo mentioned that if we wanted to come do business there, that we'd better have a business model that expected products & services to be copied in 90 days. Maybe that's the new duration of value creation. It's been about 90 days since Oprah first joined Twitter, the user count soared, and now it's coming back down to earth.

Or maybe there will now be phases of value created, like rounds of venture funding. Maybe Twitter has now been through it's adolescence value-creation phase, and over the next 90 days (or maybe 6 months, or maybe 12 months), it will have to decide if it's able to move into it's 20'something value-creation phase, or it's adult-maturity value-creation phase.

We live in interesting times. Fast moving times. Sometimes it's very difficult to not only keep up with the pace, but determine if the thing in front of you is valuable or not. I don't know the answers to my questions, but I do expect that they will flip the business world on its head over the next couple of years. Are you creating long-term value, or Twitter-time value?

Discussion of the Week - Prioritizing Shareholders vs. Stakeholders

Over the weekend, we had our first Financial Mgm't class, with Dr.Sandra Dow. One of the readings for the class was a piece by Michael Jensen (Harvard Business School), entitled Value Maximization, Stakeholder Theory, and the Corporate Objective Function.

[I'm paraphrasing & summarizing here, so my apologies to Dr.Jensen for butchering his theory]

The paper makes the argument that companies need to consistently put the maximization of Shareholder Wealth as their top priority, ahead of goals to enhance Stakeholder "value".

It was an interesting topic for a couple of reasons:

1 - Several other courses have brought up the Balanced Scorecard model as an example of how to manage the business, often showing that Balanced Scorecard provides management with balance across Financial, Customer, Internal Business Processes, and Learning & Growth. This was the first time the Balanced Scorecard was presented as the wrong approach for running the business, and that it led to too many internal conflicts to be able to manage simultaneously.

2 - It was the first class with Dr.Dow, and the first couple hours were spent going over the Pros and Cons of these different prioritizations. Needless to say, it was a healthy discussion as my classmates had very strong opinions (on both sides) about how well each approach worked in their experience, the morality issues, the conflicts of interest with employee/mgm't stock ownership, how much lower-level employees or managers could impact shareholder wealth (ie. stock price), etc.. Dr.Dow has been very generous with her time in extending this discussion with several of us via email since the class, and I expect it will be an on-going discussion throughout the semester, especially given the existing economy (how we got in, and how we might get out).

Overall, it was a good discussion to reflect on how this applies to each of our companies, our existing roles, and if we'd make any changes if we held higher roles within our organizations. I personally used it to contrast some existing thinking I've been having about 20th Century vs. 21st Century thinking that has been inspired by Dr.Umair Haque, and his recent talk at the Daytona Sessions in Sweden.

[UPDATE: An interesting article looking at how Amazon has created an 180* turnaround on their balance sheet (2002-2009) and how it used an unorthodox model of revenue growth vs. profit growth.]

Conflict of Crisis - 21st Century Economics

[More details about these concepts can be found here]

This is about a 70min video from Umair Hague,  called Conflict of Crisis.   I'd highly recommend it to all my classmates.  It goes against the majority of what we learn in MBA programs, because they typically teach based on examples (cases, companies, etc.) that succeeded over the past 5-20yrs.  

Haque's messages are starting to connect with me more and more for a few reasons:

1. In OpsMgmt, we're reading case after case about how manufacturing jobs and companies are leaving the US because of lower costs.  But while the US grew to economic dominance on the backs of these manufacturing giants, we're not necessarily seeing similar prosperity happening in the 3rd-world countries that are taking over this work.  Why is this not happening?
2. The GenY population is not embracing large company ideals and culture, they are bringing their principles to companies and asking why they aren't being embraced.  
3. The "value" created over the last 10yrs is almost completely unsustainable (as we've seen with the last two bubbles; Internet & Credit).
4. The hyper-connectness of the Internet is allowing very different business models to be created and grow.  

So what does all of this mean?  It means the pace of change could potentially start moving much faster than any principles we're learning in B-School today.  It means businesses could be in sprint mode all the time, with radical market shifts happening every 5 years.  It means you need to keep you mind open to new ideas, and consider looking for ways to focus on the 4 principles Haque mentions.  While the examples he gives are still somewhat limited, they are beginning to show the building blocks of what could be the new 21st century economic principles.  

