What is the role of an MBA at a technology startup?

by Michael Quinn

Many skeptics are questioning the value that an MBA brings to an early-stage venture. These concerns have only increased as some of the most successful recent technology startups, such as Facebook, Google, and Dropbox, were started by engineers. Has the MBA lost its value in the fast-paced world of technology?
I don’t think so. In fact, I believe that the lean startup methodology may increase the value of an MBA. Lean principles encourage entrepreneurs to utilize hypothesis-driven development to avoid building a product that no one wants. In the early stages of a venture, fast development iterations and frequent customer feedback is vital. While engineers obviously play a pivotal role in executing fast software iterations, hypothesis testing is only as good as the hypothesis being tested. This is where an MBA can add value.

Engineers are taught to objectively look at a well-defined problem and attempt everything they can to try to solve it. After all, it was Thomas Edison that said, “I didn’t fail; I found out 2000 ways not to make a light bulb but I only needed to find one way to make it work.” Most engineers pay minimal attention to the “user experience,” as long as they have “solved” the problem. If users can’t figure it out, that’s their problem. However, MBAs are trained to handle uncertainty and ambiguity. The “case method” trains an MBA student to dig deeper to understand all aspects of a situation from multiple perspectives. Therefore, MBAs are equipped to ensure that engineers are prioritizing and solving the right kind of problems, those that are the most meaningful to their potential customers.

Engineers enjoy solving new and difficult challenges, as opposed to monitoring metrics. On the other hand, Wall Street MBAs pore over annual reports to extract as much data as possible to produce accurate financial forecasts. That same Wall Street analyst, with a little training in the lean startup methodology, would be equally adept at poring over metrics such as the customer conversion funnel, CAC, and LTV that are so critical to understanding and predicting user behavior.

So what does this all mean for a graduating MBA? One way to improve the perception of MBAs in startup circles is to demonstrate the true value created by a cross-disciplinary approach. Utilize strategy frameworks to identify the best position within the value chain for market entry. Conduct customer interviews and receive user feedback. Exploit your operations background to identify the process bottlenecks and use the Toyota Production System’s “5 Whys” to diagnose the root cause of customer frustration. Leverage your marketing skill set to analyze the customer purchase decision process to ensure proper customer segmentation and understand their willingness-to-pay. Employ your leadership skills to grow the organization with a culture from the start that people want to be a part of.

Doing only one of these things adds minimal value to an early-stage venture. However, combining the complete MBA toolkit with the lean startup methodology can greatly accelerate the process of reaching product-market fit, which even the most relentless engineer will appreciate. That being said, once you have defined the problem to solve, the most important thing you can do to earn an engineer’s respect is to get out of the way and let them do what they do best.