How David beats Goliath

Every once in a while, usually late at night when I'm a little punchy, I come across an article like this from Malcom Gladwell which seems to connect a lot of dots that we studied throughout the semester. I sent this one to my classmates because not only did I think it was great to see OpsMgmt, ITMgmt, and StratMktg concepts all woven together, but because I believe the alternatve mindsets that are discussed are important to consider as we prepare to visit China, Japan and South America over the next 2 weeks. Much of what we'll experience on these trips will require people to recognize that other cultures see the challenges of the world differently, and that these alternative approaches may be their competition or partner. Having the flexibility to understand these differences, and either embrace or reject this alternative thinking, may make the difference between success and failure in the future.

Getting your Business to the Right Size

I've written about this before, but Seth always seems to be more elegant at describing concepts that will effect our future. So what does this mean for companies and employees?

On one hand, it means that there won't be as many jobs available (from big companies) in the future as there have been for the past few years. On the hand, it means that companies will look for more ways to leverage outside "groups" to provide functions for them. This isn't a new concept, it's called outsourcing. But outsourcing in the past was about large companies taking over chunks of work for other large companies.

I think that's going to change going forward. It's going to be more project-by-project, or what's sometimes called "Hollywood-style", because it's similar to how studios bring together various groups to make the movie and then it disbands. And with all the interconnectedness via the Internet, those groups can be small and geographically dispersed.

So I believe what this will create is a new market for big companies and small independent groups that create expertise in making this Hollywood-style work very efficiently. Not only will they bring world-class skills, but also world-class integration and process-management. There are some opportunities here for people with operational and project management expertise to create quite a niche expertise and consulting business.

What an MBA program should be like!

We're about 8 months into the program, and we finally had a weekend that was what I had expected the program to be like. Don't get me wrong, the program so far has been very fun, and we've learned quite a bit from both professors and classmates. But this weekend was just a little more rich, a little more complete in terms of the entire experience.

Here's a few of the highlights:

Every class spend much of the time working through cases. I've stated my preference for case method learning before, and this weekend was an excellent example of the types of learning and discussion that can occur when it's focused around multi-facted cases. OpsMgm't focused on capacity planning (for manufacturing & service industries); ITMgm't focused on runaway projects and outsourcing; MgmtAcct focused on companies that are looking at techniques like Open Book Management and Beyond Budgeting; and FinMgm't focused on capital budgeting for multinational companies. Great discussions of the issues within the cases, intermixed with healthy arguments of opinions and personal experiences from classmates. The prep work and actual discussion can be exhausting, but I feel like we learn so much more from this method.

In our MgmtAcc't class, Dr.Beatty has been talking about Open Book Management (OBM) throughout the semester as a topic that student may want to consider evaluating for their work environments. In fact, our final exam is being dropped in favor of a OBM project to create a plan to introduce OBM into one of the companies without our group. Our project (Team 5) will be for General Parts International (Raleigh, NC), a $3-4Byr privately-held company, where teammate Matt Johnson is a Sr.VP. After sending us a recent WSJ article on OBM, Dr.Beatty realized that Kindermusik (referenced in the article) was a local company and arranged to have their EVP/GM (Brian Healy) visit class and give us an overview of how they implement OBM within their organization. Mr.Healy did a tremendous job of sharing experiences and taking Q&A about how OBM helped shape the culture of Kindermusik, and focus each individual in the company on the "critical number" necessary to make that portion of their business successful.

The evening before our FinMgm't class, the amount of discussion between teams in trying to pull together all the information and analysis of the Whirlpool case was excellent. We were literally walking back and forth between rooms in the hotel comparing notes, debating analysis, struggling with how to handle missing data or assumptions, and generally putting in a ton of time for a piece of homework that effects a very small portion of our overall grade. By 2am we were completely blurry eyed and exhausted. But the journey was well worth it. Not only did we each learn quite about about the concept (capital budgeting), but I think we broke down a couple of mental barriers between the teams.

