Like the stock market and the world economy, the marketplace for MBA talent is in constant flux. For Vanderbilt and its students, preparing for the future means keeping a constant eye on hiring trends, technological developments and geographical shifts, among a dozen other parameters. With employment figures in for the Class of 2015, Vanderbilt Business decided to look at job placement and trends in the years before and after the 2008 financial crisis.
This year’s economic environment is still evolving, but Vanderbilt’s 2015 full-time MBA graduates entered a business world viewed as stronger than any since before the recession. In fact, Bloomberg Business Week called it “the best job market in a decade.”
One sign of the rebound, according to Emily Anderson, MBA’99, director of Owen’s Career Management Center, was visible in the internships that are such a key part of the MBA program at Vanderbilt.
A full 100 percent of the Class of 2015 looking for internships had offers during the summer of 2014. Those impressive figures correlate to employment stats. “In 2010, less than 20 percent of internships turned into full-time job offers,” Anderson says. “In 2015, it was more than 50 percent.”
Where they’re going
Job offers for the Class of 2015 reveal interesting shifts and the results of where grads are accepting employment.
Individual companies help drive those geographical trends, and the most obvious takeaways in the recent list of top-hiring companies for Owen grads are the No. 1 hiring position of Amazon and the presence of firms like AT&T, Citi, Deloitte, General Electric, Hewlett-Packard, and Johnson & Johnson as the ultimate destinations of many Owen grads.
“We are impacted by individual company hiring needs and expansion,” Anderson says. “The most obvious example for Owen is Amazon’s expansion. Amazon has multiple MBA-level management development programs and is able to provide a lot of geographic flexibility for the students. They certainly have corporate functions in Seattle, but other opportunities throughout the U.S. as well because of their extensive distribution footprint.”
PLACEMENT BY INDUSTRY (2007: blue | 2011: gold | 2015: white)
Top hiring companies
Let’s begin with geography and a growing shift westward for Owen grads. Nashville remains the top city for Vanderbilt MBAs (as is typical for any national MBA program, the largest alumni base is always in its own region). New York and Atlanta have jockeyed for second place as employment destinations throughout the past decade, and San Francisco has become a steady top-five presence. Now with Los Angeles and Seattle both making the top 10, the pull in that direction is obvious.
TOP DESTINATIONS FOR CLASS OF 2015 GRADUATES
TOP HIRING COMPANIES IN ORDER OF NUMBER OF GRADS HIRED
2007
Bank of America: 6
Citigroup: 6
Deloitte: 6
Capgemini: 3
General Electric: 3
Harrah’s Entertainment: 3
Johnson & Johnson: 3
PricewaterhouseCoopers LLP: 3
2015
Amazon: 12
Deloitte: 9
AT&T: 4
Citi: 4
The North Highland Company: 4
American Airlines: 3
General Electric: 3
Hewlett-Packard (HP): 3
Johnson & Johnson: 3
KMPG Consulting: 3
Trends in operations and tech
The Amazon connection figures prominently in the visibility of operations management as a job function.
“Employment in operations has increased primarily because we are a major partner in recruiting with Amazon and they have hired a lot of students over the past three years—mostly in operations roles,” Anderson says. “There are a few other firms as well, especially in technology, that have increased hiring, but the majority of the impact comes from Amazon. They became our largest employer three years ago and will be again this year.”
Technology is, of course, a prime driver of economic growth and change, and it has had an increasing role in employment decisions. The field saw dramatic change over the past decade, with employment for graduates falling by half between 2007 and 2009, and then climbing—first slowly, then dramatically—between 2011 and 2015.
“The growth and excitement in technology has certainly led to increased interest in the tech sector, and we see more of our students heading to tech hubs in Seattle and San Francisco,” says Owen Dean M. Eric Johnson. “Our annual tech trek to visit companies keeps growing, with this year’s trek being the biggest—both in terms of the number of companies visited and students participating.”
Consulting blossoms
Gaining new skills was key to the career plans of second-year MBA student John Von Euw. A Massachusetts native who taught in New Orleans with Teach for America, Von Euw moved into administration and then decided he needed to expand his quantitative and technical skills.
“Once I got to Owen,” he says, “I decided to pivot away from education and focus my job search on strategy consulting in the private sector. I think what really motivated me was the opportunity to work for a consulting firm on projects in a number of different industries.”
Consulting, in fact, has seen a strong uptick among Owen grads after a downturn during the recession.
“Economic downturns impact consulting first,” Anderson says. “Companies shift discretionary spending away from projects they would normally use consultants for—like big software implementations. Consulting hiring out of business schools decreases.”
The bounce back was just as dramatic. By 2015, a quarter of all Vanderbilt MBAs were going into the consulting field.
“Coming out of the recession,” Anderson says, “we have changes in the regulatory environment that impact how companies do their business and may cause them to seek outside help to understand and react. I believe the Affordable Care Act in health care and the financial reform bill did impact and increase hiring for consulting firms.”
SALARY BY INDUSTRY
Health expectations
With an aging population with increasing medical needs, health care is expected to be the fastest-growing industry in the next decade. Owen’s expertise in health care management makes its students attractive to established firms and startups alike.
“The rise and growth of new firms in the industry has also increased hiring,” Anderson says. “These are not hospitals hiring, but firms like McKesson, DaVita, Cardinal Health and Medtronic, which provide products and services to the health care industry.”
Health care hiring at Owen spiked as the recession hit—perhaps because health care is seen as recession-resistant—going from 8 percent in 2007 to 19 the following year. It dropped again dramatically in 2012 and 2013, then rose in the past two years.
Attraction of finance
“We still have many students heading into finance and accounting,” Johnson says. “Wall Street beckons many students, and we had a solid group of first-year students visiting the banks this fall. Even so, fewer are focused on traditional Wall Street firms. Rather, we see more students taking finance roles in technology and health care.”
In parsing the numbers since 2007, Anderson adds, “I think the core number of those interested in investment banking was stable. In my observation, student career aspirations did not change that dramatically due to recession. Students continued to seek MBAs and use the degree to redirect their careers in line with their interests.
“Financial services recruiting decreased during the last downturn,” she says. “That was due to slower recruiting but was also impacted by graduates deciding to look elsewhere.” Those students who were marginally interested or for whom finance was a second choice chose other industries and functions, she says. “I believe Owen, like most MBA programs, has seen those students gravitating to technology and consulting.”
SALARY BY GEOGRAPHY
What’s ahead?
Like the class before them, the Class of 2016 saw a full 100 percent of those seeking internships accept one. Approximately half of those students returned to campus in August having received full-time job offers from their internship companies. By graduation, that number had soared. (In 2015, nearly 90 percent of the graduating class had received job offers.) Current trends in location, hiring companies, metro areas and industries are expected to continue for the Class of 2016.
Call it buzz. Call it sizzle. Call it Music City mojo. By almost any measure, Nashville is an It City. Publications from The New York Times to GQ, Southern Living to Rolling Stone and Bon Appetit to Business Insider have sung its praises.
Revitalized shops and restaurants along historic Broadway reflect in a panoramic view of the new growth in downtown Nashville.
Our branding may still have country music at its core (and given the long, loving establishment shots airing weekly on the ABC series that bears its name, who’s complaining?), but it now includes professional sports, the health care and automotive industries, world-class education, fine dining, upscale downtown living and an explosion of entrepreneurship. Combine those with a reputation for safety and civility, and you’ve got everything any convention and visitors bureau might want.
“We have all the assets of a growing, vibrant city,” says Country Music Association CEO Sarah Trahern, EMBA’04, “and we’ve been able to hold onto the intimate business environment we had before.”
Sarah Trahern, EMBA’04, says that the tie between business and the music industry is one of Nashville’s strong points.
Owen Dean Eric Johnson, who returned to the city after 14 years at Dartmouth College, says the changes were almost like Rip Van Winkle falling asleep. “In coming back, everything was dramatically different,” he says. He cites the Nashville Predators and Tennessee Titans, both of which began play in Nashville in 1998, as well as the Schermerhorn Symphony Center, opening five years later, as among the keys to a re-emergent downtown. The 1994 lifting of a ban on most downtown residential development contributed to transformations like that of 12 South, which Johnson saw go from “a pretty unsavory place” into “the hottest, coolest thing ever.”
Johnson came back to a business school whose people and programs are an integral part of the city’s transformation. After all, while affordability, climate, far-sighted governance, and attractiveness to a young, upscale demographic all play a part, a great business climate is crucial. A recent Gallup poll ranked Nashville in the nation’s top five metro areas for job growth, and CNN Money called it one of the five “best cities to launch a startup.”
Nation’s health care manager
A key component is health care, and there are few stronger examples of synergy than Bernard Health, conceived by Alex Tolbert, JD/MBA’07, in a health law class. The Nashville-based company offers health care planning and advice to individuals and corporations.
Alex Tolbert, JD/MBA’07, combined two of Nashville’s strengths, health care and entrepreneurship, when he founded Bernard Health.
Attracted to the city while visiting his brother, who attended Vanderbilt, Tolbert “got really passionate about the misalignments in health care” while at Owen. He focused on health savings accounts, and when someone asked how he could start a business without raising initial outside capital, “I said I would get my insurance brokerage license and start calling on employers in Nashville to help them understand how HSAs might work for them and their employees,” he says. Bernard became a reality during his last year at Vanderbilt, and he is quick to praise the school’s atmosphere.
“I don’t think it should be discounted, having an environment that really encourages entrepreneurship and experimentation,” he says, “and having cheerleaders among the professors, who bring students together with entrepreneurs who tell stories about how they did it. That’s a really big deal.”
The Nashville area is home to more than 300 health care companies that extend the city’s reach nationwide, Johnson says. The dean, who also is the Ralph Owen Dean and Bruce D. Henderson Professor of Strategy, says, “Many cities have world-class health care, but what’s really different about Nashville is that we’ve become a city that manages health care for the whole country, in a quiet way that the average person in Columbus or Kansas City really wouldn’t think about.”
Health care strategy is a must for businesses and individuals alike, and the Owen School’s role in preparing industry leaders since launching its Health Care MBA in 2005 makes it a key player.
“We fundamentally believe that health care has become a topic that’s important for all managers to understand,” Johnson says. “Whether you work at GE, Exxon or Amazon, you’ve got to know something about it because the health care equation in the U.S. and what it means for corporate America is changing.”
The industry’s reach and buzz help feed Nashville’s attractiveness to the best minds, Tolbert says. “Interesting people like to work on interesting problems. We’re attracting and keeping people here, and I like to think our growth and success are a good thing for Nashville.”
(Continued below slideshow.)
High-rises, restaurants and eclectic shopping thrive in the area known as the Gulch.
Nashville now has two major league sports teams. The Nashville Predators brought the 2015 Stanley Cup Playoffs to the Bridgestone Arena.
One alternative to downtown traffic and parking rates is B-cycle Bikes, a bike-share system.
The neon lights are bright on Broadway. The once-avoided area bustles with activity almost 24/7.
The Gulch has a reputation as one of Nashville’s hippest areas. It mixes residential living with cool retail, dining and entertainment choices.
Hill Center Green Hills was one of the area’s first mixed-use projects. It combines retail, dining and office space with an emphasis on walkability and neighborhood culture.
Lower Broadway
Power of connectedness
The possibilities of a wider back-and-forth between industries are part of the approach of Van Tucker, EMBA’96, a consulting strategist and entrepreneur with a background in banking and finance. She’s now CEO of Fierce Company, which helps creative companies build business infrastructure around their products or ideas.
“The CEO of a young clothing company can learn from a health care CEO running a multimillion-dollar company,” she says, “and that health care executive can learn from that young clothing company about connectedness and authenticity.”
Tucker is also CEO of the Nashville Fashion Alliance, a trade association for the city’s burgeoning fashion industry—an industry driven by the city’s attractiveness to young, educated professionals. She cites yet another example of synergy in the way the group draws inspiration from the music industry.
