I was recently in New York City to speak at the Harvard Business School club there and, for the first time in a while, had the opportunity to ride in a few iconic Yellow Taxis. While sitting in the back seat of two of these taxis during my stay, lurching to and fro through the canyons of Manhattan, I watched looping video snippets on the flat panel television in front of me. Scenes from Late Night with Jimmy Kimmel and Live with Kelly encouraged riders to tune in when at home. But what caught my eye more than these was a promotion for Arro, Yellow Taxi’s answer to Uber.

Arro is a mobile-based application that allows users to order a Yellow Taxi, see taxi locations, and pay via a stored credit card. Sound familiar? If you are thinking “Uber,” so was I. 

Generally, I am an Uber fan for two reasons: I love being able to order a car from my phone of a certain level of luxury and I love not worrying about having payment handy. 

But there are two things I dislike about Uber’s business model, both ultimately driven by the fundamentals of economics. The first is related to the fact that Uber drivers are not tied to a city or region, they can float to where demand is. On the surface, this is a great thing. Why have drivers in one location twiddling their thumbs reading the paper while some short distance away others are inundated with requests for a pickup? One day while touring Boston with my family, I ordered an Uber to take us back to the Harvard Business School campus where my car was parked. The driver told us he was from Providence, Rhode Island, about an hour south of Boston. He said he came to Boston on the weekends because there was more demand than in smaller, sleepier Providence. This mobility of supply has a drawback though: drivers outside of their “home” area typically don’t have a good understanding of the city they are driving in, and that can cause frustration for the rider, even in the age of GPS. 

In my case, the problem came about because the listed address for Harvard Business School isn’t as much an address as a suggestion. This is an issue for a driver compensating for his lack of knowledge by using GPS. I would have directed the driver myself but after 11 years in the Boston area, I still get flummoxed when in the financial district; I needed help to get to the main highways before I could help the driver. So we spent nearly 30 minutes trying to figure out how to get the GPS to direct us to the school. Even if we had a good address, the other problem is likely familiar to many who live in cities with roads buried deeply between buildings and poor sightlines to the sky – GPS can be unreliable. So, we had a driver who didn't know where he was going and a GPS that didn't know where it was. Not a good combo.

Contrast that with all my time as a student at the business school years ago. There wasn’t a single taxi driver who didn’t know what I meant when I said, “Take me to HBS, please.” They not only knew where to point their vehicle but they knew the exact location the school had designated as a taxi stand. 

The other thing I don’t like about Uber is surge pricing. For the uninitiated, surge pricing involves charging the customer more when demand is higher. On the surface, it’s another creative exploitation of fundamental economics: raise your price when demand is high to optimize the revenue of the available supply. But as a user, it can be a bit off-putting, given how much of a premium you can pay. In one instance I paid a 100% markup to get a car – one that arrived much later than the app told me it would. 

To date, these minor hassles were just that, minor. The alternative to Uber and its few problems was a taxi service and its many: not able to take my credit card payment, not able to let me easily order a taxi, and not able to let me see where available taxis are. But the new Arro app appears to change that to a great degree. And here’s the kicker … Yellow Taxi (with Arro) has differentiated itself with a key distinction: no surge pricing. So, it begs the question, why use Uber if I essentially get Uber without the surge pricing and, in some cases, more knowledgeable drivers? In fairness, I have not compared Uber standard pricing or surge pricing to taxi rates but some people have. But even if the numbers don’t always work, the messaging does… I hear no surge pricing and I think, “Thank goodness.” 

There are some areas where Uber can still claim a leg up in many cases. The ability to order a level of car, for example, allows me to get an upscale car when I’m feeling more like a movie star with cash to burn, rather than a leader in an academic institution. And I can’t remember the last time a taxi driver had a bottle of water, candy, or a newspaper available for me to enjoy during my ride. 

Still, the release of Arro without surge pricing has me thinking about another fundamental law of economics: in a competitive market, no one player has an advantage forever. The Uber/Arro battle is an example of that. The world of business is one filled with punch and counterpunch. Success often relies on anticipating the competitions’ counter-punch and having a counter-punch to their counter-punch teed up. And this is hard to do. It’s especially hard when the future is hard to predict, and we are biased by what we know of the present. If you had asked a taxi cab company in New York ten years ago if a startup car service would threaten them, the response might have been, “It won’t happen, they would have to buy a medallion (a license to operate a taxi in many parts of the country). Medallions cost way too much to make a start-up competitor a viable threat (before Uber introduced competition, a medallion in New York could sell for $1MM).” The answer would have seemed perfectly reasonable, but it didn’t anticipate a world where the startup wouldn’t bother with a medallion. 

