Most grad school orientation weeks consist of a few days packed with dry lectures about the upcoming semester, with a mixer or barbecue thrown in. But this year at the University of Michigan Ross School of Business, new MBA students were immediately tasked with creating a startup. And they were given four days to do it.
From Monday, Aug. 24, to Thursday, Aug. 28, all 450 first-year MBA students participated in the fourth annual Impact Challenge, a week-long competition to come up with the best business proposal, with a grand prize of $US50,000 in funding.
Students were split into six groups of 75 and given the task of crafting a business plan for a for-profit company that would serve underprivileged youth in Detroit and inspire them to grow up to become entrepreneurs.
Each group was assigned one faculty member, but in a mostly observational role. It was fascinating to watch each group find a way to organise 75 people on their own, professor of management and director of the Ross Leadership Initiative Scott De Rue tells Business Insider. “Some groups were led by a collective of five to 10 leaders. In others, one leader was dominant. And others operated on a kind of leadership rotation,” he says.
Since the task was complex and the groups so large, De Rue found that the groups that operated with a fluid leadership system were the most successful. Such a system helped the group that created Mo’Tech ultimately win. Their company will sell refurbished computers to businesses at a profit and a smaller fraction to Detroit youth at affordable prices.
“It was really cool to see the specialisation and focus within our group,” Mo’Tech member Giancarlo Moise tells us. The first day was used for organisation and brainstorming, and the members of the group that became Mo’Tech split into groups of specialisation based on their professional backgrounds and natural talents.
Moise became the face of the proposed startup, along with Lily Hamburger and Lucius Clay, since they had exceptional storytelling and presentation abilities, which was crucial for effectively pitching the company at the end of the competition.
On Tuesday, the second day, the groups traveled en masse to downtown Detroit to gather information on the impoverished neighborhoods that would become their client base.
The Ross Leadership Initiative arranged groups of community leaders, youth groups, and local entrepreneurs for the Ross students to meet with.
Mo’Tech was assigned to an area centered on the Brightmoor community. Clay tells us that he met with a pastor who told him that it required a great deal of effort to improve the rundown neighbourhood.
“He told us that before joining the parish, he was asked if he was really sure he wanted to take the job, since the church and the neighbourhood were so rundown. There were piles of trash in front of the church, and it was surrounded by abandoned, burnt-out houses,” Clay says. Detroit has suffered for years with an arson problem.
While Clay got an idea of what his company’s client base looked like, Moise spent the day meeting with Detroit entrepreneurs like Quicken Loans‘ Dan Gilbert and representatives of the incubator TechTown Detroit.
When their group met back on the UMich campus, some common themes emerged.
“We noticed that there was a need for computer literacy,” Moise says. “We learned that students were using smartphones in lieu of computers for schoolwork, and that they didn’t know the capabilities of personal computers.”
On Wednesday, some of those community representatives and business leaders visited the campus to help the Ross students refine their pitches, which they gave to a panel of judges on Thursday. The panel consisted of one Ross professor, two venture capitalists, and another professor who was also a VC.
Clay tells us that Mo’Tech took first place because they found a sweet spot between social outreach and the potential for profitable growth.
Mo’Tech plans to gather used computers from large companies like General Motors, wipe their memories clean, and sell them to local businesses at affordable prices. Clay says that for every fourth or fifth computer sold, one would be sold at a price of around $US25 to $US50 to youth groups, schools, or individuals. The low price was not for profit generation but to give their clients a sense of ownership that would compel them to take care of the machine.
Clay adds that Mo’Tech was also prepared to answer the panel’s questions when they tried to point out potential flaws in the plan. For example, they were asked how they would pay for software, which would generally be more expensive than the used hardware. Mo’Tech, however, would install Linux operating systems on their computers so that their clients could use free Linux software that mimicked a Windows interface.
De Rue says he was especially impressed by the way Mo’Tech incorporated its social initiative into a for-profit company, and that even though each of the other five competitors could still become viable companies, they were less focused on finding ways to scale and become profitable.
After prevailing in the “Shark Tank”-like judging process, Mo’Tech was awarded the first-place prize of $US50,000 from GM to turn Mo’Tech into a reality. UMich business undergrads wrapped up the Impact Challenge on Friday by competing to make the best Kickstarter campaign, which has yet to go live, to help get Mo’Tech off the ground.
Ross MBA students, now fully immersed in their first semester, can say that they started their business school experience by creating a company. It was an intense but highly effective transition into b-school, De Rue says.
“I was very impressed with all six groups,” he tells us. “We threw them all into the deep end, and they ended up swimming.”
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