Tag: Business

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My Experience With Teaching Ethics Session As Part Of Core Marketing Course

This past week I had a chance to teach an ethics session as part of a larger, core marketing course that I am teaching at Irvine University. I write this post to share my experiences on what worked and what didn't.

Now as context, about four years ago in 2005 I wrote a post on covering ethics as part of business school curricula, and to make a long story short, back then I didn't have a very comfortable opinion on how effective that type of training would be and whether students would want to pay for such training. I have since that timeframe (and based on comments from folks) augmented my opinion a little bit in that while I feel that ethics is something that should not be exclusive to business schools, it is something that leaders need to work with, and as such, is a fundamental topic for business schools to address.

That said, I am not quite comfortable with how I addressed ethics in this past week's session. Setting my effectiveness and student perceptions aside for the moment, here's the basic path that I took:

  • Though I'm no business historian, I characterized the history of the revitalization of ethics in the business schools as falling into two mini-eras in recent history– One of these mini-eras started on the order of five to ten years ago and was driven by a lot of the corporate scandals, executive fiascoes (e.g., Enron), and need for better financial reporting (e.g., Sarbanes-Oxley). In this first mini-era, business schools introduced ethics into their curricula with some of them incorporating ethics into leadership courses with others taking ethics and spreading a little bit of those ideas into all courses. Waving my hands a lot, I cited Michael Lewis' piece, "The End" (Of Wall Street), the role of credit default swaps, and failure of ethics (among other things) being at the heart of the cause of the economic downturn. So I concluded that business schools can still do more. Mini-era two is taking place with MBA graduates taking part in the student-led MBA Oath, which has been going viral.
  • I indicated that leaders need to be concerned with ethics – basically what I said above in that it is not the sole responsibility of business school students, but that we can further the practice of ethics.
  • I promoted two key frameworks for analyzing ethical concerns– Both of these frameworks are from Chapter 4 of the McGraw-Hill Irwin textbook, "Marketing", 9th Edition, by Kerin et. al. One framework was the standard, 2×2 consulting-like matrix that broke ideas into 4 quadrants with (Ethical-Not Ethical on one axis and Legal-Not Legal on the other). We spent time discussing certain scenarios and whether they fell into one quadrant or the other. I argued that the legal axis was, in principle, more straightforward than the ethics axis, where the degree of overlap and misfit between individual, company, general business, and international ethical principles are more fuzzy and can require reconciliation whether by management, ethics officer or other. I cited Transparency International as a data point and source for international practices and norms for ethical conduct. The second ethical framework that we covered conceptually balanced profit maximization and shareholder value against items like environmental, societal, and other factors. Here I feel that the best management practices for balancing things are not so well-developed, but I struggle a bit with how this area should be advanced.
  • I talked about ethical codes of conducts (as documents that need to be affirmed by employees in many companies) and associated online training programs – although I did not have example references or documents to point to off-the-cuff.

With respect to the big picture, I was able to cite a number of cases where companies (e.g., Body Shop, POM, BP) have made ethical and social concerns an essential part of their business and/or marketing strategy, but I think my ability to cite, crisp quantitative information could have been better. What are the costs of being ethical? What are the costs of not being ethical? Where does being ethical add to the bottom-line in terms of revenues, sales commissions, shareholder value, reduced churn, etc.? The answers I provided to these questions were either a bit long-winded or not available at the tip of my tongue.

In any case, if folks have thoughts on ethics, teaching ethics, receiving ethics training, etc., please feel free to share your stories. I am interested in what works and doesn't work for folks.

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Update On Management Consulting Blogs

Close to two years ago (in February 2005) I wrote an original post that noted a dearth of blogs by traditional management consulting firms. Six months after that post, I wrote an update where I happened to run across a few more blogs by individual consultants.

Since that time, I’ve run into many more blogs that are associated with management consulting, such as Guerrilla Consulting, David Maister‘s blog, and the Management Consultants’ Blog.

