Day 48 & 49: Lights Out At Harvard Business School

The Baker Library at night

Lights Out At Harvard Business School

As they say, all good things must come to an end. And in keeping with our class' character, we chose to go with a BANG!

True to its reputation for academic excellence, our mornings are still spent attending our professors concluding lectures. And being consummate academic professionals, our professors also ended their course with a BANG!

It was truly a stupendous moment! Where both pupil and teacher came face to face and both bowed in admiration for each other. As a gesture of how much we appreciated their efforts and how life-changing the whole experience was, we gave our professors a standing ovation that made some of them blush and embarrassed from the entire class' adulation.


Farewell Dinner at the Four Season's Hotel

As a fitting send off to all of the participants of the Advanced Management Program (AMP), the faculty and staff of Harvard Business School, led by its Senior Associate Dean Das Narayandas, organized a farewell dinner at the Four Season's Hotel in Boston.

It was a touching moment, where we bid each other farewell, where we hugged and where we expressed our appreciation to each other for being a part of each others learning journey. I personally was very touched, when a number of my classmates came to me and expressed their appreciation for all the inputs I contributed in class and quite surprisingly a commendation for raising the Asian flag from my Asian classmates.

Below are photos of that marvelous evening.

















Day 46 & 47: Entering The Final Week of AMP



The Final Week of AMP

The final week of the Advanced Management Program (AMP) had arrived and I didn't quite know what to feel. On one hand, I was so excited that finally I will be coming home but on the other hand, I will be missing a lot of things in Harvard Business School.

First, would be the first-rate education that all of us received. Until today, my mind is still immersed with all the frameworks, models and business tools that were taught to us by all our Professors. In fact, despite being the last week of our program, our calendar is still filled with sessions and classes - no dissimilar to our schedule on week 1.

Needless to say, I will miss my favorite hang-out the Baker Library, which has served as my second home while on campus.

It was here where I spent reading most of the daily cases assigned to us as we got into the second half of the AMP. It's ambiance coupled with its wooden bookshelves, panels and tables makes it the perfect site for learning.

It was also here that I worked on my personal case. The amount of material that is well within reach is just astounding, to say the least.

Living Group 52, back row: Niramarn Laisathit, Tim Twitty, Gary Ang, Ron Vollebregt; front row: Vince Abejo, Stuart Machin, Ruedi Temperli, Romeo Kumalo (not in photo: Christian Martinez)

 Of course, I will miss very much the members of my living group - Living Group 52. We've supported each other, bantered with each other and cajoled each other at times. We've seen each other at our best and we've seen each other at our worst. And the best part of all, we accepted each other for who we are. I hope that we cross paths sometime soon. To Nira, Tim, Gary, Ron, Romeo, Reudi and Stuart - I salute you all - cheers!

On a lighter note, I will also miss the squirrels and the birds, who call this campus of higher learning their home, and who probably had a crash course on animal rights from the Harvard Law School, which is just down the block. Several blogs ago, I wrote about how perplexed I was when the animals didn't get out of my way as I walked on the pavements of Harvard Square.

I will of course miss all the professors and the administrative staff of the AMP, without whom Harvard Business School, would just be a hollowed out concrete shell albeit with well-manicured lawns.

Despite being the last week, our professors show no let-up in imparting knowledge to the AMP participants. In fact, the pace of the lectures have intensified and we're slowly seeing how the lessons converge to the point where it's almost difficult to delineate one class from the other.


Class Lessons

Why Leaders Lose Their Way
  • Life has both a positive and negative narrative that is the source of our motivations and distractions, the key is to identify, accept and if needed, address it
  • Leadership is lonely, so the challenge is how to keep yourself grounded
  • It is the people who make you successful; the leader's job is to set the stage to make them shine
  • To be an authentic leader, does not mean you have to be perfect
  • Sustain your leadership energy and focus through:
    • introspection
    • physical exercise
    • support team
    • time management
    • leaving a legacy
  • At the end of the day, always know what is important to you!
Marketing
  • When introducing change, always untangle the cultural piece - communicate up, down and across
  • To be an effective leader, you need to answer the following questions:
    • what will you stop doing?
    • what will you continue doing?
    • what will you start doing?
  • Don't design plans in isolation of culture and people
  • Failure should be celebrated to make sure it does not get repeated
  • Always guard against the benefits of loyalty exceeding the cost of loyalty
  • Wrap service around the product to enhance, if not create, differentiation
  • Customer management systems tie in with talent management systems
  • 4 items to manage:
    • strategy
    • management
    • operating systems
    • performance
Leading Change
  • The notion that you have to be perfect as a leader is a fantasy - none of us are perfect
  • The world is drum-beating everyone to be a manager - rise up and be a leader
  • Work with both leaders and managers in order to become a better leader and a better manager
  • Drive yourself up the leadership ladder, even if these are small steps only
  • In life we always have a choice
I'd like to end this blog with a quote from the preeminent author on Leadership, Prof. John Kotter, whom we've had the privilege of hearing in class.

