Optimizing proxy measurements for you and your business | MBA Learnings

In our Operations Management class, we discussed how Wilson tests the durability of its tennis balls. It does so by subjecting them to pressure and checking for signs of contortion in the shape of the ball.

It isn’t possible for Wilson to put each ball through hours of tennis hitting and then confirm it is ready for sale. So, it works with a proxy measurement. It is unclear if customers can tell the difference between a tournament standard ball and a non-tournament standard ball. Perhaps professional tennis players can.

There isn’t necessarily an issue with this proxy. It seems to have largely worked out OK for them. But, it is a proxy measurement nevertheless. And, it is foreseeable that there might come a day (if it isn’t already here) when the distance between the proxy and the needs of the customer grows and Wilson fails to adapt simply because it is optimizing for the wrong thing.

Proxy measurements such as the Wilson durability test are critical in Operations. Proxy measures are critical in our life’s operations, too. They’re our attempt at simplifying a complex world and making our lives easy to navigate.

Searching for ‘The Good Life’ | MBA Learnings

Last month, Professor Cast, Professor Corona, Professor Murnane, Lexie Smith and I launched a three-part workshop series we called “The Good Life” sessions. Our idea was to help our classmates and friends breakdown this life concept into three meaningful questions:

What do I value? (Week 1)
How do I find my personal mission? (Week 2)
How do I create an action plan to live a life consistent with this mission? (Week 3)

Lean operations in real life | MBA Learnings

In the past week, we’ve been deconstructing the idea of “Lean operations” in our Operations Management classes. Lean, for the uninitiated, is a way of operations pioneered by Toyota’s legendary founder Taiichi Ono. It was simply called the “Toyota Production System” until academics from the west re-branded it as “lean.”

Lean embraces the idea of “kaizen,” or continuous improvement. The process behind lean improvement is illustrated in the image above.

The concept illustrated here is that having large amounts of inventory can hide the issues in the system. The best way to understand and fix problems is to gradually lower the inventory level. As soon as we do that, we start bringing problems to light and can begin the process of continuous improvement. It is critical that we don’t bring the water down all at once, as it is impossible to fix everything together. In fact, yesterday’s solution is, very often, today’s problem. So, it has to be one at a time and it has to be continuous.

Getting mission statements right | MBA Learnings

We recently looked at a few mission statements in our Values Based Leadership class:

Wal-Mart: We save people money so they can live better.
Burlington Northern and Santa Fe Railroad: Our vision is to realize the tremendous potential of the Burlington Northern and Santa Fe Railway by providing transportation services that consistently meet our customers’ expectations.
Dow Chemical: To constantly improve what is essential to human progress by mastering science and technology.

As we went through these statements, our comments were around the following ideas:

A letter to an incoming MBA student | MBA Learnings

Around this time last year, once the realization that I was going back to school sunk in, the immediate question that followed was – how do I get prepared? I was, after all, going to be spending in excess of $200,000 without accounting for the loss of income in the next two years.

This had better be worth it.

My plan of action was to do three things – read books on the topic, check out the blogosphere and speak to as many people as possible. So, I did just that.

I found three resources useful – the “Case Studies and Cocktails” book was pretty hands-on, the famous Stanford letter to incoming students was reassuring and the 108 tips on the MBA Excel blog was very useful from a logistical point of view.

I did, however, feel a few things were sorely missing.

And, on top of that list was a way to “frame” the MBA experience. Great frames help us cut through the noise and understand what matters. And, given we likely have a hundred thousand capable folks jumping into expensive MBA programs all over the world, I found myself wondering if we could do a bit better in preparing them for the journey.

Luckily, I stumbled upon a first version of the “frame” I craved in my first three weeks thanks to two wonderful people – an insightful professor who taught us business analytics and a dear friend. Their insights made all the difference to my experience in the past eight months, and I’d like to share them with you.

As with my essay on internship recruiting, I’d like this to be comprehensive, so this will be long.

I hope it will be worth it.

