Sunday, April 25, 2010
Feeling the Timbuk2 Love . . .
In our Processes and Operations Management class, we study the mathematics that allows some businesses to operate, and causes others to fail (I use the words ‘allow’ and ‘cause’ carefully). Our most recent study was the company Timbuk2. Timbuk2 is the yellow-swirly branded maker of messenger bags founded and headquartered in the City and County of San Francisco. Not all of their bags are made in the city anymore, but a respectable number of them are, and certainly the highest margins are earned there on a per-bag basis.
Timbuk2 is justifiably special to me. I purchased (or rather, my father purchased for me) my first Timbuk2 bag in 1998, priced at $70. It took me through the end of high school and throughout my undergrad years commuting to class on rollerblade. The laptop-messenger pictured is the third bag I’ve owned. It has seen me through all weather conditions in more than ten developing and developed countries. The company continuously fixes design faults and adds appropriate features as the model matures.
(I think it’s notable that the original messenger bag remains offered today for precisely $70, considering all of the things that affect price change over time, including but not limited to manufacturing cost, inflation, consumer demand, and the company’s preference to maintain consumer’s psychological price anchors.)
Earlier after first arriving on campus for the MBA program, no one ever had reason to give my red-and-grey shoulder bag a second look other than that it appeared a bit odd – why not a leather satchel? Now people stop me in the hallway and ask, “Hey, is that a Timbuk2 bag? We just studied that company in our operations class.”
It is definitely a point of pride that we can (or that at least someone can) still make things in San Francisco. The trick is customization. Many companies manufacture uniform, low cost products in China and ship them over a long lead time over water to the US. Apple can contract to manufacture uniform high price, high margin products, and fly them to the US. Dell and other laptop manufacturers can, only after extreme capital equipment expenditures, contract to manufacture customized high price, high margin products to be flown to the US. If you’re a small concern operating locally, you’d better manufacture customized products and capture as much of a consumer’s willingness to pay for the customization as possible. That’s what Timbuk2 does for a significant segment of its products. The rest follows the first China (and Philippines, it turns out) outsourcing model of long lead manufacturing and sea freight.
The company was covered in our operations class for two reasons. First, for the customization (and associated value-add) capability from its website, and second, from a manufacturing process called “bump back” which for its novelty is something I’m still trying to nail down. And as I’m studying for finals, I have to become pretty familiar with this operation.
Monday, April 19, 2010
Entrepreneurship
It’s rare that I read news that actually has a near term affect on my life and those around me. I think we are bombarded with a lot of noise for the sake of infotainment. When I read a newspaper under a time constraint, I challenge myself on how much I can ignore, instead of seeing how many morsels of happenings I can suck from the headlines. So I derive some kind of mildly schadenfreudian pleasure from (non-catastrophic) news events that actually affect me and people around me.
Case in point. Recently a volcano blew in bankrupted Iceland. (My finance professor relayed a quip from their Brit lenders, “We asked for cash, they sent us ash”). Who knew that volcanic ash clouds could down airliners? Anyways, it has caused transportation chaos throughout Europe. To exacerbate things, the French rail network in the vicinity of Paris went on strike. That left only the Eurostar (Chunnel) line (remember two posts ago?) operating. People around me were definitely affected. A friend missed a UK interview, the CEO of the company that designs Ferraris could not fly in, and half the class missed a long-planned sports trip to Barcelona. But there's no reason why the volcano has to stop erupting anytime soon, so my flight to Singapore in early May is in jeopardy.
On with the week’s post. Entrepreneurship – A five-syllable buzzword if ever there was one. It captures imaginations, it instils fear. For some it represents dreams to be fulfilled, and for others I suppose it ranks with having root canal at the local dentist. I wanted to talk about INSEAD with respect to entrepreneurship. Distinct from departments such as Marketing and Strategy, which I think are all critical for entrepreneurial endeavours, INSEAD offers these courses specifically for Entrepreneurship on the Singapore campus.
