Blog de GAIA Program
Master in Decision Making & Innovation
It is time to announce that the assessment process of Financial unit has already finished and you have a feedback available in the Community. We would like to share with you some final comments about your performance during this activity.
The main goal of Finance unit activity was that you were able to put in the investor’s shoes investing in a real stock market. In order to get that goal, you were proposed to face a new challenge and participate in ROBOTvsGAIA 5, where you represented the GAIA Community in a competition against the Robot through the Stock Exchange Simulator.
What we should have learned:
1. That the profile conditions are based on how I have to distribute my investment among the different asset classes. A conservative investor should have the greatest weight in public debt and fixed income; and that an aggressive investor should have the greatest weight in equities.
2. That the asset allocation and the geographic distribution is the most important part for the creation of a portfolio. It implies much more than the Stock Picking. How much you destine to RF or RV and in which countries you invest is what will determine your profitability in the long term.
3. Investing in Indexes is much more reliable than investing in stocks directly. The Robot has invested in indexes and had an implicit commission playing against him Vs. the Gaians. Even so, he has won the Gaians in most of cases. The reason is that the Robot only invests in indexes, and the probability of making mistakes is much less than trading or direct Stock Picking.
4. Diversification is the key. Put the eggs in the same basket is not a good strategy if we want to obtain some benefits. It was important to have a diversified portfolio according to our investor profile in order develop this activity in a more profitable way.
Main mistakes made for some of the participants:
1. Some of you did not create a profile in the right competition (ROBOTvsGAIA5) or started too late; obviously, much of the evaluation depended on registering on time and start operating from the beginning doing the three required movements per week. All students who have signed up late or have not done so, had very difficult to overcome the activity.
2. Not to identify the risk profile: Those of you who had operated but had not identified their investment profile, could not be evaluated in two sections: neither by volatility nor in comparison to the Robot. Identifying the risk profile should always be the first step you take before you think about investing.
3. Try to invest in an arbitrary way: Some of you decided to buy or sell in an arbitrary way without doing some research about the companies. In order to do that research, you just needed to use the Stock Exchange platform or just surf the Internet.
4. Invest more than what was due to the profile: some students have had a very high volatility for the profile they have. Even some, who have achieved very positive results, have risked much more than their profile advised them to risk. Even having won, it is a mistake, because if the portfolio has been able to earn 10% in less than 1 month being moderate, for example (120% per year) means that it has risked a lot of equity capital. If it had gone wrong, 10% would have been lost, and a moderate is never willing to risk so much.
5. To have tried to invest in shares directly without having a correct analysis, except for those investors with the capacity to carry out a technical or fundamental analysis of a company, you should not invest in shares directly. You should invest in ETF’s or Funds that replicate indexes. Selecting a specific company is a decision that must be made based on a previous study of the course and the situation of that company.
If you want to know more details about your personalized investing performance, please take a look at the feedback and the document attached to the Community!
Master in Decision Making & Innovation
Now that the assessment process of Financial Information unit has finished and you have your personalized feedback in the Community, it is time to provide you with a general and final feedback that highlights some common mistakes that our expert Egoitz Urrutia has found in your activities and the solution for the three cases: Luko, Harris and Zeltris.
First of all, we would like to congratulate those students who decided to participate in this activity and deliver it on time! You did it!! We all know that you did a huge effort in order to complete this activity and we have taken this aspect into account during the assessment process.
In addition, we are also very happy with the level of participation in the two Webinars that took place during this activity. We hope you could take advantage of them and learn as much as possible.
According to the expert of this unit, Egoitz Urrutia, these have been the most common mistakes:
FIRST CASE STUDY – LUKO
- In order to calculate the FCFs you need to use EBIT (before interests)
- You should have calculated taxes on EBIT
- FREE CASH FLOW Formula: EBIT – Taxes + Amortization – Capex– WC
- Discounting Free Cash Flows: You needed to discount each year and on year 5 discount the Residual Value and the FCF of year 5.
- Enterprise Value: Sum of all discounted FCF and the discounted Residual Value as well.
- WACC= Equity %* Ke + Debt% * Kd *(1-t)
SECOND CASE STUDY – HARRIS
- Price Earnings Ratio (PER): Price / Earnings Per Share
EPS: Earnings/N Shares
2. Price/Cash Flow Ratio: P/CF CF: Earnings + Amortization
3. Ke: Ke= RF+ (RM-RF)*Be or Ke= RF+ Market Premium *Be
Market premium and market rate are not the same thing.
Market premium= RM-RF.
