Category Archives: Teaching Business

Marketing Textbook in Top 250 Blog List

What if the question was: what’s the best book about marketing to read and recommend? And the answer was: read this compilation: Top 250 Blog Posts – Advertising, Marketing, Media and PR Spotlight Ideas. How things have changed. 

Not Kotler’s Principles of Marketing, not Seth Godin’s Permission Marketing, not even Jay Conrad Levinson’s Guerilla Marketing. But read the 250 posts included in this top 250 posts list at SpotlightIdeas, and you’d have a marketing education.

The posts are divided into meaningful categories, and include a highlights list of best bloggers in any of these marketing-related topics. Seth Godin, Chris Brogan, Leo Babuta, Robert Scoble, and many other generally-recognized blogging leaders.

Academy of Management Session Friday Aug. 3 in Philadelphia

If you are planning to attend this week’s Academy of Management Annual Conference in Philadelphia, please join me at my session on how to use software to teach planning . My session is from 2-5 p.m. Friday Aug. 3 in Room 410 of the Philadelphia Marriott.   

The session takes off from the point of view of developing a business plan as a tool for giving students a broader view of the whole process of small business management, from start-up to growth, marketing to sales to production to management team, sales forecast through income, balance sheet, cash flow, and long-term financial management. We’ll look at software as a tool, some sample exercises, working with popular websites, tips and traps, and a lot of discussion. I will share the details of the course I teach which takes students through the business plan to a presentation at the end, including assignments that build the business plan, discussions of presentation techniques, and Web implementation.

A word of caution, however: the Academy of Management annual meeting is not open to all, and isn’t free.  For more information on registration and costs, click here

I hope to see you there.

— Tim

True Story: Entrepreneur Meets MBA

You can look up Philippe Kahn in Wikipedia if you want. He started Borland International on his own and took it from zero to $60+ million per year and an IPO in less than four years. Borland has been bought and sold several times over since then. Philippe has built some other companies, he’s become famous and wealthy and he’s earned it.

I was a co-founder of Borland International, one of four members of the original board when it was founded. I had been recommended to Philippe as a business plan consultant and he had needed a business plan. We met, we worked together, and things clicked. When he offered to give me stock and asked me to join the board as the company started, I agreed.

That was in 1983. I was 35 years old but I was also a recent MBA, only 2 years out of Stanford. Philippe had far more to teach me about business than I realized. Not that he wasn’t schooled — he had a good degree in math from France — but he wasn’t MBA-schooled. And I, on the other hand, trusted analysis first and intuition later.

So as Philippe guided Borland from start-up to success, we disagreed repeatedly as he chose business strategies that defied schooling and analysis, and, over and over, he was right, and the MBA analysis was wrong. Never have I made so much money while being so often wrong.

Take pricing as an example. Turbo Pascal, which was line for line, pound for pound, one of the best software products ever made, fell into our lap in October of 1983. [Side note: that’s a good story, you can read it in Fire and the Valley, and I intend to tell it in this blog, but not now]. That was just a few months after the JRT scandal, in which somebody brought out a $30 Pascal package to compete against the $450 mainstream offering, only to go broke after charging a lot of credit cards that weren’t refunded. Furthermore, my MBA analysis pointed out, with the leader at $450 per unit there was no reason to go cheap. Too cheap would hurt credibility, I said. And we were brand new, we didn’t have working capital to handle volume.

Philippe, however, politely ignored my logic and set Turbo Pascal at $49.95 per unit. And he was so right, I was so wrong, if I hadn’t had equity to console me it would have hurt a lot. The pricing move was brilliant, that plus some very gutsy marketing got Turbo Pascal’s wings up and soaring very fast, and Borland International never looked back.

I have a second example: Quattro Pro. Philippe aimed his competing product squarely at the industry leader in 1985 and published the first "Lotus 1-2-3 compatible" PC spreadsheet. I said it was crazy to take on Lotus at that point in our history, Philippe did anyhow, and, once again, he was right and I was wrong. And again, because I was a shareholder, I benefited.

I keep this story not because I like to chronicle mistakes (although I don’t mind doing that, it doesn’t hurt and it seems useful to others) but because I think this illustrates something that happens all too often. A good educated guess often trumps classic analysis.

