Musings on books, technology, entrepreneurship, nonprofits and umm.. everything else …

Archive for January, 2013

Rawls, role models and responsibility

Over the last weekend, we went over several interesting case-inspired discussions in our social impact class at Wharton over a morning session on one day and a marathon 4.5 hr session on another. We kicked off the weekend with a case on the Norwegian Sovereign Fund divesting itself of Walmart a few years ago.  We spoke about what the company could have done and what the fund could have done that might have caused different outcomes. This led to an engaging conversation around socially responsible investing and the spectrum between silent responsible investing vs. active shareholder advocacy. We followed this up with COSCO and sustainability reporting in a Chinese State Owned Enterprise setting. Along with the Merck river blindness case, these provided a good juxtaposition to explore “do no harm” as an approach towards corporate social responsibility vs. “do good” as an approach. Thomas Dunfee’s work provided a good set of questions to ponder over in this context as well.

We moved on from this discussion to the next logical extension – doing business while doing good. In this context, we discussed One World Health and their business model, as well as Unilever and their Project Shakti campaign in India. We spoke about what it means to be a BoP customer in terms of quality and unit of consumption of product, and discussed how distribution models could inherently have empowering positive externalities – for example by working through women’s self help groups. For me, Aneel Karnani’s work on the myth of BoP marketing was bang on target in terms of several issues that he identified as legitimate reasons to be cautious about jumping on the BoP bandwagon without really understanding the nuances involved.

In the closing hour of the lecture portion of the course, we moved on from these specific cases to the more abstract notion of where to act, given all these different ways in which an individual or company could contribute towards social impact. In this context, some of Prof. Hsieh’s earlier work on a Rawlsian approach to business organizations provides an interesting backgrounder.

Watercolor portrait of John Rawls by Mardy Rawls

In this work Prof. Hsieh discusses whether multi-national corporations have a responsibility to provide aid to employees in developing nations over and beyond what the market might prescribe. Should they be held up to the same human rights standards as nation states? At a personal responsibility level, he also talks about the “natural duty” to support and further just institutions. What I found interesting here was also how by elevating the “social good doer” as a “role model” or a “social enterprise” or a “CSR activity” as individuals and corporations we are able to go ahead with our business as usual in our daily lives. Putting Mahatma Gandhi or Dr. King on a pedestal makes it easier to say how it is not easy for an ordinary human being to stand up for what they think is right. Classifying the Norwegian Fund or REDF or other socially responsible investing initiatives as “outside the norm” exonerates our businesses from attempting to conduct themselves better. As Prof. Hsieh pointed out in class, the “social impact” of a large fraction of companies making small changes to their business practices would overwhelm any changes brought by a much smaller chunk of impact investing dollars. Towards that end, it was interesting and impactful to see the discussion converge towards what are the different things we can do as individuals and as employees in corporations. A final thought that came to mind was that of Viktor Frankl as I read his “Man’s Search for Meaning”. I believe that we should do what we find meaning and fulfillment in, and the value for society will follow. At some level meaning is embedded in our connection to the community around us so doing something we find meaningful should, more often than not, lead to social good as well.

Fascinating course overall. We now have one more weekend of classes where we as teams of students go over project presentations on our chosen organizations and discuss them in the context of what we learnt in class.

The Shane Battier Effect

This post is on the influence of measurement on behavior. A few years ago, I was intrigued to read an article by Michael Lewis in the New York Times on Shane Battier titled “The No-Stats All-Star”. The article states how basketball, unlike many other sports, mirrors life in the sense that maximizing personal goals is often at the expense of maximizing team goals, and it takes a rare player to transcend those barriers. It sets the context of how new metrics were derived for basketball inspired by Bill James’ work to try and include such behavior into accounting for a player’s performance.

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And what came as a surprise to the analysts was the impact someone like Shane Battier had on his team, despite his mediocre personal stats. Lewis, as well as other authors  have gone on to call this the “Shane Battier effect” where victory is defined as that for the team, and his role in optimizing his contributions in the context of where he can maximize his team’s impact against that particular opponent. Even in his current role with the Miami Heat he’s recounted as a great example of someone who will get the job done without worrying about formal roles assigned to him. I had written about this in a post titled “The Batmobile and race cars” a while ago on versatility vs. narrow depth of talent.