THIRD CASE STUDY – ZELTRIS
- Working Capital: Here we have into account the variation. Current Assets – Current Liabilities
Assets: Cash, Stock, Clients. They are all assets. To have an increase means to have less Cash Flow.
Liabilities: Suppliers. We owe the suppliers more money therefore we have more cash.
2. Pay-out is to be delivered to shareholders from the Profit After Taxes.
Therefore, 45% is a dividend payment and 55% goes to reserves.
Dividend/ N Shares
Moreover, the expert has also prepared the solution for the three cases of this activity in case you would like to take a look and compare them with your answers! Click on the link!
Finally, we would recommend that you take a look at the personalized feedback that you will find in the Community just clicking on the Tutor’s alert and looking for the corresponding notification or going to Financial Information>Activity>page 4 and looking for your name.
GENERAL FEEDBACK – Social Innovation
This case on social innovation “Cascade Engineering: Social Innovation at a Triple-Bottom-Line Plastics Manufacturer” puts students in the shoes of Terrance Robinson, a young associate engineer at Cascade Engineering. A junior position most of Gaia’s students are successfully poised to get in the near future.
This case highlights an issue (creating access to healthy water) that is important and that many students care about, in an environment (manufacturing) that is a leverage point for broad, systemic change.
Robinson wants to advance an idea he has for a new product offering at Cascade. He seeks to create positive change without authority. In his role, Robinson has limited formal authority — he must navigate the complex system of Cascade to be effective in accomplishing his goals.
We elaborated the questions bearing in mind some concepts of social movement theory adjusted to Robinson’s position and goals (he is determined to create positive change without authority). In fulfilling his ambition Robinson needs to consider:
- when best to move forward, creating a configuration of allies. Here we looked at Opportunity Structure -Q3 (knowing when the moment is right for change) and Network Structure -Q2 & Q5 (creating the configuration of allies that is needed).
2. how to make a compelling case. Here we have analysed Framing Structure -Q1 (how to make the case attractive).
3. and how to mobilize effectively. Here we payed attention to Mobilizing Structures -Q4 (how to organize people for your initiative).
These three factors match the three learning objectives we wanted you to master after this case’s completion:
- Reflect on what drives a social innovator to lead and engage teams and people.
- Learn to create support for social innovations and viable businesses.
- Gain support for your ideas where you have low authority.
All in all a social innovator has to work with these factors to harness the momentum of the system -whatever it means to your context- to accelerate support for his/her initiatives and ideas. In Robinson’s case the system is manufacturing opportunities at Cascade.
In the following lines, we provide answers to the 5+1 case’s questions. In doing so, we try to connect the social movement theory concepts mentioned above with the practical implications we can draw from the case.
1. Given that “both products improved upon heavy and awkward previous versions and methods, and both provided ways to supply clean water in water-stressed countries.” Justify Robinson’s inspiration for a new business opportunity as a means to unmet needs.
This question relates to the second factor mentioned above –Framing Structure (how to make a compelling case). In an organization, there is a dominant logic — ways of thinking and talking about things that are in tune with cultural norms. For Cascade, what are the cultural norms? What elements of the initiative might Robinson want to highlight or downplay to activate the support of those important to its success, without triggering resistance from others?
According to the case, Robinson began to think that the WaterWheel could be a complementary business opportunity for the Triple Quest business unit. We have to examine that this contradicts Keller’s founding principle of “start with something good and make it a good business” – that is, identify a social need then the business opportunity. However, we later learned that Robinson went to Wello’s website – http://wellowater.org/ (page 8 of the Case) to find out that the WaterWheel’s “cap-in-cap design kept clean water clean” – an observation which justifies Robinson’s inspiration as a means to unmet need. Page 9 of the Case. In summary, the WaterWheel makes it easy for women and girls to transport water from long distances while the Hydraid is then used to purify water collected by the WaterWheel.
Pay attention that “Start with something good then making it a good business” is a founding principle of social innovation. It doesn’t apply to all businesses, hence the reason we quoted it here from page 3 of the case.
2. Although Cascade’s Triple-Bottom-Line philosophy naturally reflects support for social innovation, illustrate the stakeholders’ matrix giving Robinson the best bet to manage expectations and communicate effectively to eventually get buy-in.
This question relates to the first factor mentioned above – Network Structure (creating the configuration of allies that is needed). For any given decision there is one or more decision maker. Who are the people who would need to be on board for this particular decision? What do they care about? Few decision makers reach their conclusions in a vacuum. To whom do these people turn for
advice and guidance? How can you get these people on board early?
A- Robinson has to be aware of the category of all stakeholders involved to succeed. He could use the help of senior colleagues with high interest and importance to reach out to the external stakeholder(s).