“In the 1950s, entrepreneurial visionaries like Owen and Harold Bradley and Chet Atkins believed the creative spirit could be nurtured in Nashville and an industry outside the chaos of New York and Los Angeles could thrive,” she says. “They started publishing companies, world-class recording studios, record labels, the CMA. We’re the largest concentration of music industry jobs in the U.S. because of their vision. That’s our vision for the Nashville Fashion Alliance—to nurture the infrastructure necessary to support and sustain fashion industry companies.”
Business and music
The CMA’s Trahern can attest to the success of the Bradley/Atkins model. Nashville’s history as a seat of government and education goes back to the 19th century, but country music is the foundation of its reputation. While the economics are tricky in an era of downloading, the brand has never been stronger. The genre is played on 2,200 radio stations, and the CMA’s three major network television specials get great ratings. Those, along with the series Nashville and the presence of Blake Shelton and Keith Urban on The Voice and American Idol, respectively, all contribute to the city’s image. Extending that reach is among Trahern’s main goals.
“I love being able to spend time anchoring the CMA and country music into the fabric of the community as a whole,” says Trahern, who is also a board member of the Monroe Carell Jr. Children’s Hospital at Vanderbilt. She cites the work of Dr. Jeff Balser, Vice Chancellor for Health Affairs and Dean of the School of Medicine and Vanderbilt Medical Center in helping the CMA create Instrumental Health Care, which gives musicians and songwriters the opportunity to get health insurance.
“That town-and-gown kind of thing, unique strategic partnerships, is a Nashville strong point,” she says. “What’s more, banks support Music Row No. 1 parties, and the CMA has, in turn, created our foundation and given over $8 million dollars to get instruments back in Metro schools. It’s a way we give back to the community that’s given so much to us.”
Success draws talent
Nashville’s mix of creative talent, established industries and capital sources makes it attractive to startups, says Vic Gotto, MBA’02.
Like Tucker, Vic Gatto, MBA’02, CEO of Jumpstart Foundry, a health care business accelerator, and a partner in Solidus, an investment partnership, sees the city’s future in youth and creativity—places where Vanderbilt is well-positioned.
“Nashville is the place every talented, highly mobile person wants to move to these days,” he says. “I think startups also migrate to where the ecosystem is most conducive to success. In Nashville, we have a very strong mix of creative talent, established industries and capital sources. While it is likely true that San Francisco and New York have more assets, Nashville has grown to be in the next tier of three or four cities that are slightly smaller and friendlier but almost as supportive of startup companies.”
The city has, in fact, reached a point of critical mass, he says. “All of this talent flowing into our city creates a self-fulfilling dynamic in which great startups are able to hire very strong people, have success and then attract more talent into Nashville.”
It’s a dynamic that established companies appreciate as well. Bridgestone Americas, long a Nashville presence, announced last November that it would relocate its headquarters and move three out-of-state businesses to a new facility downtown, ultimately installing more than 1,700 employees in the vibrant, growing SoBro district.
“The fact that many bright, capable professionals call Nashville home is an advantage as we look to expand our workforce and recruit new talent across all of our business lines and support functions,” says Andrew Honeybone, MBA’04, the company’s vice president of talent acquisition. “Between now and the end of 2017 when we move into our new headquarters, we will be filling several hundred professional positions, so having an educated talent pool locally is very beneficial to our overall recruiting efforts and long-term talent strategy.”
It helps that so many regional firms weave themselves into the structure of secondary and post-secondary education. Jennifer Hill, a 2015 MBA for Executives graduate, is manager of process control engineering at Nissan North America in Smyrna, Tennessee. Hill is adamant about reaching out, particularly to young women and encouraging STEM careers.
Is Nashville the new auto capital of the country? Ask Jennifer Hill, EMBA’15, who works as a process engineering manager at the Nissan Smyrna assembly plant. In 2006, Nissan moved its entire U.S. headquarters to the Nashville area.
“I am fortunate to work for a company that supports the ecosystem of fostering good talent,” she says. “I believe Nissan understands it is important to start in the community and influence the upcoming generation.”
The It City appellation is one that resonates strongly with her.
“It’s well-deserved,” she says. “I am a firm believer in the power of diversity, and that is an essential characteristic of Nashville. Focusing on higher learning initiatives and career opportunities is essential to the city’s success, and we are on the right track.”
Absolutely on fire
The confluence of industry and culture and the influx of people that makes Nashville a truly multidimensional and rapidly growing city provides challenges along with the opportunities.
“For the hospitality industry, it’s a challenge to keep up with the growth,” says Rich May, EMBA’87, a food and hospitality consultant and investor whose M Street Entertainment and JHS Holdings represent some of the city’s best local restaurants, including Amerigo, Frothy Monkey, Whiskey Kitchen and Virago. “Although the market invariably finds equilibrium over the longer term, the pool of entrepreneurs is absolutely on fire.” May says that will abate somewhat as the hit rate inevitably subsides, but “it currently provides a refreshing and invigorating jolt of life to the city’s growth and reputation.”
Helping companies negotiate those challenges is something Johnson sees as a clear part of Owen’s role. “We see tremendous opportunity partnering with companies to supply their management needs,” he says.
Veteran hospitality entrepreneur Rich May, EMBA’87, is an investing partner, consultant and adviser in local coffeehouse Frothy Monkey and other restaurants in the region.
He points to the Nashville Entrepreneur Center as a great vehicle to build the school’s entrepreneurship offering. “In a uniquely Nashville way, we do a very good job of partnering with the venture community, the startup community and many of the large companies in town to build a great ecosystem our students can participate in,” he says. He cites, too, the school’s immersive experiences, “where MBA students may spend a week on Wall Street, or in surgery suites or insurance companies, gaining a thorough understanding of what the business means where the rubber hits the road.” (Read “Being There” for more about immersion.)
Organizations like the Nashville Health Care Council’s Fellows Program, Leadership Music and Leadership Nashville provide educational and networking opportunities, and Johnson says, “really leverage the strengths of what’s here in Nashville and enable us to fight way above our weight class as a city.”
The ties between Owen, the city and the wide-ranging industries and demographics that comprise it seem to undergird the sound basics behind Nashville’s image.
“Cool is fleeting,” Tucker says. “Well-run businesses stick around and have a sustainable economic impact. Someone said to me recently that the thing about being an It City is that you have to keep coming up with ‘Itness.’ I’m proud of all of the press Nashville is garnering, and it’s certainly warranted, but the real quality has always been the genuineness and connectedness we all share to make Nashville a great place to live and work.”
May echoes her words. “Owen is neither the largest nor the oldest B-school out there, but it may very well be among the most tightly knit,” he says. “Its conscious effort to promote and maintain engagement augurs well for both the school and the city.”
Tolbert says he’s extremely bullish on Nashville. “We’ve got so much going for us, and I think our motto at this point ought to be, ‘Just don’t screw it up.’”
Craig Lewis had been the Securities and Exchange Commission’s chief economist for just two months when a federal appeals court threw out an SEC rule that would have given investors more power to oust corporate directors. Lewis had spent 18 months at the SEC as a visiting academic fellow, and knew such a ruling was possible, but the July 2011 ruling was nevertheless a watershed moment.
The court issued what The Wall Street Journal called “a harsh rebuke” to the agency, essentially saying its analysis was inadequate and short-sighted.
Craig Lewis
“That helped set the tone for my tenure,” Lewis says of the so-called proxy-access rule. “It was the catalyst for beginning to rethink the role economists needed to play in rule-making, to get them involved early and make economic analysis an integral part of the process.”
Lewis served three years as the SEC chief economist before returning to Vanderbilt in July. Lewis, Owen’s Madison S. Wigginton Professor of Management, can look back on a tenure that shifted significant power and enhanced participation in SEC rule-making to a dramatically beefed-up staff of economists.
“I had to effectively certify whether the economic analysis was up to snuff and we were able to significantly contribute to the process. That has led to a number of big wins for the agency,” he says. “While I was chief economist, there was never a rule that was successfully challenged on the basis of the economic analysis, and the rules that are still coming out today are very robust in their economics.”
The experience, says Lewis, “will benefit both my research program and my classroom teaching in a number of important ways.”
The SEC kept calling
His wide-ranging research interests include corporate financial policy, capital formation and asset pricing, as well as convertible debt financing, stock market volatility and herding by equity analysts. But the catalyst for his tenure on the SEC was a paper he’d written on shareholder reaction to class action litigation. SEC economists invited him to present his research, then asked if he might be interested “in coming to visit for a year or two.” With two children in high school, he declined, telling them “it might be interesting” when he and his wife, Tari, became empty nesters in two years.
“Two years later they called to see if I was still interested,” he says. He presented another paper and this time accepted their invitation to join as an economic fellow. In that role, beginning in January 2010, he served as an adviser on policy issues and brought analytic tools to bear on the derivatives market and violations of securities laws. In May 2011, SEC Chairman Mary Schapiro offered him the post as chief economist and director of the Division of Risk, Strategy, and Financial Innovation, a think tank and the SEC’s first new division in 37 years.
Calling him “a distinguished economist with a clear understanding of the complexities of financial markets,” Schapiro said at the time that Lewis would “help to inject strong data-driven analysis into the SEC’s decision-making process.”
At the end of his D.C. tenure, Lewis’ colleagues and staff honored him with a farewell reception. Above, Lewis with his boss, SEC Chair Mary Jo White.
His job, overseeing the area that performs the economic analysis that accompanies all SEC rule-making, “looked a lot like that of the dean of a business school,” he says. “It was one of managing business processes and project flow, and making sure we were hitting our deadlines and meeting our obligations.” The work was “all-consuming. The hours were massive,” he says, something he attributes to his own competitive nature as much as the task itself. “I worked a lot because I wanted to be successful. I’m hypercompetitive.”
Much of that work had to do with SEC implementation of the 2010 Dodd-Frank Act, which gave the federal government enhanced regulatory power over the financial industry in the wake of the financial turmoil that followed the 2007-08 subprime mortgage crisis.
In addition, under the 2002 Sarbanes-Oxley Act, the SEC is mandated to review corporate 10-K reports, the annual disclosure forms filed with the SEC. Lewis brought textual analysis to bear on the process of determining whether firms found to be fraudulent “use different vocabularies than nonfraud firms” in the management discussion and analysis sections of those reports.
“We do find evidence,” he says of work he did with Gerard Hoberg of the University of Southern California, “that there’s something of a verbal shell game going on where you talk about certain elements in an attempt to deflect attention from other problems the firm might be experiencing. They tend to overemphasize benign elements in their annual reports and underemphasize things that are probably causing the problems that motivate them to engage in some kind of accounting shenanigans.”
Proving the power of data
The credit default database is one manifestation of the efforts he led to incorporate more rigorous analytical techniques into the rule-making process. “It’s an example of a data analytic initiative the division took on that turned out to be very influential in the way various rules were drafted. That was one of the first times people in some of the rule-making divisions saw the power of data,” he says. “We were able to offer financial thresholds for rules that were significantly different from what was proposed but were completely reasonable once you actually saw the data.”
Analysts, for example, determined a dollar figure for the amount of annual transactions that would qualify someone as a dealer in the credit default swaps space. “Delivering real, meaningful analysis that fundamentally changed rules was really quite a big step forward for the agency,” he says.
Students in Lewis’ Derivatives Market class were the first beneficiaries of his SEC knowledge.
All of this took a great deal of manpower. Congress, determined that Dodd-Frank would lead to change, “put pressure on the agency to hire additional economists,” according to Lewis. During his tenure, the number of employees in the division increased from 60 to nearly 120 and the division itself was renamed the Division of Economic and Risk Analysis.
Janet S. Schmautz worked with Lewis as his confidential assistant during his time as chief economist. “Others can attest to how Craig Lewis built the division based on technical ability. As his confidential assistant, I can attest to how he developed the division using interpersonal skills,” she says. “He brought everyone along with a sense of camaraderie and good will, gaining him universal respect and admiration.”
