10th Anniversary of the Capstone

MBA students meet with their client representatives to kick off the start of the popular capstone Strategic Management of the Enterprise,a partnership with A.T. Kearney known as the A.T. Kearney Student Lab at CMU. This year marks the 10th anniversary of the capstone, which pairs MBA students with sponsoring companies to address real-world business problems. Corporate sponsors this year include Campbell Soup Company, Glacier National Park, GlaxoSmithKline, Hewlett Packard Enterprise and PNC, as well as Siemens, a company that has taken part in all 10 years of the course.

This article featuring the A.T. Kearney student lab first appeared as the cover story in the 2013 issue of Tepper Magazine.

Reality. Check.

From classroom to boardroom to factory floor

MBA laboratory pairs students and companies in harnessing complexity.

Jertez Hunter, MBA ’13, is no stranger to leadership under pressure. A West Point graduate, he was a U.S. Army captain assigned to an armored division in Iraq, where mission, teamwork and unit cohesion were anything but abstract concepts. Two years after returning to civilian life, he was leading a team again, this time in a more hospitable environment, and facing a challenge decidedly unlike those he’d confronted in Iraq, which involved things like herringbone suits, camel hair blazers and cashmere cardigans. Brooks Brothers, the venerable American clothier, was scouting new locations, but lacked an analytical tool that could predict with reasonable certainty how the new stores would perform. Hunter’s team, composed of students in the Tepper School and Heinz College, was given 15 weeks to come up with answers.

The general idea came quickly. The team would develop a user-friendly tool that, by dropping in a ZIP code and product line, would predict store performance based on extensive geo-specific demographic and psychographic data as well as sales figures from stores with similar profiles.

Managing the complexity was another story. For months, Hunter and his team held biweekly discussions with Brooks Brothers executives, pored over enormous data sets, wrestled over what variables were essential and how many were too much, endured the tedium of data entry, and tested, tweaked and retested their customized model. All the while, the clock was ticking.

Experiential learning is like residency for surgeons. Surgeons have to touch and operate on a patient. Likewise, these students are touching and transforming companies.
— Sunder Kekre, Bosch Professor of Operations Management and director of the PNC Center for Financial Services Innovation

A Real-World Challenge

This was no case competition. Brooks Brothers, admittedly, was confronting its new store analytics. “We always wanted to take the time, step back and do this very in-depth analysis of our new stores and how we could enhance performance and make a more predictable model of revenue,” said Diane Ellis, president and chief operating officer. It was the company’s third year as a client in the Tepper School’s capstone course, Managing the Enterprise of the Future.

And as much as its involvement was motivated by a desire to help educate the business leaders of tomorrow, Ellis and others had come to expect innovative solutions to the problems they assigned the students — solutions the company would deploy.

 With its real-world problems, tests of skill and character, demanding workloads, deadline pressure, executive oversight, high expectations and ever-present specter of error, the five-year-old capstone course is about as close as students come to experiencing life in the leadership ranks of corporate America. And that’s the point.

“Experiential learning is like residency for surgeons. Surgeons have to touch and operate on a patient. Likewise, these students are touching and transforming companies,” said Sunder Kekre, Bosch Professor of Operations Management and director of the PNC Center for Financial Services Innovation. Kekre co-teaches the Managing the Enterprise of the Future capstone with T.K. Lim, associate professor of finance and economics at the Heinz College.

Hands-on experience resonates with Joseph Raudabaugh, whose time spent in a similar B-school laboratory taught by Harry L. Davis, professor of creative management at the University of Chicago Booth School of Business, stands out as one of the most influential experiences of his academic career. “They can work in live situations and conditions,” said Raudabaugh, an A.T. Kearney partner and founding president of the firm’s Procurement and Analytic Solutions business. “It’s the mix of people [students] have to work with. Each has an agenda. Everyone has time constraints. Data may or may not be available. The expectations vary. That’s the real world, right? You can’t get that out of a case. You can only get it from working with people.”

Raudabaugh went looking for a school to help create such a course that would involve A.T. Kearney clients in 2007. More specifically, he was seeking a faculty member who would help shape it and shepherd the concept through the necessary approval processes, which isn’t always easy in academia. Along the way he found a Tepper School liaison to assist him in making the concept a reality, Carolyn Hess Abraham, executive director of corporate and foundation relations, who connected Raudabaugh with Kekre. Carnegie Mellon was one of A.T. Kearney’s target schools for its Student Lab program and was the first to embrace it. “Starting the program here was a breeze for many reasons,” he said. “One of them was the creativity and flexibility. We had maybe three meetings, and we were off and running. I anticipate there are additional opportunities to partner with CMU yet to come.”


Anticipate, Analyze, Act

Since then, the course has tested the mettle of teams of Tepper MBAs and Heinz College students who are paired with A.T. Kearney clients. The teams are given a coach from the consulting firm and asked to assess and develop novel solutions to the complex issues and problems clients bring to them. On campus, the course that had attracted fewer than 40 students in its inaugural year now enlists approximately 80 students each year, about 60 of whom are in the Tepper MBA program. In this year’s capstone course, the students tackled problems from 15 companies, including major retailers like Brooks Brothers and Costco, the global electronics firms Siemens and Emerson, and the largest provider of radiology services in the world, Virtual Radiologic.

Although corporate clients don’t incur out-of-pocket expenses, participating in the course is far from a routine exercise. The problems clients submit require high-level consideration and must be sufficiently relevant and substantial enough to motivate students. They provide access to executives willing to help guide the student teams, as well as to data and other internal resources the students find necessary to complete the assignments. Raudabaugh has little trouble convincing ATK clients to sign on.