Startup Bootcamp
New Business Ventures
Entrepreneurial Leadership
Entrepreneurial Field Studies
Building Business in China
Building Businesses in India
Social Entrepreneurship and Innovation
Brazil & Emerging Markets
Explorations in Social Entrepreneurship
Business Planning Workshop
Effective Fundraising for Entrepreneurs
Realising Entrepreneurial Potential
Private Equity (read, 'Venture Capital')
Entrepreneurship in Action
It’s actually impossible to take them all due to schedule conflicts. Even given the largest set of courses that don’t conflict with each other, I doubt that even the most entrepreneurially minded students would take them all take of them. After all, there’s other interesting courses like Business to Business Marketing, Strategy for Product and Service Development, and Economics and Management in Developing Countries.
I took the Startup Bootcamp weekend course already. This was a fantastic retreat, comprising fast paced business plan writing, cash flow formulating, and pitching competition. Thirty of us arrived to the offsite Friday evening, had an idea brainstorm, and formed into groups (companies). The next day, we clarified the ideas, fleshed out the business model, rigorously defined how cash is transferred from customers to ourselves, and after running cash flows in Excel, determined the net value of the company. Sunday we prepared our pitches to Venture Capitalists (VCs) - short and sweet, perhaps thirty seconds per person. Of course the preparation took much longer than this. As a model, the instructor brought in the former CEO of NASDAQ Europe. This added in the appropriate level of stress and sweat.
Some people may pursue the ideas coming out of this event, most probably will not. The point is that we all came away with a rigorous early stage execution formula applicable to any endeavour we will set out to accomplish in the future. I am most grateful to our instructors and entrepreneurs in their own right, Paul Keweine-Hite and Peter Sage for their offering their time. Photographed is the practice pitching session.
When I applied to INSEAD the first time, one of my biggest fears was that there wouldn't be other entrepreneurs or support for entrepreneurs on arriving here. After deferring to pursue my business, reapplying, and finally entering, I'm rather pleased with the enterprising aspirations of many of the folks I've met and what's on offer, although the final verdict for the courses won't come until after I've taken them.
Friday, April 9, 2010
"IT Rep!"
One responsibility I've undertaken at INSEAD is to become IT Rep for my section. It certainly takes up a lot of my scarce, scarce time, so let me illustrate:
Each class intake of 500 students is divided into about 7 sections of around 70-75 students. Fontainebleau campus has 4 such sections. At the beginning of the curriculum, the sections' students elect representatives - Academic reps to interact with the professors, Career reps to interact with Career services and keep students apprised of upcoming recruiting events, Social reps to organize parties, and an IT rep to spearhead mitigating IT and facilities issues the students face. I'll preface the following by repeating the classic IT person's lament, that when systems are working, little credit is given, but when things go wrong, much credit is taken.
Many components come together to give a school its reputation. From the point of view of its students, INSEAD's greatest strength is its faculty, who are truly superior. There are long term faculty, and temporary visiting professors. Both are exceedingly strong. INSEAD's next strength is it's career services. Career services work efficiently and tirelessly to get consultancies, banks, and industry to come onto campus for recruiting. The largest and top-tier consulting firms maintain consultant-caliber staff exclusively for recruitment from *this* school. (What is a consultant? You're forgiven if you're as unfamiliar as I was before the beginning of term, but you'd be better served by your own research into this than my explanation). Then, after school culture, the remaining component that drives a school’s student experience, and by extension it’s reputation, is the quality of its facilities and IT (Information Technology) systems. These include all of the PC’s on campus, the campus local area network, the campus connection to the outside world, PC virus security, e-mail services, and about 20 other items all of which, like parts of an automobile, require regular attention and maintenance.
Unfortunately, it is at this point that the school falls far short of the mark – printers fail, the network goes down, email (e.g. from recruiters) stops receiving after filling an unbelievably low 100MB quota, and much, much, more.
One thing I recognized early on starting the MBA program was that the many and disparate IT problems the campus faced were organizational in nature, not technical. For example, follow this train of thought: “Why is email down? Because they haven’t upgraded to a new mail server version. Why not? Because there are IT contractor issues. Why? Because they don’t have enough budget to properly incentivize the contractor or hire a superior one. Why not get quality in-house IT specialists? Because if you inadvertently hire the wrong ones in-house, they are too expensive to fire because of severance pay laws here in France. Why hasn’t someone figured whatever issues, stopgaps, drivers, and incentives exist or are necessary to make the organization robust? Because management, at some level, is not yet up to task.
