Real Life Business Education: Too Many Internets

Last Year, author Ray Bradbury famously said that there are "too many internets". This was part of a crazy rant that he recorded on this blog. I'm not exactly sure what Bradbury meant by too many internets, but it turns out he was right... sort of. We actually have too many registered internet addresses.

This is a strange concept. We often hear about the capacity limiting constraints of legacy hardware or fiber, but addresses? It seems like they should just be able to add a digit or something. Unfortunately the current IP naming conventions were developed over thirty years ago when the internet was still just a closed experiment accessible only to US government agencies and a few Universities. And now... in 2010, we experiencing a famine of IP addresses.

According a Wall Street Journal article, help is on the way. Apparently help, is a new naming system call IPv6, which will allow a "near infinite" number of internet addresses. The catch is that most of the hardware out there that is more than just a few years old isn't compatible. So begins the long upgrade. I guess the one positive thing is that internet hardware and devices are typically upgraded often.

So, will we run out of IP addresses? The techie folks say that it's unlikely, however, that is only because companies began to prepare for the end of addresses a few years ago. Thanks companies- your making us all realize that Ray Bradbury's comments were just as dumb as they originally sounded after all.

Cheers!

Verizon is using their MBA

I recently noticed that Verizon Wireless applied some typical MBA know how to their pricing scheme for smart phones. The old data options from Verizon were to either buy an unlimited everything (data, text, pix, and flix), or a multimedia package (text, pix, and flix). The former was $29.99, while the latter was $9.99. What this essentially did is charge light users of data the same as very heavy users and there was no difference in speed that was offered.

Verizon’s latest pricing includes differentiation in price for total data used for a month and connection speed. The premium is for faster service and/or greater data usage.

This is a concept affectionately referred to as price discrimination. They figured out that different folks are using their bandwidth differently and thus value that bandwidth differently. Now, its not pure discrimination because VZW is actually offering slightly differentiated products, but they are essentially charging different customers different prices based on their willingness to pay.

Other examples of price discrimination include a student or senior discount, in-state college tuition, and corporate discounts. In all of these situations businesses are trying to increase their overall profitability by selling to people at the maximum price they are willing to pay.

Obviously Verizon has a few MBA graduates on their payroll. Nice work VZW.

Lessons from Business School - Economic Value Estimate

The Chevy Volt was recently released for mass production and will soon be available at a Chevrolet dealer near you. This car has been released to much fanfare and is being hailed as the first electric car that he general public will purchase. The biggest reason for this is the vehicle’s range on a single battery charge.

About a year ago, I read about the Volt and was very excited about the prospect of a legitimate electric car. After reviewing the specs and the range, the first thought I had before I could decide if I would purchase pone is “how much is Chevy going to charge?” A year later Chvy announced a price of approximately $40,000 for the vehicle (depending on options). The announcement of the price was timed very well with the pricing class that I began back in September. One of the very first concepts that we learned will allow me to share a very valuable Business School lesson with you…. The EVE (Economic Value Estimate).

The framework is actually pretty simple. You just take the price of the closest alternative, add the difference in benefit (positive or negative), and adjust for qualitative factors such as a fast adoption product strategy. Here’s a quick back of the envelope on how the Volt may have been priced…

Folks who buy the volt are probably the same people who bought a Toyota Prius, Civic EX, or Focus Ltd. So let’s tak the value fo these cars on average… say $24,000. Now add the cost savings that an owner would experience using electricity instead of gasoline over the expected useful life the car (Let’s say 10 years at $1,000/year). So now we have $24,000 + $10,000. Finally, add in the reduced maintenance costs and some amount for the novelty of owning the first mainstream electric vehicle. Let’s say that amounts to ~$8,000 over the life of ownership. The grand total is $24k + $10k + 8K… $42K. $42K is the price ceiling (the highest price that should be chosen for the vehicle based on the value it represents to a potential owner. The floor is the cost of the next best alternative, or $24,000 in this case. Chevy should then choose a place in this spectrum depending on their strategic goals. Since Chevy is just recovering from bankruptcy and the popularity of the Volt is high, the price they chose seems reasonable. If they wanted to push inventory a bit more to gain some sales momentum, the may have priced $2k, $4k, or $6k lower.

