foster
Michael G. Foster school of business
University of washington
spring 2011
Bondsof Steel
Three generations of the Hong family make KISWIRE the envy of its industry page 12
Also: Think differently. Make a difference. It’s the Washington Way.
The LEAP Impact page 16 BUILT TO LAST: TMMBA TURNS 10 page 18
Custom Executive Education Programs EXECUTIVE EDUCATION offers custom programs tailored to your specific business needs for greater organizational impact. Your employees remain focused on your mission and goals as they acquire new knowledge and skills under the guidance of the University of Washington’s outstanding Foster School faculty. Sample Program Areas:
Benefits: • Create a learning experience tailored specifically for your company needs. • Develop common processes within your company by learning as a group. • Learn relevant, up-to-date business skills from world-renowned Foster School faculty. • Work with faculty to develop company-specific program materials and lectures.
• • • • • • • •
Change Management Financial Management Global Mindset and Cultures Leadership and Strategy Marketing Negotiating Skills Operations And many others…
Foster EXECUTIVE EDUCATION is one of nine programs worldwide recognized by the Economist Intelligence Unit for excellence in custom programs.
Helping Organizations Achieve Excellence
Learn more about Custom Executive Education Programs: www.foster.washington.edu/executive/custom 206.543.8560
contents
On the cover
12 Bonds of Steel Three generations of the Hong family make KISWIRE the envy of its industry
16 The LEAP Impact The Lavin Entrepreneurial Action Program graduates its first class of students
18 Built to Last Ten years of the Technology Management MBA
spring 2011
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contents
Dean
James Jiambalvo
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Executive Director Marketing & Communications
Pamela McCoy Managing Editor
Renate Kroll Contributing Writers
Jake Ellison, Ed Kromer, Andrew Krueger, Eric Nobis
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Photography
Matt Hagen (principal), Paul Gibson Design a.k.a. design
Departments
4 In the News
In Praise of Leadership, Social Networking, Phase II Rising, Milestones Met, Reader Contest, Summa Cum Laude, Global Good, PACCAR Picnic and Reunion, Net Impact, A Legend Passes, Warm Welcome, Tee Time, What Do You Think?
22 Faculty
Marketing Misfires, Autonomy Now, Research Briefs, The Many Passions of Terry Mitchell
30 Alumni
Jody Hall, Events Calendar, Ben Mahdavi, Dick Conway, Tod Hullin
36 Opinion
Wiring the Future of Healthcare
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Foster School of Business Marketing & Communications University of Washington
Box 353200 Seattle, WA 98195-3200 206.543.5102 206.221.7247 (fax) On the Web foster.washington.edu
Foster Business is published twice a year by the University of Washington Foster School of Business. The publication is made possible by donations from alumni and friends. No state funds are used in its production. Change of Address? fans@uw.edu Comments? bizmag@uw.edu
Think differently. Make a difference.
Shaping our students, shaping the world I write this letter as political unrest and change sweep through the Middle East and North Africa. At the Foster School, interest in these events is magnified by the fact that Ali Tarhouni, a senior lecturer in business economics, left Seattle on February 28th to join the Libyan opposition. Three weeks later, Ali was named Finance Minister for the Libyan opposition government. In this role, Ali is helping to shape the history of his homeland from which he’s been exiled for nearly four decades. An oil export agreement with Qatar has already been signed, and through numerous interviews with major news outlets he continues to educate people around the globe about the opposition’s status and goals. On a smaller stage, Ali spent the past 25 years shaping thousands of our students as an award-winning economics instructor. Tracy Gojdics, director of the Technology Management MBA Program recalls his passion for teaching. “Ali made it real for students. He brought current events into the picture and really educated students, not only on economics, but on the world in general. He made them think harder, and think about how their company impacts the bigger picture. His ability to engage the class and capture their attention was incredible. He would give extra sessions for students who were interested, because he was that passionate about the topic, and the students and their desire to learn.” A winner of dozens of teaching awards, Ali’s classroom skills were enhanced by the strong relationships he built with students. In fact, his final communication before leaving was an email to students. In it, he expressed exhilaration for the change underway and sadness for the people who had already lost their lives in the uprising. On the timing of his departure and his belief in Foster, Ali concluded: “I was called to go back and I booked my ticket last Sunday. However I felt obligations to my colleagues and more importantly my students. I decided to stay as long as possible in order to minimize the disruptions regarding last lectures and finals. It has been a great trip for me to be part of the Foster family. We have a core of excellent faculty and students…and now with a new facility, Foster will rock.” The Foster family also recently lost two individuals who have left indelible impressions on the School— Karma Hadjimichalakis (page 8) and Kermit Hanson (page 10). Over more than four decades, Karma demystified the study of macroeconomics for executives and students at Foster. Along the way, she won more than 45 teaching awards, including the first PACCAR Award for Excellence in Teaching, the school’s highest teaching honor. As dean from 1964 to 1981, Kermit led the school through enormous change and growth, modernizing programs and curricula, engaging the business community, and navigating the school to national and international prominence. Karma and Kermit played integral roles in shaping the Foster experience. Both are sorely missed and fondly remembered. Sincerely,
James Jiambalvo Dean, Michael G. Foster School of Business Kirby L. Cramer Chair in Business Administration
spring 2011
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in the news
Emily Warner (BA 2009) and Alaska Air Group chairman and CEO Bill Ayer (MBA 1978) co-hosted the 2010 Leadership Celebration.
In Praise of Leadership Foster School celebrates generations of world-changers “I continue to be inspired by the business that we’re in, and that’s the business of human potential. I’m still learning from the mentors I’ve had over the years and the leaders I work with every day. As an athlete, as a designer, a CEO and a parent, I see a huge opportunity for all of us to play a bigger role in shaping the world we’ll leave for future generations,” said Mark Parker, president and CEO of Nike, Inc., as he began his keynote address at the Foster School’s 19th annual Leadership Celebration held on October 14, 2010 at Seattle’s Westin Hotel.
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The comment drew applause from a capacity crowd on hand to celebrate three distinguished leaders with a history of shaping the world, and recognize three others who are already making a mark in their young careers. A History of Distinguished Leadership
Following Parker’s remarks, attention turned to the recipients of the Distinguished Leader Awards, a trio of alumni and business partners who’ve had a major impact on the way business is conducted and taught in the Northwest and around the globe: Charles Barbo (BA 1963),
Jon Hemingway (BA 1979, JD 1982) and Mark Emmert (BA 1975).
While most Husky alums will recognize Mark Emmert as UW’s president from 2004 until 2010 when he left to lead the NCAA, some may not be familiar with the incredible accomplishments of Barbo and Hemingway. “An entrepreneurial, hands-on leader who helps others see the big picture and reach their highest goals.” Those words are inscribed on the award presented to Barbo, a partner in the recently launched venture capital firm Catalyst Storage Partners.
Builders of Our Future
Jon Hemingway (top) and Charles Barbo accept their Distinguished Leader Awards.
Prior to this new endeavor, Barbo co-founded Shurgard Storage Centers in 1972 and retired as Shurgard’s chairman following a merger of the company with Public Storage in 2006. Shurgard owned and operated a portfolio of more than 600 properties in the United States and Europe. For Hemingway, his leadership abilities became clear when, shortly after graduating from the UW Law School, he formed what would become the world’s largest operator of intermodal rail terminals. Then, among other major endeavors, he led the creation of the largest container terminal in Latin America. Hemingway is currently the CEO of Carrix, Inc., the largest independent and privatelyheld terminal operator in the world. Hemingway’s award was inscribed: “A global business builder, Jon believes in his people as much as they believe in him. He leads as an equal.”
What about the up-and-comers, the recent alumni doing great things to build a better future? That was the question that prompted Steven Hatting, associate dean of advancement, to send a query to alumni asking them to nominate their peers for a new award—the Builders of Our Future. From the responses, three names rose to the top. Saara Romu (MBA 2007) leveraged her background in basic science and commercial banking to become portfolio manager for the Bill & Melinda Gates Foundation, where she helps manage millions of dollars in grants to battle infectious diseases around the globe. As president of operations and business development for Penny Arcade, Robert Khoo (BA 2000), has transformed an obscure Internet comic strip into a media empire with a community of 3.5 million hardcore gamers, two expos that draw more than 100,000 attendees, and a charity providing games to Children’s Hospitals around the world. With his MBA and Certificate in Environmental Management in hand, Ben Packard (MBA 1998) quickly became a green
Save the Date Planning is already underway for this year’s Business Leadership Celebration. 2011 marks the 20th anniversary of Foster’s premier event and alumni are encouraged to save the date—November 2nd. Jamie Dimon, chairman and CEO of JPMorgan Chase is scheduled as the keynote speaker. Distinguished Leadership Awardees include Bruce and John Nordstrom, and others will be announced closer to the date.
champion in the corporate world. Joining Starbucks in 2008 to lead their Environmental Affairs team, Ben today serves as their vice president of Global Responsibility and is the driving force behind Starbucks’ Shared Planet program. “All of the recipients of this inaugural award have already accomplished great things in their careers. I expect they’re all destined to be leaders in any endeavors they pursue in the future,” said Hatting. n
Saara Romu poses with dean Jim Jiambalvo after being named one of the Builders of Our Future.
spring 2011
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IN the news
Textbook case of social networking One faculty member is using social media to connect with alumni…and get some advice for his textbook The power and popularity of social media has given the Foster School numerous avenues to connect with alumni, business partners and supporters. From Facebook to Twitter, YouTube and Flickr, we’re using social media to inform and engage. And, let’s not overlook the business professional’s go-to, LinkedIn. As the network was beginning to grow in popularity, the Foster alumni relations team developed an official LinkedIn page. Open to all degree-holding alumni, and now more than 4,500 members strong, the site is used for posting announcements for jobs, class reunions, school updates, events
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and opportunities. And now, Foster faculty have begun to use LinkedIn to generate discussions with alumni. When finance professor and Marguerite Reimers Endowed Faculty Fellow Robert (Rocky) Higgins ran into some conflicting information about market efficiency while working on the newest edition of his text book, “Analysis for Financial Management,” he turned to the Foster Alumni LinkedIn group for help. Higgins’ query sparked a response and discussion from a number of them. Was it helpful? “This has proven a challenging topic for me,” says Higgins. “I learned from the discussion
that in many people’s minds, the phrase ‘Efficient Market Hypothesis’ is code for lightly regulated, free-market capitalism. The phrase has clearly morphed beyond academics to become an important standard in the culture wars.” Higgins is still undecided about how to treat the topic in the next edition of his textbook, but was pleasantly surprised by the response and opportunity to connect with former students. Want to connect to the Foster School and your former classmates via LinkedIn, Facebook, Twitter and more? Visit foster.washington.edu/socialmedia n
Phase II Rising
Milestones Met
The second building of the Foster School’s new headquarters is quickly taking shape
New entrepreneurship awards accelerate student start-ups
Balmer Hall is history. The old classroom home of the Foster School was razed to rubble last fall. And from its crater is rapidly rising a new structure, Phase II of the school’s new headquarters. The central core and shear wall are already up, and the four-story steel frame has been erected. Floors are being poured, HVAC systems installed. According to Pete Dukes, chair of the Foster School’s Building Committee, the project is on schedule and on budget. “LMN Architects have created a fantastic design that we have not wanted—or needed—to change,” he says. “And Sellen Construction has done a terrific job of driving efficiencies, planning with sophisticated modeling software and correcting any problems long before they arise on the job site.” The 63,000-square-foot Phase II facility will complement PACCAR Hall in materials, look and feel. Classrooms will dominate the lower two floors. The upper two will house the Dean’s office, IT services, Undergraduate and Graduate Program offices, the MBA Career Center, the new Ernst & Young Undergraduate Career Center, CIE’s new Herbold Innovation Lab, and the Anthony’s Home Port Executive Meeting Room, an expansive space for high-capacity meetings, meals and receptions. The Phase II project, with a construction budget of $28.6 million, is financed by the UW. It is scheduled for completion in April 2012. To see the progress of Phase II in real time, visit oxblue.com/pro/open/sellen/uwbusiness. n
Four stand-out start-ups from the 2010 UW Foster Business Plan Competition have qualified for additional seed funding—and expert mentorship—through the Center for Innovation and Entrepreneurship’s (CIE) new Herbert B. Jones Foundation Milestone Achievement Awards Program. “We wanted to accelerate some of these start-ups,” says Michael Bauer, president of the Jones Foundation. “So we came up with this idea of a real financial incentive for teams to set and reach key milestones in their company’s development.” It’s a simple proposition. Serious student teams work with a committee of expert advisors to identify realistic but measurable early milestones. Achieve them within six months and win additional funding. This year, Milestone Achievement Awards of $25,000 went to EETech, developer of a device that enables people in wheelchairs to walk, and YongoPal, a webbased service to help South Korean students hone their conversational English with American peers. Emergent Detection, developer of a handheld device that measures fat loss, and WISErg, a converter of food waste to fuel or fertilizer, each achieved awards of $10,000. Perhaps more valuable was access to the program committee, including Geoff Entress of Voyager Capital, Bill Bromfield of Fenwick & West, Marc Barros (BA 2003) of Countour, Alan Portugal of Ivus Energy Innovations, Alan Dishlip of Billing Revolution, Adrian Smith of Ignition Partners, and Bauer of the Jones Foundation. “The mentorship was the best part of the program,” says Brian Glaister of EETech. “It was really helpful to have an outside view of the company, particularly to put the advice of our internal team and directors into the proper perspective.” “These awards,” adds CIE director Connie Bourassa-Shaw, “will encourage more student teams to transform into start-up teams.” n
Oh, the places you’ll go… The Foster School is proud to have more than 48,700 alumni. But, we only have email addresses for half of you—which makes it hard to keep in touch. You could tie a purple string around your finger as a reminder to update your email address, but we’ve got a better idea—kindly sponsored by our friends at Alaska Airlines: Go to foster.washington.edu/keepintouch to update your email address and ENTER TO WIN TWO FREE TICKETS ANYWHERE ALASKA AIRLINES FLIES INCLUDING HAWAII, MEXICO OR ALASKA!!!*
*See our ad on the back page for more information.
