The start of another school year is upon us. As such, nearly 100,000 aspiring MBA’s will be matriculating in the next few weeks to begin a two year program that leads to that golden business passport – an MBA.
A little over 20 years ago, I entered the hallowed halls of the Wharton School to begin my MBA. With now 21 years’ experience post-MBA, I thought that I would share five of the lessons that I learned at business school that proved to be most valuable in the business world.
Next time, I will share some of the business and leadership fundamentals that are equally important in the “real” world, but that are rarely learned at business school.
1. Finance and Accounting – It’s All About Cash
Cash flow is what matters. This is the fundamental of finance and accounting which constantly gets forgotten or obscured in the day to day business. At the end of the day, accounting done right is just a way to keep track of whether you have more money in your bank account at the end of the day today than you had at the end of the day yesterday.
Yes, growth needs to be funded and so projects and business lines can often consume cash for months or even years. But, that has to end, and the project or business line needs to start generating cash.
The Enrons, MCI’s, Adelphia’s, Lehman Brothers et al in the world were all quite foreseeable if you looked to see whether they were truly spinning off cash, instead of growing more debt. None of them really were creating cash flow, even if their accounting statements said so.
2. Marketing – It’s All About What the Customer Values
Marketing is all about taking off the blinders that your love of your product and / or service has created. Instead, you need to look at the world through the lens of the customer. What is the value of your product and service to the customer?
Yes, your product and service may be the best. And I mean the BEST. Further, it may be a product or service that the customer should need and SHOULD truly value. But, if the customer does not value it, you have lost. It is quite simple.
Looking at the world through the customer’s eyes has stuck with me ever since my then-rookie marketing professor, Pete Fader, gave us a pricing case in the first few months of school.
I don’t remember the exact details, only the magnitude. We were required to price a spare part used in the oil-drilling industry. Using all the data, the class came up with a variable cost of a few hundred dollars which most of us then doubled to price at about $500 for a healthy 50 – 60% margin. As Professor Fader worked through the problem from the perspective of the customer, we all quickly realized that this unique part had a value to the customer in the range of $10,000 with the actual price being somewhere near $4,000.
In this case, the value to the customer was far higher than our internally-focused radar would suggest!
3. Strategic Planning – It’s All About Being in the Right Market
This one is easy to say, devilishly tricky to do in practice. The fundamental of strategic planning is to be in the right market. That is, to be in a good industry or market niche with growth and healthy profit opportunities. A good market makes your life a whole lot easier and more profitable. As Warren Buffett said so well:
When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
As an example of what not to do, twenty years ago, we had a few fellow grads go into the airline industry. Guess what? Within a few years all had left. As a business to make money and grow and personally advance, the airline industry stunk back then. And it still stinks today.
4. Leadership – It’s All About Having the Best Team
As you advance in your career, your capabilities and individual brilliance will only take you so far. Vastly more important will be your ability to lead and unite a diverse team and drive them to success. As Satchel Paige said:
None of us is as smart as all of us.
The teamwork, team activities and team building that you will do in business school should resonate. The best answers and the deepest insights come when working with a good and diverse team that includes committed people with a wide background (finance, HR, management, marketing, sales, even the customer) unafraid to share their views and be heard. Alas, many corporations have forgotten this simple premise. Their top management group is either a team of clones or too cowered by an over-bearing CEO to ever share their true views. The net result is often groupthink and abysmal corporate failures.
5. International Business – It’s All About Understanding the Other Person’s Culture
“The world is flat.” “The end of history.” “English is the global language.”
Maybe. But, doing business internationally remains all about understanding your Chinese supplier or your Brazilian consumer or your German joint venture partner. I think that the comedian Dave Barry summarizes well the blinders and distorted view of many Americans in our increasingly international world.
Americans who travel abroad for the first time are often shocked to discover that, despite all the progress that has been made in the last 30 years, many foreign people still speak in foreign languages.
So, look around your class and get to know the increasing number of international students. Besides the advantage of networking, your new friends will challenge you to think more broadly and see the world through their eyes.
Year after year, consultants and thought leaders bring about “new” management ideas or leadership philosophies. Alas, they are often just window dressing or enhancements to ideas that have been around for years. The true business fundamentals that drive business to success, such as I learned at business school and (shameless plug) write about in my book, Build a Better B2B Business, are unchanging. Study them, learn them, keep them top of mind, and act on them and your business and personal success will be significantly enhanced.