It will be interesting to see how the Volt does… about 1 year from today, we will see if the Volt’s pricing analysts got their money’s worth from their respective business schools.

Real Life Business Education: China & Hong – Finally, Hong Kong

A group of four of us left our hotel with a driver and a guide named Sunny. It wasn’t very long that we realized Sunny was probably just as excited to be going to Hong Kong as we were – I don’t think she actually gets over there much.

It was starting to get dark as we approached the border. 30 minutes later it was pitch black as we made our way from the boarer into Hong Kong. We arrived in the city and finally landed in Lan Kwai Fong. We spent the first 30 minutes exploring the general area before we finally found an outdoor courtyard with a few different restaurants. As we walked into the courtyard, several restaurant owners/workers met us with menus and began attempting to persuade us to eat at their respective establishments. We settled on Thai and enjoyed a nice meal for only about $10 per person. The food meal I ordered ended up being some of the best Thai curry I’ve had.

For the rest of the night, the group of us hopped through a few bars, explored a few streets, and tried to stay dry. Did I mention it was raining?

The night actually ended pretty early… at around 10PM everyone in the group headed back to the JW Marriot and I checked into the Metro Park hotel in Kowloon Hong Kong. I spent the next day there as well before catching an evening flight out of HKG. With a full belly from all the bakeries and restaurants I visited in Hong Kong I rode the hotel shuttle back to the airport. I got there with plenty of time to spare and boarded the plane for home.

On the way home, I couldn’t help but to be excited about all I had learned. This trip truly was a real life business education. From my time in Beijing to the rainy streets of Hong Kong, I had the opportunity to entrench myself in a new culture and business on a continent that a week earlier had seemed light years away. This was a very valuable trip.

Real Life Business Education: China & Hong – Shenzhen

I woke up around 7AM on Friday and headed over for a meeting in downtown Shenzhen. The meeting was on the 50^th floor of a high rise glass and steel building – incredible views. This was the first chance I had to actually go inside one of the Shenzhen sky scrapers that had been thrown up at break neck speed. At first glance, the building looked like something you would find in an upscale part of a US city. The lobby was large and open and there was an Illy coffee stand near the elevators. A key card was required to go to the elevator lobby and people were dressed business casual for the most part.

Once up to the 50^th floor, I began to inspect the building more closely. Behind the sealed concrete floors and glass walls, doors, and cubicles, was some pretty shotty construction. Cables were exposed on the walls and simply painted over. The corners and thresh-holds didn’t quite line up right, and the windows and doors weren’t all straight. As I stared out the window at the sweeping views, I began to wonder what would happen if there was an earthquake.

After the last meeting ended, we headed back to the JW Marriot and got ready for evening trip to Hong Kong.

7:45 AM Tomorrow

I think I wrote in a previous entry that I recently interviewed for a permanent position with my current employer. I have been a contractor for the last 10 weeks or so...

Well, I received an e-mail today from my manager asking that I meet with her tomorrow morning at 07:45 AM. This is 5 days before she said I would get an answer on the interviews. As soon as I got the e-mail I felt nervous. I started immediately going through a mental list of possibilities.

Here is what I came up with....

1. The other candidates that were interviewed for the position weren't up to par and I am going to be offered the position.

2. The other candidates were far better than me and I am going to be told that I am no longer in the running.

3. The number I put in under "expected salary" on the pre-interview questionnaire was too high.

4. Something completely unrelated to the interviews.

I have gone over this list several times in my head and have come to an extremely novel conclusion... Are you ready for this?

I can't change the interviews and there is nothing I can do about what will be discussed tomorrow, so I need to let it go. I have tried very hard to do this and have mostly succeeded as of about 3:00 this afternoon.