That is the challenge of running a business today. Are you thinking about all the “medallions” that stand in the way of a current or potential competitor, blind to the fact that they may bypass that obstacle completely? Have you considered what a competitor is likely to do in response to your actions? Are your differentiators only temporarily setting you apart from your competition and, if so, do you have an innovation pipeline that ensures another differentiator is on the horizon? If not, then use the Arro/Uber example as a motivator. 

As for what happens next in the Uber/Arro arms race, if either of then is looking for their next counter-punch, then how about this one: I’d pay a premium for an Uber or taxi driver that had more speeds than full accelerator and full brake. Now there’s an innovation!

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In my last post, I looked at the role of a business as a creator of value. In short, companies make money by producing and delivering value for which customers are willing to pay in order to satisfy a want or need.

I also explored three ways in which aspiring entrepreneurs can build a viable business model based upon different forms of value. Namely, start-ups can earn revenue by:

1. Creating a product, a tangible item of value for which people are willing to pay
2. Offering a service, some type of assistance or skill to someone else for a fee
3. Selling access to a shared asset, a resource that can be used by many people (i.e. gyms, aquariums, and museums)

In this post, I look at five additional forms of value to help you find a solid business model. Some of these forms of value are a bit more niche than products, services, or shared assets, but no less viable in creating a profitable, lasting enterprise. So here we go!

Subscription

A subscription is a type of program in which a user pays a recurring fee for access to certain specified benefits. These benefits often include recurring provision of products or services. Unlike a shared asset, however, your experience with the product or service is not affected by others. To have a successful subscription-based offering, you ideally want to build a subscriber base by providing reliable value over time, while at the same time taking constant efforts to attract new customers to keep customer attrition low. As you may have seen, the number of subscription services has exploded in recent years. From magazines to Netflix to Amazon Pantry for groceries and even subscriptions for wine, businesses are turning to a subscription-based model with seemingly great success.

• Pros: This model provides certainty in the form of predictable revenue streams, making financial forecasting a bit easier. It also benefits from a loyal customer base and customer inertia (lazy customers forgetting to cancel or switch to a competitor).
• Cons: In order to run this model, your business operations must be VERY strong. If you can’t deliver the value when the customer wants it, you may want to consider something else.

Lease/Rental

A lease involves obtaining an asset and renting it out to another person for an agreed upon amount of time in exchange for a fee. People can lease pretty much anything, but leases are typically only for things that are durable enough to be rented and returned in good condition. This is so the owner can lease the good multiple times or eventually sell it. To provide value and profit from leases, the key is to ensure that the revenue you get from leasing the asset before it wears out is greater than the purchase price that you paid for it. This requires being smart with financing and potentially NOT leasing to those you don’t think will be responsible with the asset. Leases are pretty common—you may have one right now for an apartment, car, or old movie that you rented!

• Pros: You don’t have to have some great idea to make money this way. You can purchase assets from others and rent them to others that wouldn’t buy them for full value otherwise, earning a premium.
• Cons: You’ll need to protect yourself from unexpected damage to your assets. One way to do so is through is…

Insurance

Insurance entails the transfer of some type of risk from a customer to a seller of an insurance policy. In exchange for the seller of the policy taking on the risk of some specified thing occurring, the buyer receives periodic payments (“premiums” in insurance lingo). If the bad thing doesn’t happen, the insurance company keeps the money, but if it does, the company has to pay the policyholder. So, in a sense, insurance is the sale of safety—it provides value by protecting people from unlikely, but catastrophic risks. Buyers can take insurance out on almost anything: life, health, house, car, boat, etc. To run a successful insurance company, you have to be able to accurately estimate the likelihood of bad events and charge higher premiums than the claims that you pay out to your customers.

• Pros: If they calculate risks accurately, insurance companies are guaranteed to make money.
• Cons: If they calculate risks inaccurately, insurance companies are guaranteed not to make money. Insurance only works because it spreads risk over large numbers of people. Insurance companies can fail if the same people are all impacted by a big terrible event that they didn’t see coming (think about the Global Financial Crisis).