=========

Here are the four pillars of smart growth - for economies, communities, and corporations:

1. Outcomes, not income. 

2. Connections, not transactions. 

3. People, not product. 

4. Creativity, not productivity. 

Question(s) of the Week - Killer Questions

One of the comments you hear frequently mentioned throughout all the doomsday news reports is that the greatest innovation often comes from down times instead of good times.  I'd tend to agree with that..."our backs are against the wall"...."necessity is the mother of all invention", etc, etc..

At my previous company, when I was working in one of their Incubating Technology groups, I used to frequently read Phil McKinney's Blog.  Not only does Phil lead one of the large innovation groups at HP, but he also gives back quite a bit of time to explain and explore the lessons he's learned about innovation in his career.  I still subscribe to his Killer Innovations podcast, but I had lost track of it as I changed jobs and got heavily invested in the MBA program.  But recently I found myself listening to the podcast again, and also spending some time thinking about Phil's Killer Questions.

When I first started this blog, I considered a segment called "Decision of the Week".   But the more I read things like Umair Haque's 21st Century Growth Manifesto, the more I think my time would be better used in trying to weave together Phil's questioning model with Umair's problem structure model and a few sprinkles of my ideas (and hopefully my classmates). Focusing on today's decisions may just be an exercise in extending 20th century thinking that isn't going to work much longer.  

Strategic Marketing Project - Lessons from the Front Lines of Social Media

I'm pretty excited tonight because we got our mid-term Strategic Marketing project approved. (The abstract is listed below) Portia Mount and I had actually talked about a concept like this prior to the class starting, so we were glad that we'd be allowed the flexibility to choose the topic and scope.

Portia is VP of Marketing for her company, so I believe she's been thinking about aspects of this since last summer.  I got the original idea while reading this article from Umair Haque, as part of a continuing series he's doing on Edge Economy and the need for radical innovation to break us out of the challenges of the current economic crisis.  It also connected for me as I reflected back on stories from both Wikinomics and The Future of Work, as they looked at the value of sharing information externally, building communities, building partnerships, and truly building companies that can survive in the pace of the 21st century.  Listening to Seth Godin's podcast on Tribes and Leadership today completed the circle for me, showing how all of these pieces and ideas came together in the 2008 election.

The other element of the project that I'm excited about is that we're hoping to show how this 21st century approach can be applied to more traditional brick & mortar companies.  Portia and I felt like this would be an interesting challenge to research, as well as our way of giving something back to the rest of the class.

The paper and presentation aren't due until mid-April, but I'm already looking forward to starting on this project.  I'll be sure to post updates as we move along.

=======ABSTRACT========

ObamaNation: Lessons from the front lines of social media.

This presentation will look at how the Obama campaign used social media strategies to mobilize grassroots audiences to win the White House and what business might learn from this success. In this presentation we'll highlight noteworthy examples including:

1. The use of Social networking sites such as Facebook, YouTube, and Twitter that created new online communities.
2. The Campaign website and its use of targeted messages to create urgency to generate record breaking campaign donations
3. How mainstream newsmedia outlets took advantage of the unprecented online presence during the campaign season to connect to new and younger voters
4. How the rise of the citizen journalist and an expanded blogosphere allowed Obama, a virtual unknown at the start of the campaign, to gain global recognition in one campaign season

Discussion of the Week - Exponential Times

We had several interesting discussions in class this weekend, but I'll go ahead and pick a discussion from our IT Mgm't course as the introductory "Discussion of the Week" topic.  I actually learned more in the early discussions in the OpsMgm't and StratMktg courses, but I think this discussion had broader relevance to our overall MBA program.

The discussion centered around a snazzy Exponential Times video, looking at the pace at which our world is changing due to this technology they call "the Internet".  Prior to watching the video, we were asked a simple question, "How do you see the trends of the last 10 years continuing (or failing)?"  The responses ranged from Globalization to Big Box Retail to Greater Customization, alot of stuff that you read about in the press on a daily basis.  All good answers, but then we watched the video.  

As a group of (on average) 30-40yr old folks, the immediate response in the room was fairly quiet.  When you're between the Boombers and GenY demographics in the US, and the mass of humanity in both India and China, it's an interesting place to be...to say the least. 

As a group, we face several challenges and opportunities:

• While we're technology literate, we're really the first generation to move through this as a learning curve, not as a part of our DNA (sorry Boomers....you're on the way out, so I'm not counting you anymore)
• We've grown up in a world where companies followed the strategies and models defined in the 20th century.  We learned and been trained in companies that sold locally and regionally, and that survived over many decades.  Our MBA program is somewhat of a bridge between those 20th century models and scratching the surface on 21st century ideas.  