A certified public accountant who work-ed early in his career for Arthur Young & Company, Lewis earned his master’s and doctoral degrees from the University of Wisconsin–Madison. He joined the Vanderbilt business faculty in 1986 and has won a number of awards for teaching excellence. A frequent speaker and guest lecturer at industry and academic events around the world, he is an expert on corporate financial policy and asset pricing.
Front-row seat
His SEC experience gave him new knowledge about his field and himself.
“One of the great things about being there is the rate at which you learn,” he says. “I would argue it is very similar to that first year when you’re in your Ph.D. program. I have a much better sense of what’s going on in the financial world. You think that after spending 20-plus years as a finance professor you have a fairly good idea of how markets work and the subject matter that you teach in class. I was quickly disabused of that notion. I realized that there is a lot more that I didn’t know than I knew.”
The increased knowledge and contacts will have a direct effect on his teaching.
As head of the SEC’s Division of Economic and Risk Analysis, Lewis oversaw the reorganization and expansion of the division as the breadth and complexity of its activities increased.
“I had a front-row seat to a lot of important events right after the financial crisis,” he says. “I’ve had conversations with folks who are newsmakers—Ben Bernanke, Jack Lew, all the principals of the large federal regulatory bodies—and those experiences were quite interesting and fun. I think the students will enjoy just a little bit of color around how financial regulators implement the Dodd-Frank Act, for example. All of those things, and the ability to bring in new types of guest speakers to the classroom, are a direct benefit of that experience.”
Lewis also can continue to watch his SEC accomplishments play out. In July, for instance, the SEC adopted amendments to rules governing money market mutual funds, making structural and operational reforms.
“At the time, it was almost a guarantee that somebody was going to challenge that rule. We’re still waiting, but it looks like it is not going to be challenged in court, and that the industry is going to accept the rule as is,” he says. “That, to me, is in large part a vindication of economic analysis, because the economics changed that rule in a very fundamental way.”
Leadership is as much art as science. Its components can be studied, but to see it in practice is to develop an appreciation for the intangibles that turn those components into success. In training not just executives but leaders, Vanderbilt’s Owen Graduate School of Management has long provided both practical and personal lessons.
Vanderbilt was pivotal in the lives of each of these alumni. What they drew from their experience is as varied as their personalities and backgrounds, but all built on their time at Owen while advancing careers that are challenging and successful.
Flight Plan on Course
Paul Jacobson, MBA’97 Executive Vice President, Chief Financial Officer, Delta Air Lines
Career Path Milestones:
Senior VP of Finance, Treasurer, Financial Analyst, Delta
Paul Jacobson, MBA’97
The best career decision Paul Jacobson ever made, he says, was “ignoring Peter Veruki’s advice.”
There may be a touch of humor in Jacobson’s statement about the legendary former head of Owen’s career center, but the story is indicative of the way Jacobson has always dealt with roadblocks to his dreams. New at Vanderbilt, he met with Veruki and the placement staff “to tell them that my goal was to get a job with an airline. Peter spent two years trying to talk me out of it, saying I should think about Wall Street.”
But Jacobson had dreamed of flying since boyhood, and when childhood asthma and a lack of resources grounded that goal early on, the goal of working for an airline took its place. By the time he got to Owen, he had earned his pilot’s license and a degree in aviation management from Auburn. When the closest aviation job he could find was with McDonnell Douglas in St. Louis, he decided, “getting an MBA would open some doors.”
Owen did just that.
“There’s just something about following your passion that will always lead to happiness.”
“I learned a lot about finance and accounting, but most important, how to think critically,” he says. “On the softer side, with such a small class and collaborative culture, I learned a lot about working in teams. That’s not a skill everyone has.”
He also learned from Clinical Professor of Management Fred Talbott’s communications class. “To this day,” he says, “the most nerve-racking project I have ever undertaken was his five-minute stand-up comedy routine. I’ve never felt more exposed.”
Lifelong overcomer
While Veruki’s warning had some merit (“I still owe him one for bringing down the average salary from that class at first,” Jacobson says), Jacobson landed at Delta, starting as a $40,000-a-year financial analyst. He was the firm’s treasurer at 33 and its chief financial officer at 40.
His rise to CFO, he says, came in part because he followed a passion for capital markets, learning enough to make himself invaluable and a natural for the post. “I like to say that they promoted me by default,” he says.
As a lifelong overcomer, he is grateful for the bad as well as the good the job has offered.
“It’s not about achieving perfection,” he says. “It’s about getting things done and steadily improving. I spend a lot of time with the new MBAs at Delta each year. I try to instill patience into them. Everyone is looking for rapid advancement and is often chasing titles. I try to tell them that it is the experience you are getting that is going to get you ahead in the long term, and to try to stay focused on that.”
Major challenge
“The stakes were never higher than when we were taking the company through the bankruptcy process,” Jacobson says. “I was fortunate to be part of a laser-focused team with a clear strategy for turning the company around. I came out of the process with a much deeper sense of capital stewardship, and it has helped fuel our desire to change the history of this company and the industry that it is in.”
These days, when he talks about Veruki’s advice and his own humble start at Delta, he adds a qualifier—“I graduated first in my class for getting exactly what I wanted out of a Vanderbilt degree.” The lessons of his life figure prominently in his worldview and the things he passes along to those setting out on their own paths.
“There’s just something about following your passion,” he says, “that will always lead to happiness.”
The Thing That Gets You Excited
Adena Friedman, MBA’93 President, Global Corporate, Information, and Technology Solutions, NASDAQ
Career Path Milestones:
Chief Financial Officer, The Carlyle Group
CFO/Vice President for Corporate Strategy, NASDAQ
Adena Friedman,MBA’93
“The key to great leadership is that you don’t pretend to know every answer,” says Adena Friedman, president of global corporate, information, and technology solutions, NASDAQ in Washington, D.C. “If you’ve got the right voices around you and you’re listening to them, you don’t have to feel alone in making decisions, even when they’re staring at you.”
That mix of discernment and experience were part of her Vanderbilt education, reinforced particularly, she says, by Professor of Management David Rados. “He was our case study professor in marketing and he was a very hard teacher—just cutthroat—and I loved it. You had to be prepared. We did product management, which I ended up doing for the vast majority of my career.”
It was a key component of a period made all the more important by the fact that she was fresh out of college.
“What Owen got was a very enthusiastic, somewhat opinionated, higher-energy person,” she says, “and what they pushed out the door was a business-oriented thinker able to turn soft skills into hard skills and apply them to an industry I really wanted to go into.”
From researcher to CFO
Friedman joined NASDAQ, rising from researcher to CFO in 18 years. Key challenges came when she was given NASDAQ’s $100 million data business (which grew to $250 million) and then oversight of corporate strategy as well.
“The key to great leadership is that you don’t pretend to know every answer.”
“Suddenly I’ve got to find a way to bolster the trading business and expand in new ways. I started looking at merger and acquisition candidates on the trading side, which I’d never done before,” she says. “Our CEO, Bob Greifeld, put a lot of faith me and it was a lot of fun.”
She was key in the acquisition of Brut, a relatively small but important electronic trading system, and of INET.
During her time there, NASDAQ failed in attempting a hostile takeover of the London Stock Exchange, which she views as a key learning experience. “We learned a great deal about political and cultural sensitivities in addition to the structural complexities,” she says. “That helped us do better the next time around when we purchased OMX, which was a far more strategically aligned asset than London would have been.”
Chaos and decisions
She faced trial by fire when NASDAQ realigned its business following collusion charges after a 1994 study by Owen professor Bill Christie and Notre Dame’s Paul Schultz indicated that the exchange’s market makers inflated trading profits. Friedman was among seven of 14 vice presidents retained in the reorganization in a period marked by increased workloads and chaos.
“I asked my mentor what I should do. Should I stay?” she says. “He said, ‘You’re a survivor. Why would you leave now? The best days are in front of you.’ He was totally right.”
She did stay at NASDAQ and rose to CFO. She left NASDAQ in 2011 to serve as CFO of The Carlyle Group, but recently returned to NASDAQ. As president of the exchange’s information services, technology solutions and corporate client group business segments, Friedman directs strategy and operations, as well as has financial responsibility for those businesses.
Her experience prompts two pieces of advice for current students.
“Take a chance,” she says. “Don’t be afraid to try something new and different even without a clear understanding of the path it might take you down. Find the thing that gets you excited and it will probably take you in the right direction.
“And don’t be too greedy too young. Don’t turn down an opportunity because it doesn’t give you enough money right away. I probably took down the salary average for Owen in my early years with NASDAQ, but I never regretted it because the opportunities that came my way were terrific.”
Making a Business Leader from an Engineer
Steve Gruver, Executive MBA’01 Co-CEO/Owner, Orchid International
Career Path Milestones:
Manufacturing Engineer, Grumman Allied
Steve Gruver, Eexecutive MBA’01
Steve Gruver knew the value of mixing school and work. He’d worked for the local Grumman factory while attending high school and the Pennsylvania College of Technology. While earning his bachelor’s degree in mechanical engineering at the Rochester Institute of Technology, he worked for Grumman through a co-op program.
It was eight years later that Gruver, now running his own business in Mt. Juliet, Tenn., discovered a different mix of school and work. Gruver allowed a group of Vanderbilt Executive MBA students to use his company, Orchid International, as the subject of its final strategy project. He wasn’t prepared for what happened next.
“I worked closely with them,” he says. “I was impressed with them and the tools they were using to analyze our company. The group’s final presentation blew me away. After that experience, I was sold. I needed to try to get into that program.”
Gruver’s 2001 Vanderbilt MBA for Executives turned him from an engineer into a business leader just at the right time.
Irresistible opportunity
After graduation from RIT in 1989, Gruver had overseen manufacturing engineering at Grumman’s South Carolina plant, but was looking for something more.
He found it when he met Grant Bibby, an engineer who had recently started a small automation company. Gruver left Grumman, the two joined forces, and six months later, he was operating Orchid’s U.S. sales office out of his apartment.
“Looking back,” he says, “it does seem like it was a big risk, but at the time, it didn’t. I could not resist the opportunity to grow a business from the ground floor.”
Orchid originally provided custom automation. The firm designed and built quick die change systems for smaller presses and tooling, primarily in the appliance industry, then moved into other automation for metal stamping.
“Immediately apply what I learned made the process very enjoyable and rewarding.”
“Soon we were designing, building and installing large-scale automation systems for major automotive manufacturers,” he says. In 1994, the firm acquired a metal stamping operation and moved it to Tennessee. The facility attracted the team of Owen students and led to Gruver’s own Executive MBA.
Immediately applicable
When he applied to Owen, Gruver’s metal stamping and automation company was dealing with investors, acquisitions and an eventual realignment. “The majority of my time was spent growing and managing the business,” he says. “An executive MBA program made good sense.” Eventually, three other Orchid executives earned Vanderbilt business degrees as well.
“It was challenging to balance the workload, but immediately applying what I learned made the process very enjoyable and rewarding,” he says of his Vanderbilt education. “The class was divided into small groups. As a team, we worked very well together and the team provided a support system to get us through the difficult and challenging times.”
He says the knowledge gained through Ray Friedman’s Organizational Behavior, Germain Böer’s Cost Accounting and a strategy project with Rick W. Oliver was especially valuable. “Understanding accounting principles was extremely important as a business owner,” he says. “Germain had a way to teach this in very simple and basic terms that made sense.”
In 2004, Orchid sold its automation business to focus on metal stamping. The 2008 economic downturn further focused its business and prompted use of the skills and teamwork Gruver had polished at Owen.
“It forced us to consolidate and get very lean,” he says. “We had reached $180 million in sales with 800 employees. We scaled back and consolidated work to just two locations in the U.S., with $70 million in sales and three hundred employees.” Today Orchid is more product-focused and further diversifying its customer/industry base to be less affected by industry economic downturns.
