The world is their classroom

Kellogg GIM program helps solve pressing social issues with market-based research and strategies

By Rebecca Lindell

Piotr Pikul ’05 has long had an interest in the changes wrought by political upheavals.

Pikul, a native of Poland, has watched Eastern Europe struggle to adapt to a market economy in the years since the fall of Communism. He grew curious about the progress of South Africa in the wake of a similarly transformative event: the end of apartheid.

Last spring, Pikul seized a rare opportunity to take a firsthand look at South Africa and its prospects. He and Kellogg School classmates Kathy Wang ’05 and Craig Wynn ’04 visited the country to understand how businesses can prepare black citizens to become full participants in the South African economy.

“It’s an issue we thought was critical to South Africa,” Pikul says. “To have a stable, successful society, you need a prospering middle class. There are a lot of lessons to be learned there for other emerging markets.”

The opportunity was provided through the Kellogg Global Initiatives in Management (GIM) course, which sends hundreds of Kellogg students around the world on similar academic excursions each spring. Since its founding in 1990, GIM has become one of the school’s most popular courses and a cornerstone of the Kellogg experience.

“We put the first class together with no great vision of what it would grow into,” says Sandy Haviland ’90, who spearheaded the creation of GIM with a group research trip to the former Soviet Union almost 15 years ago.

“Our objective was simply to get us into places where things were happening, to go beyond the academics and theory and really interact. We’re incredibly proud and excited to see how the program has grown,” says Haviland, now president of Haviland & Co., a financial services firm in Connecticut.

The course helps to consolidate the learning in core Kellogg classes. Students work in teams and develop their own projects with the assistance of faculty advisers, interviewing politicians, business leaders and consumers. Sometimes the projects tackle a problem faced by a single industry or company, but last year, many projects had a broader focus. Many students were spurred to research social issues by the Ford Motor Company Center for Global Citizenship. The Kellogg School-based center offered prizes for the best papers on social responsibility and environmental issues.

Students researched some of the thorniest issues faced by developing societies — how to bring healthcare to the rural poor in Brazil, for example, or how to minimize pollution in China while pursuing economic growth.

Wrestling with such topics helps students learn how to apply management theories to actual business problems — one of the key goals of the GIM program, says Mark Finn, program director and clinical associate professor of accounting and international business.

“All GIM projects involve primary research and give students opportunities to say something new and important about the countries they visit,” Finn says. “The projects generally propose practical solutions to real-world problems. However, the best projects tend to make use of analytical frameworks — from marketing, strategy or finance — learned in the students’ Kellogg coursework.”

A society transforms
Pikul, Wang and Wynn took on a potentially vast issue: how to close the skills gap in South Africa so that the historically disenfranchised black population can attain better-paying, managerial jobs.

“We’ve seen huge changes in South Africa, but on the economic front, they’ve been mostly on the surface,” Pikul observes. “A number of black tycoons have been brought in, but it’s a limited group of well-connected people. The society as a whole hasn’t changed much. Most blacks are still very poor.”

The group eventually narrowed its focus to consider the corporate angle. How, they wondered, can companies operate and compete in this
environment?

Pikul notes that businesses in South Africa have committed themselves to a medium-term goal of filling a percentage of managerial and skilled positions with blacks.

“If you don’t train these people, you are hurting yourself, because you will have poorly skilled managers running your company,” Pikul says. “It’s not just a corporate cost due to government regulation. It’s that you have to do it to survive as a business. If you do it well, you can gain an advantage over your competitors. In the process, you help South Africa transform as a society and create a viable black middle class.”

Pikul, Wang and Wynn spent their time in South Africa interviewing representatives from an array of businesses, including an insurance company, a bank, a basic materials company and an industrial firm.

Their consensus: Firms should focus on skill-building and nurturing a talented work force.

The students cited the successful example of companies offering university scholarships to blacks. As a condition of the scholarship, the recipient must work for a time at the sponsoring company. Such a program creates a long-term economic value to the firm, and can be seen as an investment, rather than as an additional cost.

Establishing corporate training departments with profit-and-loss responsibility is another way to build skills, the students said. Training becomes an investment with an expected return, which helps to emphasize the endeavor’s long-term nature.

Pikul says the students had to approach their South African contacts with a great degree of sensitivity. “You come to an environment where in the past there has been huge injustice, and it ended only a decade ago,” he says. You can come across as cynical when you grill the companies about what they do to help black citizens. You have to be careful not to be perceived as biased.”

Yet both blacks and whites are working toward change, he says, and many recognize that opportunities come along with the challenges.

“We found that corporate responsibility can make good business sense,” Pikul says. “In this respect, the South African experience can serve as a model for the rest of Africa.”