Now, back to the business of preparing for school to start up again in 2 days!

My schedule this quarter is a bit weird. All of the classes are 2 or 3 credits so none of them meet on consistent days. One Tuesday I may have Spreadsheet Modeling and Business Strategy while the next I might have Ops management. This is instead of having 2 of the classes split the quarter. It is very confusing...

Well, I have a few chapters to read for my first day back. See you on the flip side.

Business School Favorites. IDEO!

Over the last several days I have been reading syllabuses, putting old school work in binders, buying outrageously expensive books, and getting my mind ready to start another quarter in business school. However, tonight I want to reminisce a bit about one of the best things I have seen in business school. It is a video about a firm called IDEO.

IDEO is a consumer product design firm that is located in Chicago (they recently moved from the silicon valley). That isn't the interesting part though. The interesting part is how IDEO develops new product designs and how they run their company.

They develop new product designs by putting together small teams of people with extremely diverse professional backgrounds. You might see a team with an ex-school teacher, an aerospace engineer, a paleontologist, a dentist, and a CFA on it. For the most part there are no hierarchical rules on the team and everyone is expected to come up with their own quirky ideas. They have a specific process for designing which involves a research phase, brainstorming phase, building phase, and refinement phase. During the whole process, the "adults" guide the group and insert deadlines. The adults are a few people picked to ensure projects stay on task.

The company culture is also very interesting. If you walk inside IDEO's offices you will see the wing of a DC-3 pertruding from the wall, bicycles strung up on the ceiling, and umbrellas blocking the glare on computer screens. Employees at IDEO are encouraged to build their workspces in a way that suits them. This produces the aforementioned decor and lots of other crazy stuff. It also gives employees a sens of ownership, and a say in how their company works.

The interesting thing is that IDEO is not only a design shop... they have also been tapped to offer advice on transforming company culture. The video that I link to above says that IDEO may be the workplace of the future. Well, it has been a few years since the video was filmed and I still don't see an airplane wing in my workplace, but maybe we have headed bit more in that direction.

Enjoy this business school favorite!

Business School at Work: Project Management

I recently had the opportunity to interview for a permanent position at the place I have been a contractor for the last 2 months. During one of the interviews, the hiring manager (my current boss) said that she would like the person who fills the open role to design a road-map for the team to use as a development guide. She shared her goal for our team, which manages the supply chain of high value IT assets, to become 1st class and then world class. I thought her definitions of both of these were interesting. By her definition...

1st class means that your customers trust you more than themselves.
World class means other groups model their teams after you.

Anyway, owning something like this sounds a lot like project management to me. And although there are many certified project management professionals, I am finding more and more that it is something many of us have to learn OTJ (on the job). It's real life Business School.

My ideas feeding into this road-map mainly center around data acquisition, vendor management, and supply vs. demand analysis.

1. The data acquisition piece has to do with ensuring systems are in place that deliver accurate and timely data about the supply chain. Currently we have some of this, but the systems aren't always reliable. Hence, some of the data is outdated and some is just plain wrong. In other cases, the data we want measured and recorded might exist somewhere, but systems still need to be developed to deliver it to us.

2. The vendor management piece is something that has already been a big focus, but a supply chain team should be able to make strong recommendations to the group procuring assets on why they should or shouldn't choose a particular vendor. We should also be able to inform the contract creation process by providing specific terms for inclusion.

3. Analysis of supply vs. demand is the last piece. Basically, this one is making sure the internal customers are ordering the product in the right amount and at the right time to meet their demand while allowing some flex for unexpected business.

In all of the above items, whoever holds the new position will be driving the processes and tool development. Seems like a great opportunity to extend business school into the work place.

Business School in Real Life: A little bit of Customer Service Goes a Long Way

I just got back from a very productive and pleasing trip downtown. I was able to get a new watch that was recently given to me adjusted and come home wearing it.