spring 2011
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IN the news
Summa Cum Laude Karma Hadjimichalakis honored in Congress, demystified macroeconomics for generations Karma Gaetano Hadjimichalakis, the celebrated principal lecturer in business economics and Evert McCabe Fellow at the Foster School, was honored on the floor of the US House of Representatives on March 2nd. Days earlier, she passed away after a long illness. In celebrating her former teacher, Congresswoman Cathy McMorris Rodgers (EMBA 2002) professed that “Karma went above and beyond the call of duty—not just to present course material, but to also make herself available… She challenged my study of economics and how to craft successful public policies in a free market economy. Quite simply, they don’t come any better.” McMorris Rodgers’ words echo the thoughts of thousands of former students who unanimously speak of themselves as “privileged” and “blessed” to have had the opportunity to study under Hadjimichalakis. They tell of her ability to link theory with the real world, to make macroeconomics fascinating, even fun. They speak of her profound impact on their lives. Real-world education
Born and raised in Utica, NY, Hadjimichalakis was educated at nearby Elmira College and earned master’s and doctoral degrees at the University of Rochester. She joined the UW faculty in 1970, initially in the Department of Economics and then at the Foster School. The turning point of her career was a two-year stint as visiting economist at the Federal Reserve Board from 1980-82. There, in the confusing days following deregulation of the banking system, she mastered the rare art of Current Analysis of Monetary Policy—the ability to accurately assess the current economic situation. She learned to find meaning in the disparate data. Hadjimichalakis’ time at the Fed also led her to realize that teaching was her true calling.
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Teaching excellence
Human side of macro
She returned to the UW with a new insider’s expertise in the inner workings of the Federal Reserve System and monetary policy. And she spent the next three decades demystifying macroeconomics for a cross section of the Foster School—undergraduates, MBAs, Technology Management MBAs, Executive MBAs, Executive Education students, even C-level Advisory Board members. Her role as faculty director of the Pacific Rim Bankers Program, since 1992, only expanded her perspective of the global economy. During her time at Foster, Hadjimichalakis won more than 45 major teaching awards, including the first PACCAR Award for Excellence in Teaching, the school’s highest teaching honor. Her twice-annual economic forecast lectures became a standing-room-only tradition—packed with current and former students energized to be back in her lively “classroom.”
Whatever the audience, Hadjimichalakis possessed an exceptional ability to synthesize complex macroeconomic theory and communicate it in terms accessible to those who lack a PhD in economics. Moreover, she did so with style, grace and warmth, humor, humility and humanity. And for this, she was not only a wildly effective educator, but also a beloved one. “It’s a rare person who can deeply comprehend the global economy at a macro level. Rarer still is the person who can communicate this knowledge to students of diverse educational and professional backgrounds. A person who does these things with absolute generosity, boundless energy and endearing warmth is so rare as to be precious,” says Dean Jim Jiambalvo. “This was Karma Hadjimichalakis.”
The “Karma Impact” scholarship fund has been established to honor Karma’s life and work. To contribute, visit washington.edu/ giving/browse-funds, and search with the keyword “Karma.” n
Global Good Student innovators impress at Global Social Entrepreneurship Competition Thirteen student teams from around the globe arrived in Seattle the week of February 14 to take part in the seventh annual Global Social Entrepreneurship Competition hosted by the Foster School’s Global Business Center. The 13 semi-finalists were chosen from a pool of more than 100 entrants representing 24 countries who submitted plans for developing creative, sustainable business ideas to address problems of poverty in developing economies. $12,500 Grand Prize | Sanergy
Sanergy, co-founded by David Auerbach and Anirudh Vallabhaneni, both graduate students at MIT Sloan School of Management, was formed to address the lack of access to basic sanitation for 2.6 billion people worldwide. Currently focused on the slums of Kenya, Sanergy plans to install low-cost, waterless toilets using a franchise model. Waste will be collected daily for conversion to electricity and fertilizer. The Grand Prize was co-sponsored by Microsoft and the Seattle International Foundation. $10,000 Global Health Prize | Wello
“Wello has the goal of providing clean water to a thirsty world,” said Cynthia Koenig, a student at the University of Michigan’s Ross School of Business and founder of Wello. Her solution? The WaterWheel, a water transport tool for retrieving clean water without heavy lifting. Koenig plans to distribute the device in rural Indian communities. The prize was sponsored by the University of Washington Department of Global Health. $10,000 Information and Communication Technology Prize | NextDrop
Another team focused on water supply in India was NextDrop, a team of students from UC Berkeley and Stanford. Leveraging the recent proliferation of mobile phones in India, NextDrop expects to provide households with accurate and timely information about water delivery to reduce the time waiting for water and enable better rationing of stored water supplies. The prize was sponsored by Microsoft. n
Mark Your Calendar
3rd Annual PACCAR Hall Picnic For Foster Alumni, Friends and Families
Saturday, June 25 at 12:30pm Enjoy a summer day full of food, fun and connections with your fellow alumni! More information and registration at foster.washington.edu/picnic.
and
MBA Reunion Weekend
For the classes of 1986, 1991, 1996, 2001 and 2006
June 24-26 Reconnect with faculty and classmates, share your memories and successes and tour the new PACCAR Hall! More information and registration at foster.washington.edu/MBAreunion.
spring 2011
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IN the news Net Impact
A Legend Passes
Foster MBAs win nation’s premier sustainability competition
Former Dean Kermit Hanson elevated business education at the UW
Business fundamentals, strong presentation skills, a collaborative spirit, and a good dose of fun—those are the elements that led a team of Foster School MBAs to victory at the Leeds 2011 Net Impact Case Competition, the nation’s premier case competition built around businesses facing sustainability challenges. The winning team consisted of four first-year Foster MBA students: Trent Huntington, Lindsey Reh, Nick Stiritz and Allison Takeuchi. They emerged victorious from a group of 20 semi-finalist teams (63 applied) representing 14 business schools including Haas (UC Berkeley), Fuqua (Duke), Darden (Virginia), Kenan-Flagler (North Carolina), and Bainbridge Graduate Institute. Competitors had two weeks to create a low-cost sustainability program for the Ball Corporation, one of the largest providers of metal packaging for beverages, foods and household products. Ball wanted a turnkey solution that municipalities or other groups could use to engage 18-35 year olds and increase their commitment level in recycling efforts. The Foster MBA team’s answer? The Loop, a multi-faceted smartphone application designed to allow users to develop a profile based on their current behaviors related to sustainability and goals; track their daily habits; engage them with a variety of fun challenges; help find green businesses and recycling receptacles; and connect with friends and groups through social networks. According to the team, judges were impressed by their ability to present a cohesive story that covered the problem, solution, roll-out, financials, and a timeline with milestones. “We didn’t want to walk in with just an idea,” says Huntington. “We wanted to show that we had thought through what we were going to do and how we were going to do it.” Foster was well-represented in the competition; three teams made it to the semifinals, the most from any school. n
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Kermit O. Hanson, the influential long-time dean of the Foster School, died of natural causes in October. Hanson led the school through enormous change and growth from 1964 to 1981, modernizing programs and curricula, engaging the business community for the first time, and navigating the school to national and international prominence. Raised on a farm in Iowa, Hanson was the first in his family to attend college, earning a degree in economics and history at Luther College. There he met his future wife of 72 years, Jane. After serving as a Naval supply officer in the Pacific during World War II, Hanson took a job teaching at the UW College of Business and Economics (as the Foster School was then known) in 1948. He earned his PhD in economics through Iowa State University in 1950. At the UW, Hanson was appointed associate professor in 1952, and full professor of finance and statistics in 1954. He eventually chaired the Department of Accounting, led the Graduate Studies Committee, and became associate dean in 1959. In 1964, President Charles Odegaard appointed Hanson dean of the college, at a time in which student interest in business was exploding, from five to 25 percent of the overall UW population. Hanson seized the opportunity to expand the College of Business and Economics— eventually transforming it into the School of Business Administration. To raise the profile of the growing program, he transformed the undergraduate business program into a two-year “school” in 1966, and adopted a quota to cap class size and increase the school’s selectivity and quality. Hanson modernized the MBA program, injecting professional realities into a master’s degree that had become overly academic and theoretical. He strengthened requirements and rigor, established a core curriculum, and emphasized the burgeoning roles of international trade and computing in business decision-making. He also introduced a professional accounting track that became the Master of Professional Accounting (MPAcc) Program in 1980. He reinvigorated the school’s offerings in Executive Education, building from a foundation of the popular residential Executive Development Program. He also established the Pacific Coast Banking School in 1977, building upon his post-war awareness of Asia as an emerging economic power and contributing to the UW’s standing in this strategic region of the world. Hanson assembled the school’s first advisory board in 1965, comprising leaders from the business community. He also assembled a parallel council of top philanthropists (including most of the advisory board) who helped sustain the school through the difficult economies of the 1970s. In his retirement, Hanson remained actively engaged with the Foster School until his death. n
© iStockphoto.com/dbabbage
A Warm Welcome
Tee Time
PACCAR Hall dedication opens the new home for business
The MBA Association hosted the inaugural Hogan Brothers Foster MBAA Classic on April 30 at The Golf Club at Newcastle. The MBAA is a student organization that supports the personal, academic, social and professional growth of its members. The all-day event connecting current students with alums and recruiters was sponsored by UW Foster grads Carl and Charles Hogan, with corporate support from Esterline Technologies. n
On October 15, 2010, hundreds of alumni, faculty, staff and students joined with Seattle area business leaders to dedicate PACCAR Hall, the first phase of an expanding campus for the school. The crowd entered the building and gathered in the Dempsey Gallery while the UW Men’s Glee Club greeted them with a rousing rendition of “Bow Down to Washington” from the floor above. Moments later, cheers erupted as Mark Pigott, PACCAR chairman and chief executive officer, and Jim Jiambalvo, dean of the Foster School, cut the ceremonial ribbon. On cue, student ambassadors unfurled six massive purple and gold banners from the gallery’s brick pillars. Five of the banners featured words descriptive of the school and the people who helped make its new home a reality: leadership, community, innovation, collaboration, dedication. During a short program following the ribbon cutting, the crowd was addressed by UW interim president Dr. Phyllis Wise, Foster Foundation trustee Shal Foster, Jiambalvo and Pigott.
