Will you be shopping with the masses or breathing in the crisp fall air outdoors? REI, an outdoor gear company that is also the United States' largest consumer cooperative, is opting out of Black Friday for the second year in a row and encouraging its customers to #OptOutside.

The company is a great example of a retailer that has cracked its consumers’ “job to be done” – to create a retail experience that’s more about a shared community that stands for integrity, transparency, and a love of the outdoors than it is about simply shopping for product. REI has translated this purpose into everything from its product offerings to its promotional strategy.

An estimated 2.7 million people are opting outside this year and at least 275 other organizations, including Google, Subaru and the National Parks Service have joined in on the campaign. For REI's consumers, the Friday after Thanksgiving will be spent outdoors, not inside waiting in line for the next doorbuster sale. Will you be hitting the trails with REI's customers this year?

To learn more, check out Why REI Is Opting out of Black Friday Again This Year from Fortune.com.

Strategy is not a static thing; what works in one context may fail in another. Likewise, the strategy that senior management intends to employ may diverge from the one that actually emerges.

Take Pinterest as an example. This company started as a place for discovery; an environment for users to gain inspiration and create wish lists – essentially, this was Pinterest’s “deliberate strategy.”

Over time, as users desired to make purchases on the site, an “emergent strategy” surfaced, and buyable pins became an attractive new opportunity.

By staying open to this new opportunity, Pinterest was able to shift resources accordingly and capture this rapidly evolving new opportunity.

Now, as they’ve expanded farther into the buyable pins strategy, the company has positioned itself as both an e-commerce platform and a major player in the world of customer acquisition for big brands.

What was the key to this successful transition?

Effective management of the strategy development process, a necessary characteristic of any organization that seeks to foster potentially disruptive opportunities, as well as a critical lesson from HBX Disruptive Strategy with Clayton Christensen.

To learn more, read Pinterest Expands Buyable PinsTo More E-Commerce Platforms, Reaching Thousands of Merchants (via TechCrunch).

I confess - I thought I knew a lot about business. As a commercial lawyer with experience in transactions like M&As and project financing, as well as disputes involving vast sums of money, I felt I understood the "binary code" of business - the contractual mechanism and rules-of-play that seal or sever any commercial relationship.

Surely law was the key component in business, the gateway through which all activity needed to be funnelled if any outcome was to be achieved?

This is why I am grateful I signed up for the HBX CORe program in July 2015, which quickly put me right. The coursework filled in knowledge gaps in areas where I knew I was weak, but also greatly enhanced my understanding of concepts and topics I'd previously felt confident in.

While my legal education put an emphasis on the "how" of business, like how a company takes over another, how a regulator applies a rule or how a plaintiff enforces a right, etc., CORe taught me the "why;" the intuitions that underly any commercial decision before legal ink even hits paper.

And CORe did this by doing exactly what it says, by focusing on the fundamentals. In doing so, it not only gave me new understandings of business but new perspectives on law itself.

The fundamentals of business

I confess, I first expected Economics for Managers to involve bone dry theories and memorization of abstract curves. CORe quickly put those worries to rest. Harvard Business School’s signature case method brought real-world fidelity to each concept, putting us in the shoes of actual managers who struggle with them. One memorable case study demonstrated how a little device called the Kindle could transform an entire industry because of its impact on incumbents’ fixed and variable costs. This overturned my preconceptions on how companies think about and respond to competition, and showed to my surprise that disruptions could be opportunities as much as threats.

Then the revelations crept closer to home. I learned how regulation, that lawyerly domain, is what economists call a market “friction” that companies can exploit in maintaining a competitive advantage over competitors. I also discovered how the spirit of a law like anti-gouging, designed to ensure greater fairness, could produce opposite and sometimes worse outcomes in reality if it ignored basic economics. Law was not necessarily the determinant factor in a company’s considerations, but one of many.

Assets, Liabilities, Equity, Revenue and Expenses. I encounter these fundamental terms daily and, because I advised on legal “liabilities”, or “equity” financings, felt I understood them. Financial Accounting taught me their precise meanings and how they relate to and interact with each other. In the end I saw how financial accounting truly is the “language of business”, fluency in which enables you to gain insights into the present and future performance of any company, regardless of the seeming complexity of its accounts. This is empowerment in the truest sense as accounting principles apply everywhere, whether to your neighborhood corner store or Apple, Inc.

