Columbia: Consulting Professors

Sony program added academic flavor to analysis and planning.
Jennifer CaplanApril 2, 2002

Most business schools offer executive education programs as add-ons to their regular MBA programs. And many executive ed departments offer custom programs, tailor-made to fit the client’s specific business needs. But Columbia University’s programs can go so far in the tailoring direction that they start to look like consulting.

Indeed, in the work Columbia Business School did for Sony’s Media Solutions Company (MSC), it’s hard to sort out the consulting from the executive ed. In MSC’s case, the problem was inherently financial when Columbia went to work on it in 2000. For years, the company had been a highly profitable maker of tape for data storage, broadcast media, and consumer products. Then, suddenly and unexpectedly, it began to lose money.

“The cash cow became anemic and was actually on the verge of death,” explains William Klepper, a Columbia Business School professor and the academic director of the school’s custom program. From 1994 through 1999, MSC’s selling, general, and administrative (SGA) expenses were on an upward trend, while gross margins declined.p

These unhealthy developments hit the company hard when revenue began to drop. Gross margins continued to slide, and although SGA costs were cut, revenue fell even faster.

Further, the company was having trouble keeping up with changes in the market and was being battered by fierce competition. “When I arrived, the company morale was in the doldrums,” explains Mike Fasulo, MSC president of MSC during the Columbia program and now president of Sony’s E-solutions division.

It was time for some outside help. The company had grown so dispirited “that simply having a new management team come in to preach was not going to cut it. We felt a need the help of an objective third party,” Fasulo explains. MSC’s executive team decided to enlist Columbia to turn the company around.

Together, Columbia faculty members and Sony executives analyzed the roots of the company’s poor financial performance. At first, the team went through a two-month analysis aimed at pinpointing where and why the company was losing money.

“In conjunction with management, we did a disaggregation of product lines, looked at customers, competitors, and the industry at large, and came up with key insights that formed the basis for a new strategic plan,” says Klepper.

No Consultants, They

On the surface, that all sounds like something a consulting firm might do. But the flavor was different. “We wouldn’t take on an assignment that would be pure consulting,” says Ethan Hanabury, associate dean for executive education at Columbia. “Education has to be the driving force behind it.”

In fact, the professors also taught MSC employees “an academic model of problem solving,” adds Hanabury. The managers learned to look “at what the root cause would be of a situation, what would be the gaps” causing the problems, he says.

The professors also taught theories of change management, innovation, and entrepreneurialsm with an eye toward changing the company’s situation. “People are naturally resistant to change,” Hanabury said, noting that an essential question tackled in the program was: “How do you work with this counterintuitive task on hand and make it easier for people to accept or understand the change?”

Participants then learned how to apply the theoretical model in breakout sessions. Professors and MSC executives also shared the results of the preliminary analysis with employees and got their feedback. “We learned that most people had a common definition of what the problems were,” says Fasulo.

“Basically, there was a deep lack of communication, a lack of rewards and recognition, and the company had a very top-down approach,” he explains. “When we started listening to employees and committing actions that were supporting their ideas, we started to see creativity come back to the company.”

Columbia’s role, he thinks, was to “get us out of a rut so that we could start coming up with ideas that would give us a competitive edge in the marketplace.”

Once a new plan was devised, professors helped managers design and implement a series of process re-engineering programs in 2000. “We implemented Six Sigma and a number of programs throughout the organization including a supply-chain initiative,” Fasulo says.

As a result of these initiatives, MSC was able to cut the time from customer orders and product deliveries from well over 14 days down to seven. Accounts receivable chargebacks declined from almost 8 percent to 4.5 percent. SG&A expenses were reduced by over $10 million.

Fasulo gives Columbia a great deal of credit for the company’s turnaround. But prospective custom clients of the university also shouldn’t expect the faculty to do the dirty work for them, Klepper notes. The professors had nothing to do with the implementation of the SONY program, he says.

Instead, executives must champion their improvement programs from beginning to end. The professors’ goal is to teach managers and employees to apply the course’s lessons on their own, says Klepper, “so that when we walk away, they are not dependent on us.”(Additional reporting by Craig Schneider.)