My experience doing this involved a store that that has a strong emphasis on customer lifetime value and showed me that through good customer service. This is a real life business school lesson. Let me explain...

Nordstrom and the Watch Adjustment

Nordstrom's customer service is the stuff of legends. Everyone has heard the story of the elderly woman who successfully returned a car tire there or of the scores of people who have returned shoes after years of wear. Although those things sound extraordinary, what impresses me is the small stuff. Today was an example.

I walked up to the men's watch counter with a brand new Seiko watch and asked if they could fit the watch. The young lady behind the counter very politely said that she would and measured my wrist. She then took the watch and the box and told me she could have it done in 5 or 10 minutes. I browsed the men's department while I waited and returned to find the watch fitting perfectly. I asked the young lady how much I owed and she said not to worry about it.

Wow! What is free in this world anymore? I walked away very impressed and in Nordstrom's debt. As a result, I will be much more likely to make a purchase there in the future and I will be telling everyone I know how great Nordstrom is because they helped me out with my new watch. Maybe someone I know hear's this and goes to Nordstrom to purchase their next watch. Maybe someone who had a bad experience at a lesser department store decides to give Nordstrom a shot because they just want to go to a place with good customer service. Remember, the watch was not purchased at Nordstrom. To them, it doesn't matter. They had an opportunity to make an impression on a customer and they know a positive impression is worth more than a $10 service fee. Kudos Nordstrom, and thanks for the real life business school lesson.

The Economics of Gardening

Harvest season of the summer's gardening escapades has begun at my house. Today, as I was chomping away on some rainbow chard, leafy greens, and tomatoes that I grew in my back garden I began to think about whether or not the DIY project was cost effective.

Here is what went into the garden this year.

-4 boards (2"x10") for above ground planter

-8 self drilling screws for above ground planter

-30 square feet of water proof liner for under above ground planter

-60 lbs of organic soil

-seeds for 3 heads of lettuce, 3 rainbow chard plants, 4 beets, 2 snap pea plants, and 1 giant leafy green plant

-a starter tomato and cilantro plant

-organic fertilizer

-approximately 15 hours of planting, watering, and trimming labor

Assuming the labor is free, the total cost of the project was approximately $118.50. From the garden I have harvested and have yet to harvest approximately 12 salads worth of leafy greens and heads of lettuce, 90 cherry tomatoes, 30 snap peas, 4 beets, 0 cilantro (died), and 10 rainbow chard leaves.

Allocating this cost in a completely non-systematic way that is...

$8.25/ salad ($100.00 total)
$0.10/ cherry tomato ($9.00)
$0.10/snap pea ($3.00)
$1.00/beet ($4.00)
$0.25/rainbow chard leaf ($2.50)

This makes the vegetables look pretty good, but the salads quite expensive. The one thing to consider is that the cost of the boards, screws, liner, and soil is a one time cost. I guess we could make the salads about $4.00 each then.

Well, the point is that I have discovered that if you garden it is not to save money. It is definitely because you enjoy fresh vegetables and enjoy trimming tomato plants. I actually discovered the latter to be true of myself. Conclusion? Gardening is not an economically sound practice for the average Joe, but it is worth it!

Bon Appetit

Business School (Part II)

It has been several weeks since I gave my final presentation in the summer management class and I am again gearing up to enter the hellish schedule, arduous rigor, and delightful experience that is business school.

I'm no longer a new kid on campus, I am now a much older and wiser second year. I will be starting this year off with three courses...

Quantitative methods

Operations Management

Business Strategy

I have to be honest that I really don't know a whole lot about what these courses will entail. I have been putting off reading the syllabuses because once I know what the courses are about I will feel like I am back in school. Not quite ready to leave my vacation.

The one thing I do know is that the quantitative methods class is centered mainly around Excel modeling. This is particularly exciting for me because the job I recently started has involved a lot of work in Excel. This means that I may learn some useful things... but hopefully it also means that the class will be a light load for me. I guess I will confirm that soon.