Finally, Business Analytics demystified “big data” and the tools companies use to contextualize information, challenge shibboleths and execute learnings for maximum results. Case again provided its vivid tapestry in demonstrating how everything from Amazon adding a single word on its homepage to Disney deciding a major home entertainment release is driven by data analysis. Most surprisingly, the daunting names of these analytic tools like “hypothesis testing” and “multiple regression” belie remarkably simple fundamentals which trace back to high school mathematics.

As an ex public prosecutor, I discovered that a trial is essentially a hypothesis test. The burden of proof (“reasonable doubt” in criminal cases) is the confidence interval of this test, which if decreased makes a false positive (a mistaken guilty verdict) more likely but if increased makes a false negative (mistaken not-guilty verdict) more likely. The same logic used in a court of law applies equally in the decision making of the world’s most successful companies.

Each time I sat down with CORe I encountered “Aha!” moments like these which showed me how much I had yet to learn about the world of business. Simultaneously, I was humbled by new insights into the role law plays within this world.  

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Want to hone your business skills to help you advance in your career and feel more confident contributing to conversations about finance, economics, and business analytics?

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Boston-based software startup Toast is one of the nation’s fastest growing companies, with a 550% year-over-year growth rate and sights set clearly on redefining the way restauranteurs run their businesses. 

While it's flourishing today, Toast initially struggled to find its place in the market and employed disruptive strategy techniques – effectively pivoting from an initial strategy of “specialization” to one of “integration” – to completely redefine its strategic focus and create a path to long-term success.

Toast entered the market in 2012 with an application that was focused on facilitating mobile payments at restaurants, allowing customers to split their tab, make payments, and get receipts delivered directly to their phones. According to President and co-founder Steve Fredette, it seemed like an easy decision at the time.

"The thinking was, let’s initially focus on mobile payments," he said. "It’s a service that we can easily sell and deploy. We thought we’d get a lot of volume with it, and build a marketplace.”

The problem with this approach was that mobile payments were only a small piece of a very jumbled "point of sale" ecosystem, which combines a variety of hardware and software to create a system that allows restaurants to take orders, process payments, and track sales and inventory.

Many of these legacy systems lacked key functionality, like the ability to manage customer loyalty programs, process mobile payments, and integrate online ordering, but proved incredibly difficult and expensive to build on to.

In discussions with a number of restaurants, Fredette quickly realized that he was not alone in his frustrations with the limitations of existing POS systems.

"The restaurants didn’t like that they had 5 or 6 different vendors with independent systems that didn’t talk to each other well," he said. "Online ordering was a system that didn’t talk to point of sale. Gift cards were a separate system that you’d have to train employees to use. Loyalty wasn’t built into the POS system. It was a bunch of pieces that didn’t fit together.”

Fortunately, Toast saw these complications as a strategic opportunity for the company and was quick to adjust.

“We felt in order to create a better customer experience, we had to start with the foundational side of it," Fredette said. "We started with the back-end, building in a way that we could layer a really good consumer experience on top of it. Now, we’ve built a system that is a bunch of systems in one.”

With this one strategic pivot, Toast was able to gain both a stronger footing in an intensely competitive landscape as well as a loyal following of hundreds of customers.

As Professor Christensen explains in our HBX Disruptive Strategy course, when you are competing in a world that’s characterized by performance that’s “not good enough,” you can’t win with a specialized approach, you must pursue an integrated system. Likewise, when you are competing in a world that is characterized by speed and modularity, you must pursue a specialized approach.

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This is Part I of a two part series. Learn how Toast identified its customers' jobs to be done and leveraged those insights to improve upon its core product in Part II.

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We sat down with Neil Tuli, a Multimedia Specialist on the Creative Team, to talk about his role at HBX, his love of music, and his burning desire to attend Hogwarts.

What do you do here at HBX?

I am on the Creative Team and report to the Creative Director. I work as a Cinematographer/Animator/Designer for course content, platform, and marketing needs and basically try to make my boss’ life as easy as possible by taking as much work off his plate as I can.