So what is the relevance of this in our corporate lives? Work, like life, is setup so that maximizing personal goals is often at odds with maximizing team goals. A wealth of research has looked at the  incentive-goal alignment problem – for example, McClelland’s Needs Theory, Adam’s Equity TheoryExpectancy Theory and Hackman’s Theory of Job Design. Interesting books have been written as well from  “The Carrot Principle” to “The Starfish and the Spider”. Despite all this, the notion of a collective maximization of efficiency through an individual’s efforts remains largely unused or underused. We find it hard to create measures that measure what we want to measure accurately, so we waste time measuring what is easy to measure – the classic “Streetlight Effect” paradox. It is more likely that the Shane Battiers of the corporate world are stowed away pushing paper in some back office than front and center coordinating between groups in a company, even if they were quietly lubricating the cogs of the machine within their reach so that the corporate machine they belong to runs faster, smoother, longer. And in a world where jobs are what companies care about and careers are what individuals care about, there is a fundamental dissonance of priorities as well.

However, in today’s world where the (Schumpeterian) creative destruction process cycles through faster and faster, building a great company requires one to avoid the pitfalls of measurement induced biases and find talent that is as yet uncalibrated by the market. Companies that do this successfully will be the great successes that we will point out in the technology sector in the coming decade, much like the Oakland A’s turnaround showcase in  Moneyball.

Entrepreneurship@Wharton

The application season is in full swing for Class of 2015 at WEMBA SF. I met with several potential candidates and spoke to them about the program and my thoughts about it over the past few weeks. This post was an outcome of that, to focus on one of the aspects of the program that to me was not highlighted enough.

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During the application process to Wharton, the term I was looking forward the most to (if I got in, that is) was Term 6. I had sat in on Doug Collom and Rafi Amit’s class on Venture Capital and Entrepreneurial Management. As I count the weeks to the start of that class and a few other interesting entrepreneurship related classes, I can think back to my first term at Wharton and how pleasantly surprised I was at options available for entrepreneurs in this program out here in SF.

To begin with, there is the Wharton Entrepreneurial Programs. It has several manifestations out here in San Francisco, one of the biggest of which is the Venture Initiation Program. This is an incubator run out of SF that brings together the Wharton network, contacts, and expertise to a selected set of Wharton founded startups and helps them through their early stages. There is also the Wharton Business Plan Competition which is seeing an increasing representation from WEMBA students, both from SF as well as Philly.  In fact, the 2012 competition was won by a WEMBA East team! There is also the Wharton Entrepreneurs Workshops that are organized under the leadership of our Vice Dean Doug Collom in partnership with Wilson Sonsini Goodrich & Rosati. These talks are actually made available to the public through the Wharton YouTube channel.

In addition to these opportunities outside the regular curriculum, there are several opportunities within the curriculum. There are two classes focused around business plans and starting companies – MGMT 801 and MGMT 806. In these classes you get to form a team with your classmates, learn to prepare a pitch and present and refine your idea. The final project involves a pitch session with VCs and instant feedback as well. Term 6 of course has two classes on the financing aspect of startups (FNCE 750 and MGMT 804) and one on the legal aspects (LGST 813). I also found a detailed blog post that talks more about other elective options and clubs back East for folks that want to know more.

These efforts at growing the entrepreneurship focus out here in SF are not going waste. Several of my classmates in class of 2013 have gone on to quit their jobs and start companies. Daniel Chen and Amilcar Chavarria founded BuckSprout with help from Ajaiey Sharma. Vinay Mahadik is one of the co-founders of Securly, a startup that will make big news soon. Vijay Ramani started SocialMoola, and Tim Grammer is a co-founder at The Ultimate Sparkle. Three classmates – Manoj, Nirmal and Kalpan – co-founded ForeSpire, an advanced analytics company for product teams. In addition to these classmates, there are many that are at the crossroads in their lives where they are making the jump from day jobs that pay their bills to the unknowns of following their dreams and starting a company. Class of 2012 had an equal number of amazing entrepreneurs as well.

So why this post? If you are thinking about startups and wondering if Wharton fits the bill, think again. It is one of the best kept secrets of the WEMBA program in SF.

Six steps to building a great SaaS product

Recently we had several students stop by our office to learn about our work and opportunities for internships and full-time roles post graduation. It was cool to be one of the small guys in an itinerary that was otherwise filled with popular names such as Google, Apple and Square. We had several sessions about the company itself, what we do, what it is to work here and and where we see the future. I spent a few minutes talking about six steps to building a good SaaS product. Thought I might post it here as well for what its worth. As we are reminded often in our quantitative classes, these are not mutually exclusive, nor are they collectively exhaustive.

