What I Learned: Week 3 At HBS

We had one of those beautiful two class days at HBS today, and so I’m taking some time working out of the iLab on this Monday afternoon to reflect on the last week of learning before I jump into three cases tonight on the Subprime Mortgage Crisis, General Electric’s Healthymagination Program, and an Operations Class Process Simulation.

I find that we are learning so much and covering so much material that if I don’t take time each week to reflect on what I’m learning so much of it will pass me by. So here’s a summation of what I learned last week, designed someday to help me reflect and recall and perhaps share a bit of what’s happening here with those who someday may wish to come (and perhaps help classmates more easily explain to their parents what’s going on).

This post is a follow-up to Week One at HBS and Week Two at HBS. Just like I wrote in those posts, I am absolutely loving the experience here and every day feel like I’m a little kid in a candy store taking in a fire hose of wonderful new knowledge. If you’re interested in seeing more photos from the time here so far, check out my photo blog. I’m also tweeting from time to time via @ryanallis on Twitter.

I have a sense that future reflections may be more spaced out as the club schedule is rapidly starting to ramp up and I’ve joined the Entrepreneurship Club, Start-up Tribe, TechMedia Club, Africa Business Club, Social Enterprise Club, and Energy and Environment Club. My section (F) is also holding its retreat in Vermont the weekend after this.

– THE CLASSES –

Field Immersion Experiences for Leadership Development (FIELD 1)

FIELD 1 focuses on “individual skill building to develop leadership intelligence” and “leadership exercises, peer feedback, and personal reflection.” Here’s what we did last week in FIELD.

• Storytelling and Improv Workshop - The storytelling and improvisation workshop was the most energizing activity we’ve done at HBS to date. It was put on by the Ariel Group and was designed to help us become better communicators and more engaging speakers (and reduce all the ums, uhs, likes, you knows, and unnecessary ands we often use as crutches when speaking). From the student feedback I heard, this workshop received the highest reviews from classmates of anything we’ve done so far. We took the time to visualize a story of a dramatic defining moment in our life and had a chance to practice telling the story multiple times. It was so wonderful to have a business school (traditionally the realm of the left-brained analytical geniuses) focus four hours on creative and emotional intelligence during the first month of classes. The next day, we discussed plans as a section to continue our practice and attend an upcoming show at Cambridge’s ImprovBoston, now being run by my friend Zach Ward from North Carolina.

• Leadership Presence – We also received a copy of two related books–Leadership Presence: Dramatic Techniques to Reach Out, Motivate and Inspire by Belle Linda Halpern and Kathy Lubar and Getting Unstuck: How Dead Ends Become New Paths by Timothy Butler. We read chapter one of Leadership Presence, which was very good and reinforced the lessons learned in our improv and storytelling training.
• Feedback Workshop - We went to the Innovation Lab on campus (the iLab) and filmed ourselves giving and receving feedback based on four fictional cases. The lesson emphasized authenticity, specificity, the intention to help, and humility in the process of giving feedback. One can learn so much when they watch themselves on video! Companies should absolutely utilize this technique in their managerial training programs. After experimenting with a few provided feedback formulas, I found that my preferred way of giving feedback to others in a professional setting was to

1. Ask for permission to give feedback
2. State the specific behavior I observe
3. State the effect of that specific behavior
4. Ask for the individua’s perspective on the feedback.

• Hay Group Emotional and Social Intelligence Assessment (EISI) – This session focused on the results of a 360 degree review assessment completed by peers, direct reports, and supervisors we selected prior to us coming to HBS. I found I had the greatest opportunity for improvement in: “Understanding others’ perspectives when they are different from my own perspective” and “using metaphors to describe themes or patterns.” This assessment was created by Daniel Goleman’s company. Daniel is the author of the well-known book Emotional Intelligence.
• CareerLeader Results Report – We attended a session on our future career paths. Not surprisingly, according to the 19 page CareerLeader report I really enjoy 1) Influencing Others 2) Creative Production and 3) Enterprise Control, I am most suited for the following roles: Product R&D Management (99), Venture Capital (98), Marketing (98), Management in Science and Engineering (94), Public Relations and Communications (90), and Entrepreneurship (86). Rounded out the jobs I am least suited for were Supply Chain Management (11), Financial Planning and Stock Brokerage (11) and Production and Operations Management (8). Finally, I learned that the four most important components of a fulfilling job to me are Intellectual Challenge (12), Power and Influence (11), Affiliation to Enjoyable Colleagues (9), and Managing People (9) with job security (0) all the way at the end.
• Section Norms – A class discussion led by our FIELD professor Amy Edmondson (who by the way was once Buckminster Fuller’s chief engineer — so awesome) on what norms we wanted to have in our section of 90

Should you happen to be interested in obtaining a copy of any of the below cases you can find them on the Harvard Business Publishing web site.

