ENTREPRENEURIAL GROWTH
SPRING SEMESTER, 2014
MAN 385.24 UNIQUE #05037
Professor
Class Days
Class Room
Office
Office Hours
Phone
E-Mail
Course Web Page
Teaching Assistants
John N. Doggett
Monday and Wednesdays from 11:00 to 12:30 p.m.
UTC 4.112
CBA 5.124k
Wednesdays, 3:30 to 4:30 p.m. or by appointment
512-232-7671
[email protected]
via Canvas
Grant Garlinghouse
([email protected])
Course Objectives
I have taught this course since late in the last century. Today, as we approach a second
global recession, helping people learn how to grow firms as astutely as possible will play a role
in speeding the beginning of a new recovery. When companies like Cisco and HP abandon
major market segments, it is even more important to think critically about how to grow a
firm’s products. Given the chaotic period that we are entering, I have made several significant
changes to this course.
First, I have done away with the individual midterm. The “next” recovery will be a group
effort. So will your midterm.
Second, I have assigned three books. These are some of the best books out there on how to
think about innovation, competition and how to grow a business. They will become “let me
read that again” go-to books that you will use long after you graduate from UT. To
compensate for the heavy reading load, I have eliminated most of the background notes from
the course.
Third, we are going to take a critical look at what is going on around the world. I believe that
more than ever before, global events will have a profound impact on our ability to grow or
maintain healthy businesses. I fear that this new global recession will be deeper and more
destructive than the one that hit us in 2007-2009, and that recession was the worst since
1948. I want to make sure that each and every one of you is prepared to take advantage of
the economic chaos that is buffeting the world.
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Entrepreneurial Growth—Spring, 2014
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This course is for students who want to explore the challenges of running and growing an
entrepreneurial company or a division of an established firm. We start by looking at the most
basic question. Can the firm grow; should the firm grow? Since growth is a choice, we will
also look at the trade-offs between aggressive growth and what venture capitalists call "life
style" businesses. We will also look at the importance of identifying opportunities for new
product development and responding to competitive threats.
We will then look at how managers can learn how to identify and respond to strategic
inflection points that shape the growth potential of all firms. This is a critical first step before
one can decide what growth model makes the most sense for a firm.
We will focus on the key things that managers must do to determine:
1. What is the right type of growth?
2. How much growth can their firms manage?
3. What will their competitors do in response?
Since growth is not a given, we will also look at the challenges that threaten the viability of
firms that have escaped the launch pad and those that have been in existence for some time.
A crucial part of our analysis will be to better understand how managers can anticipate and
respond to the reaction of competitors to their growth strategies.
No course on entrepreneurial growth would be complete without asking the "was it all worth
it?" question. While many think that owning a firm that is experiencing hyper-growth is a
dream come true, the reality is that such explosive growth is like jumping out of an airplane
with your hair on fire without a parachute. That is not for everyone. This course will
continually ask students to look at the personal challenges of being the owner/manager of a
growing, entrepreneurial firm.
Some cases in this course look at the challenge of growth from a non-US perspective. This is
to help you understand the explosion in entrepreneurship that is happening outside of the US.
To help you prepare for my style of case teaching, I’ve assigned a new HBS tool called the
Case Analysis Coach. It’s the best tool out there to help you prepare for my class.
As you prepare for each case, keep these questions in the back of your mind:
1. Which customers should we target? Which customers should we avoid?
2. What’s the right way to segment our markets? What products will our customers want
to buy?
3. How can we beat the competition?
4. How should we distribute our products?
5. How do we communicate with our customers and create a strong brand?
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Entrepreneurial Growth—Spring, 2014
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6. Which things should our company do and which should we let our partners and
suppliers do?
7. How can we delay commoditization and how can we respond when it begins to happen?
8. Who should we appoint to run this business?
9. Is this employee likely to succeed or fail in this assignment?
10. What’s the right organizational structure for this company or business unit?
11. How do we develop a viable strategy?
12. Whose investment capital will help us succeed, and whose money might poison our
chances of success?
