Lessons from Harvard Business School

Empty your cup so that it may be filled; become devoid to gain totality. —Bruce Lee

I’ve always been an avid martial arts fan and practitioner. One could say as a kid I had two passions: first, martial arts, and second, business. For most of us who grew up in the ’80s, Bruce Lee was our icon, our legend. He opened up Chinese martial arts to the west and brought the world of kung fu mainstream. While I will never have the opportunity to learn from the man who founded JKD (jeet kun do), this last month I’ve been able to fulfill a second dream of mine: to go to Harvard.

Harvard Business School (HBS) is iconic in itself. HBS is considered by many to be the top business school in the world (and has consistently been in the top five in widely accepted rankings). More than the ranking, HBS has churned out some of the biggest success stories in recent history, such as Bill Gates (who dropped out to start Microsoft), and Mark Zuckerberg (if you haven’t heard of Facebook you are on another planet), to name just two. HBS graduates normally command the highest pay among peers, and the alumni network is, shall I say, extensive.

HBS has a unique executive program called Owner President Management (OPM). OPM is primarily for successful entrepreneurs that want to take their company to the next level, or owners who want to ensure continued success. To qualify one must be either an owner and/or a CEO of a successful business. There are certainly more applicants than available slots (we are approximately 140 in our batch) so it is certainly a competitive process that ensures the most qualified candidates enter the program.

As hard as one works, and as hard as we may try, it is often inevitable that we feel ourselves hitting a plateau. Like the law of diminishing returns, it becomes harder to generate each incremental return.

It might be an entrepreneurial characteristic of mine to always try to push the bar, but despite a great 2010 and a very strong start in 2011 (my company IPVG reported record profits in 2010, and broke that record in Q1 of 2011), I couldn’t help but feel we weren’t innovating and evolving fast enough.

Entrepreneurs often fall into the “miner’s trap.” It is easy to get so mentally sucked into work that entrepreneurs will usually justify not having time for anything else. As a result many probably wouldn’t consider an executive program in another country. I cannot stress how important it is to continuously challenge yourself in new ways and have a fresh perspective on things. You can be so close to the trees you lose sight of the forest.

OPM was a great way to do this. It was rewarding in itself to know I could get away for three weeks and the business would continue running fine without me. The ultimate achievement of any founder is building a company that can excel without him. Incidentally, many say this is most likely Steve Job’s greatest challenge and legacy.

I want to provide you with a snapshot of some of the key takeaways I have learned from my first unit at Harvard. While it is impossible to capture and distill in one article a topic books have been dedicated to, I thought it would be helpful to readers if I shared my personal list:

1. Winning is a mindset. Winning starts from within. You have to believe in yourself and never lose the belief that you can institute change and conquer whatever part of the world you want to plant your stake in.

Adopt a winning mindset, which also defines how you interact with people and how you resolve problems. Getting people around you to adopt a similar mindset is key.

2. How to play: Most business schools teach strategy as a means to an end. While this is true, one must also see strategy from a game dynamic perspective. Like a story, a game can have numerous endings. Entrepreneurs must employ multiple strategies (left, right, center), that are broken down into short, medium and long-term in nature, and even go as far as fish boning or doing a decision tree to flesh out each scenario to understand the multitude of possible scenarios and endings based on the results of executing the strategic plan. One can also anticipate a potential negative outcome and have a strategic response in place to mitigate that outcome.

A company that has clearly demonstrated the ability to implement short, medium and long-term strategies is Apple (under Steve Job’s leadership). If you look at the product rollouts of Apple, from the iPod to the iPhone to the iPad and now the iCloud (where Apple users across any number of devices can store all their content with Apple on the Cloud), this continuous rollout has built and supplemented the growing strength and competitive advantage of Apple. Ultimately, with the iCloud, Apple users will be tied to Apple’s service, therefore make it almost irreplaceable. Talk about a sustainable competitive advantage. All winning strategies must lead to a sustainable competitive advantage.

