Have ten minutes? Want to learn business school basics? Keep reading -- this post is for you.
A few months ago, HubSpot CMO Mike Volpe started a mini-MBA program for HubSpot employees. During this business school crash course, the students took eight MBA-style classes taught by the MIT Sloan School of Management MBA graduate himself, plus a current student of the program. We read through multiple case studies and learned about the structure and strategy involved with starting and scaling a business.
While this "MBA" I received was a very condensed version of what someone would learn in real business school, it was really valuable for me to learn some business school basics without breaking the bank. So I figured it wouldn't hurt to condense what I learned even further in this post, where I'll walk through some of the most important topics and takeaways you need to know in order to receive your mini-mini-marketing-MBA.
The Case Study Method
Marketing MBA professors often teach courses using the case study method. This means they'll assign a business case to read and think about before each class, and the class is spent breaking down the case and discussing the major lessons in it. These real-life examples showcase how companies are solving actual problems and making tough decisions within the organization.
Throughout this post, I'll mention various companies and organizations that are using some of the strategies, structures, and leadership initiatives listed below. If you're interested in reading the full case studies that were written by professors at Harvard Business School and other esteemed business schools, I'd encourage you to check them out on Harvard Business Review.
Economics and Market Forces
One of the most fundamental concepts of economics is the delicate balance of supply and demand. Supply refers to how much a company is able to produce (products or services). Demand refers to the consumer need to acquire this particular product or service. These two elements will affect the price point and the quantity that is produced. This balance is illustrated in the chart below:
Here are four basic supply and demand laws to remember:
- If demand increases and supply doesn't change, a deficiency occurs.
- If demand decreases and supply doesn't change, an oversupply occurs.
- If demand doesn't change and supply increases, an oversupply occurs.
- If demand doesn't change and supply decreases, a deficiency occurs.
Based on these laws, the price and quantity may be adjusted accordingly to achieve a perfect equilibrium. For example, if the demand is high but the supply doesn't change, both price and quantity will need to increase.
Porter’s Five Forces
Harvard Business School Professor Michael Porter refers to five competitive forces that determine where your product or service will strategically fall in the market. See the flowchart below:
According to this method, your product or service will have a strong competitive advantage if you pay attention to these five forces:
- Barrier to entry
- Threat of substitution
- Bargaining power of buyers
- Bargaining power of suppliers
- Rivalry among current competitors
How easy is it for a newcomer to enter into the market? Is your product or service easily replaceable? (Think about what the iPod did to CDs.) Does the buyer have too much influence over your pricing? Is it relatively simple to switch suppliers? Is the competition high? These are all questions you should ask yourself if you're entering the market with a brand new product or service.
Blue Ocean Strategy
In 2005, W. Chan Kim and Renée Mauborgne wrote and published a book called Blue Ocean Strategy. This book emphasizes how companies can succeed by creating a space that's completely unique, rather than entering a saturated market and battling competitors.
Below, you'll see a graphic that explains where you can find this innovative "blue ocean" value:
The goal of blue ocean strategy is not to beat the competition, but rather to make the competition irrelevant. One example that Kim and Mauborgne cite is Cirque du Soleil, an innovative company that redefined the circus industry. Using that as an example, read through the following chart:
Cirque du Soleil aimed to do the following four things:
The company eliminated segments such as animals and the bearded lady, and reduced elements of thrill and danger. However, they increased uniqueness by developing their own tents and created a more upscale environment through drama and artistic movement.
You can get way more for your money by optimizing your business operations. I'll point out two interesting cases here: McDonald's and Burger King. McDonald's makes twice money as much as Burger King because they have an edge on efficiency. Their drive-through windows can handle more cars at one time (and more importantly at peak times). Not only can they handle more cars, but they are quicker at serving these cars, at 189 seconds vs. Burger King's 198 seconds.
Other operational elements these fast food companies need to consider are the time from refrigerator to dining room, sandwich production and composition, service, staffing, and cleanliness. Every step in the process of getting food to the consumer and creating a pleasant experience involves operational planning. Employees need to be trained to create Big Macs at scale so they look and taste exactly the same no matter which McDonald's store someone visits. In addition to scaling burgers, the experience also needs to be scaled. In order to do this, the staff needs to know where to be, what to do, and how long to take during each step of the assembly line.
Organizations are often inspected through three lenses: strategic (processes and procedures), political (authority and power), and cultural (underlying attitudes and beliefs).
The strategic lens is the most used perspective. Under this lens, a manager would be looking to optimize work flow in order to meet company goals. The political lens looks at how power and influence are distributed throughout the company. The cultural lens (the least used of the three) looks at how company culture and history affects future decisions. Once you understand the motives of the people in power, you'll be able to understand and predict what decisions will be made.
