The “Trade-Off”

Life is full of trade-offs. So, apparently, is business.

This morning, as part of Arv Malhotra’s “Managing Innovation Processes” class, we had accomplished tech journalist Kevin Maney speak as a guest lecturer. Maney is author of the recently released Trade-Off, and presented the book’s namesake framework to us. Essentially, Maney has identified two conflicting forces in business: fidelity, which he defines as the total experience of something; and convenience, or how easy it is to get or do something. All products in today’s economy, he argues, can only be high in fidelity or convenience — not both.

Take music. A U2 concert offers consumers high fidelity — the music, lights, 360 degree stage, the bragging rights to friends — but generally low convenience, like traffic, parking and ticket price. On the other side of the spectrum sit MP3s, iTunes and iPods. These are low cost and extremely convenient. But they offer mediocre fidelity: the sound quality isn’t great and there are no liner notes or cases to display proudly on your bookshelf.

Now, consider the compact disc. It sits smack in the middle of this spectrum. While it offers higher sound quality than MP3s, it is less convenient and provides significantly lower fidelity to consumers. Maney argues that these types of products — those trying to offer high fidelity and high convenience, end up doing neither. They fall into the “Fidelity Belly.” And there they die.

He can probably explain the concept better.

The “Trade-Off” was an interesting idea to discuss in class. Much of what we learn at Kenan-Flagler is about competitive cost advantage (essentially, Maney’s convenience) and product differentiation (his fidelity). Why can’t companies do both though? It was suggested that there are limitations on both companies and consumers. For example, as Starbucks tried to take its high fidelity coffeehouse experience to the masses, it stumbled not only because of operational growing pains (company-induced) but also marketing/brand challenges (consumers began questioning exclusivity).

There are big lessons to be learned here. Today’s companies can use the Trade-Off lens in two ways: to identify innovation and new product development opportunities and also to remain focused and disciplined at playing their own game.

Those that fail to do so run the risk of becoming obsolete.

– Marc Zawel

Introducing the Family Tree

As a Second Year student planning on starting a business, I’ve started to shift my academic focus at Kenan-Flagler toward those classes that will directly provide me with the tools necessary to successfully do so. One such class I’m taking now is an Entrepreneurship course offering, Innovation & Product Development, taught by Prof. Barry Bayus.

Throughout the quarter, Barry has walked us through the new product development process, providing best practices on conducting market research, identifying voice of the consumer, translating needs into specifications, brainstorming ideas and designing new products.

Concurrently, we have been working in small teams on an innovation project for mobile phone giant Nokia. The project has allowed students to directly apply all that we are learning in the classroom to a real business case.

My team has developed a product called the Family Tree. It’s a mobile phone docking unit, targeted at seniors, that integrates and simplifies communication and printing capabilities. Here’s the pitch that we developed and just sent to Finland for review by company executives.

With luck, look for the Family Tree on store shelves by next spring!

Or at least we hope so.

– Marc Zawel

UPDATE: Here are the other team entries to see how we stacked up.

A trip to Europe and a new semester

“In order to pursue leadership positions beyond the creative realm, I need a broader understanding of how companies operate. Part of this involves gaining the necessary quantitative and general business management foundation that I have had only a limited, informal exposure to.”

This is from my application essay last year to Kenan-Flager. My case for admission at the time was pretty straight-forward: with no formal business background, I sought the fundamental quantitative skills, knowledge, and network that were critical to successfully starting and growing my own business. It’s safe to say that after only a semester at UNC — one that has included ten courses, including macro and microeconomics, financial tools, corporate finance, business strategy, marketing, operations, statistics, organizational behavior and financial accounting — I’ve taken a big step forward in building that foundation.

It’s been a whirlwind and immersive four months, but one in which I’ve learned a great deal, met some fantastic people and started working toward achieving that post b-school goal. It’s also been an exhausting semester, making my winter break trip to Central and Eastern Europe — a ten-day jaunt to Prague, Czech Republic, Vienna, Austria and Budapest, Hungary — from which I’ve just returned from, a real treat.

Outside the Prague Castle, Prague, Czech Republic

Inside the Grand Hall of the National Library, Vienna, Austria

At the Széchenyi Thermal Baths, Budapest, Hungary

This trip was another opportunity to see life outside the bubble. But it was also fascinating to travel after having gone through the core at UNC. I’ve started seeing the world differently; my decision-making process, really the way I think about business more broadly, has changed. I’m coming to the realization that what I’m learning now, here at Kenan-Flagler, is something that will be with me for the rest of my life.

And that’s made me all the more excited to get back to Chapel Hill and kick off my second semester of business school.

- Marc

My life as a manufacturing executive

I’ve only been in business school for 3 months and am already running a factory. I’ve teamed up with two of my classmates to supervise Littlefield Technologies, a manufacturing facility that produces digital satellite receivers. We’re responsible for determining inventory, placing raw material orders, managing batch size and purchasing equipment — all with the intention of maximizing company profit.

There’s just one caveat: Littlefield doesn’t exist.

As part of the Operations Management core course, first year students at Kenan-Flagler are participating in an online factory production simulation (here’s a demo). In small groups, we’ve been making managerial decisions, applying what we’ve learned in class, all with the intention of generating more profit than our classmates. It’s a healthy and friendly competition. But the ultimate goal is to provide us with an experiential opportunity to make real production decisions — and provide a glimpse of what a career in operations might be like.

While Littlefield exists only in a virtual world, the choices we make are real, and have real ramifications. Should we take out a loan? Do we want to change our pricing structure? Can we speed up production of our satellite receivers? While some teams have generated millions of dollars in profit, others are in the red. Clearly some decisions are better than others.

It’s hands-on simulations like Littlefield that make UNC such a fun, dynamic and interesting place to learn.

- Marc

Life outside of the bubble

I’ve often heard business school described as “living inside of a bubble.” It’s said that the first-year experience is so demanding and all-encompassing that life revolves around the same activities, people and places. Students go to class, meet with study groups, grab lunch in the cafeteria, hit the gym, have dinner or drinks with friends, head home, do work and hit the sack. Rinse, repeat, rinse, repeat.

In some ways, my first three months in Chapel Hill have followed a similar rhythm. There is so much to juggle, so many opportunities to get involved, so many interesting and smart students to work with, that you almost forget that there is life beyond McColl’s walls. Not to say that this is necessarily bad. In fact, the strength of the community at Kenan-Flagler, fostered in part by this bubble, is one of the reasons that I’m here. But it’s also important to occasionally take a step back and experience life outside.

My opportunity came at the beginning of this mod, the Sunday before classes began. I’d read about the North Carolina State Fair — one of the largest fairs and agricultural expositions in the Southeast — and had to go check it out. We drove the 20 minutes to Raleigh, parked for $5, bought our tickets and headed inside to the overwhelming sights, sounds and smells.

With growling stomachs, we first hit the Wisconsin Cheese Shack and ordered up some fried cheese sticks with a spicy ranch dipping sauce. The verdict: Delicious.

Next, we wandered through the Midway, filled with carnival games and rides before shelling out a dollar to see the World’s Smallest Woman (who indeed was small — the world’s smallest, not so sure).

Our last stop were the agricultural expos, filled with livestock, fruits and vegetables all competing for the blue ribbon. This 8 pound monstrous sweet potato was even bigger than the ones they sell at Whole Foods! (Joke.)

We ended up spending around three hours at the fair, taking it all in. The drive back to Chapel Hill was refreshing. We had experienced the fantastic people, place and culture that make North Carolina such a unique and cool place to live. And we realized that yes, indeed, there is life outside of the bubble.

– Marc Zawel