While school was out for the summer, Columbia Business School professors remained in demand, lending their business savvy to NPR's Planet Money Summer School Business & Society.
Hosted by Robert Smith '20, professor of professional practice in Columbia Journalism School and director of the Knight-Bagehot Fellowship in Economics and Business Journalism, this year's eight-episode Summer School series offered what Smith jokingly called “an MBA the easy way.” Using old Planet Money episodes as case studies, Smith called on some of the country's most dynamic business school professors to share their insights on the different facets of launching and running a business. Smith kept CBS professors particularly busy, tapping into their expertise for more than half of the Summer School program.
Startup 101
Angela Lee, professor of professional practice in CBS's Finance Division and faculty director of the Eugene M. Lang Entrepreneurship Center, joined Smith for two episodes to talk about startup ideation and investor pitches. As a founder of 37 Angels, a venture capital company that has heard some 20,000 pitches in the past decade, Lee brings a uniquely informed perspective on what makes for a successful startup. On the podcast, she debunked the popular myth of the genius innovator, stressing that startup ideas don't come out of thin air. “Don't imagine you can sit in your garage for two years and then just unleash your product on the world. That's just silly,” she said. At 37 Angels, “we invest in data-driven learners, which is just so not sexy. People want to be a visionary, a maverick, but at the end of the day, I think great entrepreneurs are the ones who run a lot of experiments. They look at the data, and then they respond according to that data.”
To test the viability of an idea, Lee said, successful entrepreneurs use their data to answer several fundamental questions: What are the demographics of the hypothetical customer? What are their psychographics? What do they read? Where do they shop? And, crucially, what is the unique value proposition of the startup?
Lee stressed that a startup's value is not a list of its benefits and features. “If you can't encapsulate [the need for your product] in a human voice, in a few words, you don't really understand the problem you're trying to solve,” she said. Being succinct will also help in fundraising, Lee added: “VCs look at pitch decks in about three minutes. That's how quickly they decide 'Am I going to meet with you?'”
Once an entrepreneur has a viable startup idea, they need to be able to differentiate it from other products and solutions on the market. For insight into this critical step, Smith invited Dan Wang, the Lambert Family Associate Professor of Social Enterprise, to the podcast. Wang explained companies differentiate their offerings in two ways — quality and cost — and warned founders not to try to occupy the middle lane. “You can't be everything to everyone,” he said. “It's a bad strategy to try to be the most excellent product at the cheapest price, because you're not optimizing for any one thing and there will be competitors who do optimize for it.”
If your product is almost identical to another already on the market — think Coke and Pepsi — companies can differentiate by creating an emotional connection to the product or, for other products, with add-ons like subscriptions or maintenance plans. To be avoided at all cost? “Perfect competition,” the no-win scenario where companies are competing only on price, Wang said.
He also weighed in on what's known as the innovator's dilemma: For an established business, innovation always represents a risk. In fact, Wang said, a disruptive innovation can initially look like a worse choice. Sticking with the way business has always been done will often seem like the more prudent approach. But this resistance to innovation represents an opportunity for a startup.
Wang cited the classic business example of Blockbuster and Netflix. Netflix disrupted the movie rental business by eliminating the trip to the store as well as onerous late fees. To Blockbuster, this innovation looked like a worse business model. After all, it took five days to get a movie in the mail when you could just walk into your local Blockbuster that day. Blockbuster chose to ignore its new rival, which gave Netflix time to improve its business model by building out distribution centers, shortening delivery time, and leveraging its customer data to launch a personalized recommendation tool — and eventually becoming the streaming and production giant we know today. Here, taking the risk to innovate paid off: Netflix's subscriber base exploded over 4,000 percent since 2006, while Blockbuster now exists only as a single franchised store in Oregon.
Advanced Negotiations
Finally, Daniel Ames, the Ting Tsung and Wei Fong Chao Professor of Business, and Malia Mason, the Courtney C. Brown Professor of Business, both in the Management Division at CBS, teamed up for an examination of negotiating skills.
Negotiators commonly face the same dilemma: trying to get the best deal for themselves while at the same time building a productive and trusting relationship. “The challenge is that your pursuit of one often undermines your ability to do the other,” Mason said.
Ames advice? Empathy. Rather than arguing about value, Ames recommended making an effort to understand and validate the other party's position. An empathetic negotiator relies on what Ames and Mason call constraint rationales: They'd love to be able to give the other party what they want, but they just can't. In the classic car dealership example, the buyer can agree the car is worth what the dealer is asking, but they can't afford it. “If you can credibly say, 'I can't do any better than this [offer],' sometimes your counterpart will start to try to solve your problem for you,” Ames said.
Another option is to look for lopsided priorities: issues that matter more to one side than the other. For example, in a salary negotiation, the ability to work from home may have value for a job applicant that offsets a lower salary and may not cost the company much to grant.
But beyond give-and-take haggling, Ames and Mason emphasized that negotiators should always look for opportunities to grow the pie, so that one party's success doesn't require the other party's failure. Pie-growing opportunities can sometimes be found when parties set aside position-based bargaining in favor of interest-based bargaining.
As an example, Ames and Mason discussed what happened when Marvel Comics tried to reacquire its rights to Spider-Man from Sony. Back when it produced only comic books and toys, Marvel had sold the moviemaking rights to the superhero. Once it entered the moviemaking business, Marvel wanted to reunite its popular character with the rest of its superhero universe.
Sony's Spider-Man contract stipulated the studio had to release a new movie with the comic hero every six years or risk losing the rights to the character. Under this production pressure, its movies were becoming repetitive and less profitable, but the studio didn't want to relinquish the valuable intellectual property. Sony's and Marvel's positions didn't align: They each wanted the intellectual property rights. But their interests did: They both wanted to make more money off of Spider-Man and needed the other to do it.
The negotiated deal satisfied the needs of both parties. Marvel lent its expertise as well as other Marvel characters to Sony's Spider-Man films for a token percentage of profits. In return, Sony allowed Marvel to use the Spider-Man character in its own Avenger movies, some of the highest grossing films of all time. By aligning their interests, the Sony-Marvel negotiation became a textbook case of growing the pie.
From these unexpected negotiation techniques to startup advice, NPR's Summer School “students” were able to take away solid business principles from some of the masters in their field. And while an “MBA the easy way” isn't a substitute for the real thing, they got a glimpse of the kind of engaging instruction that makes CBS professors in such hot demand.