Reselling

Reselling is as simple as it sounds—it’s the purchasing of an asset from one seller and the subsequent sale of that asset to an end buyer at a premium price. Reselling is the process through which most major retailers purchase the products that they then sell to us buyers. Companies make money through resale by purchasing large quantities of items (usually at a bulk discount) from wholesalers and selling single items for a multiple of that price to individuals. Think of farmers supplying fruits and vegetables to a grocery store or manufacturers selling goods to WalMart.

• Pros: Mark-ups can often be high for retail sales. For example, a bottle of water might cost maybe 10 cents to produce, whereas a customer may be willing to pay $1.50 or more for a single bottle.
• Cons: You need to be able to gain access to quality products at low costs for reselling to work. You’d also better have the room to store a lot of inventory to manage sales cycles.

Agency/Promotion

Agents create value typically by marketing an asset that they don’t own to an interested buyer. They then earn a fee or a commission for bringing together buyer and seller. Thus, instead of using their own skills to create value, they are teaming up with others with value to help promote them to the world. Running a successful agency requires good connections, excellent negotiation skills, and a willingness to work with a diverse set of individuals. One example is a sports agent. They promote players to teams and negotiate on behalf of the player to get the best deal. And in return, they usually get something like 10% of the value of the contract.

• Pros: You can highly profit from expertise and connections in one industry, be it publishing, acting, advertising, etc.
• Cons: You only get paid if you seal the deal, so you have to be able live with some uncertainty.

These eight forms of value are by no means the only ones out there. For example, the world of finance has a LOT of different instruments that aim to create value for investors. However, if you’re looking to start a business, and need a place to start, well, one of these could just be your underlying business model. Good luck!

In honor of Memorial Day, we are sharing this post by Tom Williams, a former infantry officer in the US Marines, who recently completed HBX CORe. He currently works for a nonprofit that honors fallen service members and was recently admitted to Columbia Business School. Tom originally shared his story on the Military to Business Blog. Military to Business is a consulting service that helps military and non-traditional applicants gain admission to top graduate schools. Click here to see the original post.

One of the obvious disadvantages we face when leaving the service, whether to pursue an MBA or enter the workforce directly, is our lack of experience and unfamiliarity with the language of business. Certainly these shortfalls are expected, but that learning curve can be a steep one, made all the more challenging by the already-fast paced environment of business school and potential culture shock of going from the battlefield to the classroom.

Before I dive in, a little bit about me: I commissioned into the Marine Corps in 2011 and served as an infantry officer on the West Coast. After deployments to Eastern Europe and Afghanistan, I felt I’d accomplished many of the goals I set out to achieve. We all have our own reasons for hanging up the uniform, and mine revolved around the desire to lead and achieve in a different context outside the military. Coming to this conclusion, I realized, like many on this site, that an MBA was the surest way to accelerate my growth toward this end. As a social science major in college, I also knew that my lack of having studied anything business-related represented, to me, a gap in my background. I’d never learned to read a financial statement or how to interpret a supply and demand curve. Though I was certain there were others in my situation, and it wasn’t necessarily grounds for rejection, I decided to begin researching opportunities that would do two things: build a foundation of business knowledge; and demonstrate to an admissions staff that I was committed to my academic goals.

Many of the obvious choices came to mind. I could brush up through KhanAcademy or take a Coursera class. However, neither of these options came with the requisite weight that would demonstrate enough of a commitment. I needed something with brand equity, something that could legitimately be placed on a resume. Stanford offers some courses, but most require two years to complete and are cost-prohibitive at that. Finally, I stumbled upon Harvard Business School’s Credential of Readiness (CORe), offered by HBX.

HBX is Harvard Business School’s digital classroom. CORe is designed for those who are looking to learn the language of business. The 10-week course, taught by HBS professors, requires anywhere from 12-15 hours of work per week, and teaches the fundamentals of business analytics, economics for managers and financial accounting. I was seriously impressed with the platform, the learning curve and the interactive aspect of the course.

What was most remarkable was the platform and learning model. It was as interactive and social as any “online course” could be. In fact, a large part of the grade depends on your participation in group discussions and willingness to help your peers who may have questions about the concepts, complete with a private Facebook group. Built around HBS’ case-based learning model, the platform creates an active learning environment in which you will spend no more than a few minutes doing the same thing. Upon completion of the course, there is a final exam that must be taken at a local testing center.

