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Saturday, February 4, 2012

The power of simplicity-oft ignored during MBA

Jack Trout wrote a book 'The Power of Simplicity'(http://www.amazon.com/Power-Simplicity-Jack-Trout/dp/0070653623) in which he implored managers to keep things as simple as possible. The message is not new-we must have heard about KISS(Keep it short/simple), Occman's razor(look for the simplest explanation possible) and the dictum of simplifying to the extent possible but not further. Yet, MBA with its stress on analytics and presentation skills lays an apparent premium on making things complicated. Those with the most animated slides, longest frameworks and the gift of the gab win in terms of class participation, grades in Organizational Behaviour/Marketing courses and (sometimes) peer admiration. And this carries in the second year.

There are many competitions which ultimately boil down to the contestants having to make presentations to a jury. Judges of the numerous bschool competitions around are often so underprepared that they rarely take time to understand the case/topic statement and instead go by their assessment of the efforts/understanding of the candidate. Few try to reward output instead of inputs. While those working in industry often demand short slides/sticking to the point, academics just love tonnes of references/exotic frameworks and making things as complicated as possible.

I'm sure that I lost atleast 2 competitions this year only because there was little work done on decorating the slides. While I do not deny the importance of that(indeed thats an important takeaway), it sometimes make me wonder whether form trumps substance. When judges must make decisions based on short periods of 15-20min presentations, their gut feeling may often be suppressed by their urge to seem fair and reward those teams who put the most visible efforts(as evident from the slide artwork/complexity), even if the final output in terms of analytic rigour/novelty was not as good. But lest anyone misunderstand, I refer to simplicity in presentation, not in background work/analytical rigour.

Ironically, the real world rewards simplicity. For example
  1. VCs/PEs follow the approach of backing the team behind the idea rather than spreadsheet based investing approach
  2. Charlie Munger is famous for using a few time tested heuristics to invest, rather than use complicated DCF models
  3. Even for apparently complex investment banking models,there are a host of simplifying assumptions listed on a spreadsheet, which flow through the model and permit easy modification.
  4. Corporate Finance trends are that dashboards(with those vital few stats) are being generated, and the number of MIS reports sent are being slashed, with expert DSS allowing on-demand analysis.
  5. Unilever recently moved to the '3+1' performance system model with everyone from the CEO downwards having just 3 business goals and 1 development goal. This allows for better focus.

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