3. Focus on the customer. History has proven that businesses that are customer-centric are more successful than those that are not. It would be useful for entrepreneurs to re-check their setup to see if their organizations are truly customer-centric. Amazon.com is one such company. Amazon.com’s ethos is to be customer-centric. The teams at Amazon are constantly interpreting and analyzing customer data and having a continuous discussion on how to improve the customer experience with data to back up any proposal. Customer complaints are also a major source of customer feedback. Top management spends time analyzing and reviewing critical customer complaints. Be sure to include a customer feedback loop in your management sessions.

Bear in mind that a company can be market-driven or market-leading. Special companies fall into the market-leading category. These are basically firms that can predict what customers want, even before they do. Apple has certainly done this. So did Microsoft when it came out with the first version of Windows, and Office. Henry Ford, for example, said, “If I asked my customers what they wanted they would have said, ‘Faster horses.’” Henry Ford proceeded to manufacture cars and became a true American industrialist. All customer-centric organizations should strive to evolve into market-leading firms.

4. Walk the talk. Leadership is key. This is often a sensitive topic with entrepreneurs as not everyone is capable or able to realize their shortcomings, and to take steps to improve and evolve their style of leadership. Clearly this is an important component of building a successful enterprise. There are many styles of leadership that range from autocratic, to paternalistic, to participative, to delegative, to free rein. Management power is higher at the start of the spectrum, and gradually decreases to the point where employees have all the necessary skills and power. Leadership style must also adapt to the situation and state of the organization. An autocratic style might be needed if employees do not have the requisite skills and knowledge. Clearly a free-rein style is possible if one has a mature and skilled workforce.

Ultimately founder-centric organizations have to evolve. Founders have to adapt their style of management into a “mentoring” approach to pass critical knowledge on to their capable managers to prepare them for a shift in culture and style. It is easy to read and talk this, harder to walk and live it. This is what separates true leaders from the rest.

5. Friendships and relationships matter. Relationships matter, especially in the world of business and global business. Building relationships takes time. But building relationships for business also requires meeting the right people in the right places.

Relationships allow access to markets, open up new opportunities, and a multitude of possibilities that are part of the entrepreneurial process.

Organizations such as YPO are good ways to network but the program in Harvard was great. Doing business with fellow OPM-ers (a term for people who enrolled at the OPM program at HBS) makes a lot of sense for the following reasons:

• Generally, OPM-ers are serious and successful entrepreneurs. The chances of striking a successful deal are much higher when two successful entrepreneurs are on both sides of the table.

• Relationships take time, and there is no replacement or substitute for shared experiences and having a common history together. School, work, sports and cause-oriented programs all share this characteristic. OPM is a three-year program, and people get to know each other over time. The Chinese call this “guan xi.”

• The classroom is a great way to learn how other people think and see the world. Oftentimes, successful deals are crafted by like-minded people that have complementary skills or attributes that enable them to jointly seize an opportunity that was previously out of reach.

6. The importance of numbers and data: it takes real mental discipline to continuously make decisions and run the company through fully informed decisions with access to the requisite data. Some people are overly excessive with numbers (which also become restrictive as they lose sight of strategy), while others are so focused on strategy that they lose sight of the numbers. The key is to have the correct amount of balance between strategy and numbers. The numbers, incidentally, are what validate the strategy.

It is critically important for entrepreneurs to create and instill a culture of looking at the numbers, and to analyze the financial implications of any major investment or strategy. Many successful entrepreneurs have fallen short of their target or destroyed value due to lack of understanding of the financials. It is important to understand the financial strengths and weaknesses of your business model. Do an in-depth analysis of your income statement, cash flows, and balance sheet. Initiate strategies to exploit the strengths, and minimize the inherent weaknesses of your business model.

Learning is a continuous process. People get “fossilized” into doing things a certain way and that is when the plateau has set in. We must constantly challenge ourselves to do better. Sometimes we need to relearn what we have forgotten. As Bruce Lee said, “Empty your cup so that it may be filled.”

* * *

Any questions? E-mail me at egtheplayer@gmail.com.