Stanford Sloan at GSB: Entry 13: More Exams, Leaders vs. Managers, Intel, and MBA Clubs

Sloans starting to come out of our shell?

After midterms ended, I thought we’d have a little bit of a break from studying and exams. We might even have a chance to come out of our “shell” at the GSB – the "shell" being our rather large classroom on the fourth floor where the Sloans have classes every single day, with the same 57 people , sitting in the same seats (did I say everyday? I meant everyday except Wednesday).

The MBA’s also had midterms the same week we did. For MBA1’s (first year MBA’s), it marked the end of their EAP (Exclusive Academic Period, during which time they were supposed to focus only on academics). As far as I can tell the only two things that changed after the EAP were that the GSB clubs formally started recruiting new members, and a bunch of the MBA1’s (70 or so I think) took a mass trip to Las Vegas for the weekend.

As for our class, the Sloan program calendar has been so jam-packed with classes, seminars, talks, BBL’s (brown bag lunches) and Sloan social events, that we haven’t really had a lot of time to spend with the MBA’s or PhD students that we coinhabit the school with, nor have we had the time to attend many of the very large volume of events at the GSB.

During mid-term week (on Wednesday, just before our finance exam) the GSB had its “club” day, where all of the student-run clubs had tables. There were a ton of them – everything from the epicurean club (yes, this club is all about food), the wine tasting club, the entrepreneur club, the VC club, the private equity club, the real estate club, the family business club, the china club, the greater china business club, even the "you-name it" club (!). These clubs sponsor events, so many in fact, that there’s no way to go to all the ones you’re interested in. I think I signed up for about 10 clubs, of which I’ve only gotten around to attending events and paying dues for 5 of them thus far. Which brings me to an inevitable fact about business school (at least at Stanford): Overload. Not necessarily classes, but "other events'.

A few weeks ago, I mentioned that Steve Ballmer visited and spoke during lunch hour. Over the last few weeks, we had similar talks from Paul Otellini (the CEO of intel, more on this when I talk about our second strategy class in this blog), and the head of Saudi Aramco, which is the largest oil producing company in the world ("Political rhetoric is a short term game; the oil business is a long term game"). We also had (to mention only a few from the last 7-10 days) a trip to a VC firm, a talk by the head of a middle-eastern private equity fund, various company recruiting events, a visit by the head of some big bank from Latin America, a Women in Management alumni lunch, An Evening with Pixar shorts (an event I really wanted to attend but couldn’t because of our strategy study group project), a Latin Club Fiesta, and many, many, many more events.

In the Sloan program during this same time, we had a former CIA case agent turned Stanford professor speak to us last week about the CIA, and a woman who is in charge of helping non-profits and other organizations raise capital for their funds (I had to miss this too because of our Strategy project) give us a talk about leadership.

And all of that was just what was being offered at the GSB. There are a ton of other interesting events being held on the Stanford campus. On Friday, after taking our final exam for modeling (more on this later) I learned that there was a talk being given by Mohammad Younus, the Nobel Peace Prize winner who started the micro-finance craze. I wanted to go, even tried to get in, but the auditorium was full and we couldn’t get in. As I walked away from the auditorium disappointed, I learned there was an open-source conference going on the same day. But that would mean missing the finance review session and study group meeting that afternoon… choices, choices.

Now I’m beginning to wonder if a year at Stanford’s Business School is really enough to take advantage of all that’s offered here? By the time we get our bearings straight (which might be sometime in the winter quarter), it’ll be time to start thinking about what we’re going to do after the program since it ends in July.

More Exams and Grades.

We got our results from our finance and economics midterms, two exams that I and many of my fellow classmates were pretty worried about. Turns out I did pretty well on both so my worry might have been misplaced.

In both cases, we were given our graded exams back along with the numerical results. This seemed like a reasonable approach - we could see what we did right, what questions we got wrong, and where we might have some complaints about how the grading was done.

The third exam we took was our Organizational Behavior exam. Honestly I wasn’t really worried about this exam, because this seemed like a pretty easy exam (it was a take-home), it involved doing a lot of reading and writing (both of which I enjoy and tend to do OK with), it was a relatively subjective content ( a lot of the class, including the class assigned reading, was about how to influence people), and it involved a class that I had enjoyed and participated in quite a bit (50% of our grade was based on class participation and 50% was based on the final exam). Well it turns out that my score on this exam ended up being very poor: well below average!

But what was really strange about this wasn't just the grade, it was that we didn't get back the actual graded exams! So unlike finance or economics (where we could see exactly which questions we got right vs. wrong), I really have no idea if this was a fair score or not on the exam, given my answers. To get a copy of our exam back, we have to jump through a few hoops -including emailing the professor and meeting with him.

This strikes me as an extremely odd tactic (though perhaps effective in its own way). It reminds me of companies that offer rebates on their products. Of course, they know that a very large percentage of people who buy the product will never actually take the time to fill out and send the rebates back in, so it ends up being a mmick that works.

Was not returning our exams also just a time-saving gimmick by the professor? How many students would actually go ahead and email the professor asking for their exams back? Perhaps about as many as send in rebates?

Our OB class itself (which was a half-semester class) included lots of techniques for influencing people. I'm starting to wonder if these techniques, some of which are effective the very first time they’re used, are effective more than once?

For example, one technique we learned about was to individuate people when you’re asking them to action.

A perfect example of this technique was demonstrated to us by the professor when we had a survey to fill out for the class. Many of us hadn’t filled out the survey online, so the professor sent us individual emails the night before class; the emails implied (though didn’t explicitly say) that we were the only one who hadn’t filled out the survey and that it was due by “class-time”.

You can imagine that if you get an email from your professor implying that you’re the only one who hasn’t filled out a survey, that needs to be filled out by “class time” the next day, then you’re going to fill it out immediately. I promptly did this, thinking it was due in the morning, even staying up late and pushing aside a few other things to make sure it got done.