13. How can we build a productive culture in our company?
14. How can we change a culture that has become unproductive?
15. How can I get my employees to enthusiastically support a new course of action?
16. How do we manage and control the resource allocation process?
17. Should we acquire a new company as a way of building capacity? If so, should we
integrate the acquisition into the company, or keep it as a separate organization?
Leadership and this Course
Each student must participate in a group project during the semester. The goal of these
projects will be to help real entrepreneurs manage the growth of their firms. Groups of
students will work with venture capital firms, the Austin Technology Incubator and local
Chambers of Commerce to identify entrepreneurial firms facing major growth challenges.
Each team will then help these firms develop strategies to grow.
Project firms can be in Austin, or anyplace on the planet. The requirements are that the firm
must have a serious growth challenge that they want the team to address, they are willing to
provide the team with complete financial visibility to the issues that you are working on and
they will take your recommendations seriously. Each project team must submit a project
proposal to Professor Doggett for approval.
These projects will help you develop your leadership skills in a number of ways. First, you will
learn how to “manage” groups of peers where each student cannot be the group leader.
Second, you will learn to manage the client relationship with CEOs and other senior company
officials to maximize the value that your team provides their firm. Finally, by observing and
reflecting on the dynamics of your team and your client company, you will develop a deeper
understanding of what entrepreneurial leadership requires.
Materials
Case Packet: You must purchase your case packet from www.hbsp.edu. Grant will send you
a link that you can use to purchase the materials once you are registered for the course.
Books: Purchase on-line or at a bookstore. They are not in the Co-op.
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Entrepreneurial Growth—Spring, 2014
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Required Books:
The Startup Owner’s Manual: A Step-by-Step Guide for Building a Great Company,
Steven Gary Blank and Bob Dorf, K&S Ranch, Inc., 2012.
The Innovator's Solution: Creating and Sustaining Successful Growth by Clayton M.
Christensen and Michael Raynor, HBS Press, 2003.
Escape Velocity: Free Your Company's Future from the Pull of the Past, Geoffrey A.
Moore, Harper Business, 2011. Please use this site to access the videos from the book
if they don’t play on your tablet or PC. (http://www.youtube.com/user/geoffreyamoore)
Course Requirements and Grading
Grading: This course MUST be taken for a letter grade.
Class Participation = 50%
This is a case-based course. Case courses help students become better entrepreneurs and
managers by requiring them to conduct detailed analysis, develop managerial plans of action
and defend these action plans in class. This course will require a minimum of 4 hours of work
per class. You must spend at least 3 hours analyzing each case and at least 1 hour preparing
an action plan that is supported by rigorous analysis for each case prior to class.
I have assigned three books that will help you understand the dynamics of entrepreneurial
growth. Reading these books will require at least one and a half additional hours of work per
class. Each student must also join a study group of fellow students and spend a minimum of
one hour discussing each case prior to class. During our class sessions, each student must be
prepared to actively participate in the discussion of every case.
Your class participation grade will be based primarily on the quality of your comments, not on
the quantity. Comments that demonstrate a thorough analysis of the issues presented by
each case, an awareness and appreciation of the comments made by fellow students, and an
implementation of the frameworks from the readings that add to the learning process of the
class will receive high grades. Comments that ignore the content and flow of the discussion or
that reflect inadequate preparation will receive low grades.
Finally, we will also run a cash flow management simulation during the last weekend of
September. Your performance on that simulation will be 5% of your class participation grade.
Group Project and Presentation = 30%
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Entrepreneurial Growth—Spring, 2014
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During the semester, each of you will participate in a group analysis of a significant growth
opportunity facing a business. Your group's job will be to help them develop a strategy for
sustained growth. Your group will present a paper and an in-class presentation at the end of
the semester. Each group member must actively participate in the development of the report
and the presentation. Each group will be required to spend significant time with the
entrepreneur. You must also meet with me for three separate meetings during the semester.