I also ran into a few more blogs that I closely associate with big name, traditional consulting firms (either because the blog carries the company banner or is written by an executive at the firm). Note that even though the blogs likely reflect the perspectives of the individuals and not the perspectives of the company, I still have some loose mental association between the individual and the firm. In any case, the other traditional consulting firm blogs I’ve run into over the past two years are:

In the past, some folks had indicated that a dearth of management consulting blogs may have been due to concerns about unwanted disclosure of confidential information. I’ve not heard of any cases to date, not to mention any disclosures that would indicate that blog media increases chances of disclosure over other media. (That said, there are clearly cases where the blogosphere amplifies the transmission of information which could be argued increases general risks associated with corporate blogs or those loosely associated with companies).

As an additional note, I find it interesting that the four traditional consulting firms that I mention above all have a strong technology competency associated with their brand. For example, Accenture not only has a strategic management consulting practice but also has a strong systems integration practice.

Update (1/4/07): Per comments below (Thanks, Amaresh!), Diamond has a blog by its information and analytics practice. From the looks of it, it is a unique blog that sheds some light on more rigorous consulting practices that top consultants strive to implement for their clients.

Update (1/9/07): Booz Allen Hamiton podcasts here.

Update (3/8/07): Accenture has started a corporate blog here.

Update (3/12/07): Although apparently not officially attached to the "Firm", McKinsey alum Paola Bonomo commented here (thanks, Paola) and points us to a wiki of McKinseyite and McKinsey alum blogs.

Update (10/13/07): Consultant Ninja has a blog over here. Thanks for the links! Sorry I was not able to comment on your blog as it does not accept users without Google logins.

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Watching Nickels And Dimes On Legal Costs In Start-Ups And Ventures

Venture capitalist Ed Sim had a good post recently that touched on a number of things ranging from principle-centered negotiation to matching the core DNA and chemistry of a team in a venture. He entitled his post, "Nickels and Dimes Don’t Add Up" to reflect his late-in-the-negotiation realization that perhaps the DNA of a prospective executive hire didn’t match up because some of the aspects of the negotiation got extended too long for little reason. Because negotiations for executive employment arrangements can be complicated and involve more layers of legal mechanics stretching into the Board-level, his post triggered some tangential thoughts I had on the costs of legal and bootstrapping these costs from garage-level operations through seed and some cases of Series A financing. I suppose I could have called this post, "Bootstrapping Legal So That Nickels and Dimes Don’t Add Up Too Much".

A core problem with bootstrapping legal costs (and following a variation of a "cash is king" strategy) is that a company may pay for things later by bootstrapping these things now. For example, if a company needs to perfect its intellectual property rights because of poor professional services agreements, this can be a sore spot to have to go back to every customer one has dealt with to perfect the agreements.

But lawyers can cost from $200/hr to $500/hr. To create additional pressure on ventures, post-bubble many legal firms
(not to mention employees and other partners) pushed down their
willingness to take stock options in lieu of portions of cash compensation. Some are willing to push off costs for a few months, but you need an in then.

Let’s face reality then. Not everyone can afford to have lawyers draft every legal document change, even if one tries to make sure that drafting is the last step after negotiating or planning business terms.

If find it useful early on to know what type of company is in the making. This way you can think about how complex the company may be in the reasonable future (e.g., 12 to 18 months). As examples of types of companies and some of the pertinent legal aspects:

  1. Services-only company – may need very basic things like NDAs, professional services agreements, and subcontracting agreements
  2. Software-only company – may need more advanced things like NDAs, MNDAs, licensing,
    maintenance, OEM inbound and/or outbound, distribution and partnership
    agreements
  3. Software and services company – may need all of the above, plus additional
    considerations for when they interrelate surrounding intellectual
    property rights and/or interstate tax, say

I’ve seen the stuff above range from $1,000 to $25,000ish. When one
talks about adding core infrastructure paperwork (e.g., equity, stock
option plan, executive employment docs) costing anywhere from $5,000 to
$25,000ish, and then adding stock purchase or recap docs (post Seed round)
costing anywhere from $25,000 to over $100,000, things add up over time. One really needs to breakdown the timing of company needs (and scope of work) to get narrower ranges on these costs (and thus to bootstrap the org along).