C- He also has to be aware of the budget, schedule and scope of each stakeholders/departments which would potentially be involved in his new project. He could enquire if the organization has a standard procedure of partner engagement or has established one through its years of operation. For instance, Robinson must take into account that “Cascade originally manufactured the filter as part of a humanitarian effort (scope) with an NGO partner, International Aid” and subsequently International Aid ran into financial difficulties (budget). Page 8 of the Case.
3.What are the most important questions that would enable Robinson to “fail early to learn quickly”?
This question relates to the first factor mentioned above –Opportunity Structure (knowing when the moment is right for change). Changes in opportunity structure may encompass leadership, competitors, strategy, policy, or more. How can these be utilized to create momentum for change? There are many decisions to be made on any given day in an organization. Externally-imposed
timelines (for example, the construction schedule for a new building) can create a sense of urgency to make decisions sooner than might otherwise be necessary. In this case Robinson can relate departments in ways it may arise a sense of urgency. Let’s see this.
It’s relevant to note that the phrase “fail early to learn quickly” isn’t just a mantra. The whole idea is based on the use of experimentation to quickly figure out what works and what doesn’t. This could be applied in new product design just like Michael Dell’s experiments which actually led him to a better and faster computer. Using a set of hypothesis would enable innovators to learn quickly if an idea would work or fail cheaply before enormous resources be allocated.
With reference to Michael Dell’s scenario available on page 31 of the social innovation textbook – Robinson should be asking the engineering, manufacturing and sales teams questions about:
- Unit cost of production of Hydraid and each of its components
- Investigate the cost of production of the WaterWheel and also its components
- The cost – price margin per unit – considering International Aid ran out of fund to support the distribution of Hydraid prompting Triple Quest to take over the initiative.
- Does Cynthia Koenig’s philosophy align with Cascade’s triple-bottom-line?
Asking these questions prior to seeking buy-in would create a basis which allows Robinson to explore the future or how things might turn out when he finally seeks buy-in.
4- Say Robinson gets internal buy-in, by what process would this new product be brought to live considering WaterWheel as a patented innovation Cascade couldn’t just replicate.
This question relates to the third factor mentioned above –Mobilizing Structures (how to organize people for your initiative)
How would Robinson mobilize people’s efforts? There are three possibilities:
− Existing tracks. Strategies that can leverage existing platforms and structures are often appealing to leaders making decisions. Due to pre-existing resources there could be a lower barrier to approval. Where might there be existing structures that could be repurposed to advance this initiative most efficiently?
− Pilots. Often, leaders will be looking for a smaller way to move towards a new initiative. This allows
the idea to be tested and refined, while managing the financial and strategic risk of taking a new direction. How might this initiative be advanced in a modular and scalable way?
− Technology. Many companies and customers are globally disaggregated now. In this case in particular, Robinson is working with a network of customers and colleagues across many countries. How might they use technology to achieve their goals faster and better than would otherwise be possible?
The answer provided here addresses a general scenario which is applicable even in Robinson’s case and elsewhere. For Robinson to get buy-in, he needs to show that he isn’t just looking to make more money for the Cascade – as that would contradicts the founding principle of starting with something good then making it a good business. Social innovators like Robinson and yourselves need to identify the gap that exist which could potentially make existing products better – in his case the Waterwheel. Recall Q1.
Robinson examined the structure and features of the Waterwheel and found that it only kept clean water clean, meaning Cascade’s Hydraid filter feature could complement the Waterwheel to ensure all water (clean & unclean) collected from the Waterwheel is clean.
This shows that a potential new product would create more social value which in turn would make more money for Cascade.
5. How could Robinson’s role as an associate engineer at Cascade be of advantage to help him gain other perspectives to his idea, also considering his young age and low authority?
We’ve touched this indirectly answering question 2. Page 1 of the Case document mentioned that; “In his position, Robinson played a key liaison role among the sales, engineering, and manufacturing teams.” Therefore, with low authority, he could really influence things with those who would actually be responsible for the execution of his idea. A buy-in from them could potentially strengthen his proposal to the key stakeholders.
6. Imagine for a moment you have a job like Robinson but in your current company. (not an internship position). Do you think that there is any example of product or service in your company that has the potential to turn into a social innovation project?
You don’t have to feel compelled to find an example. If you don’t come across any, just justify why not. If you do, please answer succinctly what would you do in case you spotted a business opportunity like that?
We hope that this case study and Idris Bello’s webinar has been useful for you to learn how to navigate complex organizations (such as Cascade) to create positive change, even if you do not have authority.
