A few days ago I officially became an MBA Graduate of the Kellogg School of Management's Class of 2015. Approaching graduation, I often asked myself what were some of the major things I was taking away from the experience. An MBA gives you technical skills and core subject matter knowledge but some lessons stand out. As I thought about my own learnings, a few things came to mind and I thought it worth to share them with current and prospective students. A caveat to add here is that these learnings are tailored by my opinions and experience. My colleagues and classmates who followed different paths at Kellogg might have completely different things to talk about.
1. The free markets work...mostly
And when they don't, there is one word that describes that failure - Externalities. Externalities are actions taken by us whose impact is felt by others but this impact is not taken into account by us while taking that action. Smoking is a classic example of an externality. You don't need a business school to tell you that free markets work but you do need to understand why and when markets fail and what to do about them. If you ever feel that a market based solution is not working, hunt for the externalities.
2. Marketing is much more than advertising
Before business school, I equated marketing with advertising. What I learnt was that the ad creative is the last thing that should matter to a marketer. Marketing runs parallel to all your business decisions. The key is to think of a customer problem to solve, identify a unique customer segment, tailor the product to address their problem and then position it to them. One lesson that I will never forget came from my Advertising Strategy class - Your job is to own the strategy, the creative is owned by the agency. Never try to modify the creative. Simply reject it if it betrays the product positioning and strategy.
3. Do not mistake correlation for causality
A lot of sensational articles you see on the web suffer from this syndrome. The human mind is trained to search for cause/effect relationships everywhere and the first plausible one that we come across tends to get sanctified. Does carrying a cellphone in the front trouser pocket reduce sperm fertility in men? Did New York City's crime rate drop in the 1990s because Mayor Rudy Giuliani cracked down on graffiti? Whenever you see a sensational headline or a piece of business research, pause and ask whether it is merely a correlation or an actual causation. (P.S. - The answer to the questions above is a No)
4. Conditional Probability guides a lot of our value based debates
As one of my favorite Professors at Kellogg had remarked, Probability Studies can explain almost everything in life. Bayes' Theorem or conditional probability is often behind a lot of our policy debates - our views are conditioned by our station in life. If you are wealthy, a redistributive economic policy would not appeal to you while if you belong to an economically weaker strata of society, you would push for such a policy. But ask yourself this - if you could not choose how or where you would be born, and on one end of the probability tree is richness and wealth and on the other end lies deep poverty and deprivation, would you still prefer a world without any safety nets? To me this was an eye-opening perspective that expanded the scope of application of probability concepts.
5. Doing currency arbitrage is like picking pennies in front of a speeding truck
One of my favorite Kellogg classes was International Finance. At some level we all think we can game the markets. As an international student, I was always alive to the sensitivity of the Rupee-Dollar exchange rate. What this class taught me was that you simply cannot forecast currency rates and, unless you are playing with millions of dollars of (ideally) someone else's money, currency arbitrage is likely to burn you.
6. Create value but don't forget to find someone who can pay for it
The Performance Indicator case in my Core Strategy class was one of my favorites, not only because it related to golf of which I am an avid fan but also because it teased apart the relevant distinction between value creation and value capture. A breakthrough technology that would help golfers identify whether a golf ball was use-worthy or not, was struggling to find adoption simply because its inventors were going after a segment of the market (premium golf ball makers) for whom the technology would have eroded value by pushing customers towards lower priced golf balls. Another learning from that class - not all innovations create value.
7. Fall in love with the problem, not the product
An oft repeated mistake in technology markets is to become obsessed with a product and not the problem. The case of Iridium stands as a landmark tombstone here. A brick heavy phone developed in the 1990s to help solve the problem of being able to communicate when you had no access to landline telephones. The issue was that Iridium was very expensive and could only work when the user was in a clean line of sight with the satellite. The mockingly sighted use case - a CEO sitting at the top of Grand Canyon. Yet Iridium continued to bleed money simply because no one stood up to say that the product was bad. The cellphone revolution eventually did the talking for them.
8. There is wisdom in the crowd
I must confess I was a bit sceptical of the whole crowdsourcing buzz until a class experiment made me see its application. Under the right conditions, a crowd can outperform a team of experts. From whether it is predicting who will become President to who gets picked as the #1 player in a draft to what is the time taken by a cheetah in a video to run 100 meters, the crowd can outperform the average prediction of individual experts in all cases. There is a catch though and that is called Diversity - the crowd must be sufficiently diverse (read random) for its errors to cancel out.
9. The best strategies get tripped by non-market events
We now operate in a world where businesses routinely must accommodate their external stakeholders. The ability of non-market events to scuttle a business plan is enormous and I am glad that at Kellogg this was a core focus area. How do businesses form coalitions to guard their interests against changing regulations? How do we manage gatekeepers and regulators? How do we align interests and how do we safeguard investments in emerging markets? Relevant questions, considering the fate of Walmart, Uber and Nestle in India recently.
10. The best way to build culture is through guidelines and not rules
You will hear many Kellogg professors speak about values based leadership and how to use values to guide decision making. A lot of organizations pride themselves on their culture and a lot many try to change theirs. A key learning for me was that culture is not a dictum - it is an evolutionary process and hence best left to broad guidelines to govern it rather than strict rules. Rules promote backlash and workarounds whereas guidelines allow sufficient flexibility for implementation.
My advice to prospective MBA students - Enjoy and own your MBA journey. It's a once in a lifetime experience and it is entirely up to you to derive as much value as you can from it!