To weigh through some of this entrepreneurial & legal jungle, I find it useful to examine some pertinent operational considerations:

  1. Whether there will be a future for the venture  – Entrepreneurs are pioneering, experimenting, and there is high risk early on. Don’t expend too much on legal until you’ve figured out what you are doing and what works. Somewhat related to this, don’t make core foundation documents or organizational structures too complex and customized unless you really need to.
  2. How far out the next phase of the future is – Try to storyboard out the future of the firm in a rational way. Consider only structuring legal stuff to keep you rolling for 12 to 18 months. Things like getting perfect distribution, licensing, and maintenance agreements may not make sense until you’ve got more traction selling direct. Why? People may not be able to sell accounts for you until you’ve a critical or workable mass of reference accounts. Although one may pay $5K more or even $15K to fix the job in the future on a $10K job, weigh the costs systematically.
  3. What that future could look like – Will there be things like capital raises? On core infrastructure documents (primarily corporate finance documents), I would not mess around here too much. In my opinion, these problems are the most expensive to fix, and it is in part because the problems are more diffused through the legal documents. The key factor that one can control, however, is that looking for iron-clad documentation and customization can cause much $$ pain early on. Maybe some of this can be fixed if the venture makes it to the next round.

Yet another strategy is to look at each of these types of documents above and figure out where they are most likely to break. If you need lawyers to focus on just getting that piece of the document iron-clad, this is another strategy to minimize costs in a somewhat "layered way".

I also find it useful to note, at least based on my experiences, that so long as one is reasonably careful, there’s little that lawyers can’t fix. Delaying costs is a key principle to look at.

Aside from actively managing legal costs and mechanics, I have another good option. Consider having a lawyer in as one of your business partners. They can save you a ton and help put your mind at ease.

Note these are insights on legal topics within start-ups from a
non-lawyer but from a person that has worked with a number of lawyers
in corporate finance and infrastructure, intellectual property, and
employment and human resources within start-ups and growth firms. I have been spanked (lightly) by lawyers for drafting stuff.

Steve Shu

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Management Consulting and Getting Seated in Client Interviews (Part 2)

Changing gears from my prior post on the overall character of solution building in management consulting, I thought I would skip around a bit to cover the client interview. It is a very important topic in management consulting. Ethan Rasiel, in his book, "The McKinsey Way" dedicates a whole chapter to it.

One benefit of bringing in certain types of management consultants is that they can float up and down the chain from the CXO-level to the trench-level worker. I find it important to gather both hard data and soft information in the interview. Here are some examples of quotes I have experienced in the trenches (watered down from some past clients):

  • "I feel like I have failed. It’s hard to ask for help in this environment."
  • "Headquarters: The regional management will have the measurements you are looking for."
  • "I don’t have those reports. You should go to sourcing."
  • "I have no idea. You go to processing to get that information."
  • "Who cares about those reports? Headquarters does something with that. They should have the reports."
  • "People that deal with our personnel say that our competitor has a higher-class of industry expertise and it shows."
  • "Morale is really bad. We’ve tried everything but continue to show bad service."

Rasiel indicates that McKinsey usually conducts interviews with two management consultants at a time. I can see how this could be of benefit as it is hard to both ask questions and take notes at the same time. That said, I have generally conducted with interviews by myself or with one other person under special circumstances.

Rasiel also indicates that McKinsey generates interview guides before an interview. Preparation helps, and the amount of prep is a bit sensitive to how familiar one is with the industry and functional area you are working with. I often use a spreadsheet or Microsoft Word document that covers the main questions and topics that I want to cover.

The real key to a client interview in my mind though is getting seated properly. This is the question I get asked most by client prospects and business acquaintances. How do you get people to open up? I find it is one of the biggest risk points in a project. If you cannot get on the same side of the table as the client, project risk goes way up in being able to deliver.

I don’t have a formula for getting on the same side of the table as the client, but here are some things that have worked for me:

  • It is important that everyone up and down the chain know that you are there to help. You need to go in with the attitude that the client comes first, even if that means putting yourself out on the street. Your client sponsor has a right to "fire" you at any time if you are not adding value.
  • You must be sensitive to fact that people are people and not just a bunch of names or boxes on an org chart.
  • You must establish trust. If people confide in you, you must not violate trust.
  • You must make it clear to the people that you talk to as to who you are working for and what your goals are.
  • You should be there to solve problems without passion, prejudice, or politics. You should have enough fortitude to tell the client when they are wrong, but you should have enough sense and ethical grounding to admit when you are wrong, don’t know something, or can’t add value and need to redraw subproject scope boundaries.
  • You must realize that clients, in many situations, know their business better than an outside consultant does. The consultant brings other value to the table, such as being independent and less connected to politics, having structured analysis tools and specific functional expertise, bringing additional bandwidth to get over hurdles, providing an opportunity for change, and drawing in experiences from other companies.
  • You must strive to get concurrence with the client throughout the project – regular communication and working sessions.
  • You must learn to develop capabilities to become a servant-leader (some of the same capabilities required for an executive or chairman of the board).