First of all, I would like to congratulate you for the outstanding work that you have accomplished during these weeks. As we said at the beginning of the module, it is difficult to teach (referred to us) about innovation and creativity, but we think that it is possible to learn (referred to you) about these topics.
Surely you have realized that…during this Activity, almost the 100% is learnt with one of my favourite methods: Discovery Learning (not to be confused with trial-error). During these two weeks you have discovered interesting things as your Basadur profile, the different kinds of innovation, several methodologies, the importance of users’ feedback and of prototyping as well as the difficulties of coordinating a team in an innovation work and mostly of all, the arduous task of prototyping and testing ideas that are defined step by step.
I also hope that the “invisible learning” that you have had during this module, helps you in the future (I mean Crowdfunding, Apps Prototyping, Microgrids or whatever you learnt).
What I can guarantee is that this process, launching an idea + prototyping + testing and re-prototyping (which in innovation is known as PIVOTING: leaving a foot aligned and change the direction of the other), can be done in the timeframe that we proposed.
I also learnt a lot about how you guys can really make the world a better place, awesome ideas and nice implementations that, in some cases, you should consider to follow up as we recommended to some teams (please read particular feedback in the community).
So, change the world is hard and the weather is still hot, but some of you chose to try it and you really deserve an applause.
The FIVE most important things here were:
1) PROTOTYPE in order to validate your assumptions
2) TEST your PROTOTYPE, but with REAL INTERVIEWS in THE REAL WORLD (lazy surveys are not the best thing to learn because people answer WHAT YOU WANT, NOT WHAT THEY WANT!!!)
3) GET OUT OF THE BUILDING
4) GET OUT OF THE BUILDING
5) GET OUT OF THE BUILDING ….
As a summary, I realized three kinds of teams (teams without a prototype are not included in these feedback):
1) I want to prototype but I validate my own prototype and invent some potential feedbacks for the future –> You should be a sci-fi writer, but that´s not an innovation methodology my friend.
2) I want to prototype and I want to test it, but It´s too hot outside and streets are dangerous, maybe with a survey it´s ok… and our friends and family will answer that “everything is good honey!!” and we will rule the world. –> This is a good exercise to firm up your social network and your family ties but it´s not and innovation methodology.
3) Ok, I have a prototype and I know that the truth is out there, I want to find it and I will try to be creative to find some neighbor (NGOS, Experts in my company) to gather some feedback. I don´t need to go to Africa to test my prototype. –> You really understood what innovation is about and you should apply for the contest we told you in your personal feedback.
Let me show you some examples of people really solving these challenges:
Thanks for your effort and best regards!
Luis González Lorenzo
Master in Decision Making And Innovation
Analyzing Uber’s strategy in Colorado!
It has been a pleasure to assess your assignments on the CORPORATE STRATEGY- unit’s activity. The starting point of this activity was for students to be able to analyze the Uber’s strategy in Colorado in the year 2012. In doing so, we wanted you to read thoroughly the case text and -supporting your opinions in the e-book’s content- answer 7 questions about digital-born vs. traditional companies and Uber’s strategy in relation to regulatory constraints and loopholes, ways to opening new markets and -broadly speaking- corporate reputation.
All these questions can be categorised as opinion-based questions open to your own interpretation. In this sense, I recall what we said in the activity definition: there is no right nor wrong answer because the purpose is to exercise your reasoning. Thus, insufficient argumentation will render any response invalid.
For making easy reading this feedback it helps us ordering the 7 questions in the following three sub-categories. As well, at the risk of sounding reductive, I’ve synthesized each question in a single sentence in an effort to capture its learning objective.
- Questions requiring e-books’ understanding and partially research on the present situation of the taxi industry. Answers must include essential features on the topics.
Q1 – Why is Uber a digital company? Name features which make its digital success.
In order to answer correctly you could look up to the chapter #1 of the ebook. It is indispensable to refer to the essential elements that distinguish Uber as a digital economy company, as for example:
- Being a digital platform with mobile friendly access.
- It should aggregate infinity of offers
- It should be a social platform.
Among others aspects to be considered for answering why being digital gives Uber a competitive advantage in contrast to the traditional taxi industry you could mention:
- Offering easy payment terms.
- Good contracting system.
- Include some improvements in the service.
- Having greater level of demand to the product or service’ supplier.
In regard to the taxi industry launching mytaxi platform to counterbalance Uber’s threat, you could broaden the information given before by means of highlighting the differences between analogical and digital-born business models. Finally, you could conclude that pure analog taxi operators will face mounting pressure when mytaxi affiliates fully incorporate digital capabilities similar to Uber and the likes.
Q7 – CSR, strategic COM and Geopolitics. Uber’s urges to shape its environment.