Well it turns out that I wasn’t the only one who got the “personalized email”, and moreover, the survey wasn’t needed in class the next day (turns out it was due by “class” the following week!).

Which brings us back to the question of whether this kind of technique leads to a temporary effectiveness followed by a "never cry wolf"-like situation in the future? If I got another seemingly personalized email from the same professor about getting something done by a certain time, would I start to wonder whether 1) the email was really just a mass email meant to look like a personalized email, and 2) whether I really needed to get it done by the time indicated, 3) what other influence or manipulation techniques the professor was trying to use on me? At the very least, i'm asking to see a copy of my exam!

Speaking of exams, we also had our first two-part final exam last week, for our spreadsheet modeling and statistics class. This is a pretty core class at the GSB. The first part was a take-home exam that involved creating financial models in Excel. The second portion was a 3 hour in class exam. This was our first three-hour exam, and it was grueling in its own right. Almost no-one finished early; and most were still working on it when the three hour mark came around, so I think we can all agree that it was a pretty difficult exam, given the time constraints. Standard deviations, regressions, random sampling, the central limit theorem, auto-correlation, linear programming and linear optimization, along with various statistical techniques were all tested on this exam. How did I do? I couldn’t tell you – I’ll have to wait to see when (or if!) we get our graded exams back.

Strategy Redux and Leadership vs. Management.

After midterms, we started another strategy class which lasts only for the second half of the semester. This class is at 8 am on Tuesday’s and Thursdays. Those of you reading this blog will know that I’m not much of a morning person. Despite my general start-up rule of never attending meetings that start before 10 am, I actually find this class to be pretty interesting and worth getting up for (Not to mention that some of my classmates have decided to take it upon themselves to be self-appointed policemen/women to monitor the tardiness/skipping tendencies of errant class members like me; LOL yes I haven't heard the term "tardy" since elementary school either... but I digress...back to Strategy...)

As for Strategy, the professor, Professor B. did a long term study on Intel and wrote a book about the decisions that Intel had to make along the way. There’s a famous story/quote about Andy Grove (who was the second CEO of Intel after Gordon Moore, a Silicon Valley legend) cited by our professor and by Paul Otellini (the current CEO of Intel) when he did his talk here at the GSB recently.

Intel had started out in the memory business (DRAM) and was pretty successful at it in the beginning; along the way they stumbled into inventing the microprocessor which was a smaller niche business opportunity at first, but was growing rapidly. By the early to mid 1980’s Intel’s market share in DRAM had fallen to 3% of the market, while Intel was quickly becoming the micro-processor company (with sales of the IBM PC soaring).

Some on the team didn’t want to abandon the products on which the company had started and become successful (DRAM). Others clearly thought they should focus the company on microprocessors.

Andy Grove asked a now famous question to Gordon Moore and to other team members: If a new management team came in, and took a fresh look at this business, what would they do? Inevitably the answer was that the new management team would drop the old business (DRAM) and focus on the new fast-growing business (microprocessors).

Grove then suggested that instead of bringing in a new team, the existing team go out the revolving door and come back in and make that decision, which they eventually did, and the rest, as they say, is history.

Being a technology guy, I find case studies like Intel (the largest and most successful microprocessor company) and Electronic Arts (one of the largest video game companies in the world) to be terribly interesting. But for some of my colleagues, who have no interest in high tech, this class doesn’t seem to hold the same appeal.

We also had several sessions over the last two weeks with Stanford GSB’s Dean, Bob Joss, who is retiring next year, about leadership. He spoke a lot about the differences between leadership vs. management. It’s getting late now and I won’t have time to go into everything he talked about, but one thing he said that I liked and I think might even summarize a lot of what we discussed regarding managers vs. leaders:

“Managers are assigned subordinates. Leaders start with no followers; they have to recruit them.”

Stanford GSB, Entry 5: The Second Week: Study Groups, Blue Angels, and Russians

We are now two weeks into classes (Two weeks and One Day since I’m posting this on Monday Night) – that means our “pre-term” is almost over (it’s actually only two and half weeks long), and after some wrap-up activities this week, we’ll move into the real “term” next week, when we’ll have grades and everything.

So here are some notes and observations about the second week. I’ve already given an overview of what we’ve learned in Strategy in my posting over the weekend – click on the link to entry 4 to the right if you’re interested in learning more about that class. I’ve promised to do the same for Microeconomics and Managerial Accounting, but I seem to keep getting distracted with reading assignments and study group meetings and what Professor Flanagan, our Economics professor, calls “merriment and diversions” - so will get to it eventually.

Read more!

#1: Our Study Group(s) Finally Seem to be Humming Along.

Each of the study groups seem to have settled into a pattern in the second week (this is good news, since there are only three weeks in the whole pre-term). During the first week, I heard many complaints about Study groups (no, I’m not telling who complained about whom, that’s confidential); By the second week most of the groups had gotten beyond the initial shock of having to negotiate with each other and started plowing through the large amount of reading and started working on the two group assignments we each had to present.

For example, my study group, after some negotiation, agreed to have some evening sessions in addition to the morning sessions, in order to balance the burden between the “night people” and the “morning people” (Yes, this took a little negotiation, and it’s still on-going!). We even ordered pizza in the GSB building at our first evening session – Round Table Pizza (a California chain with California-type prices - it cost us like $60 for two large pizzas – outrageous. It took me like 10 minutes to explain to the guy on the phone that GSB wasn’t an apartment building).

To counteract all the reading, we are assigning individual chapters to group members, who are responsible for creating summaries so that not all of us have to read every single chapter before every single class. (Oh wait-a-minute, our professors might be reading this blog, so what I really meant to say was that each of us is doing all of the readings assigned by our professors before every single class!)