The aspect of not playing politics is very key. Many new consultants get too involved with politics (I did too when I first started). Although you may feel that it is ingratiating yourself with the client, clients are not paying money for that. Playing politics can also create bad side effects and factions within the company. Take no part in that.

Finally, I have found that blogging has helped provide a personal side to my practice of consulting. In many cases, I know that a client has read my blog to figure out what I’m all about, what values I represent, and what kinds of business methods I believe in. I want that to happen. In the words of a famous song, "You’re so vain. I bet you think this (blog) song is about you". Perhaps it is. Whatever it takes to help the client. That’s my style of effective change management consulting.

Steve Shu

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My Personal Purple Cow: Keeping the MBA Fresh (Con’t)

About a week ago, I picked up on a Seth Godin post that hinted the body of knowledge surrounding an MBA was limited. As a result, I posted my thoughts here as well as a number of other posts to help others sort through the question of whether to pursue an MBA. Regardless of where that discussion has gone on the net, what I do agree with is renewing oneself.

I recently completed Seth’s book, "Purple Cow". From the title of this post, I’ve hinted that I’ve taken a lot in. It’s a great book and a very quick read.

For me, I see his book as more of an innovation book than a marketing book, but in the end it could go either way. Perhaps what threw me was that the impression I got from net readers (before reading the book) was that it was a core marketing book. I see it as being an awesome complement to core marketing frameworks. In my mind it would be hard to facilitate an innovation session using the Purple Cow book as it stands though – some additional layer or framework would likely be necessary. Even Seth himself talks about not having a real framework or formula for innovation in the book. I think he’s likely smart enough to be able to come up with one, several, or many though.

Some interesting aspects of the book:

  • Seth motivates the book by comparing the "military industrial complex" to the "TV industrial complex".
  • In the military industrial complex, an increase in creation of weapons created a self-reinforcing cycle of bigger government, more taxes, more jobs, more taxes, etc.
  • Similar kind of buildup occurred with TV advertising, but with the amount of information overload, basically this leads to a decline in the TV industrial complex. As a result, a lot of the things that got built up are unwinding and new things are forming (note to self: may be interesting to explore this in further depth)
  • Skipping a bunch of steps in Seth’s argument for brevity, he basically winds up with the concept of "The Purple Cow". He relates the story of watching a field of cows and getting bored. Had there been a "Purple Cow" in the fields then that would have been something remarkable to grab his attention.
  • A key point he makes in the book is that companies need to make remarkable products (as distinguished from making outrageous products) that can spread word of mouth through the market. Making great products is simply not good enough. It’s bad.

Lots of good takeaways. Lots of good mini-case studies.

It is good to have innovation permeate whatever one does. As a results-oriented management consultant, the guidebook, process, and tactics I use to wedge it in will take some active thinking and doing.

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Offshoring: Far From Home, Close to Home, and In Your Driveway Aspects

As far as business goes and in terms of how life is affected, I often think about macroeconomic history in three areas: 1) the Industrial Revolution, 2) the Information Technology Revolution, and 3) The Offshoring Revolution. Not necessarily the perfect model but a working model that highlights key periods delineating changes in the way things are produced.

Offshoring is a big subject that has ranged from simple areas to more complex areas like the outsourcing of innovation.

In the first two areas of revolution, the output of the United States (in terms of GDP) went up drastically. Some economists and statisticians have estimated a "productivity constant" (which directly relates the GDP to key macroeconomic factors) and have determined that substantial (non-linear) increases in the productivity constant (and hence, the GDP) have occurred due to these first two revolutions. (See the second link in this post for one example of how this was done for the IT Revolution.)

Now as for the offshoring revolution, Mike Nevens (ex-McKinsey blogging at the Sand Hill Group) highlights,

The proximate cause of the offshoring phenomenon and ensuing debate is the addition of 300 to 400 million highly educated workers to the global economy over the span of less than a decade.