You have to answer one of the three questions depending on which elective unit you chose last time. In any case, the three topics exposes what are the actual challenges Uber faces and offer hints at what is the strategic approach Uber is currently positioned. We think Uber operates a shaper environment role since its inception. Due to explosive growth expansion combined with recent scandals, you could discuss if its ambitions may be somewhat constrained by regulation. According to BCG report, in several European countries popular resistance to ridesharing is likely to gain some legislative support. This and other intel gathered could lead you to advance any valid opinion.
- Questions which require e-book’s understanding and demand insights based on the text case. Answers widely open to your own interpretation.
Q2 – Uber’s sector positioning. Provide arguments supporting its claims.
Considering as possible categories: taxi, limousine, IT- your answer is valid in any given case and qualifies as follows:
- Your answer is considered adequate if you mention at least one
- Your answer is considered good if you mention two or more
- Your answer is considered perfect if you argument about the new typology of company.
We have reviewed your answers and arguments for each classification and organized your rationale in choosing one of them.
- Taxi—Many riders choose both UberX and UberBlack instead of a taxi; Uber pricing varies by distance rather than being set in advance like most limousine rentals.
- Limousine—UberBlack rides are provided in limousine-class vehicles, in some cases by licensed limousine drivers; like limousines, Uber does not pick up street hails.
- Technology and information company—Uber does not own vehicles or directly employ drivers and its main product is a smartphone app. Uber’s algorithms for surge pricing, matching riders and drivers, and route optimization are key competitive resources.
Q3 – Launching Uber in Colorado -2012. Identify Uber’s position and choose a strategy.
This is an opinion based question, extremely open to your own interpretation. Nonetheless, you have to use the BCG adequately which means foremost contextualising Uber in Colorado in the 2012, then describe the company according to the three dimensions: unpredictability, malleability and harshness.
These dimensions define five approaches to strategy:
As we have said in your specific feedback, in our view the most adequate positions for the moment the case was written would be to say that the company was in an unpredictable, malleable and slightly hostile moment, therefore for us the environment that better match is the Shaping due to the fact that Uber lacked predictability but still could try to change or reshape and influence their environment, as well as leading the definition of a new sector, because in many places, Colorado included the rules were not yet defined.
As it could be glimpsed in the case, the strategic recommendation, that the Uber team was carrying out, was to involve and promote collaboration among the main members of the sector in order to influence this sector’s direction.
Q4 – Did Uber adopt a Lean startup approach in Colorado?
Again we are in case of another opinion based question, though more narrowly defined in its conclusion.The case share many data that can make you think at Uber opening in cities with a small structure and that is increasing its deployment as it validates the viability of its product, while checking if there is demand or if the environment is going to allow its growth, etc. Despite all this we think it is important to clarify that the concept of MVP would not be applied “per se” given that the product has already been validated in other sectors. However, it would make sense to advocate that they have made tests or minimum releases and evaluate their viability before they grow.
Other aspects from the ebook could be useful in this analysis:
- The love for measuring and making data based decisions.
- The possibility to pivoting or iterating if the model does not work. Which in the case of a local office would mean to use new products that really in with the local demand or on the contrary close the office which done on time can be considered a success.
- Questions which demand insights based on the text case and research on one topic currently in the headlines and comparative analysis between Uber and Cabify.
Q5 – Uber vs Cabify. Using PESTLE analysis.
Answers should include a comparison based on the strategic elements and on the sectors on which each company is supposed to be competing. Students should use the different aspects included in PESTLE model: Political, economic, social legal, environmental and technological aspects. I have valued as positive a brief introduction of Cabify and its Spanish environment to frame this comparison.
Q6 – Uber’s scandals at present risk its performance. Has Uber react changing strategy?
A good answer to this question may take a skeptical tone. A company that is widely known for having a disruptive strategy, and a more-than controversial CEO can endure damages coming from explosive revelations of a sexist corporate culture. All that said we take as conventional wisdom that the general public will not turn its back if Uber keeps being conveniently cheaper and faster than competitors. However, I did not find any reference in your answers -please tell me if you did- to the fact that Uber is not a publicly traded company (it isn’t listed yet in Nasdaq stock market). For funding, Uber operates in private markets so its valuation has to be inferred from this secondary markets. Ex ante, this situation gives Uber some advantage in enduring financially many scandals because it hasn’t to recur to public markets. However, paradoxically, the illiquidity of private markets makes harder to gauge the potential imbalance between supply and demand in Uber’s stocks. I believe this situation forced Uber to change its strategy and was instrumental in Uber co-founder T. Kalanick’s resignation.