What’s your favorite part of your job?

The content! The people! I love it all. 

One of my favorite parts of the job is problem solving. For example, one time we had to create a steamy effect where we wanted to animate hand-drawn text onto a steamy window. Our first few animated steam attempts failed to get the results we wanted, so we had to get the effect practically.

We decided to shoot through a glass pane onto a black background, so we borrowed a hot plate to boil a pot of water just below the glass and filmed it. We then set the blending mode of that video to screen in post (to remove the blacks) and laid it onto our b-roll and boom! We had a great time building it all out. 

How would you describe yourself? 

I'm obchessed (a.k.a. chess obsessed), and I love analog synths.

Where did you go to school and what did you study? 

I went to The George Washington University, majored in Music and minored in Film Studies.

If a genie gave you one wish, what would you wish for?

For the Harry Potter universe to be real, and for me to be 11 and recently accepted into Hogwarts. That’s one wish, right?

Any hidden talents? 

I was the music director for my college a capella group (GW Troubadours) and have been singing since I was little. 

Speaking of music, we actually had a fun shoot recently where I got to play guitar and pretend to be a member of the band in Adriel's testimonial video. Talk about different worlds colliding!

What is the best advice anyone has ever given you?

When someone tells you that something is wrong with a piece you worked on, they are almost always right. But when they tell you specifically what is wrong with it, they are almost always wrong.

What’s your spirit animal? 

I want it to be a panther, but it’s probably a corgi.

Where do you get your news from?  

I read it on reddit.

A product can be innovative without being disruptive: take the case of Apple's latest iPhone 6S release. 

With such new features as 4K video and 3D touch, this is a great example of a "sustaining innovation," as it builds upon pre-existing value networks and markets. 

People often refer to the iPhone as being “disruptive” – and they’re right – if they’re referring to the 2007 first generation release, which delivered laptop-type functionality for a fraction of the price. Since then, Apple has effectively “moved up” the value curve with sustaining innovations that continue to build higher levels of functionality.

The best iPhone ever isn't necessarily the best phone http://t.co/zSEiYI1NGx pic.twitter.com/BJSnmr8nQW

— WIRED (@WIRED) October 5, 2015

So, is the Apple iPhone innovative? Of course. But that doesn’t mean it’s still disruptive.

To learn more about disruption versus innovation, check out HBX Disruptive Strategy.

Holden Gibbons is a veteran of the war in Afghanistan who returned home with a commitment to social change. He enrolled in the June 2015 HBX CORe cohort to realize his entrepreneurial ambitions and gain a strong business skillset. 

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What prompted you to sign up for CORe?

I am the quintessential entrepreneur whose creativity and ambition is boundless. Yet I lacked some of the (no pun intended) core competencies to be able to bring my ideas to fruition. My first tech start-up failed in 2008 due to lack of financial and managerial discipline, and I joined the Army to be able to afford to go back to school and realign myself.

I told myself that before I would try to start another non-traditional business, I would do myself a favor and seek an educational foundation to allow me to understand, and converse, with the more corporate/fundamental side of the business world, on their terms. When I heard about CORe, I knew I had found the right program.

What was your favorite part of the program?

My favorite aspect, by far, was the truly astounding variety of students that HBX drew together for our cohort. I have met several of them in person, often resulting in significant gains for me intellectually and personally. I really cannot underscore the ability of HBX to use the power of the Harvard brand to bring together a truly impressive mix of individuals, who are motivated to impact the world around them, in a myriad of ways. Even though our cohort is all wrapped up, I am still meeting people, or deepening my connection with them, via social media and personal interactions.

How are you applying the skills you learned in CORe?

As a recent Honorably Discharged Veteran of the war in Afghanistan, I am working feverishly to use my life experience, and intellect, to create a more empathetic and sustainable world. To that end, I am currently completing my undergraduate education on the Post 9/11 GI Bill.

I am working with my University at the highest levels to increase Veteran enrollment, as well as catalyzing the Veteran community to better understand progressive issues that could use authentic Veteran support such as gender equality, civil rights (on many dimensions), financial reform, and access to quality education and employment.