A few weeks ago a few of us where out late, signing Bon Jovi's "Living on a Prayer" with the local cover-band, and started talking about some ways that we could have a little fun and bring the class together a little better. Sometimes we get too focused on school work. The first attempt fell short (sorry Matt Kirk!!), but this weekend's Pajama Saturday turned out to be a big success. I'll get into that more later.

The 1st annual EXFT Ping-Pong Singles tournament reached the finals. This is our unofficial break-time activity. Congrats to Gregg Lewis and Brian Turner for reaching the finals. We're looking forward to the match next weekend.

So all-in-all a really great weekend. Lots of variety, lots of interaction within the class and outside of class, and I think the group is continuing to come together quite a bit more. It's a great bunch of people and a program that I'm proud to be a part of.

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. 

Discussion(s) of the Week - Today's Economy and Tomorrow's Economy

Since last fall, the world has been going through various stages of reality checks, depending on your industry or specific company. Whether you were Leiman Bros, or Chrysler, or IBM or Mom & Pop's local diner, the reality of the new economy has hit you in some form or fashion. That reality seemed to be in full effect in class this weekend. Classmates are starting to loose jobs, have plants closed, laying off more people than expected, closing more stores. There was clearly a new level of stress and frustration on their faces this weekend. And as positive as we're all trying to be, I believe it's going to get considerably worse. Worse throughout 2009. Worse continuing into 2010.

I heard a conversation asking the over/under on how many people in class would still be employed at the end of the program. This wasn't a joke.

I heard conversations where people were asking what their management was forecasting for a recovery timeline. None of the people mentioned 2009. At least one mentioned 2011.

There were a few conversations this weekend (some hallway, some classroom) that were very interesting to me (WARNING: If you're looking for sunshine, stop reading now):

1 - For an administration that hit almost entirely home runs during the campaign, there have been a lot of foul balls and missed swings during this first month. But this conversation is not about bashing the new administration, since they walked into a tremendous mess that isn't a short-term fix. The real discussion was about whether or not people believe that these stimulus plans truly address real problems.  For example, if no floor is reached on the price of toxic CDOs, then how are the banks ever going to reach a level where their holding ratios allow them to lend?  Neither TARP nor the proposed Stimulus package seem to address this.  Fred Wilson makes some interesting points today about why this probably shouldn't be a solution the government tries to address my itself.  And how do they expect infrastructure improvements (ie. roads) to create a short-term impact?  Those projects take 5-10yrs, are notoriously over-budget and late.  And where are we going to find all the workers?  In case they haven't noticed, America has become a knowledge worker economy.  

2 - In our OpsMgmt course, we get a daily dose of how America has lost it's way in manufacturing.  One of the questions that is always asked is, "How would you fix this situation?".  In talking to classmate Ric Freeman, we asked ourselves if we had a magic bullet to "fix it", if we'd have the people to drive the fixes.  We've gone at least one generation with American kids not seeing manufacturing (or certain aspects of engineering) as an exciting field of work. They've seen their uncles or fathers lose jobs from that segment, or seen jobs shipped overseas.  So we asked ourselves, what would it take to create that new interest for American students and future generations?  What if the Obama administration decided that there would be one US Automotive company, with the goal to not only create world-class vehicles, but also serve as a beacon for future manufacturing and engineering students?  Would this help?  Would it even be possible considering current wage expectations or forces or competition? This is a difficult problem to comprehend a solution for.  

3 -  During the ITMgm't course, we looked at Merrill Lynch's eTrading platform from 1998 and the challenges they faced with their Financial Consultants (FC) as they moved to electronic trading and the potential changes to fee structures for the FCs.  As we looked at ways to communicate these changes to FCs, and integrate that with the strategy towards online services, someone suggested that maybe the FCs would be willing to take a pay cut to help the overall strength of the firm going forward.  Hmmm...socialism for capitalists?  Interesting.  I bring this up for two reasons:

a - My classmate works in an environment where loyalty to the company is very strong, and this wouldn't be a completely unusual request to workers.  

b - Based on the recent number of layoffs across all industries, I wonder if we're going to have a generation (or multiple generations) of people that have absolutely no trust in their employers and how this will effect managers ability to motivate teamwork in workers.  