" With a humble heart and open mind, you can learn from anyone at any place."
Prof. John P. Kotter (right) posing for a photo after his lecture

Day 44 & 45: Revisiting the Kennedys

The John F. Kennedy Presidential Library and Museum

John F. Kennedy Presidential Library and Museum

One of the places I've longed to visit was the John F. Kennedy Presidential Library and Museum. It contains historical artifacts and memorabilia of the late Mr. Kennedy's presidency, from his campaign all the way up to his assassination.

Of particular interest to visitors are items from what has been dubbed by history as the Cuban Missile Crisis, that put the world on the brink of a nuclear holocaust.

An avid doodler, President Kennedy wrote his thoughts on a yellow pad as he was chairing the meeting and listening to his advisers. Of particular interest are the words "diplomatic", "missiles missiles missiles"and "pearl harbor" that he scribbled. On the left is the actual pad that he used.

The crisis was eventually resolved with both the United States and the Soviet Union agreeing on a quid pro quo. The USSR halted its missile installation in Cuba while the United States removed its missile batteries in Turkey.

Of course for those who are interested in fashion, are Mrs. Kennedy's outfits that she wore to various events at the White House and other state functions.

A media sensation and a favorite of Washington's social elite, Mrs. Kennedy's outfits were as closely followed as the policy pronouncements of her husband. She brought class and pizazz to the post of First Lady.

Just like her husband, she used what was then a new media called, television, to reach out to the American people to promote her causes, very similar to the manner and style of the iconic Princess Diana several decades later. For her efforts, she is apparently the first and only First Lady to have won an Emmy.

Of course, the Kennedy Presidential Library will not be complete without mementos of the Kennedy family itself. Occupying a prominent space in the Library is the desk of then United States Attorney General Robert Kennedy, the President's younger brother. Detailed on one wall were his efforts in advancing civil liberties, notably the issue of desegregation among blacks and whites. Just like his brother, he too was assassinated.

Towards the end of the tour, is a portrait of the Kennedy family in happier times. This was apparently the last photograph of the entire family.


It is my hope that the Philippine too will someday realize the importance of honoring and preserving its history. And just like the Americans, a good place to start is the Philippine Presidency. As a people, Filipinos have had a "love-hate" affair with its President, further underscoring the need to preserve and discuss its history as a monument of unity and redemption. After all as Edmund Burke, an English statesman and philosopher, once stated, "those who don't know history are bound to repeat it".


Class Lessons

 Operations.
  • You need to create an "an don" culture in order to identify operations deviations and come up with solutions early on
  • Doing so alerts the entire organization of potential problems and galvanizes it to come up with solutions and manage business expectations
  • Businesses have made an excellent job of making supply chains lean that it has made operations very vulnerable to disruptions (e.g., Fukushima nuclear accident)
  • Management credibility premium affects stock pricing
Business, Government and International Economics
  • The Japanese successfully built a strong competitive advantage in a relatively short time and across several industries and this has carried them through over 20 years of economic progress
    • The US took 20 years to do the same
    • The Germans took about 10 years
  • The Japanese saved massively and invested massively and today it continues to reap interest dividends from these investments
  • A period of low interest rates and high export earnings, known as "endaka" triggered a housing and stock bubble which eventually burst and led to what has been commonly referred to as the "lost decades".
  • Japan continues to teach the world to this day, the American economic policy of quantitative easing, where government takes the lead in spending to boost consumer spending, was a lesson learned from the Japanese economic malaise
Corporate Accountability
  • One of the factors that caused the economic crisis of 2008 was that management incentives were geared toward more risk taking as incentives were predominantly anchored on return on equity
  • Return on Equity unfortunately ignores the impact of leverage in value creation
  • Some of the major players in the crisis unfortunately used short-term funds to manage long-term funds

Day 42 & 43: What I Will Miss Most

The majestic Baker Library framed by clear skies and sunshine on a warm spring morning.