Tim

Do Business Schools Stifle Creativity?

The best class I took at the Stanford Business School during my MBA years (1979-81) was taught by Professor James March, co-author of the book An Introduction to Models in the Social Science. It was about the same subject. He was funny. He was contrarian. He was brilliant. He had a mathematical model of a cocktail party that predicted how many people would be passed out at the end of the party, based on inputs including how many couples, how many singles, and, particularly important, how many more male singles than female singles. That may be too gender-specific for today’s world, but it was applicable 30 years ago.

I liked and respected Prof. March so much that in the middle 1980s I tried to get him to join me in what would have been a venture to create a game that teaches business. Prof. March didn’t join me and I didn’t create the new venture. I continued with my business plan consulting instead.

I’ve never forgotten the conversation we had in his office that day. I can’t remember the exact words, of course, but Prof. March reminded me that there is an underlying conflict between education and creativity. He was an educator, but he was also a contrarian and a thinker, so he enjoyed flanking our standard assumptions.

"Schools teach conformity," he said. "Education is about reinforcing the supposed right way of doing something, meaning the way we’ve always done it, the way the establishment expects us to do it." Schools taught that the world is flat until a renegade proved otherwise.

"New ideas come from people that haven’t been indoctrinated," he said. This was of course before the phrase "think outside the box" came along, but he would have referenced that if we’d been later in time. Schooling is about learning how to think inside the box. If you believe this line of reasoning.

Here again, I run into paradox. I believe in education but I also believe what Prof. March suggests. Is the answer that you have to know the fundamentals before you transcend them?

Dumb Investors: a Dumb Idea

Last Fall my son Paul dealt with a potential consulting client with a website business who wanted to bring in investors. They had half a million dollars of seed money, but it was running out. “They tell me they’re looking for someone without investing experience who won’t interfere with management and will take less equity than normal,” he told me. “In other words, they want dumb investors.”  He didn’t push his proposal. He got out of that business relationship.

"Wanting dumb investors", to use Paul’s phrase, comes up a lot. Here’s just a sampling of some email questions I’ve received that seem to indicate that same kind of thinking:

… I need capital to hire
and build the appropriate infrastructure, but I don’t want to borrow. How can I get the $ I need
(between $300k and $700k) without losing much equity? And how would you suggest I go about it?


I am about ready to start fund raising. The business will be set up
as an S corporation. The business is a gym-type operation, and the
current financials predict I will need a total of $800,000 for proper
capitalization. I personally can put in $80,000, and will manage/work
there every day putting in that oh-so-necessary sweat equity.
What percentage of a company should a person expect to give up to
receive various types of equity? Seed money? 1st round? 2nd round? etc.

… we are at a start-up stage, having developed proprietary
auction search technology and have set up to go live via our own
start-up capital in the order of $100K. Given that we can build up some
semblance of traffic, would it make sense to bypass an angel round of
financing which would provide around $500,000 in return for 50% or more
of our company in equity, and go directly to a first-stage VC round
where we can solicit $2-5 million in return for a 10-30% equity stake?

I’m amazed at how often this idea comes up. I think it’s usually disguised as wanting a good deal, or looking for a way to not "give away too much equity." I have dealt with people who assume investors are more attractive the worse the deal they negotiate.

The first question here, hidden in the mess, is whether or not you want to build the kind of business that takes outside investment. Most of the time this is a question of resources. First you develop your plan to get a good view of what’s required, then you compare what’s required to the resources you have on your own. If you can’t do it on your own, and you can’t scale it down, and you still want to do it, then you need investors.

And if you’re going to deal with investors, think of it as a long-term relationship like a marriage. Don’t look for dumb investors. Look for investors to build your company, not tear it apart. Or don’t look for investors at all.

— Tim

 

Moot Corp and Other Venture Contests

Eleven years ago Mark Lang asked me to judge the University of Oregon’s Venture Championship, an intercollegiate and (now) international venture contest. I wasn’t paying attention when I said yes. This was months in advance. When the date arrived, I arrived as asked at lunchtime on a Thursday in April and discovered, to my shock, that I’d carelessly committed myself for the rest of Thursday, all of Friday, and most of Saturday.