We’ve also gotten to know each others strengths and weaknesses pretty quickly. For example: B. is great at presenting and PowerPoint, but not so experienced at accounting, L. is great at accounting and Excel but doesn’t like presenting so much, V. is really good with IRR and NPV, but likes to “discuss” strategy A LOT and thinks that 1 hour in the morning is not enough to discuss a single strategy case, while P. likes to keep our strategy discussions short and takes great notes on the whiteboard, but doesn’t like to create notes about the econ and accounting reading, J. is a good all around mediating force in the group, and, along with H., is pretty good at economics, and I’m, well, you’ll have to ask them! Though I certainly win the award for showing up late at most early morning study groups. [NOTE: names have been abbreviated to protect the innocent].

We’ve also gotten to know about each other’s personal circumstances - a few of us are married and have kids, while another needed to go out and buy his Porsche the morning of our case presentations (turns out the seller flaked out on him that day so we he was part of the presentation after all - this Porsche, if he buys it, might appear in the blog again this year I'm sure). Two of us (including yours truly) are still entrepreneurs with international businesses while at school (mine is in Pakistan, while the other is in Russia), so we often have to keep u with late night calls to our companies.

Despite all these differences, or perhaps because of them, we’ve all been willing to listen to each other and support each other [for the most part, except for the occasional yelling match like the one which broke out at one of our 7:45 am meetings one day last week – I’m sorry I can’t tell you any much more about that since I was still in bed asleep dreaming about the reading I had done late the night before ].

So the good news is: The Study Groups are finally working!

Now, for the bad news: Now that we’ve all gotten to know each other and have good habits forming in our study group, guess what? The pre-term is about over and we’ll have to form entirely new study groups and will have to go through this entire process again with the new groups starting next week. Doh!

#2: The Pressure is Off, For the Moment.

Each Study Group had to make two presentations based on “cases” – one for Managerial Accounting and one for Microeconomics. These presentations created the only “real” pressure during this pre-term (though there is lots of imagined pressure given all the readings and problems that were assigned to us, believe you me).

My study group did both presentations on Thursday, and since these were the only formal assignments we had to “hand in” during this pre-term, we’re effectively done. If you saw us on campus last weekend, or see us this week, and if we’re looking kind of relaxed, it’s not just the California weather…it’s cause we’ve already handed in our assignments and oh yeah, the pre-term isn’t graded anyways!

In general, the Sloan Fellows are a co-operative group, rather than a competitive one, at least from what we’ve seen so far. The program is designed to encourage a feeling of “we’re all in this together” from study group level up to the level of the entire class of Fellows, including the families and partners. We’ve had (at least) two alumni of the program speak to us thus far – one was a Sloan ’87 graduate who will be teaching the entrepreneur workshop later in the fall, and the other was John Foley ’97 (see the section below titled “I want to Fly Jet’s, Sir!”). They both told us how the class banded together and helped each other out. In John’s case, the class decided as a group that they would have an explicitly defined mission of “leaving no one behind”.

This is probably true of the two-year MBA’s as well, since they also are taught collaboratively to work in study groups (though we'll find out about them soon enough; they're just starting to arrive on campus this week).

But it seems that not all grad schools are like that. I heard a story from a friend of mine about one of the nation's top law schools. He said that many law school students are very competitive, because of their student rankings, and he offered up the following story: A law student that he knew, in his third year, he was ill and missed class one day.

I found this story unbelievable. So I asked him again to make sure I’d heard him right and if it was true. He insisted it was. This seems to me (to put it politely) just plain silly. I don't know if it's true or not, but if it is, then: NOTE FROM A GRADUATE BUSINES STUDENT TO GRADUATE LAW STUDENTS: Live a little.

#3: The Mind Meld has Started.

Those of you who watch Star Trek will recognize the term “Mind Meld” – but no I don’t mean that we are putting our hands on pressure points on each others faces and establishing telepathic links (though maybe there’s a little bit of that going on, I couldn’t really say) – what I mean is that the classes are starting to meld together in interesting ways.

This is one of the neat things about business school that wasn’t always present in undergrad – since the classes are all about different aspects of the same thing (business), there is definite area of overlap on the edge of each class.

In the second week of business school, we’ve started to see this already – in the Managerial Accounting Case our study group presented, we had to deal with issues of elasticity of demand, a concept from our Microeconomics class. In Econ, we have already started to deal with fixed costs and variable costs, concepts which we are heavily exploring in our accounting class. In Strategy, we started to deal with issues of Total Average Cost and Marginal Cost, which we learned about in Econ.

This is actually kind of neat, though having the curriculum so inter-related means that we can’t really blow off any of the existing subjects. In fact, our same professor from Microeconomics is going to be teaching us Macroecnomics soon enough, so I guess we have to pay attention.

#4: “I Want to Fly Jets, Sir!!”

So on Friday, at the end of our second week of class, we had a motivational talk from John Foley, who was a Stanford Sloan Fellow in 1997.

John is also an ex-member of the Blue Angels – yes that’s the Navy fighter group that does acrobatic air-shows around the country and the world. They fly F-18’s in very close formation, sometimes upside down, creating a dazzling display of technical and human prowess in their air-shows. John was there, along with some of his class members from the class of ’97, to talk to us about maximizing our experience in our year at Stanford.

After doing a stint doing VC work in Silicon Valley (he did graduate form the program back in 1997, during the dot com boom, after all) he is now a motivational speaker who shows video clips of the Blue Angels and uses lessons about how they achieve such high performance as part of his talks.

In fact it turns out that the Blue Angels fly these umpteen-ton, umpteen-million dollar jets within 3 feet of each other– yes that's 36 inches (for our international friends, that’s about a meter) apart. A direct quote: “I don’t think what the Blue Angels do is dangerous, it’s just unforgiving”. I’d say it is extremely dangerous but no doubt a very good example of high performance. I happen to be a student pilot and I wouldn’t feel comfortable if there was another plane within 300 feet of me, let alone 3 feet!