“The partnership between education and business is vitally important to our region,” said Pigott. “PACCAR has a 105 year tradition of supporting education. The opening of PACCAR Hall at the Foster School of Business is a major step in the University of Washington’s goal of being the leading public business school in the nation. The school attracts world-class faculty and outstanding students and with PACCAR Hall, they have the facility that will develop leaders who will contribute in many fields internationally.” The event came to a close with studentled tours that showcased varied classroom sizes and designs, including 14 U-shaped tiered classrooms, a 250-seat auditorium and 28 student breakout rooms. The building also includes two floors of faculty offices as well as a soaring atrium with a café, and a fireplace with surrounding seating. And the sixth banner mentioned above? It read: “Thanks to all who helped make our dream of a new home for business education a reality.” n
What do YOU think? We’re beginning a new column in Foster Business, and we’d love to hear from you! In each issue, we’ll ask a business-related question, maybe about your time at Foster, what you’re doing now, or your opinion on a topic. In the next issue, we’ll print a page or two of those answers, and you can learn from your fellow alumni! Here’s this issue’s question: What was the last great business book you read, and why did you like it? Go to foster.washington.edu/ readerquestions to share your answer.
spring 2011 11
Bonds of S
Steel
Three generations of the Hong family make KISWIRE the envy of its industry
© iStockphoto.com/carterdayne
T
here is a certain industrial artistry in both process and product. Calliope strains of a Beethoven arpeggio flutter among the clamor of hard-working machinery that reverberates across an immaculate KISWIRE factory floor. Raw carbon steel from colossal spools laces through a gauntlet of precision devices. It is scoured of rust and bathed in acid, lubricated, galvanized, super-heated, and drawn through dies of narrowing diameter. And at the end of this elaborate metallic pasta maker emerges a pristine strand of gleaming steel wire. Elegant, yes. But also essential. High-carbon steel wire is an indispensible ingredient of civilization. And the kind produced by Korea-based KISWIRE is the best in the business. From filaments finer than a human hair to braided wire rope as thick as an elephant’s trunk, KISWIRE—quietly, reliably—supports bridges, buildings and stadiums, hoists
elevators, cranes and oil rigs, reinforces radial tires and highpressure hoses, transports electricity and telecommunications, fabricates semiconductors, facilitates renewable energy, even gives a piano its dulcet voice. It also inhabits Scott Hong’s (MBA 2008) past, present and future. After earning his MBA at the Foster School, Scott joined the company founded by his grandfather, and currently led by his father. As production manager of KISWIRE’s Korean operations, Scott is learning the ropes from both elders in preparation to someday take over the helm. For the first time, three generations of the Hong family are in business together, a succession of wisdom that has long guided this astonishingly successful company and endowed it with such economic, social and historic significance to the nation it calls home. “Tradition,” says Scott, “means everything to us.”
Into an Asian tiger
In 1945, a young man named Suk-Cheon Hong was working as a chandler for a Japanese import company, selling supplies to ships docked in the southeast Korean port city of Busan, when his world turned upside down. As World War II came to an end, the Japanese were evicted from Korea, their colony for decades. And Korea, an agrarian society with little industry of its own, was cast into economic chaos. Hong saw opportunity. He started his own maritime supply business, importing goods from Japan. His trade miraculously eluded the advancing communists during the Korean War. But this period of national upheaval made him consider what his company could do for his country. “After the war I decided that I could make money either importing or exporting,” Hong recalls. “But if I exported, it would lift the Korean economy.” He identified one of his best-selling products—steel wire—and painstakingly learned how to make it. Taking advantage of post-war foreign aid and scraping together modest financing, Suk-Cheon launched the Korea Iron and Steel Wire Company in 1961. Its initial product was aptly named “Elephant Wire” for its strength and dependability. From the ground floor of his nation’s latearriving industrial revolution, Hong’s gaze was always upward. By 1971, the newly named KISWIRE hit its production goal of 1,000 metric tons a month. That same year, Suk-Cheon Hong welcomed his son, YoungChul Hong, to the company. Young-Chul started out creating standards in the production facility. But he rose quickly, right alongside KISWIRE’s soaring fortunes. Through the next decades, the company steadily opened new factories and diversified its product line as the market warranted. And its sales expanded globally, from Korea to Japan, Vietnam, China, Europe and the United States. Young-Chul ascended to CEO in 1988 and Chairman in 2001, as his father gradually eased out of day-to-day operations and into his eternal role as Honorary Chairman—now well into his 90s, SukCheon Hong still works every day, keeping a close eye on his legacy. Now, as Scott Hong is groomed to take the family business into a third generation, KISWIRE has achieved a level of success that the Honorary Chairman says was inconceivable at its humble founding. Today, KISWIRE produces nearly one million metric tons of steel wire, cord and rope each year, carving a 10 percent market share of the fragmented $20 billion global industry. Its 4,600 employees operate 19 production facilities—each dedicated to a specific product line—in Korea, China, Malaysia and the US.
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Nearly three-quarters of its sales are overseas. KISWIRE is everywhere. A different kind of company
Such dramatic growth doesn’t happen by accident. From the beginning, the Hong family has led KISWIRE by the kind of unwritten code that sounds trite on paper, but holds enormous power when it genuinely permeates the culture of a family business on a global scale: hard work, honesty, integrity. These simple traits have resulted in the highest quality product, continually improving efficiency and innovation, and sterling relationships with employees and customers alike. And they have sustained KISWIRE through decades pockmarked by war, dictatorial rule, financial crisis and political turmoil. According to Scott, his grandfather set a lasting growth strategy of financing expansion with profit rather than debt. KISWIRE has relied on its own research and development to drive product improvements, cut costs and open new product lines. It has innovated opportunity, recently opening a factory catering to homemakers’ schedules, and another run by retirees not ready to hang up their hardhats. Along the way, KISWIRE leadership has inspired in its work force genuine loyalty. During several severe economic shocks, the now Honorary Chairman and current Chairman sacrificed corporate profits to protect every last employee’s job. That loyalty has been repaid in kind. In the early 1990s, when a newly democratized Korea roiled with labor unrest after decades of military rule, KISWIRE workers organized, then pledged that they would never strike. That’s a level of camaraderie between administration and rank-and-file that a library of management books could not achieve. It’s the KISWIRE gift, embedded deep inside the Hong family DNA. And Scott Hong gets it. The education of Scott Hong
Scott may have KISWIRE steel in his bones, but he also had options. His father was obliged to join the company at the behest of Scott’s grandfather, initially working, eating, even sleeping at the company’s Sooyoung plant (in a small attached apartment he fondly recalls as “The Bunker”). But times have changed in Korea. Young-Chul Hong did his best to encourage his son and expose him to the business. But the decision to join KISWIRE was Scott’s alone. He attended a science and technology high school, studied mechanical engineering in college, and briefly considered pursuing an academic career. In the end, he chose tradition. “This business is my foundation,” Scott says. “I planned everything to prepare me to one day lead this company skillfully.” It started with two years interning at the world’s foremost steel manufacturers, including KISWIRE’s largest provider, POSCO. And, to complete his business skill set, Scott traveled around the
KISWIRE produces nearly
1,000,000,000 metric tons of steel wire, cord and rope each year, carving a 10% market share of the fragmented $20 billion global industry. Its 4,600 employees operate 19 production facilities in Korea, China, Malaysia and the US. Nearly three-quarters of its sales are overseas. world to study management at the Foster School. It was a choice strongly recommended by Dr. Chan-Jin Kim, a prominent attorney and family friend who earned a PhD in law from the UW in 1972, and resoundingly endorsed by both grandfather and father. “There were gaps in my knowledge,” Scott says. “My Foster MBA gave me skill at strategy, leadership, marketing and finance that I can connect with my prior knowledge of engineering and computer science, and my familiarity with the steel wire industry. Plus, my experience in Seattle helped me to see business from many different perspectives.” His father believes it did even more: “The difference in Scott since before his Foster MBA is that he knows the world better, he understands better how people are linked with business.” The Shingo pear doesn’t fall far from the tree. Innovating tradition
“Steel is steel,” says Young-Chul Hong. “It was invented 3,500 years ago, and the demand has grown ever since.” That doesn’t mean, he adds, that KISWIRE rests on past success in an industry that has been historically stable. Since introducing a dedicated research and development facility—and through less formal means in earlier years—the company has perpetually worked to carve time and cost from the process, and produced cables of ever increasing tensile strength to meet the voracious demand of a rapidly developing world. “Most of our research has been in efficiency,” says YoungChul. “Now the existing steel wire and rope market is nearing saturation. So we will need to develop into new areas that will be important in the future.” Among the most promising is KISWIRE’s work developing state-of-the-art superconductive wire. It’s a key part of Korea’s contribution to the International Thermal Energy Reactor (ITER). This much-anticipated nuclear fusion device, under construction in France, is attempting to atomically convert materials in sea water into plasma of 100 million degrees Celsius—an “artificial sun” that could finally solve the planet’s renewable energy conundrum. That sun won’t shine if it can’t be contained and harnessed, requiring superconducting coils that can convey a magnetic field
of unimaginable strength. KISWIRE is on it, developing steel that isn’t really just steel. At this exciting chapter in his family’s history, Scott’s story really begins. So many new horizons to explore, and so many years to explore them. “If I’m going to follow in the footsteps of my grandfather,” he says, laughing, “I’ll have to work another 60 years at least.” A family affair
Suk-Cheon, Young-Chul and Scott Hong gather at KISWIRE’s Busan office on a sweltering late summer day. Outside, on the site of the relocated Sooyoung factory, construction has begun on the company’s new headquarters, residential education center, and wire museum, all to be powered by three forms of renewable energy. Always looking forward, even in celebrating the past. As the three men recount stories, consider accomplishments and ponder the future, the family pride is obvious—albeit suppressed by humility. It’s well-earned. Three generations, connected by steel wire and the honest hard work that makes it, have built a company that is the envy of its industry, and an emblem of Korea’s resilient economic growth. “We don’t necessarily have to be the biggest,” says Chairman Young-Chul Hong. “We want to be the best—most efficient, highest quality product, most satisfied customers, happiest employees. That’s what we’re aiming for.” “And look to new product lines,” Scott adds, “to diversify within our core line of expertise.” “If we can reach these goals,” says Honorary Chairman Suk-Cheon Hong, “I think we will also become the biggest .” Like grandfather, like father, like son. “I’m fully satisfied with the company today, and its growth under my son’s leadership,” concludes the Honorary Chairman. “And I have full faith in this promising young grandson of mine.” That grandson puts his faith in tradition. “I’m really happy that we’re all in this business together.” Scott says. “It’s tradition. I don’t see it as pressure, but rather a sharing of wisdom that is essential to advancing this company and this family. In a way, I’ve been preparing my whole life for this.” n
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The Leap
Impact
Y
ou could call it an incubator, a catalyst, a peer network hub, an honors program—but one thing the Lavin Entrepreneurial Action Program (LEAP) at the Foster School can’t be called is a hothouse full of decorative flowers. “The students in the program are really exceptional individuals. They are motivated. They are focused. And, whether it is academic learning, mentoring advice or work experience, they have a great ability to apply what they learn,” says Kristi Marchbanks, chief marketing officer for SeaBright Holdings and a mentor and advisor of LEAP students. In other words, these students don’t just talk about entrepreneurship, they do it: • Jim Xiao became the very first freshman to enter the Foster School’s prestigious Business Plan Competition and just recently started a new company to help artists monetize “free music” and provide a better way to share music. • Kate Borgnes started the non-profit Prom Dreams as a junior in high school as a way of providing senior girls at four high schools with prom dresses they could afford. • Dmitry Muzechuk runs his own business refurbishing used cars.