CORe has helped me make the business case for one of my main initiatives, Veterans Combating Child Hunger, which utilizes volunteer labor to sustainably farm vacant and delinquent land in Cuyahoga County (Cleveland, OH) for the purpose of engaging more stakeholders in the community, reducing government budget waste, reducing society's carbon footprint as it relates to food supply, and reducing government food subsidy reliance by replacing it, slowly, with locally scaled/owned/operated/sourced food.

I have utilized all three courses taught in CORe to make the case, from Opportunity Cost (Economics for Managers), Ethics/concept of a “going concern” (Financial Accounting), to being able to identify and quantify hidden/significant variables via regression analysis (Business Analytics). We are now one week from our inaugural harvest, which will go to benefit the Ronald McDonald House of Cleveland!

Recently, I have begun work on my first post-Army tech startup. My ability to not only have an amazing concept, but make the business case for it to potential Venture Capital/early stage investors, would not be holistic were it not for my newfound knowledge base, thanks to CORe.

I won’t pretend to be a perfect student, but since our cohort has finished, I have found myself continuously referencing my notes and ‘take away bundle’ to reaffirm my understanding of a concept, such that I can properly utilize it for my real world activities.

"CORe has been my Rosetta Stone in helping me to translate my ideas and visions for the world around me into empirical reality.“

KarmaBoard.com, a jobs board/social media platform that connects businesses/employees/customers that share the same values, (and mobile app versions) will be launching in Spring/Summer of 2016, and CORe helped me communicate effectively with stakeholders necessary to make that happen. In the Army, as a member of the Infantry we had a saying, “jack of all trades, master of none.” With the help of CORe, you can be a “jack-of-all-trades,” and the master of your own trajectory.

Any advice for people who will be taking CORe?

I have two suggestions: First, try to look at the course syllabus beforehand and try (your best) to set aside appropriate time to be able to digest material, and be able to interact with others in the discussion tabs, complete the modules/weekly assignments thoughtfully. It is important to offer help to those who might not be as quick as you, for you may be in the same boat down the line! This will also help save you undue stress as technical issues and last minute time crunches will inevitably crop up.

Second, reach out to as many people, from as many different backgrounds, as possible. Often times, “birds of a feather flock together,” holds true, but that would strip CORe of one of its primary features: the diversity of your fellow cohort members. I shamelessly ‘added’ everyone in my cohort on social media, and don’t regret it, at all. I have been challenged, supported, and enriched by all of them, and I know this will only continue as I maintain and grow these personal relationships.

 

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The CORe community consists of a rich and diverse group of learners. Want to learn more about other students who've participated in the program?

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When you tell your friends that you’ve signed up for an accounting class, you’ll likely get a reaction that sounds something like this: "Ugh, why?" Or, perhaps they will be slightly more sympathetic and say, "Oh, sorry to hear that."

Accounting gets a bad rap, but it's an incredibly useful subject to learn. Plus, it's not as complicated as you might think! Hear me out - here are four reasons why everyone can benefit from understanding basic accounting.

1) So you don’t get ripped off!

Buying a car is a big investment. It can be overwhelming to try to negotiate a better price, so why not walk in with confidence, knowing you understand how a business like a car dealership is run and the ways you can get a better deal? If you’ve had an introduction to accounting, you’ll know that the car you’re about to buy is on the car dealer’s balance sheet as inventory. You’ll also know that in order to keep the car dealership operating, they must make a profit on the car (you can still talk ’em down; they don’t need that much profit).

Once you drive away, the car is taken out of the dealer’s inventory and payment received (cash or loan), as well as profit are recorded. You also know that most dealerships work on a monthly sales cycle and have quotas for the amount of inventory they need to turn over in the given time period. With this understanding, you can walk in at the end of the month, explain what you’re looking for, provide comps on similar cars at other dealerships, and walk out with a better price on your dream car (and probably the respect of the salesperson).  

2) So you aren't intimidated by your own finances.

Be honest, can you explain where all of your money goes after your paycheck gets deposited? Even if you’ve managed to find a job that pays the bills (collective sigh of relief from all of the parents out there), it can seem impossible to set aside money for savings each month. With some accounting knowledge under your belt, you will gain a much deeper understanding of what goes on with your own finances and learn important skills like how to effectively track expenses and work within a budget. 