Killer Question - Could you customize a mass product?

From Phil McKinney's Blog, 

"When things get tough, the common reaction is to scale back and standardize the processes.  The objective is to take costs out of the business.  What would happened if you went the opposite direction?  Rather than standardize, why not customize?"

This is an interesting question for me, since my company mass produces a product that is "customizable" by our customers through software configuration.  This isn't really an aftermarket for our product, since the product isn't immediately useful in it's default state.

But if I had to think about ways that our product could be customized, the list might look something like this:

1. We could allow customers to upload specific configuration options to their order, and we'd load those before the product was shipped.  This might make it easier for them to deploy the products in remote offices without sending a specialized technician to the site.
2. While it wouldn't enhance the functionality of the product, we could offer options on the color of the faceplates on the products.  Some companies have corporate colors (ie. Yahoo - purple, UPS - brown, Wake Forest - black/gold) and this might be a desirable look in their data centers.  
3. if our selling partners identified their primary target markets, we could potentially create collateral (training, co-logo'd whitepapers, etc.) that aligned with those segments.  This would reduce their costs and increase their focus, and we could probably do it with minimal additional costs.

This is an interesting exercise, because while some these ideas could change the overall experience, they also introduce additional conflicts or problems (distribution, etc.).  I need to think about this some more, to see if there aren't more obvious or impactful ways this could be applied to my company.  I may find that this exercise works better for new companies looking to create a niche (or adjacency) to an existing market, rather than trying to change an existing product/service mix.

More on Bits-Based Production

Yesterday I talked about how I was trying to rationalize the difference between bits vs. atoms based goods, and the associated production, especially as it related to the content of our OpsMgmt course. Today I saw this brief interview, Five Questions with Fred Wilson, where Fred talks about the pressure that bits-based economies will face in 2009. While the bits-based stuff always seems to get headlines about the innovation aspects, Fred does a nice job of highlighting that it ultimately will be about how those industries drive this bits-based functionality into their production systems....for whatever good or service they deliver.

The connections between the two are starting to make alot more sense....

Connect the Dots - Unlimited Inventory

In a previous post, I wrote about the struggles I've had in trying to grasp some of the production concepts in my OpsMgmt class.  It's not that the idea of building something in a factory was foreign to me, but there was just something that wasn't clicking.  And I couldn't figure out what it was.

This afternoon, I came across this Hal Varian video.  Dr. Varian is the Chief Economist at Google, and a Professor of IT at Cal Berkeley.  In one of the segments, he talked about the production of "goods" in a digital economy.  His explanation of how these goods were made up of bits flipped a switch in my head.  That was it, that was the thing that had been my mental block for the last couple of weeks. I've become so ingrained with the thinking of everything being online and digitized, I've become somewhat immune to the realities of creating physical goods.  I live in a digital world, and so I've adapted my way of thinking to center around bits. And as he states below, "..there is no shortage....and there is no inventory" 

"The great thing about the current period is that component parts are all bits. That means you never run out of them. You can reproduce them, you can duplicate them, you can spread them around the world, and you can have thousands and tens of thousands of innovators combining or recombining the same component parts to create new innovation. So there’s no shortage. There are no inventory delays."

One of the things I constantly have to remind myself about the MBA program is that it's not just to make me think about my current environment.  It's to also make me think about different or unknown environments.  This is one of those areas.  I just need to keep reminding myself that these two worlds run in parallel, and finding interesting and productive ways to have them intersect is the challenge.  