Finance (FIN 1)

1. Gone Rural Day 1 – Evaluating the operational effectiveness of a $700k per year in revenue rural South African premium basket weaving operation and the tie between scaling social impact and operational execution
2. Gone Rural Day 2 – Creating a five year pro-forma income statement and balance sheet for this South African firm with various scenarios to determine outside funding needs and understand the link between targeted growth rate and funding needs and the link between key elements of operational efficiency (like the cash conversion cycle and inventory levels) and funding needs.

Financial Reporting & Controls (FRC)

1. Polymedica Corporation – Discussing whether direct-response advertising costs should be capitalized or expensed.
2. Accounting for Frequent Flyers – Looking at the frequent flyer accounting practices pre-1991 and how FASB was thinking through changing the accounting rules related to capturing the liability on airlines’ books.
3. Magnet Beauty Products – Evaluating whether to capitalize a lease on the books of a 32-store chain natural beauty supply company.

Technology & Operations Management (TOM)

1. Polyface Farms – Analyzing the operations and expansion plans of a sustainable farm in Virginia.
2. Fabritek – Drawing process diagrams and calculating and understanding the bottlenecks, capacity, and throughput of the various production processes of an integrated circuit board manufacturer in the 1980s.
3. Dore-Dore – Understanding the pros and cons of cell production (single-process flow) vs. assembly line production in a French hosiery and knitwear manufacturing plant.

Marketing (MKT)

1. Sealed Air – Looking at how this $4B global public company brought a new video monitoring technology called VTID to market, particularly focusing on which customer segments to go after.
2. Principles of Product Policy – A module note on new products, product mixes, product life cycles, and managing product and brand portfolios
3. Emotiv – Evaluating product positioning and go-to-market strategy for a low-cost ($299) neurotechnology headset that uses electrical brain waves to control computer games and other applications. Emotive began in 2003 and after six years of R&D launched in late 2010. As I’ve become extremely interested in neuroscience in the last year (due to my mom Pauline passing away in May from a brain tumor) I found this case really fascinating. Here’s more about the product from the Emotiv web site. After class we had a chance to play with an Emotiv headset. While I didn’t have the chance to use it myself, many of my classmates did. It was absolutely breathtaking to see a computer program controlled with just my mind alone. My classmates were playing games, lifting rocks, and scaring off spirits with just their thoughts. I plan to become a customer when I get back to San Francisco next summer. I was very thankful to casewriters Elie Ofek (our marketing professor) and Jason Riis for writing such a case about such a groundbreaking technology.
4. Marketing Breakeven Analysis – A module note on how to calculate a breakeven analysis for the number of units a company must produce to cover their fixed costs with gross margin proceeds.

Leadership & Organizational Behavior (LEAD)

1. Greg James at Sun Microsystems – Creating accountability and effectiveness on a team split between India, UAE, France, and the USA. As part of this case we learned about fairness on teams and our professor Lakshmi Ramarajan (who by the way was once a professional dancer AND managed conflict resolution programs in West Africa!) played a video of a scientific experiment involving Capuchin monkeys. We learned that Capuchin monkeys (like humans) often reject unequal pay. Watch the video!
2. Taran Sawn at Nickelodeon Latin America – Looking at how to be proactive as a manager in establishing the conditions for high team effectiveness (across performance, team work, and individual development and satisfaction) as a General Manager prepares to temporarily work away from her team due to health complications.

– LAST WEEK’S KEY LEARNING LESSONS –

It would take quite some time to list all that I learned last week–so here is just a sample of some of the key items I took away or greatly improved my grasp of last week. I’m so excited to be learning at this pace with such smart and caring peers. I continue to grow rapidly in learning how industries operate outside of the industry I’m most familiar with–software.