While the course is not meant to replace a full-time MBA program, it is a primer on the fundamentals that will serve as a foundation upon which MBA academics will be built. Now, when reading the WSJ, I no longer feel like I’m studying a foreign language. I understand concepts like network effects and market equilibrium, and can read a balance sheet or statement of cash flows. I fully intend to bring my notes and flashcards to business school with me.

Finally, it is worth discussing the cost of this course. HBX offers CORe for $1,800. However, they offer a significant discount to US military veterans, reducing the price to $700, well worth it in my opinion.

Whether you are looking to transition straight to the workforce or are pursuing an MBA, HBX CORe is worth considering. For those in the latter group, if you’ve already been accepted into an MBA program, CORe would be an ideal course to take just prior to starting school. If you’re still in the process of applying to MBA programs, you may think about using CORe like I did, as a way to learn the language of business while demonstrating legitimate dedication toward your academic goals.

It's graduation season here in the US! Although commencement speeches are aimed at new graduates entering the real world, they also contain advice that is applicable to all of us. In honor of today's Harvard University Commencement, here are some of the best excerpts from this year's graduation addresses.

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"I hope that you live your life -- each precious day of it -- with joy and meaning. I hope that you walk without pain -- and that you are grateful for each step. And when the challenges come, I hope you remember that anchored deep within you is the ability to learn and grow. You are not born with a fixed amount of resilience. Like a muscle, you can build it up, draw on it when you need it. In that process you will figure out who you really are -- and you just might become the very best version of yourself."

Sheryl Sandberg to University of California at Berkeley class of 2016

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"When life tells you no, find a way to keep things in perspective. That doesn’t make the painful moments any less painful. But it does mean you don’t have to live forever in the pain. You don’t have to live forever in that “no.” Because if you know what you’re capable of, if you’re always prepared, and you keep things in perspective, then life has a way of turning no into yes."

Russell Wilson to University of Wisconsin class of 2016

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"If you disagree with somebody, bring them in - and ask them tough questions. Hold their feet to the fire. Make them defend their positions. If somebody has got a bad or offensive idea, prove it wrong. Engage it. Debate it. Stand up for what you believe in. Don't be scared to take somebody on. Don't feel like you got to shut your ears off because you're too fragile and somebody might offend your sensibilities. Go at them if they’re not making any sense. Use your logic and reason and words. And by doing so, you’ll strengthen your own position, and you’ll hone your arguments. And maybe you’ll learn something and realize you don't know everything. And you may have a new understanding not only about what your opponents believe but maybe what you believe. Either way, you win."

President Barack Obama to Rutgers University class of 2016

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"At this moment in your life you know fewer limits, fewer taboos and fewer fears than you will ever in the future. So do not squander your ignorance. Go out and do what your teachers and parents thought could not be done -- and what they never thought of doing."

Peter Thiel to Hamilton College class of 2016

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“Skate to where the puck is going, not where it has been.”

This quote by Wayne Gretzky has become a bit of a corporate cliché, but it doesn’t make the advice any less powerful. What makes your business successful and profitable today may not be where you should focus all of your energies; it is a continually moving target and you must think ahead in order to predict how things will change.

Part of this process involves hearing landmark examples of other companies who both successfully navigated disruption within their industries and those who fell behind and failed to compete in an evolved market. For example, the performance-defining component for Intel Microprocessors in the early 2000s was speed, or cycles per second (hertz). With the advent of Wifi and the laptop form-factor, the customer’s performance-defining component shifted to battery life. 

This shift caught Intel flat-footed, even though Intel was the one who developed Wifi in the first place, and they lost a substantial amount of market share to rival AMD. Intel was eventually able to weather the storm and shift its product line to this new performance-defining component, but not without a lot of organizational and financial pain.

Knowing that you should be looking to the future is all well and good, but how do you actually predict where your industry is headed? In Disruptive Strategy, Professor Clayton Christensen teaches his frameworks of innovation, helping business leaders understand where their industry is headed and how to stay ahead of the curve. 

A few of his learnings are summarized below:

1. Understand your company inside and out, especially your strengths and what sets you apart from competition
2. Be vigilant – stay informed and keep a close eye on competitors or new entrants within your industry
3. Encourage strategic thinking and new ideas within your organization

To better understand the predictive power of innovation theory, check out Professor Christensen's book, Seeing What's Next: Using the Theories of Innovation to Predict Industry Change.