• Spencer Caldwell raised $15,000 in high school to build an
electric car for a non-profit organization. • Edward Jiang won $25,000 in a Facebook competition to fund
his computer and electronics camp for high school students. • Jake Director and Riley Goodman started Sea Town Lax in high school, a company that sells crew socks, and recently started the online company “Schedule Shark” to help college students get into the classes they want. And there are roughly 65 more students currently in the Lavin Program. “They are amazingly enthusiastic,” says Loretta Little, managing director of WRF Capital and a Lavin mentor. “It is hard to believe that they are as young as they are and have the focus that they do!” A special cohort
LEAP is an “honors” program created in 2007 by Foster’s Center for Innovation and Entrepreneurship (CIE) and funded by an endowment from famed entrepreneur Leonard Lavin. It’s designed to build a cohort of undergraduates who know their careers will be entrepreneurial, give them ample opportunity to network with other student entrepreneurs and also pair them with Northwest
Vance Roush, Yih Ong and Sohroosh Hashemi are making a difference in the Lavin Entrepreneurial Action Program. 16 f o s t e r B USINESS
business leaders who know a lot “You have people with complementary skill sets that you get to about starting a company. interact with on a periodic basis, get to touch base with, bounce “When you get a group of ideas off, with the underlying commonality of that urgency, that these students together, it’s just an idea dynamo. It’s unbebug inside of you to want to start something yourself.” Vance Roush lievable,” says Foster lecturer and Lavin faculty advisor Emer Dooley. “We’re just about to The right stuff graduate the first Lavin fellows, and they recognize that they have Lavin students are not only starting businesses; they’re shaping been a part of a very special cohort group.” the program itself. Two of those graduating seniors, Vance Roush and Sohroosh Roush has started a video archive of students interviewing Hashemi, agree. many of the region’s top entrepreneurs. “What better way to “I would say probably the most powerful part of the Lavin create a memorable opportunity with an entrepreneur than Program is the network that you gain from it,” says Roush. “You creating a video with them?” have people with complementary skill sets that you get to interact Hashemi realized that he and other Lavin students were buying with on a periodic basis, get to touch base with, bounce ideas off, the same books, so he started a library that’s housed in the CIE with the underlying commonality of that urgency, that bug inside offices. “We have 30 books about what entrepreneurs should of you to want to start something yourself.” know, available for Lavin students to check out.” Roush’s start-up background began in high school when he One big addition to the Lavin Program this year was the created his own landscaping business. He was even able to hire creation of Mentor Field Trips, wherein Lavin students team up his brother. When he graduates, Roush will go to work for one of to visit mentors at their workplace. The field trips were started by the world’s greatest entrepreneurial companies: Google. Foster School junior and Lavin enthusiast Yih Ong. He says the Lavin Program played a major role in helping “I am part of the executive committee, which consists of him make the connections that led to his first job after college. Lavin students willing to give their input on how to improve the “Google was most interested in my experience in startups. They program,” Ong says. “So last summer when we had meetings, didn’t even ask any questions about my internships at big compaone of my ideas was for how to improve the mentor-mentee nies. That is how Lavin has benefitted me.” relationships. I think it has done really well. This year we had four Sohroosh Hashemi says the message he would give to any different field trips.” high school student thinking about applying to the Lavin Program Ong has been credited with having that laser-like focus of (which is a rigorous and competitive process), centers on the Lavin someone who will achieve her dream of creating a fashion company. fellows themselves. She also competed in the UW Foster Business Plan Competition as “You will be surrounded by a bunch of students interested in a freshman and the team she was on made it to the second round. entrepreneurship, which is really useful because a lot of those “I admire her,” says Marchbanks, who has been Ong’s mentor students are starting businesses and others have already started for most of two years. “She is super interesting and really focused businesses and are doing quite well right now,” he says. on what she wants to have happen.” Hashemi got his early experience in business through his parents. These students, as all three would readily They were serial entrepreneurs who included him in the creation and admit, are just the tip of the Lavin iceberg. operations of those businesses. In one business, his parents were In fact, one of the biggest fans of the Lavin buying things at garage sales and selling them for a profit in the students is Leonard Lavin himself. Lavin, early days of eBay. Hashemi would help them by photographing the born in 1919, created the Alberto-Culver objects and uploading the image through their dialup modem. Company most widely known for its “Alberto At Foster, he has been a part of a team that created a company VO5” products. He studied business at Foster called Continuing Minds, which helps older people get connected in the late 1930s and received an honorary through social media. That company was the subject of several Foster MBA in 2001. Lavin donated news stories in Seattle. Continuing Minds is one of the few compaLeonard Lavin $3 million in 2007 to create the Leonard nies to come out of a CIE class called Creating a Company that has and Bernice Lavin Entrepreneurial Action Program. a shot at actually becoming a money-making business, according to In a recent letter to CIE director Connie Bourassa-Shaw, class lecturer and experienced entrepreneur John Castle. Lavin wrote, “These are the type of people that Mrs. Lavin and However, for Hashemi, entrepreneurship is about more than income. I envisioned helping with this kind of program. … They are not “For me the reason I am interested in making a company is just going to business school to ‘learn a trade,’ they desire to be not making money. There are lots of easier ways to make money,” an entrepreneur—to achieve something that has not been done he says, “but I see entrepreneurship as a way to impact the world before or to create something that has not existed before, creating in a positive way. I think I can create some positive change in the new opportunities, new jobs.” n world by being an entrepreneur.”
spring 2011 17
Built to last T
ova Scherzer will be graduating with her MBA from the Foster School’s Technology Management MBA (TMMBA) Program this June. She’s a senior project manager lead at MarketTools. What does she plan to do with her degree? “I’m evaluating the contribution I make and my potential for leadership,” says Scherzer. “I don’t think you should come into a program like this with the expectation of immediately advancing in your position. You have to dig into the learning; you’re working with a study group, and your team relies on you— and adds value—beyond pursuit of your individual career goals.” Where was this maturity back when the dotcom bubble was bursting? Turns out, it was inherent to the TMMBA Program then, too. In January 2001, the Foster School launched the TMMBA Program across the lake from the school’s headquarters. The architects of the program focused on a design that would teach business to technology professionals at a mid-career juncture. It would focus on business fundamentals, incorporate tech-focused case studies and attract talented students who were up to the task of a challenging 18-month journey at a breakneck pace. Later that year (on October 22, 2001), Computerworld wrote, “There are as many types of techno-MBA programs as there are three-letter acronyms in the technology industry.” Today, there are only a handful of tech-focused MBA programs extant—and the TMMBA is proud to be one of them. But, despite fewer tech-focused MBA programs, the demand for business-savvy tech professionals has continued to increase. A January 10, 2011 Computerworld article asks, “Should IT execs get MBAs?” The subhead replies: “It takes a monumental commitment, both financially and personally, but an MBA could be the fastest ticket to business proficiency.” The convergence of business and technology continues to be a change accelerant that outstrips even the most nimble organizations. The only proven asset in the toolkit is knowledge. Not
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10 Years of the Technology Management MBA just an understanding of finance and accounting or management and supply chains, but knowing how to lead people and allocate resources toward shifting goals during immense change. That is exactly the kind of tech savvy businessperson that TMMBA’s designers set out to build. As the program celebrates 10 years, it is worth noting—and celebrating—that it has run true to its mission and continues to have a positive impact on students, alumni and their respective organizations. It’s a continuum. Looking back, Gary Sundem, professor emeritus of accounting, recalls the three guideposts for building the program: It needed to focus on educating technology professionals about business, not teaching them technology. It needed to be situated on the east side of Lake Washington, which was growing rapidly as a high-tech corridor. It needed to be self-sustaining, diversifying the school’s revenue stream at a time—much like today—when state funding for higher education was flagging. Associate dean of masters programs at the time of the TMMBA’s inception, Sundem was also part of the team that designed the program’s format and curriculum. The chair of the faculty committee overseeing curriculum was Jim Jiambalvo, now dean of the Foster School. “At the time, we’re looking at Microsoft thinking, there are 30,000 workers running a complex business, and they’ve got strong technical experience, but what about core business knowledge?” recalls Jiambalvo. “There was an opportunity for us to meet a huge demand.” Building a better businessperson
So where does “technology management” fit into an MBA program? Technology is as much a language, culture and mindset as it is an industry. “The place where ‘technology management’ shows up most conspicuously is in the business case studies and anecdotes,” says Sundem. “We believed that if we could connect the
educational concepts to organizations, business challenges and real-world examples drawn from technology, then we’d have material that was more relevant and digestible.” In retrospect, the decision not to teach technology concepts within the program is one reason that the TMMBA endured beyond the trend to hitch MBA programs to the tech train. It turns out that a large majority of students in search of a tech-focused MBA are incredibly well educated and experienced in their field of expertise. Many students of the TMMBA Program already have graduate degrees in engineering or computer science. The program has even been home to some PhDs. “Students who enter this program want to learn how to lead— how to make good business decisions and bring others along with them,” notes Pat Bettin, senior lecturer at Foster. Bettin designed a leadership course and taught it to the first TMMBA class—and he’s been doing it ever since. “TMMBA students come to us as amazing individual contributors; most of them have a very quantifiable mindset and are driven to find the right answers. Our job is to
help them gain comfort with uncertainty, and equip them to enter the fog of the marketplace with confidence built on knowledge,” says Bettin. “Students progress in lock-step with their cohort, and they learn a lot about strategy from each other as they go.” The cohort-based framework of the program works amazingly well as a 24/7 thought lab for the students, and it’s not incidental to the success of the program and its participants. Harnessing the kilowatts of the cohort
What kind of alumni attend a guest lecture and read the case material as homework? What inspires a group of students (all of them with full-time careers) returning from an International Study Tour in China to self-publish a coffee table book encapsulating the highlights? Who wants to stay engaged in a program book club after graduating? For each of these, the overwhelming response is: TMMBA students and alumni, that’s who. Steve Sefcik, now associate dean of undergraduate programs, remembers learning some very valuable lessons in his five years
spring 2011 19
as faculty director of the TMMBA Program. “I thought education was about providing students with knowledge,” he says. “That’s necessary—but it’s not at the heart of quality. If you want to see students’ satisfaction with their experience go off the charts, give them face time with faculty, create moments of connection at a peer level, and then see what happens. “The biggest mistake I saw in the TMMBA Program had nothing to do with the educational content,” recalls Sefcik. “Students had complaints about the food we served before class—so we cancelled the catering.” Meals were included in the program as a convenience to busy professionals trying to juggle their work lives with their academic lives, not to mention their personal lives. “But it had become like the family dinner,” says Sefcik. “People caught up personally and professionally, amazing connections were made and they weren’t happy to lose that bonding time.” So new catering was found, meals were reinstated, and they remain a constant of the program today. One recent TMMBA class even took the opportunity to have some fun blogging about the menu. “These students…they have passion!” says Sefcik. And then he reflects for a moment on just how much the students shape the TMMBA experience for each other. “You motivate them and then get out of their way. They learn by doing and gain invaluable insights from each other—I’d say about one third of the education comes directly from the cohort. I’ve been teaching accounting for more than two decades, and I learned a ton working with TMMBA students.” With that much riding on the students themselves, the admissions process needs to provide stringent quality control. It has done just that, following a pattern of growth that is sustainable, just like a well-run company. About halfway through the program’s existence, it doubled in size without any compromises to the quality of enrollee. The program director and staff are responsible for keeping standards high, maintaining the program’s excellence, adding to the already rich portfolio of opportunities and ensuring a uniquely
TMMBA student experience. “When students graduate, they usually say the thing they miss most about the program is the immediate access to in-depth conversations they’ve become accustomed to having,” says Tracy Gojdics, program director for TMMBA and a graduate (2007). “The best part of my job is that I have continual access to great, intellectual conversations on the fly. Fifteen minutes here, 20 minutes there…the exchange of thoughts and ideas is very enlivening. And I get to see how engaged our alumni are, and watch their stories continue to unfold in positive ways.” Delivering on the promise
“But will this give me substantive return on my time and money?” That’s the question Chris Suh, a graduate of the first TMMBA class, was asking himself. “I’d heard about the program on the radio,” Suh says. “I was a UW undergraduate and then joined Microsoft in 1996. I had applied and been accepted to some great full-time MBA programs, but took a pass because of the tech boom that was underway. But I really wanted to develop as a leader and build a more strategic skill set.” Suh recalls the level of interaction between the students in the first class. “We were a pretty feisty bunch.” While he notes the quality of the curriculum and instruction, the thing Suh most misses, like many alumni, is the conversations that took place in the cohort. “It was a great sounding board,” he says. “You can’t have a meaningful learning experience without context,” said Pat Bettin. “You can have all of the content right there, but it’s the focused discussions and exploration of ideas within a diverse cohort where the learning is codified. As faculty members, we all try to give the discussions the right parameters—to apply focus.” Get the right students together, give them the right material, provide dynamic instruction and great things
“You can’t learn about the world on the internet” Nothing encapsulates the objective of the TMMBA International Study Tour more than the simple statement above, made by Sekerbank’s VP of investor relations and subsidiaries. The Turkish bank was just one of the stops on the 2011 TMMBA Study Tour. This year’s tour included company visits and cultural excursions in Istanbul and Munich, where 30 students were exposed to large multinational, regional and local companies, putting their TMMBA knowledge to the test with discussions around marketing, entrepreneurship and global strategy. 2011 TMMBA Study Tour at-a-glance:
• On March 12th, the program kicked off with an Istanbul city tour and cruise on the Bosporus. • Students met with VPs at Sabanci Holdings, Pozitron and GE, and finished the day creating a painting using a technique called marbling. • Day two in Istanbul took students to Kordsa Global and Microsoft and ended with a traditional Turkish Bath experience. • The final day in Istanbul included a visit to Sekerbank and the Spice Market, and the Grand Bazaar to practice negotiation. • Students celebrated their arrival in Munich by enjoying food and drink at the famous Hofbrauhaus, and started their Munich visits the next morning at Red Hat and Cisco. • The weekend in Munich included a guided tour of the city and the Nymphenburg Palace. • The tour concluded with vistits to Ashoka, Knorr-Bremse and BMW World, and a festive farewell dinner.