What I Will Miss Most

As Harvard Business School's (HBS) Advanced Management Program winds down, I am mentally preparing a list of things and places that I will miss very much. One of those places is the Baker Library, which has been my favorite hang-out after in-between classes and my Living Group case discussions.

I guess the other one that I will also miss is the unpredictable Bostonian weather that even the plants and animals get confused. It can be sunny and warm one day and be cold and dark the following. According to the residents, the mild winter that just passed resulted in the late arrival of spring. The result, a hybrid of winter and spring. Anyways, I will miss that as well.

Of course, I will miss my classmates and professors who have contributed and helped me immensely in my pursuit of knowledge and learning.


Lessons in Class

Finance
  • When reviewing acquisitions or mergers, conduct a sensitivity analysis across the different variables to test the conclusions / recommendations and the underlying assumptions
  • The first to consolidate and gain scale wins the game since it is able to acquire cash flow and recurring revenues
  • It becomes an even greater advantage if the company is publicly traded since its shares become currency that can push valuations upward
  • Capital market understanding is a strength as it can also impact on the company's product development or accretion strategy
  • Be cautious however of bubble type valuations as it can go down as fast as it went up
Business, Government and the International Economy
  • Increase in labor costs typically results in a drop in total factor productivity and a subsequent decline in export performance
  • Currency risk is not the same as sovereign risk, do not mistake one for the other
  • Economic integration is difficult without political integration
  • Monetary and fiscal policies need to be synchronized and complementary
Operations
  • A few tips on becoming a successful CEO
    • it's not about you, it's about the company
    • focus on adding value
    • let the value you add speak for your success
  • Manage the company for the long-term not for the short-term
    • fight the tyranny of short-termism
    • avoid stock valuations from being your guide or decision metric
    • serve your stakeholders, enrich your shareholders
    • act like you own the place
      • more effective boards
      • more sensible CEO pay

Special Sessions with Ray Gilmartin, CEO of Merck

Mr. Ray Gilmartin engages AMP students after class on committed customer service.


Mr. Ray Gilmartin and Merck & Co.

Mr. Raymond Gilmartin, former CEO of Merck, would probably rank as one of the most talked about and criticized CEO of modern times. Not only did he preside over the most expensive product recall in history, the Vioxx recall, but he also lowered the company's profit guidance while keeping it's R&D budget much to the consternation of fund managers. Needless to say, Mr. Gilmartin received serious flack from the investment community and even influential business journalists asked for his head.

From the very start, Vioxx was a wonder drug. It was an effective painkiller that treated osteoarthritis, acute pain conditions and dysmenorrhoea. What's even better is that unlike traditional pain medication, Vioxx did not cause debilitating peptic ulcers due to its clinically proven ability to inhibit the COX-2 enzyme. Vioxx brought in revenues of about USD2.5 billion annually to Merck & Co.

However, after a second round of clinical trials, the drug caused an increased risk of heart attacks and strokes from prolonged use. Faced with the choice of increased profits or potential harm to its customers, Mr. Gilmartin and his board decided to pull out Vioxx from the market. Almost immediately, the stocks of Vioxx fell sharply and to complicate matters loyal Vioxx users questioned its withdrawal.

Faced with declining revenues and profits caused by the Vioxx withdrawal, Merck was faced with expiring patents and low R&D success rates. Not only was its current business in peril but so was its future growth and profitability.

Confronted with this dilemma, Mr. Gilmartin, his management team and his board did the unthinkable. Instead of reducing its R&D budget alongside reductions in its expenses, Mr. Gilmartin chose to lower profit guidance. As expected, this whipped up a maelstrom of criticism with many even questioning Mr. Gilmartin's competence.

Fast forward to 2012, Mr. Gilmartin has retired from Merck and is now a professor at Harvard Business School. Merck & Co., is once again highly regarded for its R&D strength, its revenues and profit growth even stronger. And as a final act of his vindication, the most vociferous of his media critics, are now attributing Merck's present success to the bold moves planted by Mr. Gilmartin himself, during his stint as CEO.


"It's Not About You, It's About The Company"

He shared with the class the logic behind his decisions. As regards the Vioxx withdrawal, he said that the decision was fairly simple - it was the right thing to do. Merck's culture always put customer safety as its primary concern. In fact, earlier on in his stint as CEO he reiterated the corporate mantra of taking care of your customers and the profits will follow. And his entire management team all agreed that it was indeed the right thing to do.

