Finishing the first term felt like a real accomplishment. One of the things many of us don't do enough at HBS is reflect on what we've learned. I thought I would take a moment to capture what my first HBS classes taught me...
Finance 1- My takeaway from this class was basically about valuation. The fundamentals of how to value companies, projects, and assets. As consumers, we value things in very different ways. For example, we may buy an iPod for $99 because it's on sale or because it just feels like it's worth it. If we're going to rent an apartment or buy a house, we look at nearly identical units and compare the recent selling prices. Projects, companies, and assets though are a lot more complicated, and often much more unique (not to mention much higher stakes). For example, during the semester Disney bought Marvel Comics for $4 Billion. How did they settle on $4 Billion? Why didn't they pay $3.5 Billion or $4.5 Billion? That 500 million dollar difference is very substantial, and while human dynamics and negotiations are probably a significant part of the equation, the art and science of valuation is fundamentally critical. To me, that's what Finance 1 was all about.
FRC (Financial Reporting & Control) - A class many people simply label as "accounting," but in reality, is much more schizophrenic. The term started with basic accounting principles and applications (balance sheets, income statement, cash statements, t-accounts, etc.) but zigged and zagged into incentive structures, roles of auditors, management compensation structures, etc. The unifying themes were how to measure and analyze performance, how to design measures that drive performance, and how to best communicate those measures with the capital markets. The class is definitely not preparing anybody to be a CFO, but would at least do something to help one understand and communicate in CFO language.
TOM (Technology & Operations Management) - A class about how to use operational design to improve any process. Most would associate this concept with manufacturing, but as this class continuously emphasized, operational concepts can be applied anywhere. Our cases represented a wide variety of topics, such as the restaurant Benihana, a cranberry production case, and a consulting firm. My personal takeaway was that profit can come from a lot of places, and operational design improvement is often overlooked as a source of profit. Managers tend to look at sales growth, human resources, and business development to squeeze out profits, but improved operational design can be a great source for increased corporate profits as well. However, since cultural change is often necessary to achieve true operational design changes, this can be one of the more challenging endeavors for a company, and is therefore often neglected.
Marketing - I found this class to be the most interesting overall. Before HBS I used to associate marketing with advertising, but of course, advertising is merely the facade of marketing. In this course I learned how businesses approach customers and competitors, and how products are defined for the market. We mostly used the "Four P's" as our framework: Product, Price, Place, and Promotion. Take Coca-Cola for example:
- Where does it want to push its product most? In supermarkets? Vending machines? Spectator sports? Restaurants? That's where is has been doing it. But it could also do home delivery (like water companies), or through the mail (like Wine clubs), etc. The latter options may sound silly to us today, but that's only because we live in the world that Coca-Cola has successfully carved out for itself - and that is called "Place" - where are you are going to sell? It's not so obvious for every product (think for example software).
- What about what form will it be sold in? Cans? Bottles? Bulk or individual? Perhaps it will be sold in a powdered form? If that sounds crazy - look at Gatorade's powder success. Or perhaps they want to just license and sell the syrup - AKA restaurant and food court machines. These questions revolve around the question of "Product." To add to the complication, the Product is also more than the physical manifestation, but also the experience it represents. If you look at Coca-Cola commercials, you will notice they rarely push how great tasting or refreshing Coca-Cola is, but that it brings happiness, and that it brings people together, etc. So is the product really a soda, or is it a smile in a can? What is the product?
- How much do you sell your product for is an obvious business decision. However, what pricing model you use is not so obvious. A few years ago Coca-Cola created a vending machine that increased the price when the temperature was hotter. This was met with public outrage, and cost Coke a lot of public relations points. The idea was immediately cut. However, we already pay different prices for Coke in different places. We pay more in convenience stores than we do in Supermarkets. We pay more in ball games than we do in restaurants. We even already pay more for vending machines in different places. For example, on average, Coke costs more in vending machines in subways in the inbound areas than it does in the outbound areas. When you're already in the outbound area, alternative purchasing points are accessible, and thus the law of supply and demand is in effect. All these questions are just the tip of the iceberg when it comes to the question of "Price." Not to mention questions of pricing to distributors, bottlers, etc. etc. etc.
- Will Coke sell more by increasing consumer demand through commercials, or will it sell more by giving supermarkets greater discounts and winning more shelfspace away from Pepsi? These are both forms of promotions. In general, we studied a lot of "push and pull" strategies. In a push strategy, the product is pushed more onto the consumer by providing retailers the promotion, thereby putting the product at eye-level shelves, or putting out promotion signs at the retailer, or giving reduced prices at certain stores. A pull strategy creates demand at the consumer level, so that the consumer comes to the store looking for that product. In this strategy, more is spent on creating brand awareness and demand. This, and many other topics, touch on the question of product "Promotion."
LEAD (Leadership & Organizational Dynamics) - A class I thought would be relatively boring at first, but proved to be one of my favorites (largely perhaps because of a great professor). As one of the few students in the class with real leadership experience, the dynamics were very different than the other classes. The personal challenge for me was how to convey my own experiences and add value to the class, while also staying open minded and listening respectfully to ideas by those who have no significant leadership experience. My favorite module in the class was how to impart change on large organizations. Examples were General Electric, Nissan, and Scandinavian Airways. Overall, this was perhaps the most complicated and intensely focused course of the five, since it fundamentally studied humans and psychology, which is infinitely more complex than marketing and accounting.
I'm looking forward to term 2 classes, which will be Finance 2, Leadership & Corporate Accountability (i.e. ethics), Business & International Economics (i.e. macro-econ), Strategy, and The Entrepreneurial Manager.
I hope everyone is having a great holiday season!