Group Mid-term Exam = 20%
Each of you must join a study group to help you prepare for class. That study group will also
be tasked with spending a weekend reading, analyzing and developing an action plan for a
case, which will serve as your mid-term exam. Examination grades will reflect your group’s
success in identifying key challenges faced by the manager, developing a realistic plan of
action to respond to the managerial challenges presented by the exam case and performing
in-depth quantitative and qualitative analysis to support your group’s action plan.
Missing Class Policy
I know that one of your priorities may be to get a job. My policy on missing classes is as
follows:
You must submit a 10-page write up for every case that we covered when you missed a class.
This 10-page write up must be submitted to Grant by the beginning of the next class. If you
do not submit one paper per missed case to Grant by the beginning of the next class, your
maximum potential grade for the semester will be reduced by ½ of a letter grade.
If you miss more than one class, your maximum potential grade for the semester will be
reduced by ½ of a letter grade for each additional class that you miss, if you submit the 10page paper by the beginning of the next class. If you miss more than one class and do not
submit the 10-page paper by the beginning of the next class, your maximum potential grade
for the semester will be reduced by 1 full letter grade.
I will waive the ½ or 1 grade penalty for exceptional circumstances that are related to the
health or safety of yourself, your spouse, your children, your family or your significant other.
Religious Holy Days: By UT Austin policy, you must notify me of your pending absence at
least fourteen days prior to the date of observance of a religious holy day. If you must miss a
class, an examination, a work assignment, or a project in order to observe a religious holy day,
you will be given an opportunity to complete the missed work within a reasonable time after
the absence.
McCombs Classroom Professionalism Policy
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Entrepreneurial Growth—Spring, 2014
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The highest professional standards are expected of all members of the McCombs community.
The collective class reputation and the value of the Texas MBA experience hinges on this.
You should treat the Texas MBA classroom as you would a corporate boardroom.
Faculty are expected to be professional and prepared to deliver value for each and every class
session. Students are expected to be professional in all respects.
The Texas MBA classroom experience is enhanced when:
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Students arrive on time. On time arrival ensures that classes are able to start and finish
at the scheduled time. On time arrival shows respect for both fellow students and faculty
and it enhances learning by reducing avoidable distractions.
Students display their name cards. This permits fellow students and faculty to learn
names, enhancing opportunities for community building and evaluation of in-class
contributions.
Students do not confuse the classroom for the cafeteria. The classroom
(boardroom) is not the place to eat your breakfast tacos, wraps, sweet potato fries, or
otherwise set up for a picnic. Please plan accordingly. Recognizing that back-to-back
classes sometimes take place over the lunch hour, energy bars and similar snacks are
permitted. Please be respectful of your fellow students and faculty in your choices.
Students minimize unscheduled personal breaks. The learning environment
improves when disruptions are limited.
Students are fully prepared for each class. Much of the learning in the Texas MBA
program takes place during classroom discussions. When students are not prepared they
cannot contribute to the overall learning process. This affects not only the individual, but
their peers who count on them, as well.
Students respect the views and opinions of their colleagues. Disagreement and
debate are encouraged. Intolerance for the views of others is unacceptable.
Phones and wireless devices are turned off. We’ve all heard the annoying ringing in
the middle of a meeting. Not only is it not professional, it cuts off the flow of discussion
when the search for the offender begins. When a true need to communicate with someone
outside of class exists (e.g., for some medical need) please inform the professor prior to
class.
Remember, you are competing for the best faculty McCombs has to offer. Your
professionalism and activity in class contributes to your success in attracting the best faculty to
this program.
Academic Dishonesty
I have no tolerance for acts of academic dishonesty. Such acts damage the reputation of the
school and the degree and demean the honest efforts of the majority of students. The
minimum penalty for an act of academic dishonesty will be a zero for that assignment or
exam.
The responsibilities for both students and faculty with regard to the Honor System are
described on the final pages of this syllabus. As the instructor for this course, I agree to
observe all the faculty responsibilities described therein. As a Texas MBA student, you agree to
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Entrepreneurial Growth—Spring, 2014
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observe all of the student responsibilities of the Honor Code. If the application of the Honor
System to this class and its assignments is unclear in any way, it is your responsibility to ask
me for clarification.