On his decision to sustain investments in R&D and lower profit guidance. His explanation was straightforward. R&D is the lifeblood of any pharmaceutical company. Any weakness in this activity may severely compromise the long-term viability of the organization.

In the end, Professor Gilmartin was vindicated. So impressed was the class with his sharing that a number of us huddled and asked him follow up questions. I asked what was in the mind of several of my classmates - "How did you deal with the personal attacks that you received?". His response was not only impressive but very humbling.

"It's not about me, it's about the company"
When pressed further, he offered, " I just have a single minded focus on what I believe to be good for the corporation."

The profoundness of his responses floored all of us. I suppose that's what separates an exceptional leader from the rest of the pack. It radiates an incredible amount of self-awareness to be able to distinguish one persona from another.

Professor Gilmartin, AMP Class 182 salutes you!


The class and Professor Gilmartin in a post-class huddle.

 

Day 40 & 41: Reflecting by the Charles River

The Charles River on a beautiful spring morning.

Reflections

My advice to those who would be taking the Advanced Management Program (AMP) is to not just find time but make time for weekly reflections. The amount of knowledge one receives from the program is so immense that one does need to pause, document and reflect on how these can be assimilated as part of one's professional and personal repertoire. Actually, the idea is not mine, I just diligently followed what our Associate Dean told us on Day 1, which is to spend time reflecting since being in this course is akin to drinking from a fire hose.

And so I did just that and decided to perch myself at the Charles River. The river seems to be the nerve center of all activities that happens on this side of Cambridge and Boston. Whenever residents and students have time they will all converge at the river banks and bask in the warm sunshine - a perfect spot to reflect on the value of all the learning one has accumulated.


Lessons in Class

International Economy
  • The European Union was formed to unleash the growth potential of Europe through efficiencies generated by scale and size
  • It was also an ideal institution to end several wars that have ravaged the continent, killed its citizens and stunted growth
  • The union facilitated trade, price transparency, managed inflation and to a large extent, improved competitiveness
  • However it also clipped member nations' ability to manage inflation and growth through monetary policies
  • The institutional mechanisms to support the union is still at its infancy and is plagued by differing national views on its powers vis-a-vis national sovereignty
  • The road to success despite its decade long experiment is uncertain and the dark clouds of economic uncertainty only underscores this point
Operations
  • Customer service can be a "revenue center" provided that it is integral to the company's strategy, structure and system
  • To truly excel at customer service the company needs to know which dimension of service it wants and it does not want
  • This also extends to identifying customer segments and providing them  a relevant and meaningful service experience
  • Customer service can result in an increase in revenues and margins, however be prepared for a corresponding increase in costs and investing in the right culture and people
Strategy
  • It is important to have a realistic understanding of what you are and why you're successful
  • Not all strategic business synergies are internal, it can also be generated through alliances
  • Technology or systems alone won't win the game, it's the total customer experience that matters
Corporate Accountability
  • Corruption is caused by any number of factors but some of these may include country norms, pressure to meet targets, rationalization and weak controls
  • Business costs and investments in corrupt countries can be as much as 20% more than in less corrupt countries
  • Nations that fight corruption and improve the rule of law increase national income by as much as 400%
Marketing
  • It can be difficult to address the needs of all customer segments, a way forward may be modularizing in order to provide a pseudo-customized consumer experience
  • Segmentation can be features-based or needs-based and it evolves through time
  • Open modules / platforms are generally preferred over closed modules / platforms since it allows for interoperability making it more consumer relevant
  • Closed platforms eventually get cracked, rendering any protection moot

My favorite hang-out, the Baker Library, on a lovely spring afternoon

A Special Session with FBI Director Robert Mueller


FBI Director, Robert Mueller, addresses participants of Harvard's Advanced Management Program

Robert Mueller

A lot of what I know about Mr. Mueller comes from the materials I have read about him and his work at what is indisputably the best law enforcement agency in the world - the Federal Bureau of Investigation.

By all accounts he has presided over the biggest overhaul of the FBI since it was founded by Charles Bonaparte in 1908. The impetus for such a change was brought on by the events leading up to the 9/11 tragedy, where the entire intelligence and law enforcement community of the United States was found wanting and plagued by inefficiency.

Mr. Mueller steered the bureau through those tumultuous times through strength of character and integrity, an unwavering vision of how the FBI can best serve the American public and a first-rate management acumen that allowed him to instill the right culture, processes, people and strategy.