Lessons learned from internship recruiting | MBA Learnings

I hated looking for a job in my final year at university. It is one of those profoundly painful processes that I really wouldn’t wish on anyone. It seemed to bring to surface all my insecurities and really made me question if I had done anything of note in the past 20-odd years of my life.

So, when I decided to study again, one of my objectives was to understand how best to approach looking for a job. We’re in an age where we’re constant job seekers. Whether it is seeking an internal transfer within a company we work for or whether we’re looking for a role in a different company, it is clear that our age is one of many jobs, roles, careers and companies.

In that sense, looking for an internship at school felt like a perfect laboratory to test how this process ought to be approached. I’ve decided to break the whole process down into three main steps, catalogue my process and then share what I learned. I’ve attempted to bring it all together in one post. It is long. I hope it is worth it.

Rules vs. Guidelines | MBA Learnings

One of the more powerful ideas I’ve learned in my ‘Values Based Leadership’ class is understanding the power of using rules vs. guidelines in setting culture.

Culture is by far the most powerful change tool that exists. If you really want to change behavior, it is the culture you should turn to. The culture is the mixture of norms and rituals that act as the default behavior in every group or organization. There are rule-based cultures and guideline-based cultures. There are advantages and disadvantages to both. And, to analyze the difference, I thought I’d examine how I’ve approached designing my own culture.

Dropbox peace of mind | MBA Learnings

If I had to summarize my learning on pricing from my Microeconomics classes, it would be: avoid price competition like the plague. And to do that – differentiate, differentiate, differentiate.

We discussed Dropbox’s move last year to lower prices to compete with Google, Apple, Microsoft and Amazon. The big question was whether this was going to be a race to the bottom in a future where storage would inevitably be free.

Now, Dropbox is one of my favorite products. I have been a user since the early days when they used to be hosted on “getdropbox.com” and their brand had nothing but positive associations. All my working files sit on Dropbox, and ever since I did that three years ago, I’ve never had to fret about whether my working files will ever be lost.

So I thought I’d put together two recommendations for Dropbox based on what I’ve learnt in Marketing and Microeconomics in the past few months.

There are no stupid questions. Just ask a Nobel Prize winner. | MBA Learnings

In our first Microeconomics class this quarter, our professor spoke of her experiences presenting research to audiences that included Nobel Prize winners. She noticed that the Nobel Prize winners were most often the ones who raised their hands and asked questions. Some of the questions could be perceived as “stupid” questions as they occasionally sought to clarify some of the most basic concepts of the discussion.

When she observed this pattern repeat over and over again, she realized it was that willingness to learn and dig deep that made the Nobel Prize winners special. They might not have understood the topic when they started, but they saw to it that they didn’t stay uninformed for long. Our professor’s message to us was to make sure we asked questions about any concept we didn’t understand in class.

How relevant costs influence decision making | MBA Learnings

Fred Wilson, partner at Union Square Ventures and investor in most networks we know and love (Twitter, Tumblr, Etsy, Kickstarter), had a great post on sunk costs this week. It is a must read. My favorite part is below:

“This is a hard thing to do. It is human nature to want to recover the sunk costs. We face this all the time in our business. When we have invested $500,000 or $5 (million) into a company, it is really easy to get into the mindset that we need to stick with the investment so we can get our money back. If we stop funding, then we write off the investment almost all of the time. If we keep putting money in, there is a chance the investment will work out and we’ll get our money back or even a return on it.

Even though I was taught about sunk costs in business school twenty-five years ago, I have had to learn this lesson the hard way. Most of the time that we make a follow-on investment defensively, to protect the capital we have already invested, that follow-on investment is marginal or outright bad. I have seen this again and again. And so we try really hard to look at every investment based on the return on the new money and not include the capital we have already invested in the decision.”

Do defaults save lives? | MBA Learnings

A powerful study by Goldstein and Johnson in 2003 explored the relevance of defaults in organ donation. We discussed their findings and the implications in our class on “Values based Leadership.” Most countries have big problems with organ donations due to the large gaps between the number of donors and the number who need organs. However, this graph illustrating the difference in organ donation rates in the European Union is telling.