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Students in Pitt's M.B.A. program team up as corporate consultants [Pittsburgh Post-Gazette]
(Pittsburgh Post-Gazette (PA) Via Acquire Media NewsEdge) Feb. 21--When Danish entrepreneurs Peter and Ulla Bak raised the possibility of starting commuter rail service along three major Pittsburgh highways, the University of Pittsburgh's G.M. "Bud" Smith Jr. was skeptical.
But Mr. Smith, whose father shut down passenger service along Ohio River Boulevard on the orders of his bosses at the Pennsylvania Railroad, didn't derail the Baks' proposed venture.
Instead, he assigned four Katz Graduate School of Business students to determine whether privately operated commuter rail service along Routes 65, 28 and 8 could be profitable. The students were one of more than a dozen Katz teams that tackle real-life business issues each semester as part of a three-credit course.
Mr. Smith, who administers the Consulting Field Projects elective, said it was launched after regional companies said M.B.A. graduates they hired lacked the skills to tackle problems in a real world setting, where the nature of the problem is constantly changing, there are limited resources to address it and there isn't the luxury of time. Since the program was launched about five years ago, students have served as consultants on nearly 100 problems, including helping PNC Bank with its Virtual Wallet online banking product, evaluating wardrobes for American Eagle Outfitters, and advising MSA, an O'Hara safety equipment maker, on logistics.
"We treat this as a very formal process. They get a feel for the rigor we expect," said Westinghouse Electric senior vice president Nick Liparulo. The Cranberry nuclear reactor builder has used Katz consultants for several projects and "if they come up with something that's worthwhile, we follow up on it," Mr. Liparulo said.
"It prepares them. When they go out into the business world, they will have to do this," he said.
Whit Little, acting CEO of Advantech US, which is developing technology for low-cost LED displays for smart phones and other applications, said Katz students have analyzed the Churchill company's manufacturing costs and are helping it find additional space in the region for clean room manufacturing.
"I expect a McKinsey result," said Mr. Whittle, referring to the high-priced industry consultant. "What's key here is they're helping Pittsburgh companies with real Pittsburgh problems."
The program relies on the support of alumni like Mr. Liparulo, a Pitt chemical engineering graduate, and regional companies that are willing to provide executives to act as mentors to students assigned to their businesses. Companies typically pay Katz $9,000 to "hire" a Katz team. That fee can be waived, as it was in the case of Catholic Charities of Pittsburgh, which sought a more cost-effective way of resettling refugees.
Mr. Smith said the nominal fee offsets costs of running the program and ensures companies won't just give the students busy work.
"It's really important that a client has skin in the game. If they don't, it doesn't have teaching value," he said.
At the end of a semester, each team presents its work as part of a competition judged by Katz professors, alumni and regional executives. Students took on the Baks' Three Rivers Railroad project last fall after Mr. Bak served as a judge of the spring competition.
The Danish couple's credentials include managing a company that developed a microchip that blocks harmful electromagnetic fields emitted by cell phones and other digital devices. They came up with the idea for commuter rail when they were stuck in Route 65 traffic one day while a freight train sped by on the adjacent tracks.
"We looked at each other and said: 'What is this about?' " recalled Ms. Bak, 56.
While she liked the environmental benefits of commuter rail, the practical aspects appealed to her husband.
"I could envision Steelers trains, Penguins trains, symphony trains," said Mr. Bak, 61.
Despite Mr. Bak's imagination, the four students -- or "stepsons" as he calls them -- couldn't imagine the railroad coming anywhere close to making money.
They eliminated Route 8 from their study after walking along the tracks in Etna, where they discovered those tracks don't connect with the North Shore destinations the Baks were hoping to serve. Focussing on Routes 65 and 28 corridors and working with the Southwestern Pennsylvania Commission, they estimated a potential market of more than 19,000 commuters. Based on how many would use the service and what they would be willing to pay, projected revenue would never cover operating costs, the students concluded.
"Even if we assumed we'd be more efficient than any other operation in existence, the numbers would never make sense, no matter how many people wanted to ride," said team leader Jared Souder, 30, who is in his final year of the M.B.A. program.
But the Baks didn't go down without a fight.
"Some of the biggest successes have been created by uneducated, open-minded people who never took no for an answer," Mr. Bak said.
Their persistence taught the students the importance of perseverance and gave them hands-on experience in how to say "no" to someone who won't take no for an answer.
"Successful entrepreneurs always want to find a way to work around the obstacles and disprove their critics," said Andy Madden, 21, a senior from Hollidaysburg, Blair County, and one of the handful of undergraduate students allowed to take the course each semester. "It was very difficult to tell Peter ... that he should not continue."
Jeff Phillips, 26, a Liberty resident and second year M.B.A. student, learned that "sometimes it's harder to tell someone 'no' than it is to tell them 'yes.' "
"Our biggest challenge as a team was to prove to Peter that he would lose a lot of money," he said.
Tom Merriman, MSA's manager for North American logistics, said the company has used Katz consultants for a number of projects and implemented some of their recommendations. He assigns staff to guide the students, something he wouldn't do if he hired a professional consultant.
"It's a good mentoring tool," Mr. Merriman said.
Mr. Liparulo, who served as an adviser to the Three Rivers Railroad team, says the students bring enthusiasm and a fresh set of eyes to problems.
"I find it exciting to get involved with students," he said. "They're full of energy. They're smart."
Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.
To see more of the Pittsburgh Post-Gazette, or to subscribe to the newspaper, go to http://www.post-gazette.com.
Copyright (c) 2010, Pittsburgh Post-Gazette
Distributed by McClatchy-Tribune Information Services.
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