Students with Disabilities
Upon request, the University of Texas at Austin provides appropriate academic
accommodations for qualified students with disabilities. Services for Students with Disabilities
(SSD) is housed in the Office of the Dean of Students, located on the fourth floor of the
Student Services Building. Information on how to register, downloadable forms, including
guidelines for documentation, accommodation request letters, and releases of information are
available online at http://deanofstudents.utexas.edu/ssd/index.php. Please do not hesitate to
contact SSD at (512) 471-6259, VP: (512) 232-2937 or via e-mail if you have any questions.
Schedule
1.
Monday, January 13, 2014
a. Note:
b. Lecture:
2.
Wednesday, January 15, 2014
a.
3.
4.
The Case Analysis Coach
Every Business is a Growth Business
Lecture:
Every Business is a Growth Business, continued
Monday, January 20, 2014 – No Class, MLK Holiday
Wednesday, January 22, 2014
a. Case:
Kate Spade
Study Questions for Kate Spade
1.
2.
3.
4.
5.
Is Kate Spade a well-managed company?
Is there anything that you would recommend to make Kate Spade more
profitable and valuable?
How much is Kate Spade worth?
Which offer, if any, should Kate Spade accept? Why?
Would you invest given the business plan as written?
5. Monday, January 27, 2014
a. Case:
Sawchyn Guitars: Can an Old Business Learn New Tricks?
Study Questions for Sawchyn Guitars
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Entrepreneurial Growth—Spring, 2014
page 8
1. Describe the opportunities facing the Sawchyns. What are the key
considerations that they face? Which considerations are most important?
2. What is Peter Sawchyn’s vision for the business? Will the opportunities
presented here ultimately help or hinder his vision for Sawchyn Guitars?
3. Develop an Action Plan that tells the Sawchyn’s how to proceed. That Action
Plan must include an exit strategy for the Sawchyns.
6. Wednesday, January 29, 2014
a. Case:
Blink Booking
Study Questions for Blink Booking
1.
2.
3.
4.
5.
Evaluate Rebecca’s launch of Blink Booking in Europe.
Should Rebecca be the next CEO of Blink Booking?
Why are cloning/replication/arbitrage models springing up in Europe?
What are the attributes of the companies that Rocket Internet has cloned?
What should Rebecca do to increase the likelihood of achieving her goals of
developing an arbitrage platform to aid Spain?
7. Monday, February 3, 2014
a. Note: 3-D Printing: The New Industrial Revolution
b. Case: MakerBot: Challenges in Building a New Industry
Study Questions for MakerBot
1. How can MakerBot lead the growth of the personal manufacturing industry,
which is arguably a new industry?
2. Long-term, how potent is MakerBot’s open innovation strategy, focused on
crowdsourcing, in the face of rising competition?
3. To what degree are larger, established players from the
industrial/professional markets a competitive threat?
4. Finally, are makers or do-it-yourselfers a big enough market to fuel growth
and potential with this technology?
8. Wednesday, February 5, 2014
a. Case:
Caffébene: Master Brewer of Growth and Global Ambition
Study Questions for Caffébene
1. Why has Caffébene been so successful in Korea?
2. How important was the personality of Kim to Caffébene’s success?
3. How did Caffébene manage growth and product quality when they were
“inside the tornado” of explosive growth?
4. How important is the NYC store to Caffébene’s future success?
5. Develop an Action Plant that tells Kim how best to grow Caffébene.
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Entrepreneurial Growth—Spring, 2014
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9. Monday, February 10, 2014
a. Case:
Quirky: A Business Based on Making Invention Accessible
Study Questions for Quirky
1. How can the company achieve acceptable long-term margins?
2. Should Quirky continue to add new products at an ever-increasing rate? If
so, how can it do this while retaining the flexibility and nimbleness that
characterized its early development?
3. Should it bring manufacturing in-house? If so, how should it decide what it
should do in-house and what should it continue to outsource?
4. How should Quirky address the difficulties of selling its products through
third-party retailers? Should it increase direct selling activities? If so, how?