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Want to learn more about disruption as a whole? Disruptive Strategy with Clay Christensen will equip you with the tools, frameworks, and intuition to make a difference.

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This post is from The Harbus, the news organization of Harvard Business School. Click here to see the original article.

What could HBO’s Silicon Valley possibly teach you about running a venture? More than you might think.

During a recent talk at the Harvard i-lab, Dan Lyons, author of the recent book Disrupted and a staff writer for the show, shared some behind-the-scenes insights on the process involved in setting a vision for the show, which includes continually coming up with new jokes and generating plot ideas through the — at times tense, at times hilarious, at times boring — brainstorming sessions.

I found a lot of similarities between my own experiences working at innovation and design firm IDEO, and Lyons's description of writing for Silicon Valley. In particular, IDEO’s approach to design thinking and the lean startup mentality are similar to some of the processes — spoken and unspoken — described by Lyons.

Find a “tastemaster” to keep you on track.

Brainstorming can be tough, especially when you are sitting in a room for days with writers trained as standup comedians improvising and building on each others’ ideas. As Lyons described it, it was not only highly stimulating, but often felt like “riding around the world in first class but never getting anywhere.”

As a recent Harvard Business Review article highlights, high levels of collaboration require high levels of empathy, which, as Lyons can attest, can be exhausting. A collaborative work environment requires people to think with each other and see things from the other person’s perspective instead of tearing each others ideas down.

In order to find the gems, the most hilarious jokes, everyone in the writers’ room needed to let the conversation just roam, which often led off to obscure tangents. As Lyons explained, these meanderings needed to be encouraged and not stopped because you never knew what jokes might be uncovered.

But Lyons said key to this co-creating process was having someone who could sift through all the nonsense and decide what to keep and what to forget. What is needed in any brainstorming environment is a “tastemaster” at the top, curating the content.

In a business setting, Lyons’ tastemaster is the combination of the creative tastemaker and the action-oriented taskmaster. Successful teams need both to cultivate ideas from the bottom up, enabling a divergence of perspectives and yet a convergence of ideas which, in the case of a television show, results in a tastefully mixed palette of jokes and characters. For a company, it allows for individuals to feel as if they are part of the process of collectively moving the business in the right direction.

But tastemaster can be a tricky job: How do you tactfully inspire and empower ideas of others without killing people’s inspiration and their desire to contribute, especially when the output of brainstorming often doesn’t make the final cut, in showbiz parlance? Steve Jobs was a particularly adept tastemaster; although he shot down more ideas than he accepted, his process and high expectations inspired his employees to work harder to create products that were innovative, unique, and awe-inspiring.

How did Jobs do that? He got them to believe what he believed.

“We follow those who lead not because we have to, but because we want to. People don’t do what you do, they buy why you do it and what you do serves as the proof of what you believe,” according to management theorist Simon Sinek.

Bottom line: Allow people to share their ideas, but also make sure you have someone who has been accepted as the person who can differentiate the good from the bad without bruising too many egos.

Hire people that make the room “work." Hire for more than function.

At Silicon Valley, the team of writers each had a specific functional role as well as other “unspoken” roles. While it should be obvious that they are all creative and fantastic writers, what was more important to the success of the show was that they could each find ways to add value to the team in intangible ways.

In the Silicon Valley writers’ room, Lyons described various roles people would play. One writer always made fun of himself and others when a joke fell flat, but, most of the time, he was harder on himself. Another writer, for some unknown reason, thought it would be a good idea to live on Soylent for 40 days to simply see what would happen.  His experience led to the creation of lots of content for jokes. There were so many different roles, including one guy whose skill Lyons described as just “making the room work.”

The lesson in these anecdotes is that the function you hire a person for might not always be the place where they add the most value.

Regarding the importance of hiring the right people, Simon Sinek says,

“The goal is not just to hire people that need a job, it’s to hire people who believe what you believe. If you hire people because they can do a job they will work for your money. If you hire people who believe what you believe they will work with their blood, sweat and tears.”

Create a culture of open communication, make fun of yourself, and don’t take it personally.

At Silicon Valley brainstorming sessions, everyone arrived as Lyons characterized it, “with prototypes in hand.” But in the end, you couldn’t be beholden to anything, no matter how clever you thought your idea was. “Strong ideas, weakly held is the name of the game,” Lyons explained.

