B-School home truths

Excerpts from Michael W Preis and Matthew Frederick’s entertaining and succinct new book of business lessons

The 101 Things I Learned series has travelled through architecture, film, fashion, food and more. Now it tackles business education. Alongside useful “lessons and hard-earned wisdoms” from the MBA and beyond, composed by Michael Preis, are amusing line drawings by Matthew Frederick.

Excerpted with permission from Hachette India

Good merchandising is theater.
Consumers buy products at retail because they want or need them. But that may not be why they walk through the front door of a store; and without a compelling reason to visit a store many people will shop online.

What can your retail business offer that will make the experience of your store as interesting as or more interesting that the items you sell? What aspect of performance — product demonstrations, kinetic rather than static physical displays, even store pets — can be the “accidental” reason customers visit your store and buy from you?

Do your marketing while you’re busy.
Opportunities can develop very slowly; it may be years from the time a new contact is made until it develops into business. If one waits until business slows down to initiate a marketing effort, it may be too late for it to help one get through the downturn.

The higher one rises in an organization, the longer it takes to implement a decision.
Front-line managers can effect immediate changes by directly instructing workers. A sales manager can redirect the activities of salespeople immediately, and an accounting manager can make immediate changes in bookkeeping practices.

At higher levels of an organization, where employees are more concerned with strategic matters, decisions take more time to implement. If the vice president of marketing wishes to change the style of a product being produced, considerable time will be required to engage feasibility studies, explore design alternatives, investigate the technical methods required, and alter manufacturing methods.

A manager usually should have no more than six to eight workers reporting to him or her.
When a small business expands, one frequently finds that a new layer of management is needed when it grows larger than six to eight people. Another layer is typically required at around thirty-six to sixty-four employees, and so on.

The ideal span of control depends on the nature of the work, the abilities of managers and workers, and the similarity or divergence of tasks being managed. Highly redundant processes such as manufacturing can have a very large span, while creative businesses such as architecture and filmmaking may have a span of only a few persons. But a good place to begin analyzing the span of control for most organizations is in the range of six to eight.

A statistical correlation does not necessarily mean a cause-effect relationship.
Begun in 1924, the Hawthorne Studies, conducted at Western Electric Company, found that employees worked more efficiently under altered lighting conditions. It was initially concluded that the lighting caused the improvement in production. Years later, it was realized that workers worked better not necessarily because of the lighting, but because they knew they were being intensively observed.

Complaints can be good things.
When a customer tells a business where it failed, he or she is doing the business a favor. For every unsatisfied customer who complains, many others quietly leave and never come back. A complaining customer usually wants to continue doing business with the company — he or she just wants something to change so the relationship can continue. In fact, customers whose complaints are resolved quickly and satisfactorily often become very loyal: They make larger purchases, become personally attached to the business and its employees, and provide positive word-of-mouth.

There are costs to keeping customers satisfied, but the cost of recruiting new customers is higher. In fact, a satisfied customer may even pay more for the product or service.

Don’t just compete in existing markets; anticipate new ones.
Businesspeople sometimes restrict their vision of the future to a better, but vaguely defined, version of the present business. In doing so, they may miss opportunities for expansion into new and related industries. For example, a cable TV company that defines itself as providing television programming may be framing its future too narrowly. By redefining its mission as the transfer of information to and from homes, it positions itself to provide internet services, home security, home automation, and telephone services through the same cable.