Many people use the excuse that they are "no good at math" to explain their reluctance to study accounting, but the math actually involved is quite basic. If you can add and subtract, multiply and divide, you are set! With your new savings savvy, maybe you can save up enough to send your parents on a cruise as a thank you for the many years they supplemented your meager earnings!

3) So you can make better sense of current events.

There is no shortage of scandal in the accounting world. You’d be hard-pressed to turn on the news and not hear about a recent manipulation of numbers that has caused thousands of people to lose their shirts. Just like any industry, there will always be people who play by the rules and people who don’t. Why trust the media to fully explain what happened in an unbiased way? With a basic understanding of accounting, you can understand what these companies have done wrong and why it matters. You can even explain it to your friends and sound really smart at cocktail parties!

4) So you can impress your boss.

Picture this: You’re in a staff meeting and the CFO wants to discuss the past quarter’s financials. If you’ve had an introduction to accounting, you’ll not only be able to understand what the CFO is talking about, but you’ll also be able to chime in with your own financial wisdom and impress not only the CFO, but also your supervisor and all of your coworkers who are nodding their heads blindly and hoping no one calls on them.

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Want to learn the language of business and develop an essential understanding of financial accounting, business analytics, and economics for managers? You may be interested in HBX CORe, an interactive online program from Harvard Business School! 

 

Who’s the most hated man in America? Well, if you’ve glanced at social media over the past day or two, the resounding answer seems to be Martin Shkreli.

Shkreli is CEO of Turing Pharmaceuticals, a US firm that acquired rights to Daraprim—a drug that treats toxoplasmosis, a parasitic affliction of many AIDS patients—back in August. Since then, the company has decided to raise the price of Daraprim from $13.50 per dose to $750.00 per dose—a price increase of over 5,000 percent! The pill costs about $1.00 to produce.

This 62-year-old drug just got 5,000% more expensive http://t.co/YVlHDRNAlu pic.twitter.com/pxbF1zWqHt

— Fortune (@FortuneMagazine) September 22, 2015

A former hedge fund manager, Shkreli originally defended his firm’s decision on the basis of profit considerations. So, is Martin Shkreli an evil guy, attempting to make a profit off of sick people that need his product? Maybe. But it’s more likely he just let monopoly power go to his head…

The backlash against the firm brings the idea of monopoly pricing out into the open. The decision of where to price a product is one of the toughest that a firm has to make. For a pharmaceutical company with complete pricing power over its product, it’s usually even more challenging. Aside from the production cost of pills, a drug company must also think about numerous other factors, such as pricing to recover the costs of research and development (R&D), patient willingness to pay, whether government insurance will pay a higher price, and others.

However, one factor that all companies must consider when deciding on a price is equity—is this a fair price to charge for a product that people need? Where Shkreli got it wrong is in severely underestimating fairness considerations when deciding where to price. And because he only focused on profits, he’s paying for it.

Here's why Turing Pharmaceuticals says 5,000% price bump is necessary http://t.co/RAhefQlvKH

— Fortune (@FortuneMagazine) September 23, 2015

Read more about the controversy:

• US pharmaceutical company defends 5,000% price increase via the BBC
• CEO: 5,000-percent drug price hike "not excessive at all" via CBS News
• A pharma CEO tried to defend his decision to jack up the price of a critical drug by 5,000% - and it backfired via Business Insider
• Jump in Price for an Old Drug Will Be Rolled Back, C.E.O. Shkreli Says via the New York Times
• US drug company to cut 5,000% price rise after backlash via The BBC

There’s an old, near-funny joke about economists that goes something like this:

A physicist, a chemist and an economist are stranded on a desert island, with no food to eat. A can of soup washes ashore, but it’s sealed. So each professional ponders how to get it open…

“I’ve got it. Let’s smash the can open with a rock,” exclaims the physicist.

“No, no. The soup will splatter that way,” says the chemist. “Let’s build a fire and heat the can first.”

“You’re both wrong,” retorts the economist. “Let’s assume we have a can opener….”

The joke is corny at best. It may have even gone over your head. My apologies.

