HBS – Harvard = Business School
Yeah, it's meta.
I’ve chosen Harvard Business School (HBS) as an example of a company with an effective alignment between business and operating models.
Business Model:
HBS creates value by pooling top-tier educational resources (professors, programs, technologies, support staff).
HBS captures value by organizing these resources into a leading “education factory” with multiple active processes.
Operating Model:
HBS transforms the following assets into valuable actions:
- Brand: as a long-established educational industry leader, the HBS brand acts as a veritable homing beacon for global top-talent who borrow the brand’s credibility to achieve success which, then, returns credibility to the brand–a self-perpetuating cycle. The brand is also capitalized by hundreds of SKUs worth of apparel, accessories, offices supplies, stuffed animals, and other miscellania sold in-house and by outside vendors.
- Program: at a through-put rate of two years, HBS outputs 1000 (+/-) MBAs/yr, charging its 2000-student capacity $100k annually, a value paid to and retained by HBS as work-in-process added educational value to students which are manufactured into alumni.
- Campus: leveraging its other assets, HBS offers its facilities as venues for events and as an incubator for some in-house start-ups.
- Professors: like students, professors are drawn by a brand they subsequently reinforce. Their research is funded and owned by HBS. They might be considered “Research and Development” as they innovate the program, which is HBS’s central asset. However, they are also required to manage and teach the programs they develop, so they may also be thought of as “Factory Management.”
- Intellectual Property: HBS also, brilliantly, sells the intellectual products its professors produce via online courses, its printing press, and executive education programs. This allows them to extract additional value from pre-developed products already put to use elsewhere at little additional cost.
- Students: are experts drawn largely from leading related professional environments and used to improve the program and to advocate it during summer internship and global immersion projects in countries and companies of interest. Also, as “Raw Materials” prior to entering the program, they self-select for quality (!).
- Alumni: in addition to being powerful advertisements, are solicited for donations from incomes known to be higher as a direct result of the program. Further, they help with the placement of students and the production of program material.
So, HBS is able to sustain itself and grow financially. What’s interesting, though, is that these things are for the sake of producing worldwide leaders of prominent positive influence. Each of the assets listed could be hazily measured with influence as a capital metric. HBS is actually a private non-profit acting as an entirely self-sufficient global helm. Moreover, all of its assets replace assets that are never really consumed (discounting natural or unnatural death) and synergize with one another to exponential effect.
The business model and operating models leverage each other so efficiently and interconnectedly that repeat value is extracted from every asset for the sake of every other asset, self-sustainedly, in a way that also emanates influence outwardly at little additional cost.
Perhaps it’s a coy meta-exercise to write on HBS from within its walls, but shouldn’t HBS actually be the optimal example given the buzzwords “business” and “education”?
Only you could have thought to write about HBS, David! You’ve clearly mastered all of the TOM concepts and this is certainly an interesting way to apply them. I especially liked your comparison of us (the students) to self-selecting raw materials, however the admissions committee also plays a big part in that. I’d never reflected on HBS from the perspective you laid out in your post but agree that HBS is a uniquely self-sustaining organization which derives benefits to all parties involved.
David – thank you very much for writing this. I am a bit skeptical on how HBS is leveraging #3 – Campus. Walking around our grounds, it appears as if the utilization rates for some of the buildings are very low, with some buildings appearing to be empty altogether. However as you point out, influence may be a more appropriate metric for these assets, as they greatly contribute to the beauty of our campus and herald the legacy of our alumni.
Meta indeed. I’m curious as to how the executive education program factors into the operating model and whether “students” and “alumni” of that program contribute in a similarly synergistic manner (with regards to influence emanation) as do current students and alumni. More generally, I suppose the million dollar question, so to speak, is how much each of these processes contributes to overall value capture, but I imagine that would be quite difficult to measure given the fact that many of these processes feed into others, as you mentioned. Synergy to the max. Great post, and thanks for sharing.
James, I agree with your point. One of my biggest concerns to date as an MBA student has been how totally separate the executive education programs seem to be from the MBA program, and how much synergistic value is HBS leaving on the table here. While I’m cognizant that there has to be structure and controlled interaction between the two, given the long-term value proposition of these programs could this be a bit too narrow in that context? I intuitively believe so.
Great post, David!
Great post! After reading it I couldn’t stop thinking about how the section experience as a micro business and operating model is fascinating. The case method, the culture, the admission process… All these features deliver the value that HBS promises to its ambitious customers in a unique way that is hard to replicate. I would definitely love to read a TOM case about it!