So far I have a much better understanding of:

1. How companies achieve production efficiency manufacturing a physical product — Including how to calculate bottlenecks, capacity, throughput, output rate, work in progress, cycle time and labor utilization.
2. GAAP accounting — Particularly as GAAP accounting enables to the capitalization of assets, depreciation of assets, and amortization of assets and the effects of these balance sheet items on GAAP net income.
3. The payment cycle (aka cash conversion cycle) — Particularly with respect to ideas on how to reduce days in A/R and inventory holdings. This knowledge is particularly helpful for someone like me coming from prepaid subscription software (in which you have negative net working capital due to monthly and annual prepayments) and no inventory at all.
4. Financial ratios and how they relate to a company’s health — Particularly interest coverage, leverage ratio, ROE, and ROA.
5. Debits and credits — It took me three weeks — but I finally have learned that an increase to an asset is a debit (IAD is how I remember) and an increase to expense is a debit (IED is how I remember). From that I can work out that an increase to a liability is a credit and an increase to revenue is a credit.
6. Measuring Team Effectiveness – I’ve learned that it’s not just performance metrics that count in measuring team effectiveness. It’s also the “capability of team members to work and learn together in the future” and “individual needs for development and satisfying work.”
7. Being proactive as a leader – From both the Erik Peterson case and the Taran Swan case I’ve learned just how important it is to be proactive and aware as a leader and address potential interpersonal conflicts right away.
8. The different types of leadership challenges – Specifically the difference between tactical leadership challenges that require better processes and procedures and human leadership challenges (that require better management, recruiting, training, org structures, mentoring, etc.).

– BEST BOSSES VS. WORST BOSSES –

Finally, during a particularly meaningful session in LEAD, the class listed out the traits of the best bosses they’ve ever had and the worst bosses they’ve ever had. I wrote down the list we brainstormed as I found it particularly helpful.

Best Bosses	Worst Bosses
Supportive	No mentoring
Encouraging	No feedback
Asked about family	Humiliates people
Care about your success	Pits team members against each other
Values-centered	Sink or swim environment
Passionate	Uses fear-based motivation not intrinsic motivation
Makes you feel useful	Doesn’t follow through
Good listener	Bad listener
Inspiring	Pessimistic
Create a sense of ownership	Treats workers as cogs in a wheel
Good Presenter	Not open to feedback
Over-communicator	Under-communicator
Considerate	Doesn’t care about you
Include people in decisions	Makes decisions unilaterally
Set clear expectations	Unclear expectations
Gives credit and claims accountability	Takes credit and deflects responsibility
Enthusiasm and energy	Low energy
Commitment to the organization	Cynical
Competent and Self-Aware
Open to feedback
High EQ
Proactive

That’s all for this week. My posts may be coming less frequently in the weeks ahead, but I still plan to post reflections from time to time on my experience and lessons learned. I’m off to read about the Subprime Crisis. Thanks for reading!

13 Lessons I Learned in 2006

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1. Yes And Life
   One of the key lessons of improv is to say yes to the scene that your acting partner is creating. If your partner suggests you’re kissing cousins in a ski lodge, then you are kissing cousins in a ski lodge AND something else. By saying yes, and in response to people instead of no, but you often create better outcomes and build a much stronger relationship with the person you’re interacting with.

2. Judging People is Necessary
   As a child you learn never to judge people. Judging people perhaps even has a bad connotation. But in business, you must judge and you must judge often. You must judge based on intelligence, effort, and more importantly results. If you don’t judge, you end up with unexamined, unmeasured mediocrity. All humans have equal inherent value, but not all humans’ productive efforts are equal.

3. The People You Surround Yourself With Matters
   Venture Capitalist Steve Nelson shared some advice with me this year that has stuck with me: Stay involved with only the best. Ask yourself – are these outstanding people? To know, you only need to ask yourself: do they possess great intelligence, keen business insight, outstanding people skills, and unquestioned integrity?”

4. Life Reveals The Rules Only After You Start Playing
   Life is a game; and a game that doesn’t exactly reveal most the rules until it’s been played a few times. There are two ways to figure out the rules– a) talk to smart people who have already done what you’re trying to accomplish or b) trial and error. Either way, start playing early.

5. If Somebody Sues You, Go Talk to Them in Person
   I spent about $35,000 unnecessarily this year by listening to my lawyer and not communicating with a former client that was bringing Virante into arbitration. If I just would have flown out there and spoken with him in person initially instead of 4 months later at the mediation hearing I likely would have saved that $35,000 and a lot of personal stress. The lawyer’s advice was correct and proper legally, but the ‘legal’ solution often costs a lot of money to get to.