I called my office. "Cancel everything." I asked myself what I had done. Damn!

What had I done? It turned out, however, to be so interesting that I wouldn’t miss it. I’ve now done the Oregon contest ten times, including last month. This month I judged the University of Texas Moot Corp international intercollegiate venture competition, started in 1984, the oldest and probably best known of these competitions. I’ve also done Notre Dame’s three times, Princeton once, USF once, and Carrott Capital once. My company sponsors several of them, including prizes for written plans at most of those above.

These contests are fun. Bright ideas, bright people, good presentations, tough questions, and good answers. Ventures compete with business plans, pitch presentations, question and answer sessions, elevator speeches, and some other variations such as Oregon’s lightning round, which is 15 minutes with no props, not even a slide presentation.

For anybody with an interest in start-up business or entrepreneurship or business planning, judging one of these things is a privilege. For students, participating is a real experience.

A good percentage of the ventures shown go on to launch and in many cases commercial success. In my channel at Moot Corp we reviewed five ventures that all looked viable, all software related, from Oxford, Carnegie Mellon, University of Texas, University of Oregon, and University of Nebraska. The University of Texas entry, eVapt, didn’t even win the group but I took business cards home because my company might buy from them.

The elevator speech event gets better all the time. Contestants get 60 seconds to pitch their business with no props. Bells ring, time’s up, you’re out. Did you explain it well enough? Did the judges get it?

Many of these contests are international. Moot Corp had entrants from schools in UK, France, Australia, Canada, China, Hong Kong, and Thailand.  Oregon has a Pacific Rim flavor, with entrants from Canada, Colombia, Hong Kong, and Thailand.

The Thai teams do particularly well in these contests.  Thamasatt University’s team had a venture called Power Prawns that managed to manage shrimp genders to produce a huge majority of males, which are bigger and therefore more profitable. They finished second in Austin and third in Oregon. Mahidol, another Thai university, won the Oregon competition last year, and Thamasatt won it the year before that. Our company’s best written plan award went to Thamasatt this year, Mahidol last year and Thamasatt the year before, making that three years straight for the Thai teams.

More contests are appearing every year, and prize money is growing. Oregon gave $50,000 cash to the first place team this year, and Moot Corp gives $100,000, although only $25,000 is cash, the rest in services. The founders of Columbia Sportswear have donated $3.5 million to the Oregon contest, the first of such permanent funding for a venture contest, at least as far as I’ve heard.

I’ve missed the Notre Dame event for three years now because of schedule conflicts. That one is just Notre Dame, but it has entrants as undergrads, grad students, and alumni, which makes things more interesting, and most of the judges (I’ve been an exception) are members of the Irish Angels investment group and ready to invest.

A few years ago at the Notre Dame contest there was a strong entry for a cheerleader-focused gym in suburban Atlanta that needed only $45,000 to get started. It didn’t win anything but during a coffee break 9 judges got together and contributed $5,000 each to get the gym started.

One problem that comes up is built into the nature of the contest, and investing in general. There’s no good way to choose between the plan that needs $600K to launch and grow to $6 million annual sales in 3 years, and the plan that needs $15 million to grow to $150 million annually, particularly when the smaller one is more solid and more realistic, but the larger one is also good. That’s life, though, hard to avoid.

Another problem that bugs me is that all of these contests focus on start-ups that need investment, and most of them ask judges to decide based on investment opportunity from the point of view of the investor. I think that ends up undervaluing the bootstrap plan that doesn’t need investment. In the Oregon contest there was an entrant a few years ago that had a great business that could fund itself from sales and profits. They entered because they wanted the prize money, but didn’t need investment. They should have won, but didn’t.

Since then a group of organizers got together and responded to that problem by setting the investment opportunity criterion as the standard. Too bad.

And then there’s the fact that too few of these groups use Business Plan Pro, and, to be honest, most of the plans I’ve read would have been better off if they had. Their financials in particular would have benefitted from better, stronger financial modeling, and more charts. But of course I’m biased, and, hey, some of the plans they produce are really strong, software tool or not.

So in all, I’m happy with it, and I’m glad Palo Alto Software sponsors some of this. This trend is good for the students, good for the programs, fun for the judges, and good for entrepreneurship. I hope it continues.

— Tim