Why this CEO believes an MBA is worthless
The Leadership Insider network is an online community where the most thoughtful and influential people in business contribute answers to timely questions about careers and leadership. Today’s answer to the question “What advice would you give someone looking to start their own business?” is by Tien Tzuo, CEO of Zuora.
The first piece of advice I would give anyone starting a new business is to forget everything they learned in business school. Or better yet, don’t go to business school. Why? Because right now we are going through a once-in-a-century transformation in business that is throwing out all the existing rules. And that includes everything that the MBA programs are currently teaching their students. Don’t believe me? Let’s look at how business has been taught for the past 100 years. It is a truth universally acknowledged that the fundamental goal of business is to create a hit product. You then sell as many units of that product, thereby spreading your fixed costs over as many units as you can, and you compete on margins. Well, in my opinion that’s all worthless. Those days are gone.
If you’re starting a new business today, it’s highly doubtful that you’re selling a physical product on a per unit basis. You are probably launching something online in order to deliver great services, not sell widgets–think of all the new delivery services like Instacart, BloomThat, Washio, or PostMates. This is because the world is shifting from selling products to selling subscriptions, and in the “subscription economy,” companies are focused on generating recurring revenue. So it’s not about the price of the product and the margin. It’s about delivering value to customers, so they don’t want to switch services. But in order to manage this effectively, you’re going to have to do five things, and answer one very important question:
Define subscriber metrics
You’re going to have to think about measuring annual and total contract values, payments and declines, monthly and annual recurring revenue, and relationship retention. Stuff they don’t teach in Accounting 101.
Understand your consumer
People now expect products to adapt to their specific needs. They expect ongoing value and unique experiences. And they’re not as interested in methods as they are outcomes. Stuff they don’t teach in Marketing 101.
Personalize your service
The product economy is dead–products can’t be personalized. A product can’t learn your behaviors and preferences. A product can’t be constantly upgraded, so that it gets better—instead, it becomes obsolete. Stuff they don’t teach in Manufacturing 101.
People now define ownership as managing the decline of a physical asset. They’re opting for access over ownership: ride shares, streaming services, and subscription boxes. Stuff they don’t teach in Design 101.
Create a great experience
You have to create services that can learn and adapt based on behavior. Services that can improve themselves autonomously. Services that can be truly customized. There’s no MBA class for that.
And finally, the key question isn’t “What product can I sell?” but rather “What do my customers really want, and how can I deliver that as an intuitive service, rather than a stand-alone product?” Answer that question and you’re on your way.
Read all answers to the Leadership Insider question: What advice would you give someone looking to start their own business?
How much would you sacrifice to start your own business? by Clara Shih, founder and CEO of Hearsay Social.
4 secrets behind a successful startup by Veenu Aishwarya, CEO of AUM LifeTech.
How this startup failed (twice) and still found success by Kevin Chou, co-founder and CEO of Kabam.
Are you resilient enough to start your own business? by Ryan Harwood, CEO of PureWow.
The most important lesson I learned as a tech CEO by Kyle Wong, CEO of Pixlee.
How to avoid a startup failure by Jim Yu, CEO and co-founder of BrightEdge.
3 things to consider before starting your own business by Sunil Rajaraman, co-founder of Scripted.com.
4 ways to persuade people to join your startup by Nir Polak, CEO and co-founder of Exabeam.
GoDaddy CEO’s 5 tips for aspiring entrepreneurs by Blake Irving, CEO of GoDaddy.