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will transpire. The TMMBA Program was operating exactly as its founders intended. Just ask current student Jeff Steiner. Working in product management at RealNetworks, Steiner isn’t waiting to use the MBA he’ll graduate with come June. “I’m using it already,” he says. “As I’m progressing in product management, a lot of areas I’ve studied come into play—finance, marketing, operations management—and I’m continually amazed at how much I’ve learned. I knew from the outset that there was a lot of knowledge to be gained, but that’s an absurd understatement; every class was like drinking from a fire hose. The faculty in this program exceeded all my expectations.” Tamaira Ross and Stephen Montgomery (both TMMBA 2008), a married couple who went through the program together, credit the classroom interactions they had as one of the major benefits to the TMMBA Program. “The classroom setting absolutely made the program for me,” says Montgomery, who works at Intel. “It was very much like tackling a project at work— complex, team-based, very real.” Ross, an associate technical fellow at Boeing, really connected with the case competition that the program holds every year. “I got a lot out of competing over business cases,” she says. “It was another way to synthesize the learning and apply it under rigorous conditions.” Both Ross and Montgomery became inspired by their learning and now teach in the Engineering Leadership certificate program in the Industrial and Systems Engineering department at UW. On the topic of inspiration, Steve Sefcik holds up a matchbook from the 1950s. “Be an accountant. Train at home,” reads the inside cover. “I keep this to remind myself that just providing the training isn’t enough,” says Sefcik. “My role with TMMBA students was to serve as a lever, to apply what I know in a way that creates a tipping point for them.” Looking ahead
As those involved with TMMBA mentally review the first ten years, the obvious question is what the next decade will hold. “The pace at which technology changes the way we work, play and communicate is not abating,” says Dan Turner, TMMBA faculty director and associate dean of MBA Programs. “There is only going to be more demand—and opportunity—for businessadept technologists. Obviously we can’t predict the future, but one of the advantages we have at Foster, as a research institution, is that we can draw from a wide body of knowledge about the impacts of technology on things like business model architecture. We can equip students to meet challenges for which others won’t be prepared.” Turner notes that the curriculum is continually updated for content currency. “It’s much like a software lifecycle,” says Turner. “Perfect information is great as a construct, but as a management decision maker, you never have it. Instead, you do your due diligence, gather enough information to be comfortable making a strategic decision, and then release the next generation product. More important than getting it exactly right in the planning stages is the ability to generate—and then act upon—the insights you accumulate in the marketplace.” The TMMBA Program’s success rests on the shoulders of the people who run it, teach it and participate in it. “The most elegant facets of the program are resident within the students and alumni,” concludes Turner. “The students are the best technology-focused professionals in the region. Our faculty are world-class, and we challenge them to deliver a world-class curriculum. But it’s the plethora of talent, experience, and insight in the TMMBA classroom that truly makes TMMBA the MBA for technology professionals.” That’s something certainly worth a celebration. Happy birthday, TMMBA. n
Milestones January 2001:
1st TMMBA Class convenes March 2002:
1st International Study Tour visits Grenoble and Paris June 2002:
1st TMMBA class graduates February 2003:
TMMBA moves to the Eastside Executive Center in Kirkland May 2003:
Students join LinkedIn February 2004:
Friending begins on Facebook July 2005:
Internet radio Pandora launches January 2006:
TMMBA doubles in size March 2006:
1st annual TMMBA Bettin Cup Golf Scramble takes place July 2006:
Twitter enables tweets January 2007:
Apple releases 1st iPhone July 2007:
1st Boeing 787 Dreamliner unveiled March 2008:
International Study Tour visits Brazil January 2010:
TMMBA students are given Kindles instead of textbooks in a pilot program February 2010:
Remote and recorded review sessions become available January 2011:
TMMBA Celebrates 10 Years! June 2011:
TMMBA Alumni Network will grow to nearly 700 professionals
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faculty
Marketing Misfires The modern history of marketing is littered with cautionary tales of campaigns gone bad If the best-laid plans of mice and marketers often go awry, just imagine what happens to the worst-laid plans. The history of marketing is rife with botches and blunders at every perilous stage of the new product process, from value creation to value capture. For the sake of argument, we asked three of the Foster School’s marketing faculty—associate professor Shailendra Pratap Jain and senior lecturers Elizabeth Stearns
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and Dan Turner—to share their favorite cautionary tales. VALUE CREATION The modern era of marketing failures began with the Edsel, the Ford Motor Company’s heavily hyped revolution in style and technology that hit the marketplace in 1957 with a thud. Offering unique value that the customer wants, it turns out, is fundamental but far from a given.
New Coke
In 1985, Coca-Cola revamped its famous secret formula to counteract growing competition from Pepsi, which had stolen a chunk of its dominant market share. The sweeter New Coke beat both its original formula and Pepsi in blind taste tests. But when New Coke supplanted old, loyalists revolted. Coca-Cola ended the experiment quickly. Its brilliant comeback
with Coke Classic not only recovered lost market share, but gained additional ground. “In a naïve way, it made perfect sense for Coca-Cola to improve its product, making up for a known deficiency versus a focal competitor,” Turner says. “But it made a fundamental error in forgetting what value it was offering customers— brand associations of America, friendship, nostalgia. These are emotional associations we cannot ignore.”
VALUE COMMUNICATION Lesser ad campaigns, like hair styles and fashion trends, can look ridiculous in retrospect. But they also can do serious damage to a brand, as when a Xerox commercial from the 1960s memorably demonstrated that its new office copier was so easy to operate that a monkey could do it, enraging legions of secretaries. Some other notable failures to communicate:
safety by showing no less authority than the nation’s president sipping it happily. “Reclaimed water is a good idea—it’s not a question of if but when we will adopt it,” Stearns says. “But in California, its marketing has been taken over by the consuming public. They haven’t figured out how to overcome the psychological barrier, the ‘yuck’ factor.” SunChips
Sony was first on the market with a home videocassette player/recorder in 1975. Its Betamax boasted better picture and sound quality and a smaller console, but a shorter recording time than JVC’s competing VHS technology, which arrived two years later. But while Sony attempted to dictate the industry standard, JVC recognized that consumers liked the added tape time, and opened its technology to multiple companies, quickly creating massive market dominance. “Sony had a strong brand, but it could not do battle with 30 or 40 companies that jumped on the VHS bandwagon,” Jain says. “Once a technology is introduced and adopted widely, it becomes very difficult to dislodge.”
Though Nike has created some of the most inspirational messaging in marketing history—“Just do it,” anyone?—it’s also responsible for some egregious overreaches. Most horrifying may have been a 2000 commercial in which elite runner Suzie Favor-Hamilton and her speedy Nike kicks outsprinted an eventually winded chainsaw-wielding maniac. The punch line: “Why Sport? You’ll live longer.” Amid predictable protest, the ad was quickly pulled. “Throughout history marketers have made a plethora of mistakes in trying to capture and hold the attention of target customers long enough to deliver a marketing message,” Turner says. “Nike is a company that I greatly admire, but it has consistently pushed beyond the envelope in trying to convey its message.”
You may have heard about the new compostable SunChips bag. Or, perhaps as likely, you’ve actually heard the bag, an absolute ear-sore according to rampant press reports. In introducing its innovative, sustainable packaging, Frito Lay failed to demonstrate its value and muffle the critics. Company engineers raced to create a lowervolume compostable package, at great cost, which has just hit the domestic market. “Unlike Sun Chips Canada, which stuck with the original packaging after successfully showing the actual composting of the product to reinforce its value,” Stearns says, “Sun Chips USA pulled all but its base brand, succumbing to critics.”
Honda Accord Hybrid
Toilet to Tap
Vespa
Sony Betamax
While the Toyota Prius has become the very emblem of fuel economy and environmental responsibility, the similar class Honda Accord Hybrid barely registered with consumers during its brief existence from 2005-07. The hybrid version of the popular Accord offered more power but no greater fuel economy, and cost $9,000 more. While other car companies rolled out successful hybrids, Honda quickly cut its losses. “There is a limit to the strength of a brand,” Jain says. “Honda failed to provide a utilitarian benefit—greater fuel economy—or a self-expressive benefit—a sense of doing something for the environment—that a hybrid customer demands to justify the premium price.”
Nike
That’s not a spectacularly bad product name, but rather the cheeky media-branding of an innovative wastewater-reclamation project in Orange County, California. In a region that pipes in 90 percent of its water from the Colorado River—at enormous cost—the process has been somewhat successful for irrigation uses, but thus far failed to convince the public of its drinking potential. Meanwhile, Singapore’s Public Utilities Board has turned purified sewage into a popular branded bottled product called NEWater, and demonstrated its
A stealth marketing campaign employed attractive actors to ride Vespa scooters up to restaurants, cafes and bars, flirt with customers and hand out their phone numbers—which turned out to connect them to the local Vespa dealership. Bait. And. Switch. “A great example of an ill-conceived value communication gone horribly wrong,” says Turner. Groupon
The online coupon service had enjoyed mostly positive buzz until it aired a brazenly insensitive commercial during the 2011 Super Bowl that misappropriated the plight of the Tibetan people to sell its service. The public cried foul. Groupon pulled the ad and tumbled into damage control.
