Whenever you talk about an MBA degree the first thing that comes to mind is that it’s a great investment for setting up a business. This is why respectable business schools charge in excess of $200,000 to provide an MBA education and the coveted degree. However, the modern era has featured several businessmen/entrepreneurs that never attended a business school and have established businesses that are household brands. “The Personal MBA” by Josh Kaufman is an insightful look into the other side of the education business and how you can earn the same knowledge without investing your precious time and money in an expensive business degree that might take decades to pay off.
Before analyzing the book, it’s really important to understand the purpose of an MBA business school. As compared to Engineering and Medical universities, a business school is not designed to impart technical education. The technical side of business is covered in specialized certifications like CPA (Certified Public Accountant), CMA(Certified Management Accountant) and CIA (Certified Internal Auditor), while MBAs are basically generalists that know a little bit of everything. The lack of a standardized exam means that the course content rules and this aspect differs between universities. Plus, the fact that attending a premier business school lands you into debt, doesn’t seem like good business advice before you even start earning.
Kaufman describes the purpose of his writing as a confidence-building tool explaining that, “You only need to understand a few critically important concepts that provide most of the value. Once you have a solid scaffold of core principles to work from,” and, “building upon your knowledge and making progress becomes much easier.” Kaufman explains this body of business knowledge in 226 principles which comprise topics like how organizations function, how teams succeed, how value is created etc. This isn’t an exhaustive list, as there’s always the possibility of additional principles that may be more valuable than the existing 226 ideas. However, it is a good starting point to benefit from Kaufman’s experience.
It’s important to understand that Kaufman benefited from a consistent reading habit and employment at P&G. No single book can substitute a diversified MBA program and the life experiences of a dedicated MBA faculty. This is because ideas change on a regular basis and theories need to be linked with historical and updated practices. However, the book is great as a starting point and as a resource for learning MBA jargon. Kaufman also provides direction in the form of his website and additional resources that support this quest for knowledge. It might not be everyone’s cup of tea, but it’s certainly beneficial for those who want to gain knowledge, but don’t have the time and monetary resources for a full-fledged MBA program.
Josh Kaufman opens the discussion by explaining what a business means in five points:
“Every successful business
(1) Creates or provides something of value that
(2) Other people want or need
(3) At a price they’re willing to pay, in a way that
(4) Satisfies the purchaser’s needs and expectations and
(5) Provides the business sufficient revenue to make it worthwhile for the owners to continue operation.”
These concepts are primarily delivered from the 4Ps of marketing i.e. Product, price, place and promotion. Kaufman explains that the book’s purpose is to serve as an initial business primer that illustrates critical business concepts in an easy to understand manner. The book is divided in 3 key portions with the first one focused on business fundamentals like value creation, sales, marketing, finance etc. The second portion discusses how the individual and team perspectives combine to serve an organization’s core objectives. The third and final portion takes a closer look at how corporate systems function, along with their analysis and improvement. In order to benefit from the book, it’s important to understand that its basic purpose is an overview of the business dimension and the depth of discussion is set accordingly. For insightful and purpose-driven knowledge acquisition, additional books focusing on a single subject need to be studied.
Each chapter starts with a saying that supports the main purpose and opens up the discussion. Kaufman explains that value creation must be linked with customers’ needs to obtain a financial benefit. He explains what drives a market and how you choose which one is suitable for your business interests. He identifies 12 forms of value that encompass the basic rules of economics and finance. These forms define how you are going to make your business viable and ensure that you enjoy doing it. One of the interesting points is how the writer explains essential concepts like modularity, iteration cycle, relative importance testing, minimum viable offer, etc. The writer is committed to providing his readers the fundamental business jargon from the book’s beginning. Access and understanding of technical business jargon enables entry into the business world and supports collaboration with market players.
Without customers, the best business idea is bound for failure. The crucial step is identifying the right kind of customers which doesn’t equate to targeting a lot of customers. Sometimes, businesses create value for a niche market and at other times they create a small amount of value for many people. The main challenge is identifying the target market and letting customers know that you can solve their problem(s). The writer distinguishes between marketing and selling, by explaining that the former is needed to attract the customer and the latter seeks to close the deal. The writer explains key marketing concepts like probable purchaser, point of market entry, hook, call to action etc. in an interesting manner.
Sales is the backbone of businesses, whether they specialize in services, manufacturing or any other industry. If the customer isn’t ready to pull out his wallet, than the deal is not closed. Successful sales involve overcoming the buyer’s reluctance to invest in your product and making him/her a regular customer. The cost of conversion decides who to retain as a regular customer and how to build targeted customers. Concepts like education-based selling, pricing methods, three dimensions of negotiation and reactivation explain how the sales cycle is conducted.