“My biggest takeaway on my career journey is my appreciation and recognition for the people I met along the way and for the people who support our business,” Gruver says. “There is such power within a group of people working together toward a common goal. People have ideas and ambitions and want to contribute and make a difference.”
The Leader She Chose To Be
Cindy Kent, MBA’99, MDiv’01 President and General Manager, Drug Delivery Systems Division, 3M Health Care
Career Path Milestones:
GM and Vice President Gastro/Uro Therapies, Medtronic,
Marketing Manager, Eli Lilly
Cindy Kent, MBA’99, MDiv’01
Cindy Kent was prepared to begin work on dual post-graduate degrees in law and business when her career services director at Eli Lilly called her into his office. Kent had turned her industrial engineering degree into early success with Lilly and now she was ready to take a big step forward. The meeting came after the company put her through a battery of assessments.
She recalls that he said her tests showed she had all the right skills to succeed in their executive program, but that her empathy component was off the charts.
“Have you ever considered the seminary?’” he asked.
There’s no way I can do three degrees, she thought. So she decided to set aside law school.
“Leadership means being a balanced citizen.”
The senior vice president of human resources later told her, “We think this MBA/divinity combination will nurture your leadership. People follow you and we believe your religious leanings will make you a better leader overall, not just a better business leader.”
Kent looked at several schools before choosing Vanderbilt. “When I visited other campuses, everyone told me how competitive they were, how cognizant they were of the rankings,” Kent recounts. “We didn’t have that as much at Owen. It was a nurturing environment where I could learn and thrive as it shaped me as a business leader.”
She calls the workload of pursuing dual degrees “maddening”—and says she regrets missing out on socializing—but the workload made her the first ever to earn the dual MBA/divinity degree at Vanderbilt.
No casualties
She is proudest not of her rapid advancement at Lilly and then Medtronic, but rather that her success was “never because I left casualties in the wake. I think my dual degree and the fact that I was at Owen at all was a reflection of the type of leader I have chosen to be.”
Always one to embrace work-related challenges, Kent wrestled instead with career changes.
“Some of the hardest and best decisions I ever made involved leaving jobs and companies I absolutely loved to take new jobs and get new skills in my toolbox,” she says. “I didn’t leave because I was mad or because I wasn’t getting what I wanted or needed. I just realized I was way too comfortable (or perhaps even a bit bored at times), and that’s my signal that I’m probably ready for a change. Part of that is, ‘Do you want to be a good leader in that specific setting or do you want to be a great business leader in general?’ If it’s the latter, then it may require different experiences that your current role cannot provide.
That wider calling has taken Kent into the community and prompted her to nurture the leadership potential in others.
Balance of business and divinity
“I spend significant amount of time mentoring others,” she says. She got involved with the Girl Scouts, high school mentoring and STEM programs in her 20s as an opportunity to lead and mentor girls and young women. Currently, she and her husband are establishing a charitable giving fund, and Kent remains active in the ministry as well.
She is looking always for the kind of balance she was able to bring to the seemingly disparate degrees of business and divinity, balance she began practicing at Vanderbilt.
“Metaphorically, at least, I kept my Bible close at hand when I was in business school,” she says. “Then, when I was in the Divinity School, I’m there with my calculator. Leadership means being a balanced citizen. Every day we see examples of business leaders who’ve made ethically poor decisions. First on my list of guiding principles—a list that I have kept since my first manager role—is ‘Integrity above all else.’ I have honestly never had to compromise my ethics and personal values. I feel like I’ve been more rewarded and personally satisfied for not compromising.”
Turnaround Man
Geoff Walker, MBA’94 Executive Vice President, Fisher-Price Global Brands Team
Career Path Milestones:
Senior Vice President and General Manager, Mattel Europe
Vice President-Marketing, Wheels, Entertainment and Games divisions, Mattel
Geoff Walker, MBA’94
As a young marketing executive at Mattel, Geoff Walker found himself heading cross-functional brand teams with senior-level representatives of design, engineering and packaging, among others.
“You don’t have direct authority, but you have the responsibility to drive the business,” he says. “How well you do that defines how successful you’ll be. I was able to develop unique management skills while at Owen; much of your success there is based on how well you work with teams, since the case work and projects are mostly team-based.”
Hot Wheels to Europe
That was just one of the ways Owen helped prepare Walker for a career track that now has him leading worldwide strategy and development for Mattel’s Fisher-Price division. The turning point in his career was an international assignment. Following success in turning around the Hot Wheels brand, he was given a major new challenge and moved to Europe.
“While I don’t mind failing, I love to develop a culture of winning with people who will also take risks.”
“Even though it was considered a lateral move, going there was the best decision. The role really stretched me,” he says. “I dealt with the nuts and bolts of running a business from core, developed markets like the U.K. to opening Russia and growing emerging markets in Eastern Europe. It got me out of my comfortable marketing zone. Ultimately, it taught me a lot about owning who I am as a leader.”
The task was as challenging as anything he had ever undertaken, but it suited his personality.
“I’m aggressive,” he says. “I make bets, and while I don’t mind failing, I love to develop a culture of winning with people who will also take risks. Some people want to work on the brands that are growing. I want to be on the turnaround brands. They are a lot more rewarding and fun.”
Beyond child’s play
His current position pulls together the marketing and product development culture from Mattel headquarters in El Segundo, Calif., and the cross-functional leadership he practiced in Europe. With Fisher-Price in a turnaround mode, Walker has already set in motion three key strategies for the company: designing more innovative products, making the Fisher-Price brand more meaningful to the millennial mom and globalizing the brand. “About 65 percent of the company’s sales now come from the U.S., but the majority of growth is going to be fueled outside the U.S.,” he says.
Walker’s career has included successes in virtually every aspect of the company’s toy and game businesses. He cites the business basics he learned at Vanderbilt as an asset he has applied throughout his career.
“You have to deal with a wide variety of situations when running a business,” he says, “and as you encounter complex problems that require clear or creative thinking, you’ll find yourself drawing from the strong foundation you acquired through the coursework and classmate interaction at Owen.”
His advice? “Seek as many experiences as you can.”
For David Owens, innovation on a personal level can be hard-wired.
“I am genetically an engineer,” he says. “My wife remarked one day as we were traveling, ‘Why do you always have a bag full of wires when we go on vacation?’ It’s just always been part of my identity.”
On a business level, innovation is a much slipperier commodity, says Owens, who studies the subject as Professor of the Practice of Management and Innovation at Vanderbilt. Although all businesses rely on timely innovation, most of them too often block it, according to Owens’ latest book.
Creative People Must Be Stopped: Six Ways We Kill Innovation (Without Even Trying), published in 2011 by Jossey-Bass, takes a clear-eyed look at six levels of stumbling blocks we unintentionally place in front of new ideas and their implementation. “I believe that everyone is creative, that everyone can and will move toward positive change given the opportunity,” Owens says. “My interest is understanding ways we stop people from doing that.”
At each of those six levels—self, group, organization, industry, society and technology—innovation faces resistance. “Take the organizational level,” he says. “Imagine the monumental courage it would take at Kodak in the ’80s to say, ‘Guys, I think we should stop doing film.’ It would be hard even for those people who knew that film’s days were numbered.”
He cites the Segway, a two-wheeled electric vehicle, as an invention whose potential on paper hit the brick wall of societal realities. “The Segway was too fast for the sidewalk and too slow for the streets,” he says. “That’s not a technical problem. They didn’t need the battery to last longer or to make the handlebars more comfortable. It was the societal restraints that they failed to address.”
Fighting the roadblocks that we and others throw in front of our own and each other’s creativity is at the core of Owens’ work as a teacher, mentor and consultant to organizations like NASA and the Smithsonian Institution. His is an almost counterintuitive approach.
David Owens
“It’s not, ‘Here’s how to be creative,’ but rather ‘Here’s how to stop your existing creative ideas from being blocked or killed,’” he says. “The punch line of the book is that there are at least six different ways to look at innovation, and you should pay attention to all of them because each one has the power to help you find the hidden barriers your innovation will face. What I find is that it’s the one perspective you ignore that ends up biting you.”
He sees creativity and innovation play out in real time as a mentor at the Entrepreneur Center, a Nashville-based nonprofit that connects entrepreneurs with investors and resources, and as Faculty Director of the Vanderbilt Accelerator Summer Business Institute for undergraduates and recent college graduates.
“Projects in the Accelerator,” Owens says, “touch all aspects of business—marketing, finance, operations, HR, manufacturing, strategy, design—and the program allows these students to experience the entire span of what happens in business in just a few weeks.”
He has watched any number of students carry ideas generated, refined or actualized at Owen into careers. He points to students who have gone on to do innovative work at places like Apple, Mattel, Microsoft, Google and Nissan. Another he cites is Jerome Edwards, MBA’04, Founder, President and CEO of Veran Medical Technologies, a St. Louis-based company that has developed cutting-edge imaging technology for surgical procedures.
Surgical Precision
Before earning his MBA at Vanderbilt, Edwards worked for Medtronic, one of the world’s leading medical technology companies. There he built a voltage-based navigation system that guided catheters inside the heart to burn tissue and regulate heartbeat. That technology, however, was spun off into another company and ultimately acquired by a Medtronic competitor in a $273 million deal. It was then that a frustrated Edwards decided to start a new chapter in his career.
“I wasn’t going to let that happen again,” he says. “Medtronic had been a great company to work for, but I decided to leave and go back to business school.”
“For us, innovation is about getting people into the field,
having them see surgeries, and coming back and sharing ideas
without barriers and without process.”
—Jerome Edwards
A Dean’s Scholar, Edwards enrolled at Owen in 2002 because he says, “I felt at home and felt the entrepreneurial spirit.” That feeling was shared by fellow student Evan Austill, BS’93, MBA’04. The two teamed up and started writing business plans for the type of technology Edwards developed at Medtronic, but for different organs. Edwards and Austill were encouraged by Germain Böer, Professor of Accounting and Director of the Owen Entrepreneurship Center, as well as former faculty member Bruce Lynskey, MBA’85. Edwards says Owen’s center “kept putting me in great opportunities in terms of business plan competitions and showcasing the plans to alumni.”
After receiving $65,000 in grant money, Edwards and Austill founded Veran Medical Technologies and paid for the first patent, which was written in the 810 Café at Owen. That patent was for a device that acts like a GPS system for the human body. An electromagnetic field and sensors are used to steer the device inside the body and then help sample or excise tissue that is suspected of being cancerous. The innovation is in making the device work in the lungs, which continue to move during surgery.
“With cancer,” Edwards says, “it’s about diagnosing as early as possible. In this case, we can get to the deepest, darkest regions of the lungs, get tissues from suspect lesions and progress to therapy if it’s cancerous.”
With just 28 people on staff, Veran is a small company where, Edwards says, “everybody participates in R&D—everybody does everything.” The company’s small size and flexible approach have helped it overcome the types of adverse group dynamics and organizational missteps that, according to David Owens, hamper innovation.
“One engineer in a small company can do the same amount of work as three in a big company because you’re freer,” Edwards says. “Process is good but it can be burdensome. Here, rather than meeting after meeting after meeting, you just walk in and ask a question, then go back to your desk and get to work again.
“For us,” he adds, “innovation is about getting people into the field, having them see surgeries, and coming back and sharing ideas without barriers and without process. Once you get to a level where it’s going to be turned into a real product, then you fold it into effective process.”
Renter’s Paradise
Adam Albright is helping RentStuff.com get a foothold in the marketplace with an unconventional business model.
For a small number of students, innovative ideas and an entrepreneurial spirit lead to the business world prior to graduation. That has been the case for Adam Albright, BE’10, an MBA candidate for 2012. Albright is Co-founder of RentStuff.com, which he describes as “a marketplace similar to eBay for renting rather than selling household items.” He teamed up with his two fellow co-founders when they needed someone with a technical background. Albright, who has been doing freelance software and website development since he was 10, earned his bachelor’s degree at Vanderbilt’s School of Engineering.