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faculty “You don’t always have to like an ad campaign, but your market segment does,” says Stearns. “This ad was in such bad taste that it begs the question: who at the agency and/or company approved it?” Diet Pepsi
The new Diet Pepsi “Skinny Can” is tall, thin and undeniably elegant. The problem? It debuted during New York Fashion Week, juxtaposed against willowy models and pronounced to be “in celebration of beautiful, confident women.” Critics found nothing to celebrate. “Pepsi misunderstood the context into which they introduced the product,” Stearns says. “They did not foresee the charges of irresponsibility in an environment where obesity and eating disorders are so prevalent.”
VALUE CAPTURE Execution and pricing gaffs may appear less spectacular than product or promotion misfires, but they can prove even more tragic. A good product or a good promotion—or both—can be shot down by a bad business model, or even just a myopic one. CT Scanner
The breakthrough medical imaging device was invented and introduced in the 1970s by Electrical and Musical Industries (EMI), a company better known for recording the Beatles. EMI’s adventure in medical
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hardware was an outlandish success for a few years and the company made a quick fortune. But it didn’t understand the market, or what the competition would bring. Without deep enough pockets to innovate, EMI was quickly overwhelmed by GE and other large players in the CT scanner gold rush. “Technology is a moving target,” explains Jain. “You have to constantly be on the cutting edge. If you’ve shown that there’s money to be made and you don’t assume that competitors are already getting into the market, you’re sleeping.” Laker Airways Skytrain
The original discount airline was a big success in the 1970s, carrying idealistic young people “across the pond” in no-frills flights for low, low cost. But when its charismatic British founder, Sir Freddie Laker, tried to expand into US domestic routes, the monopoly of big American carriers simply matched fares until they choked out the upstart. “Flying with Freddie Laker was like being part of a movement, supporting an alternative, breaking up the cartel,” says Stearns. “Now it’s a revealing case study on the challenges of expanding in a regulated or monopolistic market.” Tupperware
In 2004, the iconic food-storage products company began selling its plastic ware in Target stores. But by making Tupperware more accessible, it rendered obsolete the “Tupperware party”— source of 90 percent of company business and an unmatched
vehicle for communicating value. Sales fell 17 percent, and Tupperware pulled out of Target within a year. “It’s a great example of incentive misalignment,” Turner says. “The Tupperware chairman and CEO pronounced it big and bold… and ugly.” Dotcoms
Why the big bubble? The Internet promised a revolutionary business model but, initially, few knew how to make money with it. “Dotcom theory” dictated that an e-business expand its customer base as rapidly as possible, even if that meant huge annual losses. Presumably, profits would magically flow later. But for every Amazon and eBay that thrived, hundreds more pioneering dotcoms went down in flames. Says Turner: “Pets.com, Webvan.com, Kozmo.com and many, many others generated impressive revenue lines but, sadly, failed in a massive collapse of wrongheaded pricing model logic. Poor value capture relegated them to the dustbin of marketing history.”
For expanded insight from Jain, Turner and Stearns on the classic failure of New Coke, iPhone’s struggles in Asia, and the marketing triumph of the VW Beetle, visit foster.washington.edu/marketingfail. n
Autonomy now! Workplace autonomy fosters passion, passion fosters creativity Any celebrity CEO worth his or her salt—or salary—will extol the virtues of passion in an organization, citing personal belief and illustrative anecdotes, but little in the way of hard data. Now there’s proof. A new study by researchers at the Foster School offers the first empirical evidence on the relationship between passion and creativity in the workplace. What’s more, the study demonstrates that the key to developing passionate employees is giving them autonomy. “Context is very important,” says co-author Xiao-Ping Chen, a professor of management and organization and Evert McCabe Faculty Fellow at Foster. “Teams, units and organizations that promote and support autonomous thinking and working will become more passionate. And, in turn, more creative.”
© iStockphoto.com/shapecharge, enjoynz
Harmonious passion
The authors studied the behaviors and attitudes of employees at two very different types of organizations: a manufacturing company and a financial services firm. They measured degrees of “harmonious” passion, an intense commitment to work that is driven by internal rather than external motivation. “Harmonious passion comes from intrinsic motivation,” explains co-author Dong Liu, a doctoral student at the Foster School. “You are passionate not only because you are interested in the work, but because it identifies part of you. It defines you.” The research team found that harmonious passion facilitates increased workplace creativity—acts of devising new and improved ways of doing tasks, from an ergonomic shift on an assembly line to an innovative marketing campaign. Some people, Chen explains, are naturally predisposed to be passionate about their work. These people will exercise creativity whatever the environment. The rest, however, could develop
harmonious passion if given a degree of autonomy to decide how they will execute their tasks—even when pressure to perform is external (think deadlines) rather than internal. Autonomy opens the door
The authors say that some companies have Xiao-Ping Chen a clear strategy of seeking and fostering passion. Google, for instance, screens its hires for levels of passion and then provides employees a culture of autonomy—even mandating 20 percent of work time to be spent outside of projects—to further enhance the creativity that is the company’s greatest asset. “There are practices that any company can use to foster autonomy supportive environments,” says Liu. “Things such as open communication, flexible work designs and supervisor empowerment.” Universal phenomenon
One final note that emerged from the study is that the connection between autonomy, passion and creativity appears to be universal, existing among people of every cultural orientation. “Passion is universal,” Chen says. “It’s important to creativity in individualistic cultures such as the United States. And it’s also important in more collectivistic cultures such as China.” “From autonomy to creativity: A multilevel investigation of the mediating role of harmonious passion” is published in the April 2011 Journal of Applied Psychology. It is the work of Dong Liu and Xiao-Ping Chen of the University of Washington Foster School of Business, and Xin Yao of the University of Colorado at Boulder. n
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faculty RESEARCH BRIEFS Invest Small
How to Stop the Flu
Healthy Chat
Smaller stocks diversify risk in increasingly vulnerable market
Smart vaccine subsidies could curb the spread of influenza
The healing power of social networking revealed
The annual outbreak of influenza causes hundreds of thousands of deaths and incurs economic costs in the billions of dollars. More virulent strains can create border-jumping pandemics like the 1918 Spanish flu that killed between 20 and 40 million people worldwide. Modern vaccination campaigns have brought us a long way from those dark days. But an increasingly mobile, global population is still vulnerable. Now a suite of studies co-authored by Hamed Mamani, an assistant professor of operations management at Foster, is applying supply chain solutions to this epidemiology conundrum. The first study prescribes “preseason” government subsidies to vaccine manufacturers to ensure sufficient doses are produced. A second recommends international aid programs to vaccinate people in poorer “source” countries from which a flu strain usually emerges—and spreads quickly and exponentially. A third, with Debabrata Dey, professor of information systems and Evert McCabe Faculty Fellow at Foster, suggests that financial incentives to the domestic population will help reach optimal levels of vaccination. As he continues to fine-tune the models, Mamani believes they will someday be implementable by public health organizations. “Once we have those parameters and the cooperation of forward-looking governments,” he says, “we can produce optimum results.” n
Adding to a long list of attributes, it appears that social networking can also make you feel better. Research by Yong Tan, associate professor of information systems and Evert McCabe Faculty Fellow, and Lu Yan, a PhD student at Foster, presents the first measurable evidence that networking over the Internet improves a patient’s health condition.
Want to diversify investment risk? Think outside the basket. That’s the message of a study co-authored by Avraham Kamara, the William W. Alberts Endowed Professor of Finance at the Foster School. Kamara analyzed daily share prices of the entire NYSE and AMEX over the past 40 years. This analysis revealed that the rising preponderance of institutional investors trading in bundles or “baskets” of large-cap stocks has led to a growing confluence of price movement. As a result, the overall market has become increasingly vulnerable to systematic shocks. The bottom line? Owning large, established stocks today—even when they represent a wide array of industries—offers substantially less protection than before against unexpected negative events. Diversification requires small stocks in the portfolio. “You still need to diversify,” Kamara says. “But you cannot diversify as effectively as you did in the past by just holding large stocks. You have to hold smaller stocks that aren’t in the leading indices to gain the benefits of diversification—especially during a crisis.” n
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Tracking individuals who interact via the health care community site PatientsLikeMe.com, Tan and Yan found that participation in the online community provides patients information, emotional support and self-identification, all of which help them improve their health conditions and better engage in their disease self-management process. “We demonstrate that patients participating in online health communities are contributing to a more efficient delivery of health care,” Yan says. “The health care industry is in transition. In the past, patients had no role in their treatment. Now patients are increasingly taking an active role. Participating in social networking helps them improve their condition, and in turn provides support and encouragement to other patients to improve their condition.” n
© iStockphoto.com/lumpynoodles, LoBoCo, mbbirdy, ALexandraPetruk, dareknie
Googling for Dollars
Style Counts
Business as Usual?
Online search makes financial markets more efficient
A firm’s financial reporting is shaped by the CFO’s personal style
Bribery penalties sting less than other forms of financial misconduct
The transformative technologies that enable the “Information Age”—exemplified in Google searches of the Internet—are making financial markets more efficient. According to a study co-authored by Jacob Thornock, an assistant professor of accounting at the Foster School, corporate earnings announcements are preceded by an abnormally high and rising volume of Google searches for a firm’s stock ticker (think MSFT or AMZN). Investors trade on the information they find. And, as a result, share prices anticipate the earnings announcement, effectively softening the slope of peaks or plunges that traditionally follow the periodic release of earnings information. “As investors gather and trade on information prior to earnings announcements, market prices begin to partially
The exacting rules and rubrics that govern financial reporting would seem to preclude any stylistic interpretation. But that’s not the case at all, according to new research by Weili Ge, an assistant professor of accounting and William R. Gregory Faculty Fellow, Dawn Matsumoto, the Emmett S. Harrington Endowed Professor of Accounting, and Jenny Li Zhang (PhD 2010), a former doctoral student. They find that the individual style of a chief financial officer (CFO) has a significant impact on the way his or her firm goes
reveal that information,” explains Thornock. “As a consequence, there is less of a price reaction when the information is announced because a greater portion of the earnings news is anticipated. “Emerging technologies such as Google search are helping people become more informed. And more informed investors make for more efficient markets.” n
about reporting its financials. The more discretion and the higher job demands a CFO faces, the greater the effect of CFO style on the firm’s accounting choices. The trio tracked 359 serial CFOs, searching for patterns of behavior— aggressive to conservative—across different firms and over time. CFO style and behavior did not appear to be correlated to age, gender or education. And it was consistent, unaltered by company culture or financial incentives. “The fact that CFOs’ accounting choices are impacted by their individual styles potentially complicates firms’ ability to obtain optimal reporting choices via financial incentives alone, unless the CFO’s style is aligned with the firm’s preferences,” Matsumoto says. n
Click on any Research Brief headline to read the full article.