6. Build Consensus with the Core Before You Present Widely
   Build pre-emptive support and communicate your vision individually to your Executive or Director team or in small groups to get feedback and adjust before presenting to everyone. This can be a lot of work, but it’s how it is done in companies larger than 20 people.

7. Life is Too Short to Not Be Passionate About What You Do
   Stand out, make an impact, be compassionate, and help others. Too much injustice occurs in this world to not want to make a positive change at whatever level you can. Torture, human slavery, murder, genocide, starvation. Too many people don’t have the opportunities we have, and too many people die needlessly from preventable diseases and starvation to make you not want to do the absolute best you can in your life. Have fun. Enjoy life. Help others. Reduce suffering. That is the credo.

8. There Are Four Must-Attend Conferences for Future Leaders
   This year I sat next to John McCain and talked about soccer and energy policy as we watched the semi-final of the world cup for 15 minutes. I had a conversation with Madeleine Albright about security and aid policy in Africa. I talked about digital camera technology riding on a bus next to Steve Jurvetson on the way to Michael Eisner’s ranch. I sat next to Glenn Close, Sandra Day O’Conner and Stelois Ioannou in a roundtable discussion on climate change. How’d I get there? Five years of consistent hard work and getting invited to attend a conference called Fortune Brainstorm. By getting invited to and attending a few key conferences you can have access to pretty much anybody in the world. In my experience so far, those key conferences are Fortune Brainstorm, The World Economic Forum, TED, and the Clinton Global Initiative Annual Meeting.

9. There’s A Good Deal of Corruption in the World–It Can Affect Policy–And Competition Can Reduce It
   In 1995, the telcos had the technology to launch DSL. But they held off for nearly five years. Why? Because the cable companies didn’t yet have the technology ready to launch cable modems and the telephone monopolies saw hundreds of millions of dollars of second-line dial-up revenue from their subscriber base. Instead of providing DSL to Americans and allowing economic-enhancing broadband access, they (somewhat understandably perhaps) held back the technology to make more money, in the mean time using their huge lobbying base to ensure governmental policy wasn’t enacted that would benefit all other businesses, all consumers, and the entire economy. Finally, in 1999 the the technology for cable modems became ready and marketable and amazingly, DSL launched. The lesson perhaps is that while business in general and consumers in general should have the right to lobby and influence, a single industry should never have the power to lobby at the expense of the wider good.
   
   
   
10. Compounding Experience & Compounding Resources Allow For Greatness Over Time
    The big wooden flywheel from Good to Great has held true in my business experience. It takes a long time to get the flywheel moving at all. It takes a lot of really hard pushes to get it going. Each individual push doesn’t move it very much. But if you keep pushing, eventually the wheel starts moving and inertia and momentum start to take hold, causing each subsequent push of equal strength to have a greater and greater impact. In 2003, Broadwick did $12,000 in sales. In 2004, $296,000. In 2005, $1.3 million. And in 2006, $2.7 million. We worked from October 2002 until December 2003 to generate $12,000 in sales (and $20,000 in expenses!). We worked equally as hard in 2006 as we did in 2003, but instead of $12,000 we generated $2.7 million with the same effort. Intelligent consistent effort compounds as experience, knowledge, and access expands. Sometimes it is difficult to fathom how people like Rockefeller, Carnegie, and Morgan acquired their fortunes and made the impact they did in one lifetime. They started by working their butt off to make $12,000 and forty years later they were working with hundreds of millions. Same way Buffet did it, same way Gates did it. Play life like a long-term game. And always be improving.

11. Networking Isn’t About Handing Out Business Cards
    In every personal development conference you go to you hear that networking is key to business success. And that is in fact true. But most teachers leave out the most important rule of networking. It’s not about shaking hands, having a little small talk, and swapping business cards. It’s about building real, trusting, mutually giving relationships with quality people.