Participation in a summer-long incubator program at the Entrepreneur Center provided RentStuff.com with $15,000 in seed capital, mentoring and networking, and the chance to refine their presentations with the help of Michael Burcham, Lecturer of Entrepreneurship and President and CEO of the center. The program also gave them temporary office space.
“We have a couple of desks and white boards, and we make a lot of to-do lists and brainstorm ideas,” Albright says. “Part of my job is to explain the technological complexities behind what we want to do.”
The RentStuff.com model takes advantage of a fundamental shift in the way people access everyday goods. Albright cites a phenomenon called “collaborative consumption,” which he says is when “people try to own less stuff and rethink how they consume assets.” He and his partners have drawn inspiration from Zipcar, a membership-based car-sharing company, and Airbnb, which matches people needing short-term lodging with those offering everything from sofas to castles.
RentStuff.com handles payment transfers and security deposits, and offers reviews of people who use the service and the items rented, which include bicycles, cameras and even cocktail dresses. Recognizing that the target demographic skews younger means part of the innovation lies in finessing potential backers.
“Someone making six figures is not going to be renting golf clubs for $20 a day,” Albright says. “You have to explain to investors how it would work and who would be interested because it’s a new model and the math doesn’t add up for them. The investors aren’t the ones using it, but they’re the ones we need on our side.”
In other words, Albright and his business partners have faced some of the societal innovation constraints that David Owens writes about in his book. Society’s adherence to a conventional way of doing business sometimes prevents more creative approaches from gaining traction.
In the case of RentStuff.com, part of the solution lies in bringing small stores on board and offering to link them to potentially large audiences through the website. “We can emphasize the rental business side of RentStuff.com to investors, and then add that individuals can do it, too,” Albright says.
He finds that as a businessman, youth can be a mixed blessing. “Being young, you get a lot of helpful advice,” he says. “People are very willing to tell you about experiences they’ve had and pitfalls they’ve faced, and it speeds up the learning process. But when you go to an investor looking for half a million dollars, maybe they’d feel better if you were 50.”
Nashville, he adds, has been a good place to get attention and work out the kinks before carrying the concept to a larger city, where high-density neighborhoods and apartments concentrate the potential market for rental items like carpet cleaners and sporting goods.
Albright also attributes their early success to the company’s domain name. He believes that it has been crucial in driving people to their website. “RentStuff.com is a pretty identifiable name,” he says. “It’s easy to figure out what we do.”
Wallet Allocation
A great name is also the capstone of a highly regarded customer loyalty measure developed by Bruce Cooil, the Dean Samuel B. and Evelyn R. Richmond Professor of Management, and alumnus Tim Keiningham, MBA’89, with marketing research firm Ipsos Loyalty.
The Wallet Allocation Rule, as it’s known, came about because traditional metrics gauging customer satisfaction and loyalty “do a terrible job of linking with the share of category spending that customers allocate to the brands they use,” says Keiningham, the firm’s Global Chief Strategy Officer and Executive Vice President.
Bruce Cooil and his co-authors won the Next Gen Market Research “Disruptive Innovation” Award for their work on the Wallet Allocation Rule.
That need prompted a two-year study in collaboration with Lerzan Aksoy, Associate Professor of Marketing at Fordham University, and Alexander Buoye, Vice President of Analytics at Ipsos Loyalty. The study examined more than 17,000 consumers in nine countries and covered purchases in more than a dozen industries. A key datum was the number of brands being considered along with relative rank.
In the end, Cooil and his collaborators found that companies would be better served paying attention to how well they rank in comparison to rivals, rather than concentrating on achieving high customer satisfaction levels. According to their research, being a customer’s first, rather than second, choice can have a significant financial impact.
“What we found shocked us,” Keiningham says. “Our research uncovered a heretofore unknown relationship between customers’ perceptions of the brands they use and their share of wallet that could be easily calculated using a simple mathematical formula: the Wallet Allocation Rule.”
The rule makes it simple for managers to determine the financial implications of rank and of moves up or down, he says. Its implications include the fact that customer satisfaction is best understood in the context of competition, since it can rise even while per-customer spending declines.
“We looked seriously at alternatives,” says Cooil, who analyzed the data. “You see other papers that look at converting ranks to market shares using industry-specific parameters. We were expecting to have to go that way, but Alex suggested this other approach, and more complicated methods couldn’t do any better.”
Tim Keiningham
It’s an approach that breaks through the kind of industry constraints and societal barriers that David Owens studies. “We all start out with an idea of how things work,” Keiningham says, “and this view causes us to seek out information that supports that view and discount information to the contrary. As a result, we get a lot of ‘motivated’ research to prove what we want to believe.”
Keiningham and Cooil have become close friends through the years: Cooil was a best man at Keiningham’s wedding in Istanbul and has collaborated often with Keiningham and Aksoy, who are husband and wife. Their collaboration plays off their differing approaches and personalities.
“They get me interested in projects I might not find interesting otherwise,” Cooil says. “I have very different talents from Lerzan and Tim. They’re much more organized, much more focused on what industry really needs to know about, what would really help companies—and they get projects started.
“They’re the ones asking the questions and telling me what the current theory is. I go through and see how the models are working. Then they ask, ‘What can we do? We have this really interesting data. Can we come up with another approach or do something different with the data or clear up an issue that everyone’s convinced they understand but we’re convinced they don’t understand?’ They’re pretty demanding. They want answers and they keep projects going.”
Their four-way collaboration with Buoye on the paper “Customer Loyalty Isn’t Enough. Grow Your Share of Wallet,” published in the October 2011 Harvard Business Review, earned them the Next Gen Market Research “Disruptive Innovation” Award. It’s a major acknowledgement, although Cooil laughingly dismisses one of the accolades that went with it.
“They called us ‘thought leaders,’” he says, “It’s a mixed blessing because I’ve always hated the phrase. Doesn’t it sound Orwellian? But they did give us these really artsy trophies. I can’t even put mine in my study because my wife wants to put it on the mantel as an art piece.”
Special Resonance
Cooil’s and Keiningham’s work is another example of the worldwide impact of innovation with Owen ties. It is a key to what makes Nashville a city with special resonance as a business center for David Owens.
“I feel a real energy here once again,” he says, “with new startups and tech companies and a level of creativity in Nashville that really make it exciting for me.”
His work in breaking through innovation barriers is aimed at helping to keep the Owen School in the thick of that creative energy, as a meeting place of education and innovation that is as good for human development as it is for business development.
“With Accelerator, as with everything else,” he says, “we want to help students find that part of the wide spectrum of business that talks to them. I try to expose them to a lot of things to do, to give them enough diverse projects and experiences that they find something that makes them say, ‘I like marketing’ or ‘I’m good at managing teams.’
“I want to offer a perspective on business’ role in society, one that often gets lost,” he says. “It’s so much more than making money. It’s about feeling good about what you do and helping make the world an amazing place. How can you be a contributing member of society? Business is a great way to do that.”
Market impact. It is part of the very fiber of Owen’s finance department. Members of the school’s finance faculty are not only contributing to the industry’s intellectual underpinnings and analytical tools but also training students who, as Vanderbilt alumni, are putting theory into practice worldwide. We look here at some of the key players who are helping shape the face of modern financial management.
At the Center of Research
The sweep of history represented by the finance faculty is nowhere more dramatically represented than in the Financial Markets Research Center (FMRC). Founded in 1987 to foster research in financial markets, instruments and institutions, it has long promoted interaction among executives, researchers and the Owen faculty, particularly through its renowned annual conference. Hans Stoll, the Anne Marie and Thomas B. Walker Jr. Professor of Finance and Director of the FMRC, calls the center “our window on the real world and our connection to what’s going on and the issues that face policymakers and financial executives.”
Hans Stoll and Tom Ho
Stoll is known for developing put-call parity and for seminal work in market microstructure, which has become a major subfield within finance. He is also credited with providing analysis that demystified the role of futures in the crash of 1987, leading to a more balanced approach to regulation amid calls for drastic measures. The breadth and depth of his work have earned him one of the industry’s most stellar reputations—he has been elected President of both the American Finance Association and the Western Finance Association—and the markets still bear the stamp of his contributions.
Tom Ho, who has worked with Stoll since they co-authored papers at the Wharton School in the late ’70s, serves as the FMRC Research Professor of Finance. Through voluminous research, papers and books, Ho has been key to introducing rigorous mathematical modeling to securities. His work with the Thomas Ho Company, providing analysis and consulting to financial institutions, is an example of the integration between Vanderbilt finance research and the business world. It also demonstrates how the FMRC is bringing together all the elements of financial education, research, practice and policymaking.
The huge impact Owen has had on the world of finance grows larger this year with the introduction of NASDAQ OMX Group’s Alpha Indexes. Developed by Bob Whaley, the Valere Blair Potter Professor of Management, and Jacob Sagi, the Vanderbilt Financial Markets Research Center Associate Professor of Finance, the indexes help investors isolate the performance of individual stocks or commodities from broader shifts in exchange-related funds. This will, according to Sagi, “allow investors to understand correlations better and allow for interesting hedging opportunities.”
The idea for the indexes started when alumnus Eric Noll, MBA’90, who serves as NASDAQ OMX Group’s Executive Vice President of Transaction Services, turned to what he calls the “academic firepower” of Whaley and Sagi for help in developing new NASDAQ products. Noll was looking for something of the caliber of the Market Volatility Index (VIX), or “Fear Index,” created by Whaley for the Chicago Board Options Exchange in the early ’90s. The VIX, which quantifies the market’s expectation of short-term volatility, has become a highly influential measure; a futures contract based on it has traded publicly since 2004. Sagi, an expert on asset pricing and decision theory with wide-ranging research and practical interests, has conducted research with Whaley on relative performance indexes.
The NASDAQ OMX Group is offering derivatives of the indexes that will allow investors—primarily institutional at first—to bet on or guard against fluctuations in the worth of securities or funds. The products are designed to help investors hedge against the kind of market swings exemplified by last year’s “flash crash.” The collaboration between Vanderbilt and NASDAQ is, Sagi says, “the kind of thing that demonstrates how you can take research-based knowledge and apply it in a way that helps people and brings value to the market.”
As veterans on the finance faculty, Professors Bill Christie, Nick Bollen and David Parsley represent a wellspring of theoretical and applied knowledge, transmitting real-world experience and academic rigor to the classroom. Their accomplishments are among the school’s most noteworthy.
Christie, the Frances Hampton Currey Professor of Finance, analyzed NASDAQ pricing in the ’90s and found that market makers were implicitly colluding to maintain artificially high trading profits at the expense of investors. His research led to sweeping reform of the NASDAQ market, the introduction of the SEC Order Handling Rules and a billion-dollar settlement. Christie also served as Dean of the Owen School from 2000 to 2004.
Bollen, the E. Bronson Ingram Professor in Finance, authored a cutting-edge 2008 study of hedge fund liquidity that quantified the risks to investors facing the restriction or suspension of withdrawals from hedge funds during market turmoil. The subsequent financial crisis bore out his conclusions, as many funds closed and others were revealed to be fraudulent. His most recent research focuses on predicting which funds are at a higher risk of fraud by examining their statistical footprints for peculiarities best explained by misreporting.
Parsley, the E. Bronson Ingram Professor in Economics and Finance, has shown through his research into political connections and lobbying that the portfolios of firms with higher lobbying intensities and expenses outperform those of firms without such connections. He also has discovered that politically connected firms appear to be less sensitive to market pressures to increase the quality of financial information given to minority shareholders. His current work includes seeking explanations for the globally declining impact of exchange rates on prices.
The Owen finance faculty’s reputation continues to grow thanks to newer members like Alexei Ovtchinnikov and Miguel Palacios, both Assistant Professors of Finance. Ovtchinnikov has done widely cited work on corporate political contributions, showing in a large-scale study published in The Journal of Finance that there is a positive and significant relationship between such donations and both stock returns and return on equity. His follow-up study examined the nature and effectiveness of individual contributions, particularly to politicians with oversight of industries having economic impact on contributors. Ovtchinnikov is now looking at the flip side of the coin, studying the way government policy affects corporate decision-making.