Foreign bribery can be big business. It’s also the target of increasing enforcement action by the Department of Justice and SEC. But do penalties for paying off foreign officials really carry much sting? According to ongoing research by Jonathan Karpoff, the Washington Mutual Endowed Professor in Finance at the Foster School, the cost to firms of being charged with foreign bribery are substantially smaller than for other types of misconduct, especially financial misrepresentation. Investors and regulators appear to care about—and discipline— financial reporting violations far more than bribery as a stand-alone offense. Karpoff and his co-authors analyzed the hit in firm value following bribery enforcements dating back to the Foreign Corrupt Practices Act of 1977. While firms prosecuted for bribery do experience a loss in value, Karpoff says, most of the loss can be attributed to other offenses that the firm commits at the same time. “Our findings indicate that investors, customers and employees care about bribery only to the extent that it results in penalties from the SEC or DOJ,” he says. “In this respect, bribery is more like an environmental violation than consumer fraud or cooking the books. Firms who cheat their customers or investors, in contrast, lose much more value because they lose future customers and face a higher cost of capital.” n
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faculty The Many Passions of Terry Mitchell Late in his career, an exceptional, eclectic scholar trains his considerable energies on Foster PhDs So, who is the real Terry Mitchell? The Foster School’s powerhouse Edward E. Carlson Distinguished Professor in Business Administration who has published more than 120 articles in major professional journals, delivered more than 120 addresses at major professional meetings, contributed more than 40 chapters to edited volumes and published four books? Or, a fascinating cruise ship lecturer who packs floating “classrooms” with colorful tales of regional history under such titles as “Pirates of the Caribbean,” “Can you count in Mayan?” and “There’s gold in them thar’ hills,” depending on the destination? The author of formative research on leadership, motivation, decision making and employee retention—and still solving new puzzles of organizational behavior in his fifth decade? Or the player of a mean rock-and-roll piano who will still give the ivories a workout if you catch him on the right night? One of the 35 most influential management scholars in the world, according to a 2008 study in the Journal of Management? Or an expert collector of rare sports memorabilia who wrote the definitive book on the golden age of tobacco trading cards, promotions that depicted famous athletes, models, actresses and politicians into the early 1900s? Recipient of the 2010 Lifetime Achievement Award from the Organizational Behavior Division of the Academy of Management? Or an avid sportsman, family man, and devotee of Duke basketball? As you’ve probably guessed by now, he’s all of the above. The plans come together
Master of the work-life blend, Mitchell has managed to carve an indelible, world-renowned academic career while also savoring a rich personal life. In all things, he is guided by an outsized curiosity. At work, this has meant diversifying to accommodate his considerable professional interests. “I worked in five-year plans,” he says, “taking advantage of the freedom afforded by the academic life to periodically shift focus to something that really interested me at the time.” In the fifth year of his latest—and possibly last—academic adventure, Mitchell finds himself director of the Foster School PhD Program. “Activist director,” amends Tom Lee, associate dean for academic and faculty affairs, with a grin. “That’s true,” confirms Mitchell, laughing. “When I took the position, I began doing the same thing I do in my research, which is to go out and talk to people—in this case, students and faculty on how the program could be improved.”
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He’s turning ideas into action, improving all facets of the program and lifting the academic reputation of the Foster School. The most competitive prospective students are now flown to campus for recruiting. Key entry test scores and language ability standards have been elevated. An enhanced website and new brochure are helping market the program more effectively. Doctoral students become actively engaged in teaching and research more quickly now. They benefit from a mentoring program, a 10-week teaching course, a core of dedicated doctoral courses, a mandatory first-year paper, a formal annual progress report and exit interviews upon graduation. To help place students in the best faculty positions, each is now mandated to present a job talk in front of faculty. The program also aggressively sends students to network and present research at conferences with the aid of airline travel vouchers. A rich legacy
In the twilight of his brilliant academic career, Mitchell insists on making every last bit of work count. In the case of the Foster PhD Program, exponentially. Through his policies as program director and his example as a smart, caring mentor who knows as much about life as he does work, he’s creating a rich legacy in the legions of students he has touched. “Through his doctoral courses and now his role directing the program, Terry’s influence reaches beyond the publications and presentations that are easily counted,” says Brooks Holtom (PhD 1999), associate professor and interim associate dean at Georgetown University’s McDonough School of Business. “His social
capital and immense ability have allowed him to shape education at the Foster School in many ways.” Adds Will Felps (PhD 2007), an assistant professor at Rotterdam School of Management in the Netherlands, “Terry’s guidance and support has been critical to the success of so many young people.” The not-so-young as well. “No one in my entire career has been more important in shaping who I am as a scholar and a professor,” says Stephen Green (PhD 1976), the Basil S. Turner Distinguished Professor of Management at Purdue University and one of Mitchell’s first students. “To this day, Terry is still the standard by which I judge my performance and contributions. He always inspires me to push myself to do better.” Mitchell says the inspiration is reciprocal. “I love what I do,” he says. “And a big part of what has made this life, this career so positive is the relationships I’ve had with doctoral students. It’s an honor, an infusion of energy and ideas, to be able to work with some of the brightest young people in the field.” n
Paying Inspiration Forward Count Heidi Hopper (PhD 1997) as a charter member of the Terry Mitchell fan club. His former doctoral student recently made a significant gift to the Foster School to create the Terence R. Mitchell Doctoral Fellowship, which will offer financial support to PhD candidates for the next four years. Hopper came to the UW with her husband, Jeff Dean, who earned a PhD in computer science. She was drawn to study under Mitchell, as so many others have been, “because he was so much fun to work with,” she says. “He didn’t just assign grunt work but encouraged us to dive into every facet of research.” Hopper also recalls Mitchell’s instrumental help in securing funds for at least a few quarters to focus on her own research, undisturbed by the usual heavy loads of course work and teaching. “To be able to focus on research is vital to becoming part of the academic community,” she says. And now that she is able, Hopper is helping Mitchell help others do the same.
Fosterize Casual Friday Your school is highly ranked, well regarded and setting the standard for building business leaders in the Northwest and beyond. Sport your b-school gear with Husky pride…and let folks know that Foster means business!
Foster apparel & accessories are now available. Shop online at foster.washington.edu/shop.
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Sweet Success Jody Hall reinvents the penny university around the noble cupcake It takes a neighborhood to raise a cupcake … or that’s the way Jody Hall (Executive Development Program 2010) sees it. Hall is the founder and owner of Cupcake Royale, the Seattle region’s breakaway cupcake bakery and coffee houses. For Hall, it wasn’t enough to offer customers great coffee and delightful cupcakes. Her entrepreneurial desire was to also create a business where neighbors
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would come together to cook up ideas, learn something new and inspire each other in conversations about the arts, society and politics. “The heritage of a coffee house is the penny university,” she says of her inspiration. “You got this penny, you get a cup of coffee in this gathering place and you talk with the business merchants, artists, poets, musicians and get an education about what
is going on in your society.” It’s a style of business that Cupcake Royale wears in a far from somber mood with slogans such as “Ask me about my cupcakes” and “Legalize frostitution,” which is also the name of the company’s blog. And, it’s run by an entrepreneur whose professional marketing and branding experience stemmed from a part-time barista gig at Starbucks in 1989 that led
to a position in marketing when Starbucks was revolutionizing how Americans drink coffee. It’s also a combination of coffee, specialty cupcakes and community that has been a big success. The first Cupcake Royale opened in the Madrona neighborhood of Seattle in 2003, and in 2010 Hall opened her fifth location in Bellevue. The cupcakes range from the Classic, Red Velvet and Salted Caramel to the monthly specials such as Bacon Whiskey Maple and the
So, while Hall has a successful foundation for her business, she felt that to grow and succeed in this new competitive landscape she needed to bolster her understanding of finance, operations, management and leadership. To give herself the advantage and to engage in the kinds of high-level conversations about strategy and marketing she had when she worked at Starbucks and REI, Hall enrolled in the Foster School’s Executive Development Program (EDP). The
EVENTS CALENDAR May 3 Global Business Center presents New Directions in Global Business: Educating our Future Entrepreneurs, Leaders and Managers 11 Leaders to Legends Dean’s Breakfast Lecture Series: Speaker Jim Fruchterman, CEO, Benetech
“After every class I literally would download with my managers: Here’s what I learned and how I think we can apply that to what we are doing here.”
13 Financial Reporting Conference
Deathcake Royale, for Valentine’s Day, of course. “When people come in and look at that cupcake case, from one to 91 years old, they just flap their arms and are like (dramatic inhalation), and little kids almost launch they are so excited,” she says. When Hall started Cupcake Royale, you’d have to go to New York to find a commercial cupcake of quality, let alone one made like hers, with high quality local and seasonal ingredients. “We can tell you with every bag of flour, this is from farmer Fred and this is from farmer Carl. We know these guys and have driven their combines. We know about the wheat,” she says. However, the reality of business is that any store as successful as Cupcake Royale will attract voracious competitors. “Everybody sells cupcakes now,” she says, “not to mention the other cupcake bakeries that are opening up at a pretty hefty clip around here.”
June
nine-month, part-time Foster executive program is for busy senior managers, executives and other professionals looking to explore each facet of the business enterprise from an executive’s top-level view. “I wanted to sharpen my own skills and validate them, and EDP was great,” she says. “After every class I literally would download with my managers: Here’s what I learned and how I think we can apply that to what we are doing here.” So what’s next for Cupcake Royale and Jody Hall? “World domination, probably. Every street corner in every city,” she jokes. However, Hall is in the process of building a strong three-year plan that takes the new fierce cupcake competition into account. “In fact,” she adds, “one of my strategies has come directly out of the EDP class.” n
26 Business Plan Competition: Finals and Awards Banquet
5 Undergraduate Graduation Ceremony, 3 p.m., Hec Edmundson Pavilion 6 TMMBA & Executive MBA Graduation Ceremony, Meany Hall 11 PhD, Full-time and Evening MBA Graduation Ceremony 24-26 MBA Reunion Weekend for the classes of 1986, 1991, 1996, 2001 and 2006 25 All Alumni Paccar Hall Picnic, Denny Yard November 2 Business Leadership Celebration Keynote: Jamie Dimon, Chairman & CEO, JPMorgan Chase Visit foster.washington.edu/events for details and more events.
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True Grit Determination delivers Ben Mahdavi to big-time football and finance Led by determination and self-confidence, and backed by an enthusiasm for hard work, Ben Mahdavi bet his college future that he could play Husky football. It was a gamble that landed him in the National Football League, the Foster School MBA Program and, currently, his position as assistant vice president at Barclays Wealth. With just a couple of days left before his start at the University of Utah in 1998, Mahdavi (MBA 2009) forfeited his only scholarship and transferred to the University of Washington where he “walked on” the Husky field and proceeded to make one play after another like each one was the only chance he was ever going to get to prove himself. “At first people think you were probably lucky to make that play,” Mahdavi says, “but if you are ‘lucky’ often enough—then it’s no longer luck.” The transfer was a lot to risk for the son of a single mother also helping his two older siblings get through college. But Mahdavi not only made the team and red shirt his first year, he started at middle linebacker the following three years, made dozens of major
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tackles and scored two touchdowns from the defense; he was made team captain and voted MVP numerous times, won UW’s coveted Guy Flaherty Award and was drafted into the NFL. Then the injuries mounted and three seasons in, his professional football career was over. “I moved back to Seattle and didn’t really know what I wanted to do,” Mahdavi says. “I was kind of considering going into coaching.” But then a family from Mercer Island offered to help him learn how to be a business man. He worked in the retail businesses that family was a part of for three years, doing everything from folding towels to supply chain management. “I learned a lot,” he says, “and I realized that there were other things I was passionate about besides football.” With that new passion, the same selfconfidence and readiness for hard work, Mahdavi decided to pursue a career in high-level business. His first goal was to get an MBA from the Full-time Program at the Foster School. “I honestly had no idea what I was in for.