John’s speech was a mixture of inspirational stories, videos of the blue angels flying, and applying some of the principles he learned there and in his year as a Sloan Fellow. The Blue Angels, he explained, were the top one-tenth of the top one-tenth of one percent when it came to jet pilots (I believe it given some of the things they have to do). He drew the analogy that we (the Sloans at Stanford GSB) were like them in a way, the top one-tenth of 1 percent (I don’t know about this; Once you get into the real world and away from structured hierarchies like med school, law school, and the military, I don’t think you can rank people so easily). Regardless of where we fall on the map, his point was that for people that are already top performers, whether fighter jet pilots, top athletes, or in the business world, a 1% improvement can make a world of difference. That was a very interesting point I had never really thought about before.

Sometimes, though, high performance can only come with the right amount of teamwork. We saw video clips not only of the Blue Angels flying, but of how they prepare for their flights. They do an extensive briefing which includes a visualization of every part of the flight; it was pretty interesting. Being a student pilot myself, this made sense to me. They make sure that each part of their flights are coordinated, with what they call a center-point for each maneuver, and verbal and visual marks that they can look at to see if they and there colleagues are off – because at the speeds they go – over 1000 miles an hour, and the distances between them, even a few inches can be a very costly mistake.

How did he deal with all of the reading that the GSB students have assgned? His answer was: "Yes, It's a lot of reading". Then after a pause, with a knowing smile: "If you bother to do it."I thought I detected a wink and a nod there about the necessity of doing all the reading that's assigned to us.

Another element of his personal story that I found interesting was that he wanted to fly F-18’s ever since he was very young, but at each stage of his career, he seemed to get de-toured. They didn’t let him into the Air Force because of some technicality. Then later, in college, he joined the Marines. At first they didn't take his wanting to fly jets seriously, but then they sent him to flight training. After his flight training, they wouldn’t let him fly F-18’s because he was too young. He ended up going on what were considered not very great assignments. But each detour led to its own set of interesting experiences. In fact, one of those diversions, he happened to be on the USS Enterprise (no, not Star Trek, in this case the aircraft carrier) in the Indian Ocean when the movie Top Gun was filmed. He said that he’s actually one of the fighter pilots shown on the aircraft carrier at the very beginning of the movie. I found this to be very interesting because I believe that sometimes we get to where we want to go not by following the normal path, but by following what seem like diversions but turn out to be integral parts of our individual paths to success.

OK, OK, so for the Trivia Pursuit purists, I quoted the wrong 1980’s military movie in the title of this section (“I Want to Fly Jets, Sir” was actually spoken by Richard Gere in “An Officer and Gentleman”, and not Tom Cruise in “Top Gun”).

One thing I noticed is that John probably wasn’t as used to making presentations in front of international groups – he sometimes came across as, well, an American military guy who’s gone into business trying to “pump up” the troops. While this works great in a sales convention in the good old U.S. of A., that aspect of it might not have worked so well in a group that is more than one third international (don't get me wrong, the talk was quite successful overall).

In Example: In one of the videos he showed from his visit to Russia, a Russian pilot was tapping him in the chest, a bit aggressively, saying “Me Pilot, You Pilot”. He took this to mean that the guy was challenging him and when he took the Russian pilot up in his F-18, he did some intense maneuvers, intending to impress on him that our pilots have the “Right Stuff” too. This he proceeded to do by going into a 6-G climb (maybe it was 4-G or 9-G, I can’t really remember), in which the Russian went unconscious for a moment. This struck me as a little over the top and completely unnecessary, but he proceeded to tell us that after the flight he and the Russian pilot, who was a "hero of the Soviet Union", proceeded to be great friends. John spent a lot of time with the guy’s family and they even went to the ballet together during his time in Moscow. The piont of his story was that a relationship could change quickly.

#5: A Russian Perspective

We happen to have more than one Russian in our class and it’s interesting to get their perspective on Americans. When I asked one of our resident Russians about the pilot episode, he said: “that Russian guy probably only knew one or two words in English, so he was probably just trying to be friendly, that’s all.” Oops.

In another example, this weekend, a few of us went out to see the new movie, Righteous Kill, with Al Pacino and Robert DeNiro, about NYC cops investigating a serial murderer. In the movie, there is a tough Russian who, despite having been shot nine times, is still alive, though hovering near death. One of the Americans is tyring to revive the Russian, and starts yelling a Russian word, Svoboda, over and over again, alternating it with what we think is the English translation, "Wake Up! Wake Up!".

Of course, we had one of our Russian classmates, Valeriy with us, who started laughing. The word they were repeating in the movie, Svoboda, had nothing to do with “Wake Up”. He told us it means “Freedom” in Russian. *Sigh*, Hollywood gets it wrong, again.

But then again the Sloan program is pretty unique that way. We can get an international perspective from any major country simply by turning around and talking to someone from that country, since so many companies are represented in our class.

This really started to become apparent in the second week. When we did the case on Wal-mart, we were able to turn to our Korean and Japanese and Chilean friends to find out why Wal-mart’s strategy didn’t work so well in those countries.

That is one of the things I really like about being at Stanford GSB in general, and the Sloan Fellows program in particular.

In fact, I think that is “Kruto”, which Valeriy tells me is the correct Russian translation for very “Cool”!

SPECIAL DISCLAIMER: the opinions and experiences recounted in these blog entries about my year at Stanford Business School for the Sloan Program are my own personal observations and ranting. This blog is not endorsed by either the Stanford GSB or by any of my fellow Fellows.

Stanford GSB, Sloan, Entry 4: So, What did We Learn?

So what exactly have we been doing the past two weeks? As I mentioned in my previous post, we had three classes during this pre-term period – Managerial Accounting (aka Basic Math), Microeconomics (aka Graphs), and Strategic Management (aka Lots of Talk).

For each class, let me attempt to give you an overview of:
1) What it’s like to attend this class
2) What we’ve learned over the past weeks (not in detail, of course, you’ll have to pay mucho bucks to attend Stanford for that).
3) What (if anything) makes this class interesting, and what (if anything) really bothers me about this class. On this last point, I don’t mean “bothers me” in an everyday sort of way, but rather something about the overall subject which seems to give me a “nagging feeling” that while we’re learning what they’re teaching us, there are some things that are unsaid that are actually pretty important.