Palacios’ work on human capital, its quantification and its effect on other assets’ prices, is decidedly and excitingly off the beaten path. One question he raises is what effect the retirement of baby boomers, who will no longer have future earnings as an asset, will have on the value of stocks. Another is the possibility of a financial instrument tied to future earnings, and whether such an instrument “might make people willing to take more risks in stocks and other investments, changing their price and return,” he says. He and a business partner have explored the practical aspects of his questions for the last nine years, founding a company called Lumni Inc., which pays for the education of young adults—many who could not afford college otherwise—in exchange for a small stake in their future earnings. His book Investing in Human Capital: A Capital Markets Approach to Student Funding was published by Cambridge University Press in 2007.
Australian-born Kate Barraclough jumped at the chance to take a more active role in oversight of the school’s Master of Finance (MSF) program. As its Director, she says, “I see myself as taking an already excellent product and raising its profile by engaging and coordinating its stakeholders—faculty, alumni, employers and current and future students. My aim is to build a great program, recognized as one of the best in the country.”
Her background is yet another example of the way in which research, teaching and real-world experience come together within the Owen faculty. A former manager at KPMG Canberra and financial consultant to the Australian government, she has research interests that include asset pricing, derivatives and bond markets. Under her guidance, MSF has introduced a new course on financial modeling (which she teaches), formed a board of advisers made up of distinguished alumni and friends of the school, and created an internship program for the MS Finance Class of 2012. The latter was an initiative proposed by alumnus Bruce Heyman, BA’79, MBA’80, who is Managing Director and Partner at Goldman Sachs in Chicago and a member of Owen’s Board of Visitors.
Barraclough is working to encourage cohesion within the MSF group with a number of MSF-only classes. “A key part of my role is mentoring our students, encouraging and supporting them while they are at Owen,” she says. “Seeing them grow through their experiences at Owen is extremely rewarding for me.”
Wall Street Presence
Sean Rogers, BA’87, MBA’95
It would be difficult to overstate the Vanderbilt presence in the world of business and finance. Thousands of graduates carry the lessons learned here into boardrooms, exchanges and regulatory offices worldwide. One notable example is Sean Rogers, BA’87, MBA’95, a key figure in one of the two largest financial institutions on Wall Street.
Rogers serves as Managing Director at Bank of America, overseeing communications technology. He works closely with senior management at companies like Nokia, Ericsson and Motorola, advising them on an array of financial matters, including capital formation and structure, corporate finance, mergers and acquisitions, joint ventures and IPOs. It is a job that requires wide-ranging knowledge applied to complex but specific situations in real time, and he cites his increasing appreciation of the “softer skills” he learned at Owen.
“It’s learning how to study,” he says, “how to work in teams, how to communicate with your counterparts. As you become more senior in investment banking, what makes someone good or bad comes down to qualitative skills. You’re more concerned with building relationships, with understanding issues. You become results-oriented.”
More and more, those relationships transcend borders and backgrounds. “That’s why both the student mix and the interdisciplinary possibilities at Owen, like those with the Vanderbilt University Medical Center, are so valuable,” he says. He also cites the class size and the close relationships he was able to develop with both students and professors. He has long since been returning the favor, bringing his business expertise to Owen as a member of its Board of Visitors—something that is particularly important in that Bank of America has become the single biggest recruiter of Owen grads.
Tools of the Trade
Vikas Dwivedi, MBA ’00
Vikas Dwivedi, MBA’00, says his career has become “all energy, all the time.” After stints at Shell Oil, Enron, Prudential Equity Group and Morgan Stanley, and a rating as No. 1 stock picker in electric utilities in 2004, he is bringing his experience in energy and commodity trading, private equity, project development, operations and engineering to bear on his own firms. He is a Principal at BTU Capital Management, a Houston-based hedge fund focused squarely on energy, and Quantum Energy Partners, a $5 billion private equity firm.
“It’s focused on natural gas,” he says of BTU, “and our trades will allocate capital directly into futures and options on the commodity itself.” He came to Owen as an engineer and an energy trader, but says, “I didn’t have any real sense for the broader capital markets and the bigger world. Seeing how those markets work and how they impact each other and impact energy was very helpful. It gave me a much bigger perspective on how stuff is really put together. And not having a financial background, it was a really good rounding experience to learn accounting and a little more on corporate valuation.”
In addressing students and recent graduates, he encourages creativity and daring. “Never assume everything’s been solved,” he says. “There are always other markets and other problems if you can help solve or even identify them. I’d also recommend a bit of irreverence for the way markets work. They’re not perfect. See if you can insert yourself into something that’s not quite right, which is always an opportunity.”
Four years ago Christopher Parks found himself facing an all-too-common dilemma. He and his mother, who was in the midst of cancer treatments, were sitting in her living room going through a stack of her medical bills and those of his father, who had died recently.
It is a telling indictment of the daunting complexity of health care billing that Parks, despite 17 years in the industry, felt as overwhelmed by the paperwork as did his mother. It was she who put the situation into words.
“She looked at me with tears in her eyes and said, ‘Honey, I want to know who I owe, what I owe, and if it’s fair,’” he says. “To hear someone who was in chemotherapy and heading toward hospice say that as she wrote out a check for $20,000—well, that was the moment I knew I had to do something.”
Billing represents one small corner of an American health care system known for flaws that seem inextricably bound to its undeniable strengths. In technology and drug development, quality of hospitals and physicians, availability and speed of delivery, it is the world’s gold standard. But it is staggeringly expensive, needlessly redundant, and too often out of reach for tens of millions who have little or no coverage.
For Parks, his mother’s plea was the starting point for a new business venture that has slowly and sometimes painfully refined its mission to bring light to the billing process for employers and employees.
For the rest of the health care world—often-competing constituencies including physicians, hospitals, insurers, pharmaceutical companies, device manufacturers and the investment community—the future is a complex and uncertain foray into a new health care universe. All of them must sort through the thousand pages of legislation, the politically charged implementation process and the legal wrangling that are all part of the Patient Protection and Affordable Care Act, the 2010 bill that will no doubt change American health care forever.
Parks
Parks admits that his journey, begun well before Congress took up the trillion-dollar health care bill, involved any number of blind alleys. “We spent two years getting it totally wrong,” he says. “We started off trying to give everyone tons of data points, information about cost, quality, utilization, what other people thought, and so on, and we created this wealth of broad decision-making information. The feedback we got from both users and employees was, ‘Oh, my gosh. That’s too much. I just need one thing answered.’”
The process was also hampered by the fact that large insurers and the government were simply loathe to share information. Ultimately the company he formed, change:healthcare, evolved to offer self-insured companies and their employees easily understood information on medical provider cost, quality, access and performance to help them make educated decisions.
Parks, the company’s President and CEO, sees the approach as vital in the face of legislation that greatly increases the pool of covered individuals, making their decisions an important part of any hope for fiscal responsibility. “With the increase in access to coverage, there will be increased demand and desire for both information and transparency, for more insight both to control cost and make choices,” he says.
A key element is the point at which potential savings prompt behavior change, and for that Parks turned to two friends at Vanderbilt Owen Graduate School of Management.
My simple problem with the health care legislation is that it wasn’t focused on cost, and we will have to address cost next year, the year after and every year going forward.
—Larry Van Horn
“Luke Froeb and Larry Van Horn surfaced as two really bright, insightful guys who know how to look at problems from different angles and who could help us evolve what we’re developing,” Parks says. Froeb, the William C. and Margaret W. Oehmig Associate Professor in Entrepreneurship and Free Enterprise, and Van Horn, Associate Professor of Management, have been studying pricing and behavior. They welcome the increased pool of information for examining a pivotal portion of the health care equation.
“My simple problem with the health care legislation is that it wasn’t focused on cost,” Van Horn says, “and we will have to address cost next year, the year after and every year going forward. The reality is people will have to pay more and make difficult decisions as part of a long-range solution.”
The change:healthcare approach, Van Horn adds, involves “trying to figure out the simplest, most concise way of solving the consumer’s problem by massaging the data behind the scenes and doing analysis. They’re trying to simplify the patients’ process, walking them through a thought process that is meaningful and important to them.”
That patient is the hub about which all else in the legislation and in the health care world revolves, and every constituency faces dramatic changes. The one with the most to gain, at least in the short term, is hospitals.
“We provide a fair amount of underfunded and unfunded care,” says Larry Goldberg, CEO of Vanderbilt University Hospital and an at-large board member of the Tennessee Hospital Association (THA). “The idea that there will be more coverage—with 32 or 36 million more Americans now having insurance—is very appealing.”
Larry Van Horn (left) and Luke Froeb are collaborating on a study examining how much the price of health care has to vary before consumers will change their purchasing behavior.
He and others are very aware, however, that those gains may well be short-term. “Obviously payment reductions and questions about how all this is going to be financed concern us a great deal,” he adds.
Members of the Hospital Alliance of Tennessee, an organization of the state’s nonprofit hospitals, are hoping the rollout of health care reform draws on the lessons of the TennCare program, which saw the state tackle managed care beginning in 1994.
“If you know the history of TennCare,” says Paige Kisber, the Alliance’s President and CEO (Goldberg is its Board Chair), “you know that it was the right idea in terms of attempting to bring insurance coverage to more people, but that it just didn’t quite work the way the state hoped. My understanding is that as this federal legislation was being crafted, they looked at what has happened in Tennessee and what is happening in Massachusetts.”
Early hopes for TennCare faded amid reports of fraud and sloppy management. Costs soared, and a 2003 study declared the program was not financially viable. TennCare has since considerably scaled back enrollees and coverage. For the state’s hospitals, even the best of times were problematic.
“With TennCare we saw more people insured, but it did not take away under-reimbursements, and charity care did not go away,” Kisber says. “The state had the best intentions, but there are so many other economic pressures. Given education, prisons and many other programs, you have to prioritize, and you cannot deliver all services to all people.”
That makes it especially important, according to Kisber, that the state’s health care history remain part of the equation. “As the federal government writes these regulations, they will seek public input, and we feel like that will give us the opportunity to bring our experience and expertise to bear on things like eligibility criteria,” she says. “That input will be vital at a time when there will be increasing pressure on nonprofits, and Congress and state legislatures will be looking to cut every penny they can.”
Kisber
The economic environment for health care reform is clearly rocky for the federal government, which is adding trillions to a deficit many fear it can never repay. Add that to the fact that half a trillion dollars’ worth of planned Medicare cuts are part of the new federal approach, and investors have at least one clear starting point.
“I would be extremely careful about investing in any health care services sector or company that has significant Medicare exposure,” says Debbie Guthrie, MBA’79, Founder and CEO of Capitol Health Management Corp. in New York City. “It’s my view that Medicare reimbursement will continue to be reduced substantially over time—the economics simply do not work.”
The industry, she explains, has underlying structural problems that must be addressed.
“We should provide access to basic health care for every citizen,” she says, “and ultimately we may already have the ingredients to do that, but our delivery system has structural problems, with fragmented points of entry and reimbursement, which makes it impossible to know which Americans are getting excluded from the system and why.”
While she does support “comprehensive universal access and incremental insurance reform,” this legislation is, she says, “a mess,” adding that jealous guarding of turf by many other constituencies will make implementation, let alone cost savings, that much more difficult.
Guthrie is, not surprisingly, supportive of free market solutions in dealing with many of these problems. “I am very much a capitalist,” she says. “I believe the private sector will continue to take the lead, driving efficiency through innovation, which the government is incapable of doing. But nobody is taking a step back to understand and evaluate where the incentives should be aligned and which participants are truly delivering cost-effective health care. Everyone is protecting their turf just as everyone was looking for special deals. I don’t think anyone understands the full implications and the unintended consequences as the reform moves into the implementation phase.”