The way the writers’ room works best is for people to share their ideas and let others build on them using the old improv trick of “yes, and” to further a joke instead of a “no, but.”

The culture that was created also led to a lot of making fun of everyone so that no one personally feels singled out as the one with the idea that got no traction in the team meeting. For the Silicon Valley staff, quantity led to quality. Making fun of everyone creates a culture of psychological safety and allows people to relax and be themselves.

If everyone knows their idea has an equally good chance of being both mocked and accepted, they stop trying to perform and rather let their true capabilities shine, which adds real value to group discussions. Too often in corporate meetings we come in concerned about what we are about to present, worried more about how we will be perceived rather than the actual content we intended to deliver.

Collaboration is at the core of how HBO’s Silicon Valley is created. Startup founders should take a page from this script by welcoming critiques, and learning from them, instead of feeling like failures.

Be intellectually honest with the pros and cons of your business model. Turn the “tastemaster” role on its head and allow your employees to break down your own ideas and innovate with you by establishing an open environment for communication.

And remember to be able to laugh at all your bad ideas.

For centuries, the p-value has been the gold standard of statistical testing. Whether it’s determining whether a specific result is significant, or deciding whether a study is publishable, the science and business communities have used p-values as a main criterion. If the p-value is less than 0.05, we reject the null and conclude that something is going on. If the p-value is greater than 0.05, we fail to reject the null and conclude that there’s nothing to see here; move along.

However, over the past few years, more and more disciplines have been questioning the validity of the p-value. For example, most of the major psychology journals have either stopped using the p-value as a criterion for publication, or have banned its use entirely.

The p-value doesn’t give any indication of how important the results are (that is, it doesn’t measure the magnitude of the effect); it doesn’t even give an indication of how likely it is that the results are due to more than random chance. All a p-value communicates is how likely a result would be IF the phenomenon under review WASN’T there. If you find this confusing, you’re not alone; it’s a very peculiar way of looking at a question.

Let’s take a concrete example. Imagine scientists wanted to find a connection between jelly beans and cancer. They could collect a lot of data about people’s jelly bean consumption habits and the incidence of cancer, and then perform statistical analysis to see if there’s a relationship. Well, spurious correlations are abundant in the real world, so we’d expect at least a slight connection, just by random chance.

The question is: are the patterns we’re seeing in the data GREATER than what we’d expect by random chance. If there were no correlation between jelly beans and cancer, each sample would give a slightly different result, but they’d all be pretty close to showing no relationship. At a certain point, they’d be far enough from showing no relationship that we’d say “Hey, it’s REALLY unlikely that we’d see this if there were no relationship; so there probably is one.”

Usually, our threshold for REALLY unlikely is 0.05. If the null hypothesis were true (if there were no relationship between jelly beans and cancer), we’d only see results this extreme 5% of the time. We consider that unusual enough that we could say, hey! There’s something going on here.

This means we would imagine that if we do 20 studies where nothing is going on, we’d expect, on average, that one of the studies would end up statistically significant at p<.05, just by chance. Let’s say we do 20 studies, and three of them end up significant. On average, one of the three is just due to chance, and the other two are the result of an actual phenomenon. However, we have no way to identify the one that is just random chance. Furthermore, a result of p=.04999 and result of p=.05001 are virtually identical; but one is “significant” and the other is not.

This doesn’t mean p-values are worthless. But it does mean that researchers (and consumers of research) need to be thoughtful when interpreting them. A p-value by itself doesn’t tell you much, and simply knowing that a result is “significant” tells you even less. More useful is an estimate of the effect size, or a review of multiple studies looking at the same phenomenon.

To learn more, check out this great post from PLOS.

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This past Saturday, May 7^th, I had the privilege of being involved in something that at first glance is replete with contradictions. I gathered with people I knew, but didn’t. I talked with students of an institution who had finished their program of study but who were, in many cases, making their first visit to that institution’s campus. I saw men and women who had taken a course together interact as if they were long lost classmates from an in-residence, multi-year program despite never having been in the same room. And I saw this from people who had to make travel arrangements and purchase tickets to come from all areas of the globe: from Australia to India, from Colombia to Qatar.  

HBX ConneXt was wonderful in its own right but it was most important in the evidence it offered of what an online education program can be. When we set out to create HBX, we started by putting ourselves in the student’s shoes and thinking about the pedagogy (for HBS, this means the case method of study). In starting there, we realized quickly how important interaction between members of the community would be if the case study would be at the center of the learning experience. After all, the case method relies on students questioning and challenging each other. Through this back-and-forth, they come to induce principles and, in having to work for the answer to a problem, they come away with a more fundamental understanding of how to apply their thinking to a host of situations. 