Having lived on Internet time for the past 15 years, I felt comfortable (as much as anyone can be) with the explosiveness of the numbers in the video.  I've lived with growth on that scale for a long time.  What I need to get my head around is the idea that many of the current business models I know will be (or already are) obsolete.  The good news is I have Fred, Seth and Umair to balance my work experience and MBA learnings.

Was excited about 2nd Semester..Now I'm Torn

It's 11:15pm on Wednesday and I'm almost finished with my prep-work for this weekend's classes, which kick off the 2nd semester.  While I'm still not that excited about Managerial Accounting (because it's Accounting), StratMktg, OpsMgm't and ITMgm't all have aspects that I'm looking forward to exploring.  

I've been giving OpsMgm't quite a bit of thought, as the first class is focused on Operations Innovation, and the concept that 21st Century business success will be driven by new thinking about these types of innovations.  With the Internet and global competition able to commoditize so many things so much faster, it makes sense that OpsMgm't has the ability to provide consistent financial & strategic buffers between product innovations.

But then I'm scanning my RSS Reader and noticed an updated post from Umair Haque, 21st Century Economics.  On the surface, Dr.Haque probably comes across to some people as an angry guy because of the tone of some of his posts.  I've never met him, maybe he is and maybe he's not.  But one thing he definitely is is passionate about the need to really, REALLY think hard about the types of changes that are going to be needed for the world to recover from the mess it's in today.  I'd love to get access to his lab research and better understand some of his analysis, because on the surface they make alot of sense to me.  The concepts around edge economies, asymmetric competition, creating actual vs. perceived value seem to align very much to the other global topics we covered our the BGE class.  We've seen this environment where short-term rapid consumption and lack of concern about global results has consistently caused crisis (US Currency Crisis in 1970s; Formation of the EU; US Credit Crisis of 2008, etc.).

Why do I bring this up?  Because there is part of me that's eager to learn more about these interesting topics, and part of me that wants to throw out many of those existing theories and explore "innovations" in those areas that will sustainable for the 21st century.  Hopefully there will be enough flexibility to find a balance.  I've told my team that I intended to push that envelope quite a bit during the semester, so we'll see how it turns out.  

The long break for work and school is over....back to the routine.

More than a WFU MBA journal

Since I'm still in time-warp mode until January, backfilling a bunch of posts to recap the 1st semester, I'm occasionally going to preview some of the other things that I hope to do with this blog.  If it were just a journal, I doubt anyone would keep reading.  But if I take Seth Godin's advice and create a Tribe, then the possibility exits that we can create interest and expand the conversations we have in Winston-Salem (and Charlotte) each week

1 - "Decision of the Week" - Each week, I will take a recent topic from the Business Press and highlight certain aspects that are worth exploring in more detail.  It may be an executive decision, a competitive market shift, a unique marketing approach, a savvy financial transaction or some other interesting element.  I'll open up the discussion (via blog comments) to my classmates in both the Winston-Salem and Charlotte programs.  We have mechanisms in the program to do this within the context of a class topic, but this should let us explore cross-topic impacts of business decisions, as well as open it to outside input and discussion.

2 - "Discussion of the Week" - This segment allows me to highlight an interest discussion, or person from each weekend's discussions.  These discussions may involve classroom topics, or may center around back-of-the-napkins brainstorming that often leads to great ideas and great companies.  I also hope to highlight some of the gifted personalities from the WFU EXFT2009 class, or across the WFU MBA programs.  

3 - "Connecting the Dots" - Academics are greats, but unless you can tie it to real world activities, it's just learning for learning's sake.  This segment will highlight connections between the topics in class, and real world examples of the concepts in practice.  

4 - "inVinCible Ideas" - What would a MBA program be without the creation of new business models and company ideas?  This segment will spotlight the activities that classmates are exploring and developing as they plan for the next step in their career or life.  VC funding may be required.

[Update - Dec.28, 2008] - The more I think about this, and the more I follow people like Fred Wilson, Umair Haque and the read books like What Would Google Do?, I have to ask myself if the recent worldwide economic crisis doesn't require us to truly think differently about how we conduct business, define government and shape societies.  I don't have a name yet for this segment, but there will definitely be segments where we'll explore this type of thinking, which should be a lot of fun.