Guthrie is particularly troubled by the fact that the legislation “penalizes rather than supports specialists, which is counterproductive. If you have a cold and just need an antibiotic, you don’t really care, but if you have cancer or need heart surgery, you want to make sure you have the best physician you can get. Of course we want these specialists to keep working and have the financial incentives to do so. What’s happening now is that many of the top doctors are looking at the challenges on the horizon and are refusing to treat Medicare patients and are accelerating their retirement plans.”
Guthrie gets no argument from Dr. B. W. Ruffner, a Chattanooga oncologist who is President of the Tennessee Medical Association (TMA). “Certainly we wouldn’t come up with a public policy saying, ‘Pull out of Medicare,’ but there’s no question that some physicians are doing just that,” he says. “Concierge medicine is one option. Another is limiting your practice to commercial insurance, and yet another is retiring, and I’ve heard all three discussed.”
Ruffner
Ruffner cites the cuts scheduled for Medicare, which is “not self-sustaining as it is,” but says commercial insurance may have its own long-term pitfalls.
“A lot of these processes will start with Medicare, but the commercial side will quickly follow suit,” he says. “I think it already occurs when I’m negotiating contracts with Blue Cross. A lot of the metrics for those negotiations are based on Medicare, and that trend is going to take a quantum leap forward with the new exchanges, which will tend to have rules that come from Washington about what they can include and not include. Those physicians who say, ‘I’m just going to take commercial insurance and not Medicare,’ are going to find the two are converging.”
Ruffner says physicians are also wary of the legislation’s provisions for an Independent Payment Advisory Board (IPAB) appointed by the president. “Physicians are concerned that the group will be arbitrary in its efforts to control costs and that the health care industry—and this is as true of hospitals and device makers as physicians—will be affected negatively in due course,” he says.
Should IPAB feel costs are out of hand, it could arbitrarily institute cuts, which could only be overridden by a majority in the House and a 60 percent vote in the Senate. Those votes would have to be accompanied by equivalent Congressional cost-cutting.
Decisions on care, Ruffner maintains, need to remain with those who have expertise.
Our delivery system has structural problems, with fragmented points of entry and reimbursement, which makes it impossible to know which Americans are getting excluded from the system and why.
—Debbie Guthrie
“There’s no question in my mind,” he says, “that the best person to make those decisions about what’s appropriate and what’s not is a physician, but if the physicians don’t get together and work together, Uncle Sam will make that decision, and that’s what we’re seeing right now.”
If there is a positive, at least in the short term, it is directed toward one segment of physicians.
“The thing I agree with 100 percent is putting some incentives into primary care,” Ruffner says. “In Medicare, primary care payments are going to go up significantly. In Medicaid, one of the requirements is that regular office visits for Medicaid payments will be paid at the same level as Medicare. Apparently Congress recognizes the deterioration of primary care. There’s no question that if you’ve got a belly pain, costs to the health care system are a lot less if you start with a primary care doctor who knows you as opposed to going to the emergency room at 10 p.m. Building up the primary care infrastructure is a significant step in the right direction.”
Once that bottom-line relationship is nurtured, change:healthcare’s Parks hopes to contribute to an effort to tackle the problems of paying for care typified by his mother’s experience.
“What we do doesn’t fix the system, but at least it turns on a flashlight in a dark kitchen,” he says. “At least people will be able to see the table and that broken glass over there. It’s something to help you get your bearings. There are tons and tons of data out there. There are websites and booklets and pamphlets being generated all the time, but people are wondering, ‘How do I turn that into something relevant and easy to understand for one person?’ That’s the issue du jour.”
The Owen School’s Van Horn agrees that one part of the solution is going to come from the place where policy understands and intersects with personal choice. “I think that this is one small piece of generating insight into how individuals, when faced with different prices, will change their health care consumption decisions,” he says, “and that is the future of health care.
“We can’t afford to do what we’re doing now, and the reality is we’re all going to start paying more and have to make decisions based on how much things cost. From a policy perspective, understanding how consumers make those trade-offs and decisions is important.”
Any expansion of such ideas into savings across the industry will require more cooperation among parties sometimes known for their insularity. Ruffner describes one attempt:
“I would say the THA and the TMA are working very hard to cooperate with each other and to try to have a constructive dialogue about how to move forward with these things,” he says.
“It certainly doesn’t mean we agree on everything, but we recognize the importance of working together. We’re just two of several constituencies. There are the insurance companies, there’s big pharma, then there are the device makers, and each one of these is a very powerful group with a lot to lose.”
For investors, companies in any segment of the industry are going to have to prove themselves. “The companies that are going to succeed,” says Capitol’s Guthrie, “are those that have the ability to bring efficiency to the health care system, to deliver quality and free up enough money for solid patient care.”
This may be easier said than done for most, but as America’s health care system has proven time and again, those with ingenuity and determination are capable of rising to the occasion. Physicians, hospitals, pharmaceutical companies and others in the medical community have worked together before to solve some of the most challenging problems known the world over. The question now, though, is whether or not they can do the same for the very system they are a part of.
Like information and technology, marketing is undergoing a continuing revolution. The needs and interests of consumers and corporations are evolving, and the means of informing them about products and services are changing dramatically.
Owen has met this revolution with one of its own. The school’s marketing department is essentially a new entity, bridging the gap between the quantitative and behavioral, presenting a cutting-edge synthesis to a new generation of students. As those students apply classroom lessons, and as alumni meet the business world’s present-day challenges, this energized Owen team is helping to reinvent marketing in a digital age and bolster the school’s reputation on the national and international scene.
Guiding Text
Dawn Iacobucci
If one person could be said to embody the transition from the foundational strengths of 20th century marketing to the new realities of the 21st, it would be Dawn Iacobucci, E. Bronson Ingram Professor in Marketing. Highly awarded for her work at Kellogg and then Wharton, she is a widely regarded expert on networks and quantitative psychological research who has published in the top journals and worked alongside marketing luminaries Philip Kotler and Gil Churchill.
If there is a guiding text for Owen’s marketing revolution, it may well be her new book, MM: Marketing Management. Practical, colorful and highly accessible, it is an introduction that brings nuance and application to the basics, swapping the stodgy for the downright sexy. It is—in layout, design, writing style, even price—the perfect example of what modern marketing can and must be. In taking for granted global business and the digital age, the book is as cutting-edge as her work and as the department’s faculty and direction—both of which she leads with what Dean Bradford calls “a commitment to a shared vision of elevating our standard in the eyes of the university, the academy and the business community.”
Iacobucci says, “Our faculty is comprised of extremely talented marketing people who genuinely care about the student experience. We are devoted to building Owen and taking care of the students. We’re looking to get the word out that, with the people and programs we have in place, our marketing MBA students are among the best anywhere.”
Consumer Behavior
From left, Steve Posavac, Jennifer Escalas and Steve Hoeffler
One of the clearest proofs of Owen’s ability to draw top talent and foster in it both vision and cohesion lies in the behavioral side of its marketing department. The teamwork is epitomized in the Consumer Behavior class taught by Jennifer Escalas, Steve Hoeffler and Steve Posavac, along with Dawn Iacobucci.
“Consumer behavior is the foundation for managerial judgment in marketing,” Posavac says. “Each of us carved out a quarter of the class in line with our unique specialties.”
Escalas, Associate Professor in Marketing, who runs a company with her husband making and marketing customized swimsuits, is an expert on brands, identification and culture. Hoeffler, Associate Professor in Marketing, has a background in consulting for P&G and IBM, and research interests that include consumer behavior and radically new products. Posavac, E. Bronson Ingram Associate Professor in Marketing, who previously taught and served as Associate Dean at the University of Rochester, cites a long-term interest in “how managers use what we know about people to make better decisions.”
The application of their varied research interests to their individual classroom work gives students a broad knowledge of technique and application. Their investment in the Owen community does the rest.
“We get to know students on a one-to-one basis,” says Hoeffler, “so we can work from what they’re interested in and where they’re going.”
As for the bottom line, Escalas says, “Hire the best faculty members you can, teach both the basics and the cutting-edge aspects of the field, give students some immersion in the real world, and you’ll do well.”
Quantitative Approach
From left, Mark Ratchford and Jeff Dotson
Jeff Dotson and Mark Ratchford, both Assistant Professors of Marketing, are the department’s young guns on the quantitative side. Dotson says he was drawn by the fact that Owen has an environment where people enjoy working together and get along. Ratchford heard good things about Owen from Steve Posavac, whom he had met while at the University of Rochester.
Dotson’s work employs statistical techniques in marketing. “Companies are drowning in data but starving for knowledge,” he says. “Being able to take information and turn it into actionable insights is a huge challenge, and anyone who does analytical marketing is really in demand now.”
Ratchford’s work “has to do with how people relate to one another with social networks, with the interactions among companies and people,” particularly the way companies form coalitions and achieve synergy in developing products. He is teaching courses on new products and marketing strategy this year.
Both are pleased with the department’s approach and their roles within it.
“This is an amazing group in the sense that everyone is new,” Dotson says. “It’s really unusual for a marketing department.”
Ratchford adds, “I think even among the quantitative types, the kind of work Jeff and I are doing is a bit unique. My work uses cooperative game theory, which nobody in marketing does. I kind of knew that only places with more of a cutting-edge vision would be interested in me.”
Iacobucci agrees on both counts. She describes both as “nice guys who are super-smart,” adding, “Since we’re a small group, it would have been safer just to go traditional, but that would be boring, no?”
Resume Building
From left, Shashi Shanbhag, Cara Tragseiler, Patrick Phillippi, Phoebe Zhang and Allison Earnhart
Five Owen marketing students took their classroom knowledge into the business world last semester in a pilot program that brought the immersion concept to the department. Phoebe Zhang, Cara Tragseiler, Shashi Shanbhag, Patrick Phillippi and Allison Earnhart, all MBA candidates for 2010, spent 11 weeks together under Yvonne Martin-Kidd, Executive Director of Marketing & Communications and Adjunct Professor of Marketing. Together they served as a consulting team on a rebranding and marketing project for a worldwide telecommunications software firm.
“I probably learned more about marketing and brand management from that one project than from any single class I’ll take,” Phillippi says.
The Brand Group met weekly with Martin-Kidd, who Zhang says, “gave us the tools and great advice, drawing on her marketing background, and then she let us run with it.”
Phillippi adds, “The great thing about Owen, is that it’s a small school so you know everyone, but people have worked in all kinds of industries.”
Following interviews with senior management, employees and customers, the team made recommendations for everything from logo redesign to improved product bundling. “We couldn’t have asked for a better demonstration of the strength of Owen students,” Shanbhag says, “or our ability to do the job of high-priced consultants.”
All are excited about the future of such ventures. “This pilot program was a great addition to the marketing curriculum,” Tragseiler says. “I was excited to see they’re planning to expand the Brand Group into a Capstone project and to add a Brand Week between mods 1 and 2.”
Earnhart, who, with her colleagues, represents the face of the department’s continuing revolution, adds, “The marketing curriculum is definitely taking huge steps forward.”
Investment Opportunities
From left, Gil Fuqua, BA’73, MBA’75, Dru Anderson, BA’80, EMBA’89, and Pat Watson, EMBA’83
It may specialize in investor relations, but as a firm in the business of presenting other companies, Corporate Communications Inc. is a hub of strategic marketing. In producing, among other things, quarterly and annual reports for a variety of small- and mid-cap publicly held companies, it makes financial data useful to investors, analysts, the press and public. Doing so draws heavily on what Gil Fuqua calls the cross-training he and fellow Senior Vice Presidents Dru Anderson and Pat Watson received at Owen.
“We are in the communications business,” Fuqua says, “but what we do is largely based on a thorough and relatable understanding of a company’s financial picture. Our Owen training in finance and accounting provided the right base of knowledge.”
“We always say we are marketing companies as investment opportunities to a Wall Street audience,” Anderson says.