I actually sought the challenge of figuring out what process distills human and human-created issues into tangible real-world physical effects. Looking from this point of view, you begin to understand that airplanes don’t fly because of differences in air pressure across a wing, they fly because Boeing/Airbus and the airlines will them to fly with no tolerance for failure.
To become a ‘rep’ , one runs for the position in an informal election. So I ran unopposed, for the rep position because I knew there were problems that needed to be solved, and I figured I was as reasonable a choice as the next person to solve them, and do a favor for my class in the process. My campaign platform noted all the problems we face and getting responsiveness from the IT department + facilities. There were three other IT reps, and they made clear early on that they didn’t share the same level of enthusiasm as I did for “getting things done”.
But over time, the class perceived my role as being Mr. Fix-It, instead of the role I intended: someone to take complaint surveys and push for organization change while learning more about how people and organizations work in the process. While I found the undesired fix-it view disheartening, it also pushed me to find the people throughout INSEAD responsible for how things work around here. Now I can solve most major things that go wrong in a technology-enabled classroom with a phone call or polite text message in French, and the relationships I have with the staff give me a peek into what isn’t working on an organizational level. By contrast, I’ve heard that the other reps experience great frustration because they didn’t know where to start when a problem struck and the pressure from the class built to do something about it – one rep even quit because he couldn’t handle the pressure.
It was about halfway through the first 10-week period of school that the senior class’s rep got on board my campaign and we managed to identify exactly who in the IT department it was we were supposed to meet with in order to start getting things done. Org chart? No way; doesn’t exist even if people weren’t too fearful of their jobs to give us one. What about tips from previous years’ reps? Well although these kinds of efforts have been taken up before, there’s very little continuity from intake to intake in the one-year MBA. Along with so many student clubs, like industry and affinity clubs, on campus, everything gets built from scratch every 6-months to a year. This phenomenon which in part represents the efficiency of the INSEAD curriculum, also represents a lack of continuity, deteriorating the effectiveness of the clubs (and the reps) – the contacts they make, and the cultures they create. For efforts expecting only long-term results, you have to pursue them knowing you and those around you won’t get to benefit from them since they’ll graduate in less than a year. Instead you operate on the knowledge that you’re helping the next class, and that has to be enough even though you know the next class will never tangibly realize what you did to make their experience better, or be able to thank you for it. In turn, we know that we are benefiting from earlier classes of students in perhaps intangible ways.
Eventually we managed to get weekly meetings in place that people actually attend. And after all of our haranguing, the IT Department is starting to “get it”. We’re seeing some specific improvements we’ve pushed for, like replacing lots of the printers with new ones, making some Windows7 support software available, and more excessively mundane issues that 1) drive people nuts when they encounter them and 2) don’t need mentioning here for their sheer obscurity. I have another meeting with the Dean of the school coming up. And after newer updates to my section and new surveys I’ve taken from them on their complaints, now I have enough political capital to get org charts and start asking about incentive schemes without feeling like I’m trodding on sensitive territory.
We at INSEAD like to compare ourselves among the top and penultimate tiers of American business schools. These include (not exclusively) Harvard, Columbia, Wharton, Stanford, Sloan, and Kellogg, Fuqua, Haas. If we expect to truly hold our own, IT+facilities absolutely have to be improved.
More than any student on this campus I am acutely aware of IT systems near term future. In light of that, to future MBA's intending to spend time on the Fontainebleau campus, I have to make the following recommendations: 1) Bring and rely on your own laptop - for example, an Asus mediabook is ideal – reliable, very portable + good size screen, long battery life. 2) Foot the bill for a Blackberry, it provides a lot of communications robustness independent of INSEAD systems. You'll be on a contract with Orange that you can, with some trouble, get out of if/when you switch campuses.
Having covered IT more than anyone should ever have been interested, look for discussion of Entrepreneurship next post, and Social life in a following one.
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