Tuesday, December 28, 2010

Start Ups at HBS

While most (i.e. 99%) of HBS students don't start their own business coming out of business school, the school likes to publicize that about half of the HBS alumni at some point in their career get involved in a start-up, and about 5% may join a start-up after graduation.

The HBS Rock Center for Entrepreneurship is a great resource and the school in general provides many great resources for those interested in starting a business. While highly encouraged, it is seldom followed because 1) It's really really really hard, and 2) The opportunity cost of not accepting a job out of school is very significant. Many students claim that they are also burdened with debt and therefore cannot start a business, although I would say this is more of a way for somebody who is naturally risk averse to justify it to themselves. It's tough to walk away from a nice signing bonus and lucrative compensation with a prestigious firm in return for a mountain of debt, uncertain future, and a diet of ramen noodles.

There are of course students that make use of the resources offered at school, mostly mentorship and networking, and experiment with start-ups while still in school. These are often very low capital business ideas that students can use to experiment with and incur very little downside. If the business gains traction, the student can pursue venture capital or other ways to grow the business. Many of these businesses are built in conjunction with a "Field Study" structure sponsored by a professor, and therefore the students also receive course credit.

I'll list businesses started by classmates of mine in the Class of 2011. I'm not aware of an official master list anywhere, but these are businesses I have come across through personal discussions and meetings. There could be more, and I will keep a running list on the left column of this blog from here on out.

Class of 2011 start-ups (not complete list):
  • SaferTaxi - Helps rate, share, and schedule taxis
  • Athena Advantage - Provides personal security training my military special ops
  • Pushpins - Provides instant grocery store coupons through a smartphone app
  • FashionStake - A place to discover new fashion designers and to purchase from fashion collections
  • K+E Advisors - School admissions consulting
  • CleverBootz - Travel planning tools
  • KlickPlan - Group coupon discounts and event planning
  • Farm Builders - Provides long-term financing and agricultural management services to support tree crop farmers in West Africa
  • GobbleBus - An online bus hub for transportation planning
  • SenseCheck5 - Online users can sample new products/services for free or deep discount in exchange for their feedback
  • Crooster - Advanced survey designs
Some may be surprised by the breadth and variety of these businesses. Needless to say, it is not easy to start your own private equity fund or investment bank at business school, and the above (for the most part) represents relatively straightforward and low cost business models that students can build in between class and on weekends. Some are more developed than others... some are profitable and some are still building their site.... so please recognize that the above are works in progress.

I don't know how many businesses were launched last year, but I'm familiar with four that are still going:

Class of 2010 start-up survivors (not complete list):
  • TroopSwap - A private marketplace for US military personnel
  • LearnBoost - Tools and gradebooks for teachers
  • RelayRides - A neighbor-to-neighbor carsharing program
  • Birchbox - Delivers beauty sample products by mail
Business Plan Competition

In April of every year HBS hosts a business plan competition. While I wouldn't say it has been a great predictor of who might succeed or fail, it is a great showcase of ideas and more than anything encourages students to improve their business models and offers solid exposure and feedback. A list of past winners can be found here.

Where this leads to...

While some might, it's unlikely that many of the current Class of 2011 start-ups will lead to blockbuster businesses. They do however provide a great learning platform for entrepreneurs to refine their skills and undoubtedly many of those entrepreneurs will be at the forefront of new ventures in the years to come. When I think of successful start-ups by HBS grads in recent years, most were started after some post-MBA work experiences. Off the top of my head, these include companies like TheLadders.com, Care.com, Military.com, and Gilt Groupe. Gilt Groupe is a fashion clothing sample sale site launched in 2007, and now supposedly worth well over $500 million.

I hope this has helped shed some light on start-up opportunities at HBS, and I would guess similar articles could be written about other business schools.

And with that... I am about to board my plane to India. Good luck to all the round 2 applicants!

Monday, December 27, 2010

Post-9/11 GI Bill for MBAs Update

The following Post-9/11 GI Bill Update was provided by John Kang, an active duty Army Captain. I haven't verified the data, but he has done a lot of work on this and details more of his methodology on his blog here.

John has taken my original calculations a step further (as well as updated them to reflect 2010 rates). He includes all tuition costs and income, including living expenses and expected internship pay (before taxes).

Taking the Yellow Ribbon Program into account (if you qualify), the results shows that many top schools offer a tuition free education for veterans, and taking BAH and summer internship pay, one can afford to pay for reasonable living expenses and most end up with anywhere from only $10k to $50k total debt after two years. This is pretty good considering one is not working, includes living expenses for two years, and a top MBA degree.

This reinforces the message I tell a lot of people who write in and are concerned with losing their steady military income. Fear no more. The economics of a military person going to a top business school is extremely favorable. You can make more your first 3-4 years after business school than you probably would in the military over the next 10 years. Whether you want to change occupations though and take that job is a totally different question and I am by no means saying it makes sense for everyone to go business school. I'm just saying that from a purely economic point of view, it is a highly net positive financial decision.

Sunday, December 19, 2010

End of semester.. and some thoughts on consulting

Only one more semester to go...it's a cliche... but I have to say "I can't believe it's nearly over." Last year I discussed what HBS students do over the winter break. This year is of course no exception. Most students are traveling, and mainly overseas.

