Things I’ve learned from some of my first cases
It’s been a month and a half since I read my very first case at school (The case study method is the primary pedagogical tool used here, see link for 10min. video of what it’s like in the classroom). Since then, we’ve gone through about five dozen cases. They’ve been on everything from well-known companies & industries: Toyota, Dell, to companies in obscure industries: iron ore shipping, styrene-based cement coating, and finally to the absolutely bizarre: contact lenses for chickens. For each of them (even the contact lenses for chicken one), I’ve attempted to write down one sentence that summarizes the most interesting takeaway I got from the case discussion. Here are some of them (they’re not necessarily related to the primary lesson of the case) :
-
Anytime you hear a statistic such as “1/3 of HBS alumni hold C-level positions”, remember this equally compelling statistic: “1/3 of HBS graduates get fired within the first 10 years of graduating” (statistic derived from HBS class of ’74 data).
-
All leaders need to be able to play different roles (coach,cheerleader,disciplinarian), a good leader knows precisely when and where to play them.
-
Surprisingly, it is actually possible to apply a linear regression in analyzing and shaping the culture of an organization.
-
Accounting is not math, and it certainly is not  black and white. When reviewing any statement keep in mind the parties’ biases. Know that there’s always a trade off between accuracy and precision, and that accounting rules allow for a party’s judgement to come into play. THere’s no right answer, only differences in judgement.
-
Always, always, look through the footnotes of a financial statements. There’s a reason why the footnotes are typically more than 30 pages long.
-
When competing against a low cost/low quality entrant, consider creating a “fighter brand”, a brand which is completely disassociated from your existing brand. This allows you to maintain the brand equity of your premium brand.
-
When creating a marketing strategy, you must take into account your competitors’ likely responses. For example, you may decide not to price low if that puts you at risk of entering a pricing war with a competitor with a significantly stronger balance sheet.
-
When segmenting a market, don’t get stuck only segmenting based on the obvious aspects (basing it on existing products on the market, performance, price, etc.). There may be opportunity in targeting an underserved segment defined by dimensions which are not immediately obvious.
-
Assumptions drive financial models: Never trust an investment banker’s numbers without understanding his or her assumptions.
-
Michael Dell’s true genius is in his financial strategy. Dell is one of the few companies in the world that has managed to create a significantly negative cash conversion cycle (Amazon is another).
-
It’s all about the benjamins. It’s better to evaluate companies based on their free cash flow projections, not their net income projections. Net income can hide hideous increases in net working capital and other bad things.