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1. The customer is king

The first piece of the puzzle is to build what your customers want. While the greats like Steve Jobs might claim that market research is not worth it, for us mere mortals this is a must. In a small startup it is a lot of fun to talk to your early customers to understand exactly how they use your product and what features they look for to improve the experience. Focus on those and deliver them to keep the customers happy.

2. Know your costs

Offering a SaaS product means that you have to model your traffic pretty well and understand what your peak usage, average usage and usage patterns will be. It would be a good idea to run these through some basic scenarios and model your worst case capacity requirements. These need to be built accounted into your operating costs and accounted for during pricing. For example if you plan to run a video or audio conferencing service, it might be useful to know your peak usage days and times and run at least some basic Poisson process models, or mixture Poisson models to know your worst case capacity needs.

3. Don’t be shy to price it right

In the B2B SaaS world, pricing is critical to success. Price too low and you bleed money as your user base grows. Price too high and you get great margins but not much top-line growth. The key is to price high enough that you account for healthy margins to fuel your growth, but low enough that traditional on-premise solutions or other competing solutions look much less attractive from a total cost of ownership analysis.

4. Know your enemy

There is no free lunch. You will have to clearly identify the landscape that you fit into and who your competitors and complementors are. Especially if you are building a sales team that can pitch to businesses and convince them to purchase your product, you need to be very clear on what your value proposition is compared to the hundred other solutions out there. SaaS is a recurring revenue business. If there is no happiness, there is no recurrence, so snake oil techniques may not work out that well here.

5. Find out who’s on your bus

You might have assumed that a certain type of customers will be your early adopters and viral propagators of your technology. But it would be good to do periodic checks to validate your assumptions. SaaS products offer you the ability to learn more about your customer as they use your product, so detailed usage analysis, demographic segmentation, K-means clustering and other statistical techniques will provide you surprising insights on who ended up using your system the most and why. Who knows, you might even end up building our a separate sub-brand just for those identified segments if they turn out to be a lot more profitable than the market you were targeting at the beginning.

6. Build, test, rinse, repeat

Unlike a hardware product that is out of sight, out of mind, once sold, a SaaS product is well suited for frequent updates. You might have assumed that a certain layout for your website works best or maximizes usage or conversion. But unless you test, you never know. You are as good as the last set of tests you ran. While many sites make it easier to do A/B testing on your websites, it might be worth it to start building sites with the capability to run multivariate tests so you can run your experiments without impacting your top-line too badly. From a product features perspective as well, being situated in the cloud makes it a lot more hassle-free to rollout latest product updates and bug fixes within a few hours.

So is this all it takes? Of course not. But this is a good place to start.

On Social Impact and Social Enterprise

Finally we have a Wharton cohort that gets enough critical mass and votes for a Social Impact course for the West cohort – am proud of class 37 for this accomplishment! This weekend we had Prof. Nien-hê Hsieh with us for three sessions of his class on Social Impact and Responsibility. At a high level, the class seeks to give us an overview of how to think about social impact work being done by non-profits, through CSR, CP, social entrepreneurship and impact investing. We also got quick clarifications on the different shades of grey between these different paths towards social impact.

We started off with an interesting case on SKS Microfinance and what it meant for an MFI addressing the BoP in India to go IPO and what role that had to play in the downfall of the company and subsequent clamp-down by the Indian Govt. on MFI-NBFCs and the regulatory environment that resulted. We had a vigorous conversation in class on the various aspects of this issue, and this discussion led nicely into a great article from the Stanford Encyclopedia of Philosophy on Exploitation. This sets up an interesting normative framework to evaluate actions of entities along the grey line between exploitation and empowerment. It identifies three core ideas of efficiency, fairness and freedom. We also briefly considered how it leaves out other values such as community as found in Asian philosophy and going further to value the environment. It also did not go as far as to discuss other concepts from normative ethics such as utilitarianism or Schweitzer’s Reverence for Life, but still provided a good context to evaluate businesses and their actions against the metrics of not doing any harm, and respecting the choices of others.

