I’ve resurfaced, finally, from around six weeks of low-level illness.
We had the third cycle of the EMBA in Cambridge two weeks ago, and for a few weeks before I had been laid low by The Cold. This is the really heavy cold that has been going round seemingly the whole of the British Isles and the US simultaneously for the last month, putting a sluggish haze between me and reality.
Given that there hadn’t been much sleep at home due to this cold and a teething baby, I felt that I needed to make the most of my potentially unbroken sleep in one of the very comfortable guest rooms at Westminster College when up in Cambridge. This led me to miss out on some of the (apparently extensive) extra-curricular activities of the rest of the class in the evenings, which was a real shame. It certainly feels like the group is coming together nicely, with social networking on Facebook* and WhatsApp keeping us in touch when away from Cambridge, and a positive, very friendly atmosphere when we’re all together. Fingers crossed for my energy levels for the next trip to Cambridge…
Speaking of group dynamics, this cycle there was a lot of talk about how each other’s study groups are working. The somewhat diverse approaches and attitudes within some groups seemed to be providing food for thought, but no outright conflict yet as far as I could tell. I wonder if cracks will begin to show once group projects are assessed, although I am hopeful things will continue in the generally collaborative vein they have been in so far. For me, it is, of course, a pleasure to be in my study group – we have a range of approaches, background knowledge and ways of thinking that is proving to be very interesting to work among. One issue we had in the previous cycle was a sub-optimal split of time between the two group projects we needed to complete – we spent too much time on Corporate Finance and not enough on Management Science. This time around we are parallelising work on the two group projects we have in a bid to be more productive. I’ll report back on the success or otherwise of that approach.
There were two overarching themes to the content in our Cambridge visit this time: portfolio theory and financial ratios as a way of assessing a business. The coverage of portfolio theory across both traditional corporate finance usage and through Management Science’s case study approach was very well knitted together, with each reinforcing the other. The discussions of financial ratios clarified some other areas of murky corporate finance minutiae. Not coming from the corporate or financial world, I feel an outsider’s view is useful here – I enjoy questioning orthodoxies.
The question of financial ratios allowed us to continue a discussion that had started in the previous cycle around company valuation, particularly in the tech world. It was interesting to me that there seems to be a divide in the class between those who I’d say generally trust the valuations and those who don’t. I am very much in the latter camp – to me, if something looks too good to be true, it generally is. Valuing a company at tens of billions of dollars when they have at best shaky revenue models, and more importantly sometimes before they even have any revenue model, seems crazy to me. The discussion on this will run and run, I think, as it is one of the big questions of our time. However, I think I have the empirical research on my side regarding the performance of ‘growth’ stocks versus ‘value’ stocks over the long term.
Going back to portfolio theory, what came through in the teaching was a kind of formalisation, restating and consideration of something that I think many businesses do instinctively or subconsciously – a balancing of projects or activities in order to in general advance the strategy of the business. In my own case, CI has recently been designing a new process for managing ‘feature development’ within our digital music delivery platform. In our terminology, ‘features’ are additional functionality around content exploitation or presentation at music services, often driven by marketing and label relations teams at the music services themselves. We recently began a process to help us to prioritise and allocate development resources to these feature development items to balance the interests of various stakeholders. The benefits of our particular approach remain to be seen, but the theoretical backdrop of portfolio thinking gives me a lens through which to judge the effectiveness of the approach.
*I hate Facebook and freed myself from its ugly grip a few years ago, so I have no idea what the rest of the group are saying about me on there.