I'll start with our Strategy class and see how far I can get in this post:
Read more!

Strategic Management Class

This is one of the more popular courses we've taken so far, because of the free-wheeling nature of the discussion.

Professor Leslie walked into the very first class looking generally pretty relaxed. His Australian accent added to the casual nature of the classroom. He proceeded to tell us a little bit about his plan for the class: while the textbook (by Saloner, Shepard, and Podolny) would give us general principles, frameworks, and tools, the real medium for understanding strategy would be the cases themselves, of which we would read one each day.

During each class, Professor Leslie asks questions related to the case, and we contribute answers, dissecting the company that was described in the case and distilling out the features that made that company successful.

In our very first class, we were to have read a case about Equity Bank, a micro-finance bank in Kenya. These days, social entrepreneurship and micro-finance are part of the rage in business school. Ever since Mohammad Younas won the Nobel Prize for his work with Grameen Bank, this area has really attracted a lot of people.

According to Professor Leslie, many of the MBA students want to go into social entrepreneurship nowadays. Their reasoning is: if “I can make a lot of money and do good at the same time, I'm there."

While I think that social entrepreneurship is a pretty promising area, I’m worried that it’s becoming kind of a fad – with people jumping into it because it’s the “hot thing to do” – not because they are really committed to social development in the long term. This reminds me of how graduates rushed to investment banking in the 80’s, management consulting in the early 1990’s (when I graduated from my undergrad in 1992, working for McKinsey or such spinoffs was the hot thing to do), rushed to dot coms in the late 1990’s, and then back to banking and consulting in the early 2000s. Today it’s private equity and social entrepreneurship. What will it be in a few years?

It almost feels like the class is teaching itself because he is able to elicit the key points of the case. But of course, it’s not that simple at all, since Professor Leslie has a definite direction in his questions and points about each case that he wants to make.

Adding to the informality of the class is his general disarming ability to use everyday language (i.e. he talks like a real person, albeit with an Australian twist). On that first day, he declared, much to our surprise that “…we don’t really give a shit about Equity Bank, even though we were going to talk about it all day.” It was the characteristics of their strategy and the principles for their success that we were really interested in.

This would be true of all of our cases. So I’m going to give a quick summary of the cases that we studied and why (at least as far as I can tell why we studied them). Since all the cases are about real companies, you can look them up and find out about the strategy yourself if you want to follow along.


Case #1: Equity Bank of Kenya.
Why we discussed it: To see an example of optimizing an organization for serving the needs of a target market through culture.
What about it is important: One of the key ingredients to their success in Kenya was that they understood their local culture, and they tailored the organizational structure, bank policies for lending and opening accounts, and culture to serving their target market: who were the unbanked. For example, you could open a bank account without any collateral, just an ID card which is one of the few ID”s that Kenyans had. They had very little deposit requirements, and were very flexible on collateral when it came to loans. All of this allowed them to get huge growth rates vis a vis competitors like Barclay’s for a while. But now other competiors were starting to focus on this previously unbanked target market.
Why I think we really discussed it: micro-finance is hot – it wouldn’t do to not have one case about it.

Case #2: Capital One.
Why we discussed it: To show another example of how culture influences a successful strategy.
What's important about it: Capital One used heavy-duty analysis of data to find features of credit cards that were attractive to end users. One thing they did that was innovative was to combine the marketing and the credit risk departments together to optimize offers made to individuals based upon their credit history and any other information they could gather. Before Capital One, most credit cards were at the same fixed rate, without any variations. The ability to analyze data and make decisions based on what a particular prospect or customers needed was innovative in the banking sector in general. When Capital One introduced its balance transfer and low introductory nterest rate, its sales went through the roof, making it a major player in the US consumer credit market virtually overnight.
Why I think we really discussed it: The CEO is a Stanford GSB Alum, and this is a good example of a company that uses very analytical decision making.

Professor Leslie told us in this class that Business Schools in general, and Stanford in particular, likes to think that success can be taught using analytical frameworks and that it relies not just on “gut feelings and “instincts”, which is one of the reasons they really like to use the Capital One example. I’ve touched on this topic on the blog before and will again as it is very near and dear to me. In fact, I think that gut feelings and instincts probably played a very significant role in both the Equity Bank and Capital One cases. In Capital One, the CEO was out trying to get many banks to sign onto his ideas while they all told him he was crazy (according to the case, one banker threatened to throw him out of the window). After he finally got Signet Bank to fund his enterprise, it took a lot of “churning” of ideas ideas and markets and analysis before they came up with the one that worked. In fact, they were very close to having the plug pulled on their group because it hadn’t shown any results for a few years when the killer tactic happened.

This is an underlying issue that’s been nagging at me as I’ve arrived at Stanford Business School – can success really be taught? Especially in the case of corporate strategic decisions? Most entrepreneurs operate almost entirely on intuition. Most MBA’s try to operate on analysis. Is there a middle road between these? We’ll talk about this more in the year to come, I’m sure.

The next two cases introduced us to the concept of explorers (“innovators”) and exploiters (who do something so well that they are more efficient at it than others).

Case #3: Wal-mart
Why we discussed it: Wal-mart is the biggest and most successful retailer in the US (and perhaps the World).
What's important about it: In this case, we were introduced to the idea of organizations that optimized operations as a competitive advantage, and to the idea of an evolving strategy. When Wal-mart first started, they targeted in towns where many of their competitors didn’t have stores. This idea of targeting an underserved market is one pattern that has come out in many of our cases. Then as they grew, they virtually created the concept of “economies of density” – by having stores close enough to each other they could supply them once and for all. Finally, as they grew and started to appear in areas with competition, they started to get buying power from their suppliers, and this added to them being able to negotiate the lowest prices, as did their heavy investment in technology. Their distribution centers, delivery trucks, and inventory were far more optimized than their competitors. One issue that came up was about internationalization – they weren’t very good abroad. Since we had students in our class from Japan, Russia, UK, Korea, India, South America, and other countries, we were able to get perspective on the Wal-mart strategy in these other areas and why it didn’t seem to work as well.
What we really got out of it: Wal-mart, while doing some innovative things, is primarily focused on operating better. Many of their ideas were just copied from somewhere else (Sam’s club, for example, was a copy of earlier large membership type clubs) or out of necessity more than foresight. Even their innovative distribution strategy came about because no one was willing to spend time supplying them. This is a good question to ask in any organization: are you an innovator or an execution oriented organization (explorer or exploiter?)