If not, why not?
5. Should Quirky partner with established consumer companies? If so, what
form should such a partnership take? Whom would you partner with?
10. Wednesday, February 12
a. Case:
AirAsia X: Can the Low Cost Model Go Long Haul?
Study Question for AirAsia
1. What is the general environment of the global airline industry?
2. What factors lead to the success of AirAsia as it grew and expanded from
Malaysia to other parts of Southeast Asia and beyond?
3. What broad elements of AirAsia’s original business model had to be revised
as it introduced AirAsia X and moved beyond short to medium haul service
to longer haul service? How did its industry and competitive environment
change during this expansion?
4. How can X best leverage the extensive network of the regional sister
company AirAsia to select new and profitable destinations for X?
11. Monday, February 17, 2014
a. Case:
Bonnier: Digitalizing the Media Business
Study Questions for Bonnier
1. Was the choice Bonnier chose to establish a centralized R&D department
and to change its innovation practices a sound business decision? What
made this decision highly risky? What specific decisions did Bonnier and
Öhrvall take to overcome related challenges?
2. What is the nature of digital innovation and how can fast-paced digital
innovation processes be handled in traditional and conservative business
contexts and industries? How did Öhrvall organize innovation differently
from the traditional incremental innovators in the industry?
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Entrepreneurial Growth—Spring, 2014
page 10
3. Which direction should Bonnier take when developing the Mag+ further?
How can it position the product in relation to other products and services?
Should Mag+ be integrated with social media like Twitter and Facebook?
Do readers want to discuss the articles that they have read on such
services? How much should be included in one issue of a magazine?
Should some of the content be free, and if so, how can that be addressed in
the service design?
4. What should Bonnier R&D focus on for its next innovation project? How
can it move beyond digitalizing existing product categories? What would a
“totally new kind of business” be for Bonnier? How does digital media
manifest itself in new ways?
12. Wednesday, February 19, 2014
a. Case:
Phase Separation Solutions (PS2): The China Question
Study Questions for Phase Separation Solutions
1.
2.
3.
4.
Should PS2 enter the Chinese market?
Is PS2 ready to enter the Chinese market now?
Which options should PS2 pursue?
Develop an Action Plan for expansion.
[Activate Working Capital Management Simulation: Managing Growth]
13. Monday, February 24, 2014 [Midterm distributed at the end of class]
a. Note:
b. Debrief:
How Fast Can Your Company Afford to Grow?
Working Capital Simulation: Managing Growth
14. Wednesday, February 26, 2014
a. Case:
M-Tronics (A)
Study Questions for M-Tronics
1.
2.
3.
What is troubling George McElroy?
Should John Martell be concerned about the same issues?
What actions should John Martell take at this time Please prepare a specific
action plan.
15. Monday, March 17, 2014 [Midterm due at the beginning of class]
a. Case:
Discuss Midterm
16. Wednesday, March 19, 2014
a. Case:
MercadoLibre
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Entrepreneurial Growth—Spring, 2014
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Study Questions for MercadoLibre
1.
2.
Why has MercadoLibre been so successful?
If you were Marcos, what three “challenges” would make it hard for you
to sleep at night?
What do you think about the investment eBay has made in MercadoLibre?
If you were Amazon, do you want to beat MercadoLibre or just acquire
them?
If you are MercadoLibre, do you want to be acquired by Amazon? Given
eBay’s ownership in MercadoLibre, is that even an option?
Develop an Action Plan that tells Marcos what to do next.
3.
4.
5.
6.
17. Monday, March 24, 2014
AngelList
b. Case:
Study Questions for AngelList
1.
2.
3.
4.
5.
6.
What is AngelList’s business model?
Why has AngelList been so successful?
Should Naval and Babak apply for a Broker-Dealer’s license?
Should they add a crowd funding platform to their business?
Should they start charging for listings?
Develop an Action Plan that tells Naval and Babak how best to grow and
monetize AngelList.
18. Wednesday, March 26, 2014
a. Case:
AVA.ph: Growing a Filipino E-Commerce Company
Study Questions for AVA.ph
1.