As in so many firms, theirs is a mixture of business basics and ever-changing technology. “The information we deliver to the market is the same as it was 25 years ago,” Watson says. “The real difference is that instead of faxing or mailing it to a couple of hundred people, you’re posting it online to countless people, and it’s almost instantaneous.”
All have kept a close watch on Owen’s continuing transformation. “I’m very positive about the changes Owen has made in its marketing department,” Fuqua says. “What has too often been left out and what Owen is addressing is that once you’ve got the information, how you communicate it is just as important. Owen students learn both skills.”
Patients’ Needs
Jill Austin, MBA’88
The marketing challenges Jill Austin, the Chief Marketing Officer at Vanderbilt University Medical Center, and her team faced with the $64 million rollout of Vanderbilt Health at One Hundred Oaks were both sweeping and intricate. They had to (1) reassure neighbors, (2) form alliances with physicians, the city and merchants, (3) inform the media, and (4) bring patients to 22 planned clinics and additional offices.
Their playbook contained everything from community meetings to Twitter, reflecting the desire of the VUMC marketing team “to communicate with people in all the ways they want to be communicated with,” Austin says.
The marketing process has been as much about listening as speaking. “One of my favorite quotes was from a focus group on our Web site: ‘Please make this more about us than about you,’ which is so great,” she says. “That became a philosophy that pervades our work.”
Cyril Stewart, the Senior Director of Facility Resource Strategy and Management at VUMC, says, “I think that Jill’s careful crafting of the One Hundred Oaks focus group sessions is what turned the tide on the project.” Austin, however, is quick to share the credit, saying, “We couldn’t do what we do in marketing if it weren’t for our colleagues in other areas, including news and public affairs, community outreach and physician liaison service. We are all part of the communications channel.”
And for Austin, the end is clear. “It’s not about selling us,” she says. “It’s about understanding the needs of our patients, families and neighbors, and then working to best serve those needs.”
They are among the nation’s most compelling potential customers— the nearly 100,000 men, women and children who are in line for the fewer than 30,000 organ transplants that will be performed this year. That staggering gap is caused both by a scarcity of donors and by the fact that only 70 to 80 percent of the organs actually harvested can be utilized because of problems with quality or preservation.
The work of four members of the Vanderbilt Executive MBA Class of 2008 may help change the latter half of that equation. Their start-up proposal, developed for an Owen classroom and aimed at bringing to market a system that would better preserve donated organs, has earned the top prize in a prestigious business competition and has begun moving them toward the marketplace.
Classroom Origins
The company, Organ Transplant Technology (OTT), began attracting real-world interest while it was still a project in Bruce Lynskey’s entrepreneurial course, Creating and Launching the Venture, during Owen’s fall 2007 semester.
“In seven years of teaching at Owen,” says Professor Lynskey, himself a successful entrepreneur, “I can count on one hand the number of classroom projects I’ve seen with this much potential upside.”
Three panels of judges agreed with him. The OTT proposal wowed a group of venture capitalists brought in by Lynskey to rate student projects, reached the semifinals of the Wharton Business Plan Competition, then took top prize in the MBA Jungle Business Plan Competition in New York. For the team that developed and pitched the idea—Dr. Ravi Chari, Ted Klee, Drew Bordas and Fernando Sanchez—those milestones served as validation of both the quality of their teamwork and the importance of the concept itself.
We realized this was more than just a classroom project or a competition. This is something that can really save people’s lives.
~ Fernando Sanchez
“We realized this was more than just a classroom project or a competition,” says Sanchez, who is Vice President of Finance and Treasurer of Gibson Guitar Corp.
“This is something that can really save people’s lives.”
The project is the culmination of two years of teamwork for Sanchez; Klee, who is Vice President of Square D/Schneider Electric Co.; Bordas, Director of Warehouse Management Systems for Ingram Book; and Chari, Professor of Surgery and Cancer Biology and Division Chief of Hepatobiliary Surgery and Liver Transplantation at Vanderbilt University Medical Center. The four were assigned to the team by Associate Dean of Executive Programs Tami Fassinger, who cites their disparate backgrounds as a source of strength.
“The goal of the study groups is to approximate all the skills you’d have in the executive suite,” she says, “and with this group you’ve got people representing four areas of functional experience as well as four different industries. Fernando Sanchez comes from the world of musical instruments and played the role of finance guy. You’ve got Ted Klee, who is the quintessential engineer and who understands manufacturing and operations. You have Drew Bordas, who understands distribution from a service industry point of view and has got the consumer piece. And then Ravi is the doctor at a leading medical center, bringing the scientific piece and contacts in the health industry.”
The quartet clicked at the week-in-residence at New Harmony, Ind., a getaway that kicks off the Vanderbilt Executive MBA experience, developing a style that was part think tank, part frat house.
From left, Dr. Ravi Chari, Ted Klee, Drew Bordas and Fernando Sanchez are the team behind Organ Transplant Technology.
“They’re big practical jokers and very sarcastic,” says Fassinger, “but they genuinely enjoy each other’s company and have become very good friends. It was just that typical guy thing—making fun of each other, but out of respect. It was about all four of them getting the idea right.”
A Better Solution
They used first-year projects to hone their group approach, then weighed ideas for Lynskey’s class during the summer between academic years. The one they chose grew out of Dr. Chari’s work as head of Vanderbilt Medical Center’s liver transplant surgery team.
“Currently,” says Dr. Chari, “of the 40,000 to 50,000 potential donors, more than half are excluded because of concerns with organ preservation and quality. Of those that are harvested, 20 to 30 percent are not actually used, again because of concerns about preservation and quality. It is critical that organs are optimally recovered and stored.” That led him to the work of a European friend who was “having trouble commercializing a project that from a scientific standpoint had a lot of merit.”
The project took aim at improving the decidedly low-tech means now in use for transporting donated organs, which are placed in a solution in a zipped plastic bag and carried on ice in a portable cooler. That technique risks damage to the organ through freezing or temperature variation, and greatly limits the sustained viability of a donated organ. At present the limits are six hours for a heart, 12 for a lung or liver, and 24 to 30 for a kidney. Work done in part by Dr. Thomas Van Gulik of the University of Amsterdam brings two improvements to the process. The first is a system driven by compressed air that circulates the solution through the organ, constantly supplying it with oxygen and nutrients designed to prolong its useful life. The second is an improvement in the perfusion solution itself. Both can be used in an easily portable container that keeps the organ at a stable low temperature.
In addition, one of Dr. Chari’s colleagues at Vanderbilt, medical student Clayton Knox, had developed and patented with Dr. Chari a compound designed to improve the performance of the perfusion solution even further.
The others embraced Dr. Chari’s proposal enthusiastically.
“Ravi’s idea surfaced pretty quickly because it was real,” says Bordas. “It was no contest, really.”
Bordas, Klee and Sanchez all acknowledge the centrality of Dr. Chari’s role and the importance of his technical knowledge and contacts, but Dr. Chari himself is quick to return credit.
“From a logistics standpoint,” he says, “Drew is outstanding. Ted is all over the strategy and the operations side, and Fernando is great with the financial side, so each brought different areas and perspectives. A good thing about them is that they aren’t in the medical field, and they brought a real business perspective and asked demanding questions: ‘The science is good, but how can we monetize the idea so that it’s something people would actually buy?’ They pressed those issues further than a roomful of my colleagues would, and so we were able to turn a great idea into a marketable business plan people would be interested in.”
The strength of the team and its presentation was clear by late November, when Lynskey had his students present a working draft of the proposal, weeks before their final presentation.
They submitted their draft, and I brought it home and read it again and again, looking for something I could say was wrong with it. My only comment back to them was, “You need a nice presentation cover for this.” I’d never seen anything like it.
~ Professor Bruce Lynskey
“Ravi’s team submitted its draft, and I brought it home and read it again and again, looking for something I could say was wrong with it,” says Lynskey, “and my only comment back to them was, ‘You need a nice presentation cover for this.’ I’d never seen anything like it.”
By the time of the in-class, end-of-semester presentation to a six-member panel of venture capitalists, the team’s message had been finely honed. Each panelist had $5 million dollars in imaginary money to distribute among 10 team proposals, and OTT garnered about two-thirds of the $30 million available.
“As they started talking about our proposal,” says Sanchez, “I turned to Ravi and said, ‘You’d better give them your business card. This thing has legs.’”
From Competition to Market
The team had already entered the Wharton Business Plan Competition, which requires that one member of the team be pursuing a Wharton MBA. That was exactly what Knox, who was still working toward his M.D. at Vanderbilt, was doing, following in the footsteps of his mentor, Dr. Chari.
“I realized,” Knox says, “that in academia, there are all these great minds and great ideas, but not a lot of people know how to get them out of the lab. Scientists are much better at thinking up new ideas than commercializing them.”
Professor Lynskey’s course had guided them toward doing just that.
“We never would have gotten this far had we not been in a program that forced us to think the project through and commit it to paper,” says Klee. “And I don’t think any of the guys in the group ever would think about doing something like this on his own, but put us together as a group, each with our own sets of talent and experience, with the university training us around these aspects important to developing a business plan, and it’s not that long of a putt.”
Their success continued as they were named semifinalists in the Wharton competition.
“When that announcement came out,” says Bordas, “The Wall Street Journal piece cited five ideas and ours was one of the five. Some of the judges said it was the best paper they’d seen in five years, and we said, ‘We should think about this more seriously.’”
They had entered the Jungle competition at the urging of Professor Lynskey. Their win capped an incredible run for what had begun as a classroom project and convinced them to pursue the company’s future, beginning with a return visit to Lynskey.
“The great thing about Bruce,” says Bordas, “is that he’s been there and done that. When you have a guy teaching you about starting companies who has started them and been very successful at it, that just gives the whole course a ton of credibility. And when we went back to him and said, ‘This looks real. What should we really do next?,’ he was able to have that dialogue with us. That’s one of the things you get by going to a university like Vanderbilt.”
The team has never lost sight of the underlying importance of the endeavor.
“More and more often, less-than-ideal organs are used, which is an unfortunate but necessary practice to manage the long waiting list,” they write in their business plan. “Ultimately, OTT’s goal is to improve the size and quality of the organ pool available for transplantation in order to increase the number of transplants performed each year and reduce the organ waitlist.”
“It’s pretty clear,” adds Dr. Chari, “that we’re excited about moving ahead with this work and with ironing out the agreements we need to get under way.” To that end, they are working to effect an agreement with the Amsterdam-based developer of the solution and the air-drive system, while awaiting approval of both in the United States and the chance to deliver the concept to a waiting marketplace.
“Some of the significant liver transport units around the country are eager to get it and put it into trials,” says Klee.
A Rewarding Experience
The value of the team’s Owen experience has become more apparent, with Dr. Chari seeing his MBA as a key to better positioning in a changing medical climate.
“Looking at the landscape of health care right now,” he says, “a premium is being placed on improved processes and improved function in the medical field. Traditional medical education gears you toward science and clinical applications for patients, but cost efficiency, process efficiency and other business principles constitute an important language to be able to speak.”
His Owen experience, he says, “changed not only how I think but how I analyze a situation—not just what information to use, but what questions to ask and where to look for that information.”
For Knox, who is part of OTT’s management team, the project’s success is “extremely rewarding and extremely validating in terms of the need for people who can understand both worlds, who can understand medicine and the business side of it—something Vanderbilt is especially good at fostering.”
As noble as the medical aims of OTT are, its principals are equally thrilled with the personal rewards of their Owen experience.
“We had a great class,” says Bordas. “Meeting those 40 or 50 people, I think, is going to pay dividends down the road. And within our group, I’m very grateful to have that core set of people you can bounce things off of. I consider them very good friends as well as mentors.”
Those friendships are likewise a prime reward for Sanchez.
“First and foremost,” he says, “I now have three or four people who I consider great friends for life. They are just good people from varying backgrounds, and I wouldn’t have met them any other way.
“The experience,” he says, “is a great one from a personal standpoint.”
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