So our efforts to include a community in the platform had much to do with our pedagogy. What wasn’t anticipated at the time but which, in retrospect, should have been obvious, is that this online community that engaged to solve a real-world problem would form bonds that would transcend the course platform. That is what we saw at HBX ConneXt.

We saw digital world relationships become physical world friendships. We saw how helping peers online led to bonding with colleagues offline. We saw what I believe is the beginning of something very special.

As an employee and graduate of the school, I had an amplified sense of pride in what I saw. The employee in me thought about how well the team here executed in creating a wonderful platform and the courses that go on it. The graduate in me took pride in seeing the extension of the school’s mission – to educate leaders that make a difference in the world – take root in so many lives across so much of the world. HBS Dean Nitin Nohria noted to the HBXers assembled during one of the day’s sessions that the world is in desperate need of leadership everywhere. After seeing the enthusiasm of the HBX students, relatively early pioneers in the new world of digital education, I think I can say with confidence that we have many who are ready to answer that call of leadership.

 

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When I think of a traditional residential college, I picture ivy-covered brick buildings, stately Greco-Roman facades, and checkered-floor libraries filled floor-to-ceiling with books. Essentially, I picture Harvard’s stately campus.

When I signed up for HBX CORe, Harvard Business School’s online-only cohort focused on business fundamentals, I didn’t think much about community. After all, it was “just something I was taking online.”

I couldn’t have been more wrong. Hundreds of HBX past participants gathered at Harvard Business School this past Saturday for HBX ConneXt to celebrate exactly that. After engaging in spirited online debates, e-meeting people from Bangalore to Baltimore, and messaging directly with my fellow cohort, I was able to put faces to names, hear their stories, and make real, in-person connections with people I had interacted with for months.

Between student panels, a campus tour, and faculty sessions throughout the day, I felt inspired—and ready—to take on the mission of HBS: making a difference in the world.

Here are a few of the moments that inspired me the most from HBX ConneXt:

“With [online education], the constraint is only the motivation and talent of individuals looking to better themselves.”  

--Professor Bharat Anand

Professor Bharat Anand opened the day by discussing the transformational power of education. He explained that traditional education is a privilege because of scarcity, and that scarcity comes only from the literal, physical constraints of a college campus. With online, that’s completely changed.

If you’re motivated to make yourself better and to learn, you’re able to more than ever. He reminded us that it’s ok to never have done something before. HBX ConneXt was “the first time we’ve had a gathering of students we’ve taught…but never met.”

“Trying to understand the customer is the wrong unit of analysis. You need to understand the job that needs to be done.”

--Professor Clay Christensen

As a marketer, I constantly focus on customer demographics: who are they, what they care about, and their daily habits. Professor Christensen flipped this on its head during his faculty session and spoke of instead the job that needs to be done. What problem does your product solve?

Rather than focusing on differentiating by product, differentiate by solution. Ultimately, our characteristics don’t cause us to buy something—the flow of daily life does.

“As much as I love math and analysis, the hard stuff is what we traditionally call the ‘soft stuff’: managing people.”

--Professor Jan Hammond

HBX CORe provides a common language of business: how to understand your finances, analyze trends and performance, and bring your product to market. But the next step for all of us is the soft skills.

Professor Hammond emphasized learning how to lead an organization in skills like analytics, but also in mindset. She also encouraged us to push ourselves and each other to be the bestwe can be, and to gather people around us who will always ask why.

“Be substantive, not superficial. It’s real results that matter.”

--Larry Culp, Senior Lecturer of Business Administration at HBS and former CEO of Danaher Corporation

As a former CEO, Larry’s advice gave great insight into what real business leaders care about day-to-day. He focused on education as an important self-investment and the sense that people are more important than numbers. Encouraging us to take the long view on issues and on our careers, he talked about maintaining a “continuous improvement” mindset.

We can no longer pretend that doing things as we’ve always done them will be successful. By building a culture where you can say, “I don’t know—but I’ll go find out,” and positioning problems as opportunities, not failures, makes a difference in the success of your company, but also of your career.

“Management is doing things right. Leadership is doing the right things.”