In the mean time, I plan on enjoying the time I have left to be a normal person. I will continue to pretend that having nights and weekends off is normal and that reading books for fun is actually something I can do. I have only a few more days of bliss where I just have to work so I am going to soak them up. I will wrote again once I begin preparing for class.

Until then...

Is Amazon Taking Over the World?

I was recently reading the Wikipedia entry for Amazon.com. Turns out that Bezos' Seattle army has been very busy...

In addition to becoming the world's largest online retailer, swallowing Zappos earlier this summer, and beginning to sell everything from ATV winches to Platinum Ruby & Diamond sets, they have set up a cloud computing business and a grocery delivery service.

Not bad for a company that frustrated early investors by not earning a profit for several years after its IPO. But is Amazon getting too big for it's own good? Well, let's look at the previously mentioned cloud computing and grocery delivery business to evaluate this question.

Amazon Web Services (AWS) began in early 2006 and offers several remote IT infrastructure services like data storage, a Query service, dbsase management, and even a web driven market for human computer labor called mechanical turk. At first glance it seems that Amazon is stepping a bit outside of its "core business", decidedly retail, to offer a very lucrative product like web services. But upon further investigation it begins to make sense. Amazon has been providing IT infrastructure of every sort for its internal customers for 13 years. Along the way they have figured out how to manage IT assets efficiently and keep them very reliable. So why not take that expertise and sell it to a market full of companies that really don't have any expertise in or desire to run their own IT infrastructure? Maybe not so far off course after all.

But what about groceries? Well, Amazon Fresh is still restricted to select areas of Seattle for the time being, but it also appears to leverage some of the core business strengths Amazon has developed over the last several years. Amazon fresh requires expertise in wherehouse management, delivery logistics, and customer service. These are all strengths that Amazon can pul out of its Fulfillment center human resources. Add in a little outside grocery talent like a wine guy and produce guy and your in business. It also doesn't hurt that Amazon has been offering non-perishable goods in their retail store for some time now.

The truth of the matter is that Amazon has developed an expertise at business operation over the last decade in a half and very few things are truly outside its core business anymore. So maybe we are asking the wrong question. Maybe the question we should be asking is "What is the next logical step for Amazon?". It seems this young behemoth is just getting started and if Bezos has his way we will see a lot more of Amazon in all kinds of industries. I wonder what's next...

On Break from Business School... Mac vs. PC ads

I was surfing the series of tubes today and decided I would check out apple.com. To fill in those of you who haven't been following the OS wars... Apple is due to release Snow Leopard in the next week and windows is planning the Windows 7 release in October (although the RC version has been available for months). Anyway, it was a web page talking about snow leopard that got me to think about Apple and head to their site.

Once I got there, I started poking around and ended up watching some Mac vs. PC ads. Having just completed a marketing class a few months ago I have a new appreciation for the genius (pardon the pun) of these ads.

First, Apple does an amazing job of constructing the two characters that are featured in their commercials to speak to their audience...

The PC guy (left above) is a slightly out of date guy that is trying really hard to be cool. He is unsure of himself and often over compensates and exaggerates. The Mac character (right above) on the other hand is laid back and cool.

Second, the commercials usually center around a particular flaw that Apple is trying to point out to potential switchers. They do this beautifully. Items like security, dependability, and ease of use have been highlighted. These have all been good points of difference for Apple to discuss, but in their latest ad they hit the motherload when they have a consumer ask the PC guy what kind of PC she should get if she "just wants it to work". This is obviously the voice of the customer and the PC responds that all PCs have issues like viruses. Her response... "I guess I will get a Mac". Great!!!

This series of commercials has largely gone uncontested by Microsoft (the obvious target of the ads) and they seem to be working as Apple's market share has been increasing for the last few years.

If you've got some spare time and want to catch a real life business school marketing lesson, check out the ads in my link above.

Happy watching...