Connect the Dots - Networking your Social Networks

As I was flipping through HBR this evening, I came across an article about Social Networking, written by Alex "Sandy" Pentland.  Dr. Pentland runs the Human Dynamics group within the MIT Media Lab.  Back in the spring of 2007, I had the good fortune to meet Dr. Pentland, get to know about many of the really cool things being built within the Media Lab, and actually work on the project that is described in the paper.  My former company was a Media Lab sponsor and we co-funded some of the initial work in this area of dynamic social networking.  Needless to say, it was a nice surprise to see something you worked on (albeit slightly) published in HBR.

So what does this have to do with MBA programs?  Actually, quite a bit.  We covered social networks briefly in LOB with Dr. Miller, but only to the extent that people need to be aware of where the strong vs. weak links are within their companies.  Social networking came up again this weekend, during a discussion in our OpsMgmt class, as we discussed the connection between groups within the production process (product mgmt, engineering, production, etc..). What Dr. Meredith pointed out is that many times one of these groups will be outsourced, and then eventually other connected groups move as well because the communication channels break down over distances.  

This latter point seems to be proven out in Dr. Pentland's MIT research.  As much as I enjoyed using technologies like Telepresence, distance has consistently proven to be a huge barrier to effective communication and collaboration.  So why does this matter?  It matters if parts of your business are moving offshore, or great distances from where you are located.  Chances are, if that group is really important, then they are going to get tired of the communications breakdowns and look to move your function closer to them.  All the more reason for US companies to step up their efforts to bring expertise and skill-levels back up to competitive levels with the rest of the world. Unfortunately, it's more than just low-cost labor that might move jobs overseas.   

Connect the Dots - Relating to what you're learning

In a previous post, I wrote about how an article about the accounting model at Apple helped me connect some learnings from FinAcct (deferred revenues) with something I'm interested in both personally and profession, since I work in the technology sector.  Amazing concept...personal interest in the subject, useful learning area...1+1 = 3!!  

One of the things I'm really enjoying about this semester is that every class seems to be very focused on including assignments that make you apply the current topic to an aspect of your current or former business.  Not only does it make you think about how it's relevant to your world, but it also forces you to go meet people outside your current functional area.  It's a networking exercise, which I believe is where at least 50% of the value of your MBA comes from. 

(btw - that value is a complete SWAG, so don't ask me to do an analysis of it....bad MBA student!!...not using objective numbers to justify a decision or conclusion)

But what happens when the course work covers an area where your company really doesn't focus on anymore?  This is somewhat of an exaggeration, but let me give an example.  In our OpsMgmt course, much of the focus is on manufacturing processes, the creation of physical goods.  We also cover service-centric businesses, but the majority is product-centric businesses.  I work for a high-tech company that sells products, but we don't "build" any of them anymore, at least not the finished good to our customers.  We write software, and then put it on commodity computing hardware, which is built and distributed by 3rd-party partners. Our product managers do handle aspects of this, such as forecasting, but it just becomes a number in a spreadsheet,  So as much as OpsMgmt is critical to business survival, it's a tougher connection point for me because it's not something I actively think about.  

So the $64,000 question becomes, what's the best way to connect with a new topic when the path for connecting is either very bumpy or non-existent?  

"Decision of the Week" - Building a 21st Century Car Company

OK, here goes...we're going to see if we can create some interaction on the site. This question is open to everyone, and all comments are welcome. I'm thinking this one relates to everyone (we almost all drive cars) and it relates to class, as we're taking a mix of Marketing, Operations, Technology and Accounting classes.

We've all been watching as the Big-3 US Auto companies fly to Washington DC and ask for money (bailout, bridge loans, etc.). I believe the total is somewhere between $25-$34B at this point. While these companies all have their share of HUGE challenges (retirement costs, union costs, inefficient operations, poor brand images, etc.), they also have a number of valuable assets (engineering knowledge, production facilities, etc.).  

So here's the question... 

What if the US Gov't (Congress, TARP, Treasury..whoever) decided that instead of giving the existing companies the $25-$34B, they were going to give it to you and asked you to create an automotive start-up. You'd be allowed to pick and choose from existing US Auto expertise, personal, facilities, suppliers, etc., because they all went under. How would you build a 21st century automotive company?  