--Anne Dwane, Partner & Co-Founder, GSV Acceleration

For the closing panel, Anne emphasized the opportunity education provides us to become more knowledgeable, but also to become better people. She encouraged us to “create more value than you take,” and to continually give back to our communities. 

Today’s workforce is changing, and traditional ways to select for talent aren’t working. We all need to remember that it’s not just about doing everything correctly, but about seeking a path forward—particularly as we start to co-work more frequently with machines.

The real value of HBX was the ability to learn and meet new people completely different from me. I met a fellow from Singapore raving about his first-ever lobster roll, a native New Yorker visiting Boston for the first time, and an intelligence officer from D.C who couldn’t really talk about what he did every day.

Alumni traveled from as far as Australia and as close as Allston, from all walks of life, work experiences, and backgrounds. Together in one room, you could really see how much we had to learn from one another.

As Professor Anand told us in closing, “The story of HBX is still being written—and you will shape that narrative.”

The success of any training program isn’t what happens during it; it’s what happens after. I can’t think of a better way to celebrate the completion of the program—and the start of my “after.”

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So you want to start a company, but you aren’t sure about a viable business model. How might you create something that people would be willing to pay for from which you could earn a profit?

Before diving deep into potential strategies, it’s important to understand what exactly a business is and does. It’s surprising how many people work for businesses, but don’t actually know what they do.

A successful business creates something of value. The world is filled with opportunities to fulfill people’s wants and needs and your job as a potential entrepreneur is to find some way to capitalize on these opportunities. A viable business model is one that allows a business to charge a price for the value that it’s creating, such that the business brings in enough money to make it worthwhile to continue operating over time. Whatever the business is offering must also satisfy the customer’s needs and anticipations of quality.

Admittedly, value is quite a subjective term. What’s valuable to one person may be far less valuable to another. Moreover, the concept of value excludes any moral judgments about the intrinsic worth of an offering. For example, while most would agree that human life is more valuable than sports, Pablo Sandoval still makes far more playing baseball than the average brain surgeon does in the operating room.

Nonetheless, the concept of value provides a useful bedrock upon which to begin building your business model. In particular, one should first think about what form(s) of value that people would be willing to pay for. Here are three classic forms of value along with some pros and cons for each to get you started.

Product

A product is a tangible item of value. To run a successful product-focused business, you ideally want to produce the item for as low of a cost as possible, while maintaining a passable level of quality. Once the item is produced, your objective should be to sell as many units as you can for as high a price as people are willing to pay to maximize profits. Products are all around us. From laptops to books to HBX courses (products don’t have to be physical), products are a classic form of value with high upside if you can get them right.

• Pros: Many products can be easily duplicated. Thus, firms can achieve economies of scale after bearing some upfront costs of production.
• Cons: Physical products need to be stored as inventory, which can increase costs. They can also be damaged or lost more easily than, say, a….

Service

A service involves offering your assistance to someone else for a fee. To make money from your service, you ideally want to provide some skill to others that they either can’t or won’t do themselves. And you want to keep providing this benefit to them at a high quality over and over again. Like products, services are in abundance, especially in the knowledge economy. From hairdressers to construction workers to consultants to teachers, people with lucrative skills can earn good money for their time.

• Pros: If you have a skill in high demand or a skill that very few others have, you can get paid a lot!
• Cons: If you don’t charge enough for your services, or many people have your skill, you will have to work a lot for not very much money.

Shared Assets

A shared asset is a resource that can be used by many people. Such resources allow the owner to create or purchase the good once and then charge customers for its use. To run a profitable business around shared assets, you need to balance the tradeoff of serving as many customers as you can without affecting the overall quality of the experience too much. Think of a fitness center: a gym typically buys treadmills, ellipticals, free weights, bikes and other equipment and then charges customers for monthly memberships for access to all these shared assets. The key then for Golds Gym or 24 Hour Fitness is to charge their customers enough to maintain and, if needed, replace their assets over time. Finding the right range of customers is the key to making a shared asset model work.

• Pros: This model provides people access to a lot of assets that they would not have access to otherwise. In addition, many people are willing to pay a lot for access to trendy social spaces.
• Cons: Because they don’t own the assets, customers have little incentive to treat your resources well. Make sure you have enough cash on hand for quick fixes if necessary.

These are just three forms of value possible to the aspiring business owner. Stay tuned for my next post which will discuss five more.

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Click here to see part 2!