I love traveling. I love David versus Goliath tales. And I enjoy reading about business strategies.
Put this together and what have we got? The Roadside MBA by economics and business professors Michael Mazzeo, Paul Oyer and Scott Schaefer.
Armed with PhDs in economics from Stanford and Princeton universities, Mike, Paul and Scott were three divorced dads when they made a total of 6 road trips across different cities and states in the US.
From Denver, Colorado, to Missoula, Montana, Memphis, Tennessee to Atlanta, Georgia, the trio of business academics visited some 45 small businesses spanning a wide mix of trades. They include F&B businesses, book stories, law firms, industrial manufacturers, telcos, and recycling outfits, to theatre schools, bowling alleys and theme parks.
Each company is featured in the form of a case study in a business discipline, be it in marketing, branding, operational management, human resource management, technology, growth, customer service or strategic planning.
Let me provide a brief summary of the lessons in each chapter.
The first chapter unpacked how a dental practice, espresso cafe, vintage car rubber parts manufacturer, and grill and bar restaurant scaled their businesses through different strategies.
By spreading out fixed costs over multiple units of production, and reducing their variable costs, these businesses were able to grow. Beyond costs, they also considered issues like demand weighed against the cost of production, as well as how monitoring quality could be done in a cost effective manner.
Erecting barriers to entry reduces the likelihood of competitors encroaching into your territory. In the case of children furniture retailer Wilcoxson’s Kids Place, the size of their market and formidable costs of entry helped them to save off new competitors.
High sunk costs (ie investments in infrastructure), a minimum efficient scale, and network effects (think Facebook) also helps companies to deter copycats. These were exemplified by Key Fire Hose (a fire hose manufacturer), Prodew (an injection-molded misting system maker), and CollegeFrog (now Accounting Fly) respectively.
Successful product differentiation in the authors’ opinion is predicated on four key factors:
Part of the marketing mix, the price of a good or service is established through a mix of knowing the product costs, the customers’ willingness to pay, the segmentation of customers, and the opportunities available to bundle products.
In the case of Marietta NDT, a company manufacturing testing equipment specifically designed not to damage objects while they are being tested, the highly specialised expert nature of its business allowed it to charge higher prices so long as its customers were prepared to pay.
For small businesses, “getting the word out” and “managing brand” can take up a large chunk of the entrepreneur’s share-of-mind.
The authors offer five different branding strategies for readers to chew over, depending on the nature of their business:
To secure a win-win outcome in business deals, small businesses can adopt a variety of approaches.
In the case of Eko Compost – a waste processing plant which converts waste water to fertilisers – the company’s location adjacent to its business partner (a wastewater plant) gives it an advantage. This was because Eko Compost was the next-best option for its business partner. By taking care of waste water, the plant can avoid the expensive trucking of its bio-solids to a landfill.
When high fixed investments are involved, as in the case of Gaylord Chemical, it may be more advantageous to negotiate a better agreement up front while it still had better options available.
Having more information and knowing whether you can go it alone also helps businesses in wheeling and dealing. A case in point of the latter is PT Coupling, a hose fixture manufacturing company, which decided that it may make more sense to start its own foundry to ensure quality.
HR issues can often be a huge headache for small businesses. I guess this was why three whole chapters were dedicated to this topic!
The salient lessons were as follows:
Towards the end of the book, the authors cover the topics of competitive advantage and long-term sustainability of small businesses.
To beat the Goliaths in the industry, small businesses should do one of four things:
The final chapter in the book described how strategy was a never ending process.
Citing the example of Megagate – a telecommunications company serving the local business community – the authors described how the company pivoted from cellular services to local and long-distance landline services, to broad band Internet, to wireless voice and data services.
Each time, the threat of competitors nipping at its heels forced Megagate to switch to a different business model while not forsaking its core competence.
Written with much wit and candour, The Roadside MBA oozed with charm while instilling vital business lessons for small and medium-sized businesses.
Reading the book, I enjoyed the casual banter between the three professors as they navigated their way around the states, often having to make detours due to unforeseen circumstances.
Unlike many other academic publications, the book does not offer an overarching framework for consideration. Instead, it unearthed practical lessons and business insights through the power of narratives.
Personally, I am inspired by what these academics have done, and would seek to apply their lessons in my own entrepreneurial ventures.
Professors Michael Mazzeo, Paul Oyer and Scott Schaefer (source of image)