I had heard from the people I had worked for that, just like in sports, the harder you work the more successful you can become,” he says. “And if that was the same recipe for success, I was okay with that.” Mahdavi credits his mother, Julie Mahdavi, with instilling in him a strong work ethic. To help him attend UW, she worked several jobs, one of which was running the concessions at Husky Stadium. “She is my inspiration for why I work so hard,” he says. Julie Mahdavi passed away in 2008. Praising the education he received at Foster in the technical and quantitative aspects of business as well as the assistance he received writing resumes and preparing for interviews, Mahdavi adds that the team structure at Foster helped him learn a lot about people, leadership and management. It also established a network of friends he can turn to for advice, information and, perhaps in the future, collaboration. “The fact is that I am close to a lot of my classmates. They are still friends and still resources,” he says. “I really hope we all get a chance to work together someday.” n
Master Forecaster Dick Conway has long been the go-to guy for regional economic projections One of Washington’s top regional economic forecasters and economists, Dick Conway (MBA 1971) says he’s only working on paying projects about half-time now. After a nearly 40-year career—30 of them running his own firm—it’s the pro bono work he can’t resist that keeps him up to his pocket calculator in reams of data, input-output tables and forecasting models. And pro bono publico is exactly what he means: “For the public good.” He focuses his expertise on issues as publicly important, and politically charged, as tax reform and the Seattle Monorail Project. He has served for 25 years on the Washington State Governor’s Council of Economic Advisors and many other panels, committees and advisory boards, and has been quoted in national and local newspapers and journals. He says he picked up the “bad habit” of pro bono in the Peace Corps during the mid-1960s, teaching mathematics in Sierra Leone after graduating with an engineering degree from Stanford. “Lots of times I’ve gotten involved in things when I didn’t get paid but were important,” Conway grouses (half-heartedly) during a recent interview at his office overlooking Lake Union. Career launched at Foster
Conway’s for-hire career has been as publicly important and far-reaching as his hobbies—from his subscription-based economic forecast publication and major evaluations of regional and state economies to economic impact studies for Boeing, Microsoft, Weyerhaeuser and many other private companies. “Dick Conway is one of the most highly respected economists in the area,” says longtime UW geography professor William Beyers, who has worked with Conway on many highlevel economic models, impact statements and forecasts since the late 1960s. Conway’s career was launched by a chance encounter at the Foster School
when he came to campus sporting an unfocused interest in economics and needing an income when he returned to America after his third year in the Peace Corps. He had decided to try his luck in Seattle, because his family had established itself here in the 1870s and he had a deferred acceptance into the business school’s MBA Program. However, it was summer, 1968, and the campus was practically deserted. There was only one professor working in an office in Mackenzie Hall—Philip Bourque, who taught finance and business economics at Foster from 1957 to 1992. (Bourque died in 2002 at the age of 80.) “So, I knocked on his door and I told Phil what I was up to,” Conway remembers. “He was working at the time on what was called the Washington Input-Output Study. I knew nothing about this but I was fascinated by it.” Bourque couldn’t promise anything, but he contacted Conway during his final year in Sierra Leone and offered him a research assistantship. “So for two years, I got my MBA and was a research assistant and I was also a teaching assistant,” Conway says. Patterns in the numbers
The project that Bourque hired Conway and others to work on, the Washington
Input-Output Study, based on a survey of all the industrial sectors of the state, was one of the first of its kind in the nation and became the workhorse for economic forecasting studies and the “gold standard” in many academic studies. After getting his MBA, Conway worked for his doctorate in regional science at the University of Pennsylvania and finished his dissertation back at Foster, working with Bourque on the update of the state study that covered 1972 and was published in 1977. Conway became the co-author of that major economic study. From that jumping off point, Conway launched a career that became Dick Conway & Associates, The Puget Sound Economic Forecaster, 27 publications in economic journals and books and more than 300 publications and research reports. Not that it has all been smooth sailing, Conway pointed out. In 1982, after his first large private contract concluded, he gained his first lesson in running one’s own business: Drumming up customers. “I was 38 years old, single with a child and I had $78 dollars in the bank,” he says. “I was virtually broke, but then another job came along—Mount St. Helens had blown and a couple of years later the state was looking at the economics of that and I got some work then and I never looked back.” n spring 2011 33
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The Business of Persuasion From the White House…to Searle, SmithKline Beecham, Time Warner, Seagram Co, Vivendi Universal and Boeing, current Edward V. Fritzky Chair in Leadership Tod Hullin (BA 1966) brings vast communications expertise to Foster You’ve worked in three different industries and reported to 12 CEOs in six Fortune 500 global companies, yet you got your start in the White House… how do you explain this adaptability?
The public sector is a terrific learning ground for the private sector. I think the reverse is also true—in fact I recently lunched with a former senior staffer on the Hill who said he wished he’d had private sector experience earlier on. Switching industries was not as hard as I thought it would be. Once you get into the balance sheet and income statement, understand the business model, and the minds of your employees and customers, you can pretty much see the landscape. The most difficult thing was leaving the company I was with and the great teams of people I had the opportunity to work with. I left great relationships with CEOs and folks on my team, and that was hard to do.
“The one [golden rule] I swear by is: persuasion is more difficult than communication. Most large companies have communications capabilities. If you’re trying to persuade, then you need to listen in order to be able to relate to your audiences.”
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You’re always confronted with unknowns when you move, from culture and company politics, to how information flows in a company. I was always able to find a certain amount of comfort with that. How did you get your start in communications?
I had the privilege to be in the White House and work for two Presidents. I quickly learned that it’s the greatest communications platform in the world. I observed—and also participated in—the diligent work that Presidents and White House staffers perform to define the problems, examine the role of government to provide a solution and assess the pros and cons of different options. I think that’s true for Republicans and Democrats. You might disagree with the philosophy that guides specific decisions, but I think the analysis in all cases is very rigorous. I took that belief in rigorous analysis into my business career. Is there a “golden rule” for communications professionals?
The one I swear by is: persuasion is more difficult than communication. Most large companies have communications capabilities. If you’re trying to persuade, then you need to listen in order to be able to relate to your audiences. Truth, facts and reason are powerful. I reject the word “spin” because it connotes
a lack of candor. I’ve spent a lot of time trying to marry perception and reality. A factbased understanding of perceptions and reality is essential before you can start the communications and persuasion process. Incidentally, it is much easier to change reality than perception. Simplicity is essential and powerful. When communicating, most of us make it more complicated than it needs to be. It’s essential to know your audience. In order to persuade your audiences, you have to be consistent and you have to be redundant. The redundancy is the difficult part because a lot of smart people feel like if they’ve said it once they don’t want to repeat themselves.
You have been a key player in helping companies manage through various issues and crises (product tampering, product withdrawals, CEO departures, board reorganizations, acquisitions, ethical misconduct). What lessons have you learned from these experiences?
Every crisis is unique—no two happen the same way. It’s essential to grasp that nearly any problem can be escalated into a larger crisis if it isn’t addressed in a timely fashion—and “timely” is now blindingly fast in light of the moment-by-moment news cycle. The instant you become aware of an issue, it’s best to assume the worst and act accordingly. The first thing you need is as much accurate information as you can get in a hurry—which is very difficult to do. Next assemble your team and assess the impact of the severity of the problem on your company, products, shareholders, employees, customers, brand, etc. The hard part is putting a solution in place in a timely fashion, while recognizing that recovery takes time. The key to recovery is business performance. All the while it is essential to control your message. There’s no way to jump out of a hole that’s self dug. There are a lot of companies standing in tribute to that right now. Being on the inside for so many years, I definitely empathize with corporate crises. If you were to be a guest professor at the Foster School for one year, what subject would you want to teach and research?
I’ve been doing this for nearly a year—being the current Fritzky Chair has been great.
I’ve primarily been talking about things that professors have asked me to talk about relative to specific course material. But for me…I think there is precious little understanding on how much pressure lies on those in the CEO spot. In advising and reporting to a large number of CEOs,
You were the starting quarterback for the Huskies for 2 years, an Honorable Mention All American, and most valuable offensive player in the East-West All Star Game. What lessons did you take from athletics into your government and business careers?
“Every crisis is unique—no two happen the same way. It’s essential to grasp that nearly any problem can be escalated into a larger crisis if it isn’t addressed in a timely fashion—and “timely” is now blindingly fast in light of the moment-by-moment news cycle.” I watched them spend more than 50% of their time communicating and trying to persuade. And the average tenure of today’s CEO is about three years. There has been a lot of critique around CEO compensation, but you don’t hear about the compressed time frames and the amount of pressure to perform from boards, shareholders, customers and employees. The second thing I’d teach is that government at all levels, particularly at the federal level, is having a greater impact on business. Government is not good at understanding the unintended consequences of its decisions on business—and its impact on business is constantly increasing, regardless of party. Government has an important role, but at times they overplay their hand.
“Simplicity is essential and powerful. When communicating, most of us make it more complicated than it needs to be. It’s essential to know your audience. In order to persuade your audiences, you have to be consistent and you have to be redundant.”
There are some fond memories and some not-so-fond memories and that’s one of the things that sport teaches you—how to rebound from the tough moments. The value of teamwork comes into play quickly, as does knowing when to be a team leader. But overcoming adversity is one of the best lessons that sport teaches. That lesson can be learned through many different life experiences. I learned it through sports. You have to do it. Coach Owens and I talked at length about this. I got in the habit of setting a stretch goal and then: preparation, preparation, preparation. At the end of the day, execution is key—all the goal setting and preparation comes down to a moment. It’s true in politics, business and sports. Those lessons were really driven home for me. Is there something you’d like to tell 48,000 fellow Foster School alumni that I’ve not asked you?
I hope that Foster students and alumni know that they’ll graduate with a lot of great tools, and, they’re not going to have all the answers. The process continues; lifelong learning remains imperative. n
spring 2011 35
First Person
Wiring the Future of Heathcare By Barbara W. Cosgriff
As the debate over healthcare reform continues to swirl inside and outside Washington, DC, policymakers and regulators at the federal, state and local levels have proposed myriad solutions to fix what many commentators describe as an inherently broken system. In this process, many solutions have been popularized and, unfortunately, politicized. From this multitude of often controversial remedies, I would suggest distilling a viable solution with the potential for real reform. This idea posits a system that aligns disparate groups around a common goal: creating a wired healthcare system that empowers patients and payors alike to make informed decisions. Imagine a world in which a central repository exists that enables a 360-degree
view of every aspect of healthcare— including the data and results from the lab, from the health plan, from the pharmacy, from the hospital, and from the doctor or doctors—all organized around the patient. In this healthcare system, safeguards are in place that improve safety; raise the quality of care; increase access; and reduce waste—while delivering increased transparency to payors and patients. This is—in short—a wired healthcare system. But this is not some blue-sky theory, it is happening all over the country, today, through technology advances and leadership from the public and private sectors. Today’s “wired” healthcare system is based in large part on America’s longstanding pharmacy practice and a 1990 federal law enacted to wire pharmacies from end to end, nationwide—leveraging this system holds unleashed promise. Many companies today use this type of system to allow a pharmacist to cross-reference pharmacy data with medical data thereby providing more comprehensive treatment of chronic and complex conditions. The shift from the legacy healthcare system to a wired system that utilizes as its backbone the wired pharmacy coupled with tools and training, has proven to be effective in lowering costs, improving quality and increasing access. All told, wiring healthcare creates a foundational opportunity to improve the effectiveness and efficiency of our healthcare system—and minimize waste that arises from treatment and manage-
ment of complex and chronic disease, to personalized medicine and beyond. In fact, studies have estimated that efficiencies stemming from wiring healthcare could save an estimated $680 billion annually. In an overburdened system, that represents significant cost savings. Several healthcare companies are already harnessing the savings, efficiencies, and quality of care associated with a wired healthcare system that leverages the wired pharmacy backbone. Patients and payors receive the benefits associated with a wired healthcare system when they are confident medication compliance monitoring is the norm, cost-saving generic medications are widely available, and treatment regimens comply with national standards of quality care. Today’s reform debate would do well —especially for the average American—to move beyond fractious and narrow partisanship and seriously consider the benefits of building upon an existing wired foundation as a model for tomorrow’s healthcare system. America’s payors and, most importantly, patients, deserve no less.
Barbara Cosgriff is the former Senior Vice President of Public Policy and External Affairs for Medco Health Solutions, Inc. Cosgriff holds a BA in Business Administration and Accounting from the UW Foster School and an MBA in International Business from The George Washington University n
We love to hear from our alums! To that end, we occasionally feature a Foster Opinion—a forum for exploring issues and ideas relevant to the world of business. This material is not intended to represent the views of the Michael G. Foster School of Business. We welcome your comments and feedback on our blog at depts.washington.edu/foster/category/alumni.
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spring 2011