We then had an engaging session on metrics and impact assessment and a debate around measurement and the artifacts it creates in terms of what gets funded based on what can be measured vs. what generates most impact, though not-quantifiable. Keeping those limitations in mind, we took a quick look at REDF’s SROI metric, Hewlett Foundation’s Expected Return metric, and as part of a case discussion, Acumen Fund’s BACO based comparison of investment choices much like this case.

We also touched upon Theory of Change,  and how that is driving organizations to evaluate their existence all the way from inputs, activities and outputs to outcomes and impact. My sense of this is that though this sounds better than the alternative of doing nothing, focusing too much on being able to quantify impact results in NPOs pivoting to implement projects that can be measured and reported on, vs. projects that are decided upon through participatory discussions with their target communities. Added on top of this is the limitations imposed by the North forcing an evaluation framework and process on the South without possibly adequate representation of the voices that are being helped. In general once has to walk the line between deciding by proxy and disempowering, and seeking open feedback and criticism from target communities and having them as equal partners in deciding upon their choices of development and empowerment.

After many years of volunteering with Asha, NVIDIA Foundation, Mindful Schools and other groups, this gave me a good setting to finally take the time to look back and evaluate all the mistakes I have done in the past and see how things could be done better, and what gaps I could see in where the industry is headed. Prof. Hsieh seems to be doing some really interesting work around looking at CSR and the day-to-day operations of corporations itself and assessing their footprint and making that more socially relevant. He also spoke to us briefly about ongoing work (including his own) on what the obligations of transnational corporations are towards human rights.

Can’t wait for the upcoming sessions and learn more! Class 38 and others that will follow – keep the light shining and vote for these classes!

First day of the last term …

Finally, the end is within sight. Tomorrow, the WEMBA Class 37 cohort starts its final term – 8 more sessions to go to graduation! It was a great few weeks away from school for those of us that did not sign up for Global Consulting Practicum projects or Global Modular courses in different parts of the world. Was a good time to reintroduce ourselves to our near and dear ones and spend more time with them through the holidays :).

To keep with the long-distance running analogy that this blog has had about the WEMBA program, these are the last few miles where it will be mind over matter and willpower over pain. You can see the folks that are headed towards top academic honors in good form, head over shoulders straight back and clockwork strides one after the other. For the rest of us, now’s when we’re dragging one foot in front of the next, heads drooping and backs stooping as we look ahead towards that finish line so close, yet so far away.

Many made the wise decision to load themselves up with global modular courses earlier in the program and/or GCP/DCP projects. They need very few credits to graduate – I expect to see them hanging out at the pub and in general taunting the rest of us for our misery. Unfortunately, the program saves the best for last – this term is filled with electives that are all interesting and it is a tough call to decide what to pick and what to drop. Look forward to a few posts around entrepreneurship, marketing strategy and impact investing in the upcoming months.

 

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Speaking of reading and learning, I just finished reading Christopher Steiner’s Automate This, a fascinating collection of stories from different walks of our lives where algorithms have taken over. Without giving away too much of the anecdotes, let me just say that he presents real anecdotes from Wall Street, music composition, and even call centers. This completes a sequence of three awesome books through the break – Nate Silver’s book and Chris Anderson’s book being the other two. Looks like the year is off to a good start, so I look forward to more of these in the coming months!

 

10 good reads from 2012

Now that it is January of 2013, we’re all busy looking back and wondering what we liked about 2012 and making our lists of favorites. I thought I would add to that list by listing out my top ten among the books I read in 2012. Most of these were published last year as well, though some are from prior years.

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1. Nate Silver – The Signal and the Noise
2. Dan Ariely – The Honest Truth About Dishonesty
3. Chris Anderson – Makers: The New Industrial Revolution
4. Charles Duhigg – The Power of Habit
5. Sam Kean – The Violinist’s Thumb
6. Nathan Wolfe – The Viral Storm
7. Clayton Christenson – How Will You Measure Your Life?
8. Robert Burton – On Being Certain 
9. Rachel Maddow – Drift
10. Jonah Berger – Contagious

It is amazing how a book can transport you from your immediate surroundings to a totally different world of suspense and intrigue, of fascinating experiments and eye opening insights. I hope that I get lucky in 2013 as well and good reads like the ones above cross my paths this year as well. Ideas have the power to transform us all, and like brownian motion, unless there are enough collisions with interesting ideas, our lives are more likely to be stuck in the drudgery of now rather than the exciting possibilities of tomorrow.