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Many companies are discovering that consultant teams from business schools are an inexpensive means of obtaining solid advice.
Lisa Yoon, CFO.com | US
November 8, 2005
Add the word "student" to an innocuous activity, and very quickly you might have cause for concern. Think of the student driver merging into your lane, or the student barber asking just how short you'd like it.
Now try this one: "student business consultant."
The idea may seem quaintly civic-minded at best, foolhardy at worst. Yet companies of all sizes are competing for low-cost or no-cost consulting services provided by students from their local business school. Most B-schools have such a program, which may be run as a student club or a for-credit course. Many companies that have participated say it's an inexpensive means of obtaining solid advice — an especially enticing opportunity for smaller businesses that lack hundreds of thousands of dollars to hire professional consultants.
In each of the past two years, for example, Fashion Furniture Rental has worked with student consultants from nearby San Diego State University. Company president Brian Pidgeon says he intends to continue the relationship as long as the company's business goals jibe with the school's curricular concerns, and as long as the price is right. Currently, it's about $4,000 per project.
Last year, Fashion Furniture Rental worked with a team of three or four students on Web strategy and search optimization. After the company acted on the team's advice — adding descriptive text to Web pages and implementing a transaction process that customers could complete in fewer clicks — the company brought in at least an additional $100,000 in Web business, Pidgeon estimates.
Pidgeon has no qualms about being advised by students. A former consultant for a large professional services firm, he points out that many young consultants are themselves fresh out of business school. It's these fresh faces who are dispatched to client companies when they sign on for a six-figure consulting project, says Pidgeon, "but in terms of experience, they're about one week smarter" than the student consultants.
Yonnie Butler, on the other hand, was a bit hesitant about his project with students from the Fuqua School of Business at Duke University. In previous positions with other companies, Butler — now the president of Cary, North Carolina-based pharmaceutical consultancy PharmaDirections — had worked with student consultants from other schools, and their advice was "not that beneficial."
What sold him was the students' enthusiasm and the company's need for fresh perspectives unclouded by industry familiarity. One recommendation, for instance, was to bring outsourced finance functions back in-house. Another was strategic: PharmaDirections should refocus on core competencies and eliminate unprofitable services, which should save the company about $500,000 over the next three years, Butler estimates. He believes that a third recommendation — hiring an additional practice leader to help build the company's identity and scope on the framework established by founder Richard Soltero — could return anywhere from $1 million to $3 million.
These are big payoffs for a growing business that didn't have $75,000 to $150,000, according to Butler's estimate, to pay for professional consulting services. By contrast, Duke's program costs $200 in administrative fees, plus expenses.
Not every project is as successful. During Fashion Furniture Rental's first project with San Diego State, Pidgeon asked for a feasibility report on a new "home staging" business; the company would temporarily furnish homes for sale so they'd be more attractive to buyers. The students advised against the project, suggesting that too much competition would make it unprofitable, but Pidgeon and his team decided to go with their gut and proceed anyway.
Today, that project — now called Parker Rose Design — constitutes a significant portion of Fashion Furniture Rental's business. But even that situation wasn't a failure, insists Pidgeon, who notes that the students raised valid concerns and stimulated important thought and discussion about the venture. "If they raised one point that helped me prevent a mistake," says Pidgeon, "then I recovered the $4,000 fee."
Indeed, since the expense is so small, business owners can choose to implement student recommendations — or take a pass — at their discretion. By contrast, companies often feel obligated to implement the recommendations made by big-ticket professionals because of the significant investment they've already made in hiring them.
Dan Abraham, chief executive officer of FortiusOne, agrees: "It's only advice, not direction," he says of student recommendations. The Washington, D.C.-based startup, which specializes in infrastructure security analysis, is currently working with a student team from the University of Maryland's Smith School of Business. FortiusOne plans to improve its business plan to attract future investors — the company just obtained a modest A round of financing — and to switch its pricing from a billing-rate model to a value-based model.
Abraham says that since the project isn't finished, it's too early to assess results, but he notes that he wouldn't have engaged the student consultants "if it took any of my time that didn't bring value." He declines to say exactly how much FortiusOne paid for their services — the Smith School charges $9,500 or less per project, based on company situation and size, according to academic director Bob Krapfel — but Abraham acknowledges that student consulting "helps get our discretionary spending farther." Would his company go without consulting services of any kind were it not for the students? Probably, says Abraham, but more important, "we would go without sleep because the work still has to be done," and FortiusOne would have to identify solutions itself.
Companies can find out about opportunities through their local chamber of commerce or through business schools themselves, but networking is important, too; most of the companies that worked with the schools in this article had word-of-mouth referrals. That can be valuable when you consider that this year, the Fuqua School received 68 applicants from local businesses for just 11 spots, according to student consulting faculty director William A. Sax. Other schools report a similar rate of competitiveness.
Whether a company is accepted may depend on a particular school's focus — say, on technology — or on the school's desire to offer students a wide selection of possible business projects from which to choose. But most important, maintains the Smith School's Krapfel, is that companies applying for a program understand that "it's first and foremost a course — value to the students comes first."