Message

One of my most poignant and unforgettable moments in Harvard Business School's (HBS) Advanced Management Program (AMP), was my close encounter with Mr. Mueller. He had just finished delivering his lecture to the class and had opened the floor to questions. I raised my hand and began to ask him what I described as "two-part question that centers on controls" and proceeded to finish my question. His immediate response to me was, "are you a journalist"? To which I replied, "No, I'm from the Philippines." He then retorted, "I KNOW", a trailed off with a mysterious smile that only the world's top cop can credibly give.

Throughout his two-hour interaction with students of the AMP, Mr. Mueller displayed his intellectual brilliance, strength of character, wit, management acumen, charisma and integrity - all of which make him perfect for his job and also the best spokesperson for the agency, which by all accounts he so loves.

The American people are indeed very fortunate to have a man such as Mr. Mueller lead the fight for a just and safe society. Americans sleep soundly at night because of people like him.

I would like to share some of Mr. Mueller's thoughts:

Some lessons post 9/11:
  • Counter-terrorism is the agency's number one priority
    • agency was reorganized and staffed to support this priority
    • promotion and advancement programs require a stint in counter-terrorism
    • cultural and procedural changes were put in place and continue to be fine-tuned
  • Threats
    • There was confusion on which branch of law enforcement is responsible for counter-terrorism (domestic vs. international; criminal vs. intelligence)
    • Didn't know source and extent of attack
    • Need to balance civil liberties and the need to address these threats
  •  Flexibility
    • balancing what the agency's strength and what the agency needs to be stronger
    • training the agents to have the right behavior and make the right decisions
    • establishing clear priorities that are communicated across the organization
Controls
  • begins with hiring the right people and doing this requires establishing the right criteria that is anchored on the right values
  • respect for civil liberties and that interdiction can pass the American criminal justice system
  • need to be aggressively apolitical while being respectful of the public political discourse
Driving Change
  • Identify causes of failure and need for change
  • Know what to and how to bring climate of change while being flexible and adaptive
  • Put in the right infrastructure - both people and hardware
  • Be transparent and open to suggestions
    • you will not get it 100% right the first time
    • listen and adopt the suggestions of your team

Needless to say, the class's interactions with world-class and proven leaders, shaped and strengthened by crisis, would not have been possible if it were not for the tireless and diligent efforts of Professor on Leadership, Ranjay Gulati. It is so easy to underestimate his course going in, but it would be difficult to underestimate its impact on your person and leadership acumen, coming out.

Here are some more photos of Director Mueller.



 

Day 38 & 39: Even The Animals Here Are Smart

A squirrel running with its loot. The animals here in Harvard University are not afraid of humans.

Furry and Feathered Friends

Just a quick note on the animals here in Harvard University. They have become so accustomed to people that they are not afraid of even initiating human contact. The squirrel in the photo actually asked me for food and scurried to the bushes. A few days ago, I was on my to the Widener Library in Harvard Yard and the birds held their ground as I approached. In fact, it was I who had to move out just to avoid them. Strange! They too must have received top caliber education from Harvard and are aware of their rights and the law against cruelty to animals.




Lessons In Class

Entrepreneurship
  • Studies show that 65% of failures are caused by people problems, only 35% are caused by product, market and management issues
  • Core dilemmas
    • when to found
    • building the team
    • new venture hiring
    • beyond the team
    • exit dilemmas
  • Key founder's questions
    • why am I doing this?
    • what choices are consistent with my motivations?
    • what early choices will cause problems?
Finance
  • Management compensation should not be anchored on stock price movement since it creates fiduciary issues in the short-term
  • But it is worth anchoring compensation on the trend-line of the stock price
  • Economic value added is an optimal executive evaluation system since it measures return efficiency of capital employed against cost of capital
Leadership
  • Culture
    • is a pattern of basic assumptions, values and artifacts
    • acts as a 24-hour training program and marks the rules of the game
  • Culture can be a key competitive driver in tight resource environments
  • Companies that have a high culture strength achieve high returns on capital
  • Culture is affected by the country's culture, industry culture and organizational culture
  • Culture is both powerful and dangerous and therefore needs to be managed pro-actively
Strategy
  • It is important for multi-business enterprises to make sure that each part is larger than itself and all of the parts combined
  • Creates and gorws value geometrically when there was none
  • Always strive for strategic asymmetry
  • Identify critical resources and how to build scope