Case #4: 3M
Why we studied it: 3M is a great example of a company that encouraged innovation.
What's important about it: The culture of this company for innovation, at least from the case, was very interesting. They started back in the early 1900’s and have had a large number of products invented in their labs. They even tell stories of people (engineers) who were told by management to shut down a project because it didn’t show promise, but who continued to work on it anyways. Well before Google, they introduced the idea of bootleg time – spending 15% of your time on a project outside your immediate scope of responsibilities. They even had a requirement that 25% of their revenues come from new products (products which had been introduced in the last five years). If you think of the size of 3M ($14 Billion at the time of the case”), this requires, in the words of Professor Leslie, a “staggering amount of innovation”.

As we talked about culture, we were introduced to the ARC framework describe din the text – A=architecture, R=routines, and C=culture. This is a framework for talking about how an organization is structured formally vs. informally. Professsor Leslie spoke to us about how architecture of an organization can be changed very quickly – with an email you can change who reports to who. But cultures are much more difficult to change because they are much softer and often implicit. 3M in particular had a culture of innovation that rewarded those people (usually engineers) who came up with bright new ideas that led to products. Of course this culture of innovation sometimes led them astray to be doing too many things and not doing some things really well.

That concluded our looking at the internal context of individual firms. In the second week, we started looking at industries rather than just at individual firms. This led to doing industry analysis using Michael Porter’s now famous five forces – Buyers, Suppliers, Substitutes, Barriers to Entry, and Rivalry. There’s a lot about these in the internet.

Most of business schools and teachers consists of slightly nerdy people, said the Professor, but Michael Porter has become somewhat of a “rockstar” among those who follow business school type guys. In this week we studied:

Shimano. We studied Shimano and the industry for high end road bikes. Shimano provide some of the key components used by Lance Armstrong in his bikes when he won all of those Tour De France victories. Shimano is also a great example of how one firm (a supplier in this case) can capture much of the value of an industry’s value-chain (what does value-chain mean? I’m not entirely sure but it has something to do with suppliers and buyers). Shimano, like “Intel inside” in the PC industry has developed a brand for their integrated set of components that fit into a Bike, and Bike Manufacturers basically all use the Shimano components (with some slight competitors). I knew nothing about the bike industry so this was an eye opening experience that one firm had caputred so much of the value from the High End Biking industry.

Rockwell. This was by far the most boring case – and I think that is the only statement that none of my classmates will argue. It was about the market for water meters in the 70’s and 80’s. This company had an innovation that they used to their advantage for slightly better and more durable water meters which were sold to munipicalities throughout the US. Despite many of us starting to yawn, Professor Leslie called this an almost “perfect” industry to make money – low supplier power (raw materials were the inputs), high switching costs, and a very cozy relationship between buyers (municipalities, of which there are many tens of thousands) and vendors. There was pretty significant barriers to entry as well. Turns out this was a very profitable industry, just not a very exciting one.

One interesting thing we discovered during this case was professor Leslie’s ability to estimate, based on the economies of scale, the number of likely serious competitors in a market. If you took the total market size, divided it by the costs and units produced by a Bronze foundry (which was an important barrier to entry for new firms) you likely came up with an oligopolistic structure.

Dell. We had a case about Dell computer and the rest of the PC industry from the late 80’s to the late 90’s, and some of the challenges faced by Dell and others in this industry, including players like Compaq, IBM, HP, and Sony. During this time period, Dell had lower prices than most and was perceived as better quality than most as well. This brought up the idea that all the many millions spent on branding could be part of the barriers to entry for other firms to get into the marketplace. We also look at how to estimate the margins and costs for individual parts of the manufacturing process.

Airborne Express. This case looked at the third largest overnight shipping company in the US, behind Federal Express and UPS. Airborne became successful by keeping their costs lower than either of the other two, and focusing in on a market that they felt was underserved: businesses of a certain size. By ignoring the consumer market entirely, and developing long term relationships they were able to focus in and be successful in this market. Airborne was also an example of a company with lower fixed costs but higher variable costs than its competitors- meaning they used people to do a lot of the sorting that Fedex used computer software to do. This meant airborne didn’t have to invest, like Fedex did, hundreds of millions of dollars in software.

Finally, on the last day of our first two weeks, we talked about internet companies – eBay, Google, Yahoo/Overture (which is what the written case was about) and Facebook, The concept that was introduced was the idea of DSIR (demand side increasing returns), better known as the network effect being a barrier to entry to others. The perfect example of this was eBay. Once it had a critical mass of buyers, the sellers wanted to go there. Once there was a critical mass of sellers, the buyers wanted to go there. Once buyers and sellers both spent a lot of time on eBay and built up reputations in each area, neither wanted to move.

The network effect requires there being a coordinated effort of people to really move off of one company’s platform and onto another. The case for the day was actually about Overture, an precursor to Google’s AdWords, which sold advertising based on keywords on searches. It was very successful in the early days, because it partnered with Yahoo and others to get the traffic. According to Professor Leslie the company’s expertise quickly became “how to receive checks and deposit them in the bank” because the money was flowing in so quickly. Of course Google extended the idea and perfected it, leaving Overture (and Yahoo, which acquired it) in the dust.

And this took us on a discussion of Facebook and the changing landscape of Social Networking and whether it has effective DSIR or not. I’ll have a lot to say about this landscape since I have some experience in social networking companies, but this post has already become very long. I guess we’ll have to leave what we learned in other classes for another day!