I'm going to India for almost three weeks with three sectionmates. Despite India having a population of over a billion people, I have no doubt that I will be running into other random HBS students on a regular basis. I don't know how many HBS students are going to India, but it's probably in the hundreds, and everyone tends to go to the same sites. It's interesting to see that many HBS students take a vacationing interest in countries perceived to have the hottest growing global economies: India, China, and Brazil. I take it as a positive sign for the global interest of people here and would be curious to see a study of trends in HBS overseas travel. I wonder if there would be any sort of correlation with GDP growth, and whether it is a leading or a lagging indicator.

I also want to share some interesting articles I've read recently. One is from an HBS 2010 graduate who posted some really interesting statistics on the top employers of HBS graduates and particularly insightful numbers on management consulting hires over time at HBS. For the actual statistics, you should check out the InsideHBS.com blog.

Another really interesting blog is Our Consulting Problem, a case of a Kellogg/HBS husband and wife team who decide to quit their management consulting jobs and do something completely different with their lives. The subject of whether one with little prior business experience "needs" consulting after business school and whether the option value generated is worth the time invested is a topic of regular discussion here (or at least with my circle of friends). Anyway, the essay on Option Value is both funny and highly descriptive.

I recently spoke with a very senior partner at a management consulting firm who is also an HBS grad. His firm had given me a full time offer and we were chatting about how I was thinking about the decision. Perhaps because I am considering such starkly different options, that I am also willing to be very open and transparent about it. He claims that he enjoys his work so much, that he was "shocked" when I told him that relatively few HBS grads going into consulting do so with passion for the business. About the only thing HBS students are less passionate about than consulting is doing investment banking, so it is very ironic those are the top two most common jobs coming out of HBS. These truths may be rarely discussed outside of business school, but they are readily recognized from within. Perhaps people who enter those businesses eventually learn to like it or change their outlooks; I'm not the person to speak about that.

Everyone is always speaking of finding their "passion." The catch is of course, that nobody can find his or her passion by searching the web or reading books, not any more than one can fall in love by simply searching dating sites or looking at magazines. All this leads to some very dynamic forces; heavy pressure to achieve great things and change the world, while at the same time dealing with short-term forces that challenge our better judgments about ourselves. I suppose these dynamics will never change for those of lucky enough to attend this school, so in that regards, HBS is a good place to practice!

Relatively few people come to HBS because they genuinely want to be a consultant or an investment banker, yet the overwhelming forces here places most people either in those positions or on the edge of them. It is a very difficult force to fight. Some of us are still hanging in there.

Monday, December 13, 2010

It's all about execution...

Whether it’s a class on strategy, management, or even global trade, the phrase “it’s all about execution” is an often spoken phrase in the HBS classroom. The basic concept is simple enough to understand; one can have a great plan or idea, but unless it’s implemented properly, it won’t lead to the desired results.

Coming from the military, it was intuitively difficult for me to understand why this was such a common place problem in the business world. This is partly because execution is something that most military officers know how to do quite well. It is such a commonplace skill, that I never saw it as a skill. While I certainly understood the theoretical challenges that businesses faced when executing a plan, I admit that for a while I didn’t understand the fundamental nature of the problem.

Let's say that a company has a challenge it wants to overcome. Perhaps they need to fix an internal problem, or perhaps they want to take action to reach a new goal. Execution might simply mean that the organization puts into action what they already know they need to do, and one might think that putting the plan into action shouldn’t necessarily be the most difficult part of the whole operation. In trying to understand the fundamentals of this problem, I thought of an analogy that made the human nature component extremely simple to understand: think about the process of getting into shape and losing weight.

A person may realize that they are not living a healthy lifestyle. They’ve gained weight and aren’t happy with their situation. That person makes a strategic decision to get in shape. They then may hire personal consultants and seek out advisors on how to do this. These personal fitness consultants will come in, analyze the client’s challenges and goals, and prescribe an operational plan to reach the desired goals. So it turns out that coming up with the strategy and operational plans was actually the easy part. More often than not, like losing weight, business problems are not entirely original, and coming up with the theoretical solution is not necessarily the hard part.

The person now knows where he wants to be, and knows how to get there. But for most people, the act of going to the gym, of changing their diet, and of sticking to a plan, is simply beyond many people's ability to sustain. Some people fail to execute the plan despite desperately wanting to get in shape, and companies are no different, because companies after all, are made up of people who also suffer from the same challenges. Knowing what to do is often the easy part, doing it is the hard part. We see this in every aspect of our lives. A company may change the language of their sales policy or put up different mottos in the same way a person may get subscriptions to health magazines and put up motivational posters, but changing the language of a company’s strategy won’t lead to execution success anymore than having a fitness magazine on the coffee table will lead to losing weight. It’s all about execution.

In my view, execution comes from discipline. I define discipline as doing what you know you need to do, when you need to do it, irrelevant of any external distractions, excuses, or obstacles. The ability to do this was a foregone conclusion in my previous unit; I never realized what an edge it could give to military people in the business world.

Execution is often much more difficult than strategic thinking or operational planning. A former military person that has the discipline to execute, the leadership skills to lead and motivate, and the vision to think strategically, can truly be a business force to be reckoned with. I have met quite a few highly impressive people at HBS who fall in this category. Discipline and execution can be your personal edge as well... it's a more uncommon skills than one may think.