But the stereotypes in the joke are spot on, especially for the economist. One of the biggest gripes that people have with economists (and economics as a whole) is that the models that they build to represent the world often require unrealistic or even impossible assumptions in order to get results. What’s the point of building models that do not accurately represent reality?

One of the most cited examples of wishful thinking in economics is the model of perfect competition. Those of you that took Econ 101 in undergrad are (or at some point were) probably familiar with this idealist representation of how economic markets distribute goods and services. In short, perfect competition is a market condition in which no market participants (buyers, sellers, etc.) are powerful enough to set the price of a homogenous good or service.

Economists expect markets to be perfectly competitive when the following conditions hold:

1. Products are identical: sellers offer the exact same product and buyers are equally willing to buy from any seller.
2. Many small price-taking participants: there are numerous buyers and sellers, none of which has the ability to influence the market price substantially, and no single firm or consumer accounts for a large portion of production or purchases.
3. Perfect information: Buyers and sellers are fully informed about the quality of products and prices available in the market.
4. Identical sellers: suppliers have full access to the same inputs and production technologies as one another.
5. Free entry and exit: many new firms can enter the market on the very same terms as existing ones if the market is profitable and, similarly, firms can exit the industry without incurring extra costs.

Can you think of a market that satisfies these conditions? I certainly can’t… I myself used to be baffled at how strict its assumptions were. Models are supposed to be an accurate representation of reality, and this one certainly is not.

Conditions 1-3 above generate the equilibrium of a theoretical market. Firms will earn a profit at the market equilibrium if the market-clearing price is greater than the firms’ average total cost. But the presence of profits will entice more firms to enter, driving up production and pushing down prices until such competition and entry completely destroy profits. Products, prices, firms and consumers are all the same, so no one company can do anything about it. Perfect competition prevails leaving no profit.

Conditions 4-5 eliminate many of the market frictions experienced by real-world companies trying to enter or exit an industry. With all firms equally efficient and free to come and go as they please, competition is as intense as one can imagine. Since firms can leave, so no businesses make losses but none make money either. They simply break even. In this environment, one starts to question what’s so “perfect” about this form of competition. From a manager’s point of view, it’s hard to think of anything so far from ideal…

But when you look at it that way, I hope a lightbulb goes off for you. True, perfect competition is not a very useful model with which to classify modern industries today. But it’s a darn good one for a strategist to measure his or her firm against to see why and how their profit-making enterprises differ. To be clear, perfect competition is significant not because it is common (there are few to none of such markets in real life). Its real importance lies in the observation that departures from perfect competition are what underlie high profits and firms’ competitive advantages.

And for each departure from one of the model’s condition, firms have a chance to exploit attractive profit opportunities:

1. Differentiated Products: in actuality, not all products are exactly the same, and thus some firms have the power to charge premiums for better quality or target different customer segments. A firm’s ability to create value for a customer through a differentiated product or service yields profits for the firm by being able to charge a higher price.
2. Few, Price-Making Participants: actual markets are often dominated by a handful of powerful buyers or sellers that have substantial market power to move prices (the most extreme case being a monopoly who is the sole seller to a large number of buyers).
3. Imperfect Information: in the real world, market information is far from readily available and buyers must spend time searching out reliable information. Buyers are often short on time and make decisions using cognitive shortcuts, not taking all information into account. So firms that can create customer loyalty will benefit greatly.
4. Unique Sellers: some firms will ultimately have unequal access to production technologies and different input costs, making their overall costs structures very different. Firms with superior access to technology and cheap supplies can generate high profits even when the marginal firm earns no profits.
5. Barriers to Entry and Exit: in reality, incumbent firms have certain advantages, such as prior experience, lower production costs, and others, that entrants cannot easily mimic, which discourages free entry into the industry. Similarly, exit costs may be substantially high, forcing loss-making firms to stay in the industry.

The sources of advantage above are by no means the only ones available to a firm, but encapsulate useful forces to think about when planning your firm’s strategy. Use them wisely and your firm will profit.

As I’ve argued before, economics is far from perfect and at times a bit idealistic. Models, like the theory of perfect competition, do not depict the state of affairs particularly well. Nonetheless, it’s sometimes the holes in economists’ models that provide the food for thought that can lead to a lasting business strategy or new innovation that changes an industry.