Value delivery is an extension of the sales cycle and distinguishes between one-time sales and repeat buyers. There is also a third category called ‘scam artist,’ which isn’t interested in value delivery from the very start. The value delivery process encompasses supply chain, finance, distribution and customer support functions to provide goods/services to paying customers in an efficient, convenient and affordable manner. Apart from direct marketing activities, this also leads to word of mouth and is essential for the growth and sustenance of a business. Kaufman elucidates the process of market entry and survival by explaining terms like distribution channels, barrier to competition, force multiplier etc.
Finance is considered the domain of number crunching and multiple spreadsheets monitoring the whole process. Kaufman acknowledges that this does not comprise the fun part of a business and people find it intimidating as compared to sales, marketing, value creation, etc. However, he explains the necessity of this function by correlating to the end objective of the business. If a business doesn’t attain sufficient revenue and profits then the business viability is in jeopardy, despite the awesomeness of the idea. This concept is crucial to business survival and ensures that all the associated stakeholders survive i.e. customers, employees, and shareholders, etc. Maximum benefit is derived from minimizing expenses and ensuring value creation. The chapter beautifully describes accounts and finance concepts like Financial statements, Cost-Benefit analysis, Incremental degradation, and the Time value of money. Some of these concepts will prove valuable for MBA graduates as well.
The human mind is where it all comes together and Kaufman starts this discussion with a journey of self-discovery. He explains the caveman syndrome, which describes how our biology is geared for physical activities that were prevalent in the caveman era. In today’s 12-16 hour workday, where most of us sit behind a desktop, the prevalence of diseases like heart attacks, Alzheimer’s, obesity, etc. strengthen this point. Therefore, he explains that readers shouldn’t feel depressed that they aren’t cut out for modern life. He describes concepts like the onion brain, pattern matching, willpower depletion, and absence blindness. This essentially delivers a crash course on human psychology, human resource, and organizational behavior.
Working with yourself is a practical look at human psychology and how we can actually achieve the goals we set for ourselves. Everyone talks about optimum performance and achieving objectives. Kaufman spends a considerable amount of time describing the hurdles that limit us and how we can avoid them. Most of us struggle with work demands like a difficult Boss, intensive workload, or lengthy commute time. Kaufman devotes attention to showing how to achieve a fulfilling career instead of experiencing burnout. He talks about ideas like cognitive switching penalty, four methods of completion, counterfactual simulation, and personal research and development.
Working with other marks the end of the book’s second part and the nineteenth-century industrialist Andrew Carnegie’s words explain this aspect “Take away my people but leave my factories, and soon grass will grow on factory floors. Take away my factories but leave my people, and soon we will have a new and better factory.” It’s easy to forget that human resource management was formally established a century after this saying, but the message resonates to this day. After building the ‘self’ Kaufman explains why readers have to be fluent in teamwork and getting the job done. Apart from immediate colleagues, there are a host of stakeholders namely contractors, consultants, vendors and customers that require regular attention. Kaufman describes the importance of concepts like communication overhead, bystander apathy, planning fallacy, convergence and divergence in the business environment.
Understanding systems is the first lesson in the final part of Kaufman’s book. This is the place where it all starts to come together. Kaufman describes the complex nature of businesses and the basic principles that govern any business relationship with the environment and stakeholders. Kaufman explains essential concepts including Gall’s law, feedback loop, counterparty risk, and second-order effects. Gall’s law is worth describing as in the theorist’s own words, “A complex system that works is invariably found to have evolved from a simple system that worked. The inverse proposition also appears to be true: a complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a simple system.”
Analyzing systems builds upon the principles of the previous chapter especially Gall’s law to explain how running systems can be analyzed. Kaufman acknowledges that the analysis process is a difficult experiment because the systems are dynamic in nature. However, careful attention to integral components mean that the analysis can be performed in a structured manner. Kaufman delists critical concepts like deconstruction, key performance indicator, correlation and causation to acquaint the reader with the systems analysis process.
Improving systems is the last installment in the book’s life journey and describes how complex systems can be improved. Understanding and analyzing systems were more of theoretical exercises and improving them is the real game-changer. Dynamic systems need to evolve consistently and any disruption in this process will have unintended consequences. At the same time, humans are adverse to change and it affects like automation, etc. A balance is required that optimizes organizational performance and develops human resources as well. The author concludes the book with discussion of intervention bias, the paradox of automation, sustainable growth cycle, and the experimental mindset alongwith associated ideas.
The Personal MBA is a great attempt at simplifying the business process and improving learning outcomes. It’s definitely for the youth and people looking to build something. Ideally, this book should be compulsory reading material in business schools, but that’s not possible. However, Kaufman has spent significant efforts in making the journey easy for his readers and also empowered them with resources to continue the lifelong learning journey. The book is an ideal reference for an introduction to the business world and how to realize your dreams. JoshKaufman doesn’t hesitate to refer other writers and their guidance, wherever he views a definitive purpose.
Review by Mahmood Anwar.
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