The reason is the payoff. Companies not only get the satisfaction of helping to train the next generation of business leaders, they also strengthen their own brand within some of the nation’s best schools and more often than not receive innovative solutions to problems that they might not have come up with on their own.

“I’ve been engaged with this program for the past five years, ever since its inception. We like to challenge the students to come up with innovative approaches for business problems, especially with their out-of-the box thinking,” said Raj Khoshoo, senior vice president of portfolio management at Siemens PLM Software, which asked students to create an analytical approach to making investment decisions in a complex environment of multiple product lines with hundreds of modules and complex usage patterns. “This year, particularly, they gave us great insight into a few analytical techniques that we hadn’t thought of, and we were able to provide them with the experiential learning that, ultimately, business decisions need [with] humans in the loop.”

Virtual Radiologic’s dilemma was rooted in the breadth of its business. With some 450 radiologists covering 2,800 hospitals and reading more than 7,000 MRIs and other studies, predicting demand and optimizing resources is a challenge steeped in complexity. The company asked its student team to develop innovative ways to do both. “They really dove into the problem headfirst and provided a very rigorous set of criteria and solutions that I’m very confident we are going to deploy in our business,” said Pat Basu, the company’s chief medical officer and chief operating officer.

At Brooks Brothers, the success of previous years — in 2011, a supply chain modeling tool created by a capstone team contributed to changes made in its European and Asian hubs — led managers to compose a wish list of annual projects they’d like to address, but would likely have to find the necessary resources outside the company. Finding a way to predict with greater confidence how new stores will perform in certain locations topped the list in 2012.

All of the clients I’ve introduced to this course have come back to do it again.
— Joe Raudabaugh, Partner, A.T. Kearney

One of the biggest challenges for Hunter and his team was analyzing the expansive data sets required to forecast store performance in specific locations. The variables ranged from the geographic location of potential stores and whether they would be in a mall, town center or urban downtown location, to annual sales at existing stores, sales for different product categories, and percentage of different products sold. The model also infused with ZIP code-specific demographic and psychographic data, such as household income, number of white-collar wage earners, households with advanced degrees, consumption habits and television viewing habits. After a battery of tests, the students concluded that no fewer than 42 variables were necessary to yield an accurate prediction of new store performance.

“We quickly had an idea of how to approach the problem,” Hunter said. “But we had to do a lot of data cleansing and data gathering, before we could even do any kind of regression analysis. At the point when I realized how long it was going to take for us deliver the final product, I was a little concerned. We just had to churn through it.”


The Skills That Stick

That was easier said than done. What helped was the strong team dynamic that developed from the onset of the project. The team, which paired Tepper MBA students with students in the Master’s of Information Systems Management program at the Heinz College, invested the time to first get to know one another and inventory of their individual and collective skills and strengths. The resulting bonds, commitment and understanding proved to be crucial during the tense final days, when the all-important user interface had to be built, but they had little time to do so. “That was one of the more stressful points,” Hunter said. “But we had someone on the team who was well-versed in coding and was able to code and design the user interface in a relatively short period of time.”

Team dynamics often are the canary in the coal mine in terms of how well a capstone project turns out. “It’s why we spend a lot of time emphasizing the importance of developing a cohesive team and trying to settle differences early in the process,” Kekre said.

“The good elements prevailed,” Constantinos Englesos, MBA ’13, said of his experience on the Siemens project team. “There were different opinions. There were different backgrounds. There were different skill sets. But in the end, it was organizing and working toward a common goal, bringing people with diverse backgrounds together.”

The cooperation between the Heinz College and the Tepper School is a perfect match. From the Heinz College, you have students who specialize in technical skills. From the Tepper School, we have the future business leaders. It’s a win-win for both schools.
— T.K. Lim, associate professor of finance and economics at the Heinz College

The implications of the course have proven to be broader than imagined five years ago. It’s part of a transformation in how MBA students are trained, as well as an opportunity for students and faculty to gain an intimate understanding of the issues today’s businesses grapple with, said Kekre, who prior to joining the Tepper School faculty worked in engineering, project management and plant operations at Tata Steel, a major global steelmaker based in India. “This laboratory gives us a chance to become embedded in industry. We think about the problems firms are experiencing currently, and also what is headed their way five or 10 years from now. This helps us better train and prepare our students for the challenges they will encounter in their careers.”

If the first five years are any indication, there won’t be a shortage of clients willing to share complex problems for a chance at finding creative solutions. The course that began with Kekre and 36 students has been replicated on five other campuses, including the Massachusetts Institute of Technology, University of Chicago and University of Michigan. “If I call 10 clients, 9 will say yes, and the other one will say, ‘next year,’” Raudabaugh said. “All of the clients I’ve introduced to this course have come back to do it again.”

Brooks Brothers is one of them. Ellis said the company plans to participate again next year after finding previous student-created solutions helpful to its business operations. In fact, she said, the company expects to invite the most recent team to present its findings on new store performance to the balance of the executive team. “We asked them to do the analysis, and they took it to the next step. They built us a tool that we can continue to apply and use.”

Helping create something the company believes has the potential to improve business, Hunter said, was the highlight of his two years in the Tepper MBA program. After graduation, it’s off to Union Pacific in Nebraska and a job as a marketing manager that he has no doubt he’s ready for. “I now feel very confident in my ability to solve complex problems and deliver results.”