A functional structure is effective if you want to cultivate specialists, or if you want to decrease cost per unit and increase scale (also known as economies of scale). Some cons to using a functional structure are the increased risk of poor coordination across departments and decreased agility and responsiveness to the market. Here's a visual representation of this structure:
This structure is best suited for small to medium organizations with a stable and sophisticated external environment. By way of example, Office Depot, post merger with Office Max, has put in place a functional structure.
If you want to increase coordination across departments or increase responsiveness to the market, a market-based structure might be best for your company. However, you'll need to be careful of resource duplication. Other things to be mindful of are the lack of inter-departmental communication and decreased opportunities for skill development. See the org chart below:
This structure is best for organizations that have large or many products or are unstable in the external market. Apple and Microsoft are just two examples of companies that are organized by market/product.
The matrixed structure is a nice balance between functional and market-based. The issue here is that this structure can feel rather confusing. Luckily, Harvard Business Review has some great tips on effectively managing in a matrix structure. Here's an idea of what a matrix might look like:
You'll notice Cisco is currently structured using the matrix.
If you'd prefer to organize based on the work that needs to get done, rather than the people who actually do the work, then holacracy is for you. The problem here is understanding who has the power to hire, fire, and give raises. This video by Brian Robertson gives a little more insight into this structure:
Although it seems that this structure could completely level the playing field, it doesn't eliminate hierarchy all together -- it just promotes hopping around rather than moving up the corporate ladder. Zappos is currently structured using holacracy.
Want to see examples of organization structures in action? Check out this SlideShare presentation featuring marketing org structures from Mindjet, Zendesk, HubSpot, Forrester, GitHub, Atlassian, and Rue La La:
In this presentation, you'll notice many different names for organizational structure that are different from the main four structures listed above. That's because these examples strictly illustrate the structure for each company's marketing department -- not the entire organization. We gave unique names to these marketing structures based on what the company's goals were for the particular arrangement they chose.
Scaling and Sustaining Growth
Companies go through growing pains and those awkward teen years just the same as humans do. As a baby and kid company, you need to learn some tough lessons through trial and error. As you start to grow, you'll go through growing pains that come with gaining new customers, acquiring companies, or selling APIs. More grown up responsibilities will start to emerge later, such as an IPO or breaking into new markets. See the chart below to see what a company timeline might look like:
Keeping this model in mind, let's take a look at Dropbox. Asking the customer to make a smaller commitment using a freemium model works very well for those baby through tween years. However, the company recently hit 200 million users and launched a "for business" model, entering their more mature teen years. Even though the company is sustaining growth, they are now facing challenges that any awkward teen company might face. These challenges include security, an increased number of competitors, and limitations with the freemium model. The market is filled with competitors like Box and Google Drive, which makes it relatively easy for the customer to switch. Suddenly churn becomes a vital metric for Dropbox to pay attention to.
If Dropbox wants to keep growing, they might consider these various types of growth strategies:
Organic growth occurs when a business sells more products or services to sustain growth, but takes a great deal of work over long period of time. Inorganic growth happens when companies merge or get acquired, which is a much quicker way to grow. Innovation is the most difficult, but can be the most gratifying. This strategy requires a strong vision and a great deal of risk.
There you have it! Now that you know these business school basics, you can have an educated discussion with any marketing MBA graduate. Maybe you'll even go off and start your own company! No matter what you end up doing with this knowledge, you're now a better marketer for having received your mini-mini-MBA. Disclaimer: I am not a real professor, so I'd advise against putting this certification on your LinkedIn profile. ;-)
So, did you receive your mini-mini-MBA? Ready to shell out for the real deal in business school?
Case: Leadership, Culture, and Transition at lululemon
Key takeaway: Figure out how to bring the founders into a strategy rather than alienating them.
What happened? In mid-2008 new CEO Christine Day took over from founder Dennis "Chip" Wilson. The decision came as the company wanted to expand and become more corporate. At the same time, Wilson was concerned about maintaining the culture and values of the company.
Day faced entrenched problems like outperforming stores, a poor real estate strategy, and barriers between various parts of the company. She used her experience from helping expand Starbucks worldwide to align the whole company with a strategic plan. She even convinced the founders to attend advanced management programs at Harvard and Stanford so they could better understand how the company must change. Worth around $350 million at the start of her tenure, Lululemon is now a $10.59 billion dollar company.
T hanks to Dr. Jennifer Chatman, the Paul J. Cortese Distinguished Professor of Management Chair at UC Berkeley's Haas Management of Organizations Group for her suggestion