So I’ve said a lot about what we’ve learned. I like this class a lot – particularly the case and free discussion format. I’ll even venture that this has been my favorite class, thus far at the Stanford Business School.

However, the thing that’s been nagging at me is that we (and Business Schools in general) seem to be brilliant at analyzing a firms strategy and figuring out what their competitive advantage is – in hindsight. The question is by ignoring intuition and gut feelings, and doing the MBA-type analysis, are they really blinding themselves from being able to effectively study how firms create competitive advantage and future using foresight?

It’s a loaded question so I’ll leave it out there for now.

And once again this post has gone long, so i'll have to talk about the other classes in other posts...

Stanford Business School, Sloan Program, Entry 3: The First Week of Class

We just ended our first week of classes at the Stanford Graduate School of Business (GSB) in the Sloan Master’s program. The Sloan program, as I mentioned in my first post about arriving here, is a one year, full-time Master’s program that is kind of an “accelerated” MBA for people who have significantly more experience in the real work world.

Although it’s only been a week since classes started, it feels much longer – that’s because during this “pre-term” we have the same three classes each day, every day, for three weeks before the fall quarter “officially begins” at the end of September.

The three classes during this pre-term aren't graded. Professor Flanagan, our econ prof, told us on the first day of class that there are three distinct languages he could teach the class in – words, graphs, or mathematics.
Read more!

I would actually say that’s a pretty good way to describe the three classes that we’re taking during this pre-term:

• Managerial Accounting – mostly math (budgets, income statements, balance sheets – the math itself isn’t that difficult but knowing which number to plug in where can be tricky)
  




• Microeconomics – mostly graphs (demand curves & supply curves – they look pretty simple – two lines on a graph, but reveal much more than meets the eye)
  




• Strategic Management – mostly words (in-class discussion about real-world company case studies on what made them successful).
  

I’ll say a lot more about each of these classes below, including what we’ve learned (which is quite a bit, especially for only one week!), what our professors are like, and what I think of the material. But first, some general observations about the first week of class:
What’s it like to take classes at Stanford Business School?

It’s actually very unlike any of my undergraduate classes. For one thing, the classrooms aren’t big lecture halls, nor are they little breakout rooms. They’re more like a mixture of a trader’s pit in a stock exchange, and a movie theater that has stadium seating.

There are rows of tables and chairs, each one slightly higher than the last one, with the professor standing in the middle of the room. It’s also a lot more high tech than I remember undergrad classrooms being - instead of blackboards, there are white-boards, and there is a built-in projector and screens for showing slides and videos from a laptop.

Moreover, we have very nice plush green chairs, and the tables on each row have slots in the very front for our name-tags (Nice, no worrying about my butt getting sore after sitting in those old wooden chairs we had in undergrad for an hour and a half).

Taking classes is a little bit like a cross between high school (“Suzy, you sit here, next to Johnnie, that’s your assigned seat”) and the United Nations Security Council, with our nametags very prominently displaying who we are and what delegation (er, I mean company) we are representing. In fact, this last bit about the UN is doubly true in the Sloan Fellows program since almost half of our classmates are international, so we can get a pretty good perspective on an issue from around the world.

What is a Case Study Anyways and Why Are They So Important?

In Business School, much of the curriculum centers around Case Studies. WhenI first heard this term, I thought it sounded a little mysterious, since during undergrad, we only had “problem sets”, “exams”, and “group projects”, but never "cases". There are, as far as I can tell from the first week, two kinds of “case studies” in business school:

· A problem set disguised as a “case”. In much of our classes, including accounting, microeconomics, and our modeling with excel class, what biz schoolers (er, I mean, GSB’ers) like to call a “case” is really just a problem scenario followed by a set of questions about it.

Think of those old wacky groups of SAT questions that start with some kind of introduction: “Suppose Tom is in Denver and Fred is in Houston. Suppose also that Tom starts jogging east at 20 miles per hour, and Fred starts jogging west at 20 km per hour.” After the introduction there is a group of questions associated with the scenario: “When, if ever, will Tom and Fred collide with each other?” and “If so, which city will it be in?”.

OK…OK, maybe SAT questions weren’t quite that outlandish, but you get the idea. Now think of pretty much the same thing but with a company as the subject of the scenario and not dorky guys named Tom or Fred. Simply making the case about a company makes it seem like we’re studying “real business” and handling “cases”, not just really learning arithmetic, graphs and spreadsheets. One Example is our Davis Kitchen Supply Case that we got this week in our managerial accounting class, which started with a company that makes ovens. In fact, it makes 6,000 of them per month (with the recent housing slump, not sure exactly how they stay in business, but that’s beside the point). The costs associated with making these ovens (actually, they weren’t ovens at all, they were stoves; oops!) range from $50 for variable labor, $60 for fixed overhead, to $95 in marketing costs, including variable and fixed costs. That’s the “setup”.

Once the scenario is set up, we are supposed to answer a group of questions about them. Suppose some slimy mafia guy came to Davis Kitchen Supply and said that he could “take over” making their stoves for them, at a cost of only $215 per stove. Should Davis Kitchen let this guy (ok it wasn’t really a slimy mafia guy in the case, I made that part up) take over manufacturing of those stoves?

I think you get the idea. Basically you have to add up all the variable costs, and fixed costs, and figure out at which price it makes sense to outsource stove-making vs. doing it yourself. The econ “cases” involve a little less math and a little more graphing of supply and demand curves– for example there was one this week about US farming associations telling their members to dump (or simply destroy their wheat or rice or corn or fruit crop) in order to get the price of that item to stay high. We had to figure out whether this was a good idea or not, and under what circumstances it would make sense to do these.

The only real complications in these cases is 1) figuring out the right answer, and 2) making a presentation to the class (using powerpoint or excel) as a group (“study group”) about the answer that you found. We’ve had some pretty creative ones already.