Some initial thoughts...

My initial thought was to see if I could envision an automotive company being setup and run like a Silicon Valley company that sells hardware and software.  So this new company might look something like this:

• Design - This would be a combination of world-class engineering talent (in-house) and the use of crowdsourcing efforts to continue to stimulate innovative ideas and leverage "proudly found elsewhere" mentality for global ideas.  Build communities of potential consumers to give you real-time feedback on potential designs and demands.
• Production - Why do the automotive companies need to own their own plants?  I wouldn't advocate outsourcing all the production, especially since the funding came from US Taxpayers.  But I would advocate using some of the funding to kick-start a few production facilities that would be spun-off and allowed to compete against each other for the business.  
• Sales and Distribution - We buy books and media from Amazon or iTunes.  We buy groceries and homegoods from Target.  But we have to go to a brand-specific dealer for a car?  No way does that model continue.  And I'm not even sure the Auto Superstores are the right answer either.  
• Messaging & Vision - Maybe this is really advertising, but the American automotive companies really need to start making ads that create a desire to be in their cars. Knowing that I get the employee discount does nothing to give me that awesome feeling you get in a new car and the adventures it could bring.  

OK, that's a few starting points.  I'm interesting in other areas of innovation, or other aspects to consider for change.  Ideas are welcome....

2nd Semester Class Poll

IT for Competitive Differentiation

Following up on my recent post on the impact of IT for market change and differentiation, I say this article from HBS Professor Andrew McAfee.  He makes a nice analogy about how competitors can buy the same conversion technology (for raw materials or digital information) and create completely different outputs.  It all depends on how they want to apply it.  How they want to create competitive differentiation.

IT is just a digital process factory.  

That's an interesting way to think about it.  I'll have to wrap my head around the concept, especially as we have both OpsMgm't and ITMgm't courses this semester.  Academia often tries to keep topics in silos, but in this case, it'll be very interesting to see how they merge and intersect.   

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.

The 2nd Semester Approaches

I think I'm finally caught up with my summaries and impressions from the 1st semester, so it's now time to take a look at the upcoming (2nd) semester, which starts next weekend.  The course list looks like this:

Operations Management - Dr. Jack Meredith

Managerial Accounting - Dr. Bern Beatty

Strategic Marketing - Dr. James Narus

Financial Management - Dr. Sandra Dow

IT Management - Dr. Charles Iacovou

Commercializing Innovation - Dr. Tom Clarkson & Dr. Stan Mandel (Elective)

Based on some initial reading and syllabus review, both Strategic Marketing and Operations Management appear to be extremely interesting.  StratMktg includes an online simulation model, and OpsMgmt appears to be very much about active discussion and the case-study model.  As much as I like Dr. Beatty, I can't say that I'm really looking forward to another accounting course.  I know it's good for me, and so are certain vegetables, but that doesn't mean I have to like them.  Luckily I have a few teammates that seem to grasp it better than me, so I'll be leaning on them again this semester.  I'm interested to see what is covered in the ITMgmt course, since I've spent the past 15 years in the IT industry, although almost entirely on the side of the vendors selling products as opposed to the day-to-day management of those systems.  I'll be interested to see what ROI models and metrics are discussed...maybe it'll help me position and sell my vendor-side products better. The FinMgmt course doesn't have the syllabus released yet, but I suspect that will also be a favorite of mine, as I'm a closet finance junkie.  

I suspect this semester will be as challenging as any in the program, both in terms of the coursework (seems like quite a bit in several courses) and the navigation in the economy in early 2009.  I suspect that we'll all be learning alot from each other as we cope with additional layoffs, economic swings, a new government in place and the overall uncertainty in our connected world.  

The break for the past couple of weeks has been nice and much appreciated, but I'm looking forward to getting back in a routine next week.  I just need to keep reminding myself that 2009 is not 2008, and new thinking and optimism will rule the day.