That’s the "far from home" aspect. Remember that there are approximately 290 million people in the United States. Keep the numbers in perspective though – the US Department of Labour shows that only 2.5% of all job losses during the first quarter of 2004 were the result of offshoring.

Mike goes on to write:

Offshoring is simply the first step in an inevitable process as companies in highly competitive businesses seek to lower their costs by moving work to where it the value, quality, cost tradeoff is best. We are already seeing the second step: wages are rising in those countries that are the recipients of outsourcing and working conditions are improving as the demand for local workers rises …

That’s the "close to home" aspect. While the offshoring revolution may not yield the non-linear increase in the productivity constant like the other revolutions (the future lies before us), there is a significant shift in deployment of capital coming.

The "in your driveway" aspect is this … Mike continues:

I believe the third step is happening as well, but it is harder to see in the available data. The third step is stagnating or declining wages in the U.S. and other industrial economies.

Mike offers some advice that workers should make investments in education and skill building. They should make investments in areas that are less vulnerable to global market forces.

In any case, everyone needs to keep their eyes open and stay renewed. The offshoring revolution is here.

Continue reading “Offshoring: Far From Home, Close to Home, and In Your Driveway Aspects”

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Managerial Decision Making and Spiderman

I completed Malcolm Gladwell’s books, "Blink" and "The Tipping Point", and I plan to read three of Seth Godin’s marketing-oriented books next in order to keep my MBA fresh. My impression and initial investigations to date have me thinking that these books have not penetrated business schools very heavily yet. Perhaps some of these books should be recommended in business schools or parts included in packets. I gave very high-marks to "The Tipping Point". Malcolm Gladwell indicated to me via email that it’s probably too early yet to know if "The Tipping Point" will penetrate the business schools, but he is hoping so.

Having just finished "Blink", I wanted to share some thoughts related to subconscious decision-making and making decisions based on "gut feeling". This is an interesting topic in the management consulting field, which bases its core on fact-based decision making (as I’ve hinted here). Making decisions based on gut feel is generally frowned upon. I suppose this is also true for managers (non-consultants) within operating companies, but I would venture to say that since management consultants are independent third-parties to solving business problems, there is more polarization and social pressure for consultants to rely on facts (just like patients rely on medical doctors to rely on facts).

I’m not aware of any grand unification theory for balancing fact-based decision making with subconscious decision-making, but I’ll offer my working model for handling the balance (it may be more liberal than traditional consultants). I basically use what I call my "spider sense" to balance fact-based decision making.

Spider-sense is based on Stan Lee’s superhero, Spiderman, who gets a tingling sensation when something bad is about to happen to him.

So my general "algorithm" for decision-making (work in progress) is to:

  1. rely on facts
  2. check your gut feel or "spider-sense"
  3. if #1 and #2 are in alignment, great (i.e., the facts and spider-sense agree)
  4. if #1 and #2 are wildly out of alignment (contradict one another), better re-check the facts or re-factor what is going on around you
  5. on the margin (i.e., if #1 and #2 contradict, but they are not wildly out of alignment), if you have above moderate expertise in the subject matter, then weigh "spider-sense" more than the facts. Otherwise, try to seek out an expert (or godfather or mentor) to fill-out the tacit knowledge gap.

The other caveat to this is that one must constantly try to sharpen one’s spider senses. In business, some of this has to be done by focusing on vertical experiences within an industry sector. However, sharpening managerial decision making in a more general way is also important. In some business schools, this is covered in classes on organizational behavior (OB), and schools may have required OB courses to earn the MBA degree. OB training helps one to become more cognizant of biases that people have when processing information and making decisions. Whether biases are good or bad in a particular situation depends. Nevertheless, there are a ton of biases out there and OB classes help to give people a structure for thinking about these kinds of things.

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(S*X and B*NDAGE) For Software Marketing in 2005?

I swear the timing was by accident. I wrote this post on software marketing in 2005 for the Sand Hill Group over two weeks ago (I think) not knowing when it would be posted. Then yesterday I facilitated this post for my wife. In any case, the first post motivates the need for sex in software marketing. The second post, er … well, it recommends suggests bondage and handcuffs as an option to constrain consumer choice.

Steve Shu

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