· A full case study of a real-world company. The second group of cases are more like the “case studies” that I had been told about by my buddies who had already gotten their MBAs. Before I got here, I thought it odd that you could learn much by sitting in a room where the students all opined with each other about what they think a company should or shouldn’t do. But this has actually become the dominant form of teaching in the best Business Schools today.

These case studies are usually put together by Harvard Business School, or by Stanford GSB, range from 10 to 15 pages, and include the fully history of a company and some of the challenges facing the CEO of the company. In the first week alone, in our strategy class, we did cases related to Wal-mart, Capital One and a few others. It turns out that talking about the strategy of real life companies is actually quite fun. In fact, it hardly feels like we’re in school at all … so Case Studies like this give us a level of engagement that other subjects don’t.

What is a Study Group and How Late Do You Study?

So I finally figured out what a study group is – a pre-assigned list of “friends” that you have to work with during each term that cuts across all classes in that term.

In fact, I’m beginning to think that working in study groups is not just about the classes themselves, but about learning how to work with diverse groups of people that we had no choice in being involved with. This must be a common case in the business world; but as an entrepreneur, I have almost no experience at working so closely with people that I have no control over, so this has been an interesting experience.

Part of the reason for a study group is so that you can all help each other get through the term – by preparing for class together, sharing notes, and doing group assignments. However, thus far I have to say that the study groups seem to be as much of a source of stress as the classes themselves – almost no one I’ve talked to is really happy with the way that their study group has decided to do everything, though everyone (including me) likes some aspect of what their study group is doing.

One fundamental question each study group had to answer was how often it’s going to meet and when. For our group, which was larger than other groups, this little question, which should be easy to answer, has been the hardest one to answer.

A few of us in the group, like me, are not morning people. As an engineer and a writer, I tend to go to sleep well after midnight every night, so I would prefer evening meetings. In one of my software companies, I even had an explicit rule: “no meetings before 10 am”.

But, many of the members of our study group are morning people, so they would prefer to meet before our first class in the morning, which is at 9:15 am. So something like 8:15am. Ouch!

We decided on what seemed like a good compromise, our first meeting would be in the afternoon, after the first day of class, which was the Tuesday after Labor Day. After all, the pre-term wasn’t being graded, so we could afford to take it easy in the mornings, right?

Wrong! Before I knew it, while I was wandering around the San Jose Art Festival on Labor Day (Yes, this would mean I was enjoying myself and relaxing before we started our high pressure classes with no grades), my iphone started buzzing with emails from study group members about how they’re worried about all the reading over the weekend, and want to meet at 8:30 am to discuss it (Yes, this would mean we were doing study group meetings before classes had even started; I guess we were really worried about not being prepared for our classes with no grades).

The next day, because the group didn’t have enough time to argue every point in the reading from every angle, the time was moved even earlier, to 8:15 am. The next day, we had suddenly somehow decided that we were going to meet even earlier, at 7:45 am every single day! Double-Ouch!

I came to business school with memories of my undergrad days - staying up late, ordering pizza, discussing problems and working collaboratively with my classmates, with more than an occasional philosophical discussion thrown in each night.

I had heard that the Bill Clinton White House was kind of like that – with all night policy study session and lots of creativity and free flow of ideas. When George W. Bush came into office, this changed, since Bush rarely stayed up past 10 pm.

I suddenly felt like I had shown up for work thinking I was going to work for Bill Clinton, but when I met my boss on the very first day, it turned out to be George W. Bush instead! Triple-Ouch!

Let's just say I missed more than my fair share of early morning study group meetings in the first week; in the real world I wouldn’t show up at 7:45 am even if I was being paid good bucks to do so – and in this case I’m paying Stanford, not the other way around.

Well not to belabor this point, but I get the sense that our class is really taking this pre-term a little too seriously. I was speaking with one of the Sloans from last year and he said that we’ll have plenty of pressure in the fall – we should be enjoying the pre-term, perhaps enjoying the world famous Stanford Golf Course.

Actually, that is exactly what a few of our classmates did on the Saturday after our first full week. See, at least some of our classmates in Business School know how to relax: Sleep in, play a few holes, enjoy the California sunshine. Right?

Wrong. it turns out that their tee time was set for 6:30 am on Saturday (Yes this means that they had to get up even earlier on the weekend than on the weekdays!).Quadruple-Ouch!

Anyways, after a little bit of early heart-burn our study group has now settled into a rhythm. Now that some of our meetings are in the morning and some of our meetings are in the evening, I’m relatively happy with our study group. We’re also finding ways to be more efficient in our overly high reading burden.

What Have You Read for me Lately?

For someone with an engineering background (we’re called “Quants” in B-school, as opposed to the “Poets”), Business School isn’t really that difficult, though it can be hard. I mean hard in the sense that adding up 10,000 numbers isn’t conceptually very difficult. It just takes a lot of tedious work no matter what path you take – whether you type in 10,000 numbers into a spreadsheet, into a calculator, or calculate them by hand.

In the same way, we are required to read several chapters of our textbooks, do some problems, read and review cases, and be prepared for the next class, every single day. In querying the Sloan administration, I was told that the program is designed so that it’s really not possible to read every single thing we are supposed to read by the time we need to read it, while still having a life.

So, the reading can be a great source of stress, if you let it be. But that’s what the study groups are for. In our group, one guy had gotten an MBA before and told us that it might be helpful if we break up the reading, assigning different chapters to different folks, who would prepare summaries for the rest of the team of their assigned chapters.

I think the reason they designed it this way was that they wanted us to find ways to juggle the reading by prioritizing what is essential to study, and what can just be read casually. I actually think that this one of the keys to business school success.

What we learned.

OK enough of my general observations. Let’s get to what we actually learned this week. Wow, this post has already gotten long – and I haven’t even started on my reading for this weekend. I’ll have to tell you what we learned in the next post...stay tuned.

SPECIAL DISCLAIMER: the opinions and experiences recounted in these blog entries about my year at Stanford Business School for the Sloan Program are my own personal observations and ranting. This blog is not endorsed by either the Stanford GSB or by any of my fellow Fellows.