Develop an Action Plan that tells Oliver how to grow AVA.ph.
19. Monday, March 31, 2014
a. Case:
Amazon, Apple, Facebook and Google
Study Questions for Amazon, Apple, Facebook and Google
1.
2.
Define the contested boundaries among Amazon, Apple, Facebook and
Google.
For each contested boundary that you have identified, how is that contest
likely to play out? How many contests give rise to winner-take-all markets?
How many to always-a-share markets? How will the complex ecosystems,
in which online businesses are built on top of other online businesses and
third party sellers that rely on platforms, evolve?
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Entrepreneurial Growth—Spring, 2014
3.
4.
page 12
Identify a firm that you know something about, for example a media
company, a retailer or a manufacturing firm, with some involvement in the
online economy. Which, if any, of the big four firms does it currently rely
on? Might that reliance change? How might that firm hedge its risks if
there is a transition to one of the others?
What skills will be under-supplied in the future of the digital economy that
you envisage?
20. Wednesday, April 2, 2014
a. Case:
Dropbox: “It Just Works”
Study Questions for Dropbox
1.
2.
3.
4.
5.
Dropbox is a late mover in a crowded space. What opportunity did Houston
see? Specifically, what are the key elements of Dropbox’s current business
model?
Is Dropbox profitable by June 2010? Are you optimistic about its prospects?
How does your current evaluation of Dropbox’s current profitability
influence your evaluation of the venture’s prospects?
When he applied to Y Combinator (see case Exhibit 2), what hypothesis did
Houston hold about key elements of Dropbox’s business model? As of June
2010, which of these hypothesis have been confirmed and which have been
discarded? What is your assessment of the approach that Houston used to
test hypotheses? Did he waste time/resources or make notable mistakes?
Can you imagine better ways to test key hypotheses?
Imagine that at the same time Dropbox was formed Google decided to
target the opportunity that Houston had identified. How would Google’s
approach in pursuing “G-Drive” have differed from the approach that
Dropbox’s team followed?
What should Houston do about the decision poised at the end of the case,
i.e., creating a separate version for small and medium sized business (SMB)
customers? What process should he use to make this decision
21. Monday, April 7, 2014
a. Case:
Pandora Radio: Royalties Kill the Web Radio Star? (A)
Study Questions for Pandora
1.
2.
3.
Map out key elements of Pandora’s business model. As you think about
where the company is today, ask yourself what are the key indicators that
tell Kennedy whether his model is working or not?
How serious of an issue are their high usage customers?
What is the most appropriate response to the decision of the Copyright
Royalty Board?
22. Wednesday, April 9, 2014
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Entrepreneurial Growth—Spring, 2014
a. Case:
page 13
Emerging Business Opportunities At IBM (A)
Study Questions for IBM
1.
2.
3.
4.
5.
6.
Why do large companies like IBM find it so difficult to create new
businesses? What are the primary barriers to success?
What is your evaluation of the “Horizons of Growth” model? What are the
distinguishing features of emerging, H3 businesses?
How did the EBO management system evolve over time? What was
accomplished during the Thompson era and the Corporate Strategy era?
What are the key elements to the current EBO system? What is your
evaluation of this system?
How should Harreld deal with those businesses now reaching H2 status?
Should he increase the number of EBOs?
23. Monday, April 14, 2014
a. Case:
Valero Energy and Tight Oil
Study Questions for Valero
1. What impact will political decisions have on Valero?
2. What specific actions should Bill take to continue to grow Valero?
3. What are the financial implications of your recommendations?
24. Wednesday, April 16, 2014
Group Presentations
25. Monday, April 21, 2014
Group Presentations
26. Wednesday, April 23, 2014
Group Presentations
27. Monday, April 28, 2014
Group Presentations
28. Wednesday, April 30, 2014
a. Note:
How Will You Measure Your Life?
Assignment for Class
1. Write what you want your obituary to say about you when you die.
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Entrepreneurial Growth—Spring, 2014
2. Send your obituary to me by Sunday, April 27th.
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