12. The World Has a Lot of Problems, But They Are Fixable
    One of the reasons I want to be a U.S. Senator one day is to be able to influence foreign policy, especially the policy that deals with how our country interacts with other countries from an economic and environmental standpoint. This year, I’ve been made so consciously aware of the extreme inequities in the world today. 49,000 people die per day from preventable disease and starvation, 2.7 billion people live on under $2 per day, most people don’t have the opportunity to be creative through entrepreneurship due to class-divisions and bureaucratic restriction, the developed nations produce an uneccessarily large amount of greenhouse gas causing agricultural famine in non-developed nations, billions of dollars go to farm subsidies in the U.S. and E.U. creating silos upon silos of wasted grain while millions die of starvation due to lack of access to markets in developing nations, tens of thousands of humans remain in sexual or work slavery. I have been deeply affected by these issues in 2006 and hope to be able to dedicate much of my life the best way I know how doing my best to improve these situations on a global scale through politics, business, and social entrepreneurship.
13. Community Matters
    And yet, for every thought I have about Malawi, Benin, or Burundi, I think about North Carolina. For every issue in Malawi, Benin, and Burundi, I can see a parallel issue (though at a different scale) here in North Carolina. A lack of equality of opportunity in Malawi can be paralleled to a lack of educational equity here at home. Most North Carolinians know that our K-12 educational quality has not been on par with that of other States’ in the past, especially east of I-95. I applaud Governor Easley’s efforts to improve the situation as well as the measurement and tracking work the North Carolina Progress Board is doing and am hopeful for continued improvement. I was thrilled to meet with members from the Institute for Rural Entrepreneurship in November and to become a donor to the Council for Entrepreneurial Development this year and am hopeful to be able to work within the communities of North Carolina for decades to come. The Lesson: While you should always educate yourself about the world, what happens in it, and how you can make a global difference, you can most often make the largest difference right at home–and there are always plenty of issues (read: opportunities to improve) right here in our own community.

The 20 Most Important Business Lessons I Learned in 2005

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Near the end of each year, I always create a Year Review document in which I list memories from the year, new people I’ve met, the progress I’ve made on my goals, business results, and the most important business lessons I’ve learned. Per my 2005 Year Review, here are the twenty most important business lessons I learned in 2005.

1. Listen to that little voice in the back of your head. It’s usually alerting you to something that might come back to bite you if you don’t listen to it.
2. Don’t let non-communication lead to the de-generation of a relationship.
3. Full-on bias toward action is great. But only when you have little to lose. Once you have something to lose, you must balance having a bias toward action with analysis, due diligence, and care.
4. Don’t avoid doing things just because they are hard or may cause conflict.
5. Consistently look for bottlenecks and inefficiencies in communication flows and organizational behavior.
6. Integrity is what matters at the end of the day. There will always eventually be an audit or a lawsuit that has to look into what you’re doing RIGHT NOW. So make sure at all times your actions are above board and in good faith.
7. The business world can be harsh and often times there is someone in your life that you trust that you should not who will eventually try to screw you over.
8. As CEO, if there is a layer of management between you and the person you need to speak to, speak to that person’s manager first to make sure it is okay to speak with him or her or just relay the message through that person’s manager.
9. As CEO, try to avoid assigning work to people you do not directly manage to avoid priority conflicts. Rather, in all cases except emergencies give the task to that person’s manager to assign.
10. Recognition and praise can be just as big of motivating factors for employees as salary and bonuses.
11. Finding the right people when you need them is a significant challenge and can take longer than you would think.
12. Always communicate openly, fully, and quickly with your customers during any negative events.
13. Quality assurance is a critical part of the software development process. Don’t release a new version of your product until it has been thoroughly tested by both an in-house QA team and a subset of your customer base. Bugs that make it into a released version are much more costly both in lost sales and loss of brand goodwill than spending the money needed to fix them up front.
14. Raising funding for a company usually will take longer than you expect.
15. Make the call. It’s often better to call than email if you’re trying to get a project done quickly.
16. It is better to prepare for the worst when things are going well rather than when they’re not.
17. Sometimes you just have to let go. Get the right people, train them, and then trust them.
18. Just because you have a detailed plan in your head doesn’t mean other members of your team know it. If you don’t consistently communicate your vision and plans, people may think you don’t have vision and have failed to plan.
19. Be very nice to merchant account processing limit review officers and give them the information they need to review your limit well before you hit it.
20. Building a business is truly like trying to push a big horizontal wooden wheel. It takes hundreds of small pushes to get it moving, and hundreds more to get it going quickly, but once you get it going quickly inertia starts to take over and your continued efforts have a greater and greater effect.