Technology to heal Brazil’s rural poor
By constitutional decree, the people who live in Brazil should be among the world’s healthiest. Medical care is a universal right for Brazilians, regardless of race, income or location.

The reality falls far short of this ideal, due in no small part to Brazil’s sprawling size and the difficulty in reaching its large rural population. Kellogg students Dee DeFoe ’05, Caroline Brady ’05 and Patrick Lortie ’05 sensed a business opportunity in this discrepancy, which they used their GIM project to explore.

“Brazil is a very pyramid-shaped society,” says DeFoe, who worked in Brazil prior to enrolling at Kellogg and is considering a career in the healthcare field. “Figuring out how to transfer some of the good things at the top of the pyramid to the bottom will be a major challenge as the country moves forward.”

The group believed that technology could be instrumental in closing this gap. Indeed, their research revealed numerous examples of “telemedicine” — the practice of using computer networks to exchange medical information between doctors and patients.

The trio eventually focused on one company: Telemedicina de Bahia, which offers electrocardiogram services and treatment support to some 140 rural public health clinics that would not otherwise have access to specialized cardiology care.

Clinic workers use phone lines to transmit the EKG results to the central Telemedicina office, where staffers diagnose them immediately and offer treatment advice.

With cardiovascular conditions accounting for up to one-third of all deaths in Brazil, one would expect business at Telemedicina de Bahia to be booming. Though the company has grown steadily since its launch in 1999, its prospects are limited by several factors.

These include cash constraints due to late payments, which in turn hamper the company’s ability to make the capital-intensive investments it needs to expand. Another major hurdle is the need to extend the nation’s healthcare and telecommunications infrastructure. A third impediment is the decentralization of Brazil’s public healthcare system into smaller ministries, creating additional bureaucratic stumbling blocks.

“We learned a lot about the interplay between the public and private healthcare system in Brazil — how conceptually it can seem easy, but how difficult it can be to execute,” DeFoe says.

Still, the group concluded that in the short term, telemedicine offers opportunities to improve healthcare in rural Brazil. One option, they said, would be to use the Internet to disseminate healthcare information to schools and community centers in rural areas.

DeFoe says the project opened her eyes to the challenges of starting a business in Brazil. It also alerted her to the opportunities.

“Brazil has one of the better chances of becoming a mainstream economic player,” DeFoe says. “It could be really fun to go back and work there.”

Market challenges in China
China is booming. The world’s fastest-growing economy is generating unprecedented levels of car ownership and oil consumption — and air pollution.

How to profit from China’s explosive growth while minimizing its negative consequences became the focus of Kellogg students John Eisel, Jonathan Glick, Adrienne Kardosh, David Mayer and Doug Roth (all ’04) and Coleman Long ’05.

The group explored the market opportunity for environmentally friendly technology within the Chinese auto industry.

“Our goal was to pick a social concern,” Long says. “China is such an exciting country with so much growth, but we also know there are a lot of controversial issues there. We didn’t just want to focus on a narrow business concern. We wanted to do something a little different and take a look at some of these questions.”

They discovered that an opening exists to position cleaner vehicles as the preferred choice among Chinese consumers. But the typical Chinese car buyer doesn’t necessarily see the value yet in an environmentally friendly car.

To establish that idea, companies should expect to work closely with the Chinese government, which views technological prowess as a key part of the nation’s identity.

To make this link, the students interviewed China-based representatives from Leo Burnett, Mercer Management Consulting, GM and Valentic Inc., an auto supplier.

“The real focus of our research was on the government structure,” Long says. “Understanding how to do business in China is understanding your role with the Chinese government.”

The group noted that under current growth rates, China is expected to consume 8 billion barrels of oil per year by 2033 — about 27 percent of the world’s current global production. Widespread use of autos with hybrid technology could reduce that figure by 50 percent, the students say.

It would also allow for dramatic improvements in China’s air quality. Pollution already costs the nation 5 percent of its GDP in healthcare costs and lost productivity, according to the students’ research.

Such figures are not news to the Chinese government, which has declared the development of cleaner vehicles one of its top industrial priorities.

A company that can align its product strategy with this goal stands to benefit in numerous ways, the students concluded. It can receive financial support from the government, and it can position itself as a player in an industry the government plans to consolidate.

“That’s where the ‘ah-ha’ moment came in,” Long says. “We realized we could frame this as a business problem with a business solution. It was a great experience for us as future managers. You see a problem, but you don’t have to look at it as a cost. You look at how you can solve it in a competitive way.”

Projects such as this give students a true taste of the GIM experience, says Finn.

“Students in GIM gain the ability to focus on an important business problem and analyze it,” he says. “It’s an extremely fascinating thing to do. You meet top-level people and interview them on a topic that’s relevant to you personally and to your professional trajectory. It’s something every Kellogg student ought to do at least once.”