Reflecting on the Launch of Hilltop Consultants
I was recently asked to contribute to a guidebook for new student members of Hilltop Consultants, a student nonprofit consulting organization that I started while I was at Georgetown University. I thought it would be appropriate to also post my thoughts here:
Starting Hilltop Consultants was an exciting part of my university experience at Georgetown. I had heard of other student nonprofit consulting organizations on other campuses, and was surprised to see that none existed in Washington, DC. Given the plethora of nonprofit organizations based in the area, the potential client base was huge. My peers, other undergraduates at the McDonough School of Business, were an ambitious bunch who were eager to find ways to gain real-world experience early on in their university careers. These same ambitions had led many to join The Corp and the Georgetown University Alumni and Student Federal Credit Union, and I saw no reason why their energies couldn’t also be directed toward nonprofit consulting projects.
After returning from a semester abroad, in January 2004 I began working on the plan in earnest. A group of three other students answered my calls for assistance to start a new student business organization. We drafted a mission, vision, and business plan, applied for recognition as an official student organization, and recruited the first leadership board for Hilltop. By April of 2004, Hilltop Consultants was a reality. By the time I graduated in May 2005, we had served four clients over the course of two semesters, and hosted the first ever business strategy case competition at Georgetown University, the Business Strategy Challenge.
As a member of Georgetown’s case competition team, I had experienced first-hand the excitement of student case competitions, and saw a great opportunity to expand Hilltop Consultants’ activities into that area. By choosing a local nonprofit organization as the subject of the case study, we were able to further build upon Hilltop’s mission of both serving the DC nonprofit community and enhancing Georgetown students’ opportunities to learn about business by advising the managers of local organizations as they struggled to tackle real-world business challenges. Our first Business Strategy Challenge, in April 2005, focused on the obstacles facing the United Way as it adapted to a fundraising environment in which donors demanded greater transparency about how their donations were being put to use.
After graduating from Georgetown, I spent three years as a management strategy consultant for the Monitor Group. I was lucky to not only gain experience serving many impressive businesses in the United States and abroad, but also served several nonprofit organization. It was incredibly stimulating to work in a place where I was constantly surrounded by a group of people with such incredible intellectual horsepower.
Consulting is a valuable first-step out of an undergraduate education not only for business students, but students from all academic paths. It provides a strong analytical foundation which is valuable to employers in nearly all reaches of the economy. It also provides opportunities to build presentation skills and enhance a person’s professionalism as he or she is put into meetings with more and more senior clients. Finally, it provides excellent opportunities to explore a variety of industries and practice areas (e.g. marketing, finance, operations) to see where your passion lies.
I hope that Hilltop Consultants not only helps students find a way to contribute to the nonprofit community through a higher impact investment of their time than might otherwise be possible, but that it allows students to “test the waters” of a career in consulting. The long hours, the often grueling travel schedule, and your status as “advisor” rather than “decision maker” mean that consulting certainly isn’t the perfect career for everyone. As a first dive into the professional world, however, I can think of few better options available to a recent Georgetown graduate.
-Mitchell Fox
Founder and President, Hilltop Consultants, 2004 - 2005
Consultant, The Monitor Group, 2005 - 2008
Leveraging the Spirit of Giving to Do Good
Several months ago, one of my work assignments involved looking at “new trends in international development.” It was a large, difficult to structure task, but one which revealed a number of exciting and interesting organizations which are doing great things to try and improve the world in the places that need the most help.
I found that the simple ideas were often the most powerful. Kiva, an organization which allows users to provide small loans directly to entrepreneurs in the developing world, was an example of one of those ideas. By matching a face, name, and story to charitable donations, the “feel good” factor of giving to a cause is substantially increased.
A further extension of that idea, equally simple and powerful, was pointed out in a recent blog post by Guy Kawasaki. Gift certificates, essentially a charitable pledge, can be given to a friend or family member, who then decides which entrepreneur should receive the funding. Over time, that recipient repays the money that is lent to them, enabling the new user to invest in a new recipient.
What a wonderful way to build your user base and encourage a net increase in the amount of money being donated. Good work, Kiva.
Economic Weapon: “Oil to Hit $200 if Iran Attacked”
I woke up this morning to the fantastically eye-catching lead headline in the Arab News: ‘Oil to Hit $200 if Iran Attacked’. Below it, a sub-headline reads “King Rejects Using Oil as a Weapon.” The obvious disconnect between those two statements did not apparently dawn upon the kind editors of my morning newspaper, but drew me in to read more.
I discovered that they were, in fact, both accurate headlines. I worry, however, that the press in the Western World will pay substantial heed to the threats delivered by Venezuelan President Hugo Chavez, and ignore the words of moderation, restraint, and stability from Saudi’s King Abdulla. Great headlines are produced by the former, but my hope is that the latter prevails.
That said, if I were in the shoes of Chavez or Ahmadinejad, however, I would be aspiring to make sure a few more headlines like the one that appeared this morning reach the White House.
Owners vs. Operators: A Career Choice
One of the fundamental separations in the business world is between the owner and the operator. Owners have a fundamental role of identifying and valuing business opportunities, as well as setting a firm’s fundamental direction. Operators develop a strategy for achieving that direction, and ensure its execution. This is the separation that exists, for instance, in most public companies between the roles of the Board of Directors and the CEO. This distinction is of particularly relevance in job hunting because having one or the other as an aspiration should, in theory at least, influence a person’s career path.
This simple but powerful observation was courtesy of David Wong, a former colleague and fellow Georgetown alum who now works as an Analyst at a mid-market private equity firm in Boston. As I continue to explore career opportunities that will build off my experience as a management consultant but move me closer to my goal of working with small and medium businesses, I called David to get his perspective on whether working in private equity would a step in the right direction. His candid advice was powerful, clear, and refreshingly candid, something which can frankly be difficult to gain during a career search (after all, it is difficult to be impartial on something so personal).
Private Equity is About Being an Owner:
Private Equity is fundamentally about being the owner of a company. It requires being able to identify companies with promise to either be grown in size and value, or which could be restructured to release additional value from the existing business.
From David’s perspective, private equity is much more often a destination than a path to anything. Whereas consulting and investment banking are highly transient industries, with analysts and associates spending two or three years then departing for other opportunities, investing jobs tend to be long-term commitments to a particular business mindset.
Someone who moves into private equity (buyouts, to be more precise) looks at companies with proven business models and how to gain further value from them. While she might decide she wants to focus instead on identifying promising new business models and technologies, and therefore move into venture capital, she would still be doing so with an owners mindset. Similarly, she might decide that rather than worrying about individual companies, but instead on valuable industries, sectors, and types of investments, she might move to a hedge fund, but she would still be thinking like an owner.
David suggested that you could not take someone from any one of these careers and put them at the helm of a company or at the head of its strategy group and expect that he could be successful. Identifying the opportunity and actually executing against it requires fundamentally different skills and attitudes.
Career Paths for Operators:
David suggested that if my goal was to be a successful operator of a small / medium company, private equity would be only marginally helpful. While it would expose me to high growth businesses and how those companies achieve their success, my fundamental job would not be to understand how to replicate those successes on my own in the future.
As David pointed out, there is a fairly clear path from consulting into an operating role in a larger business. Many consultants move their way up the ranks of their firms until they discover a client who finds their advice indispensable and hires them to run an internal functional area (e.g. marketing, strategy, or operations).
What our conversation left fundamentally unanswered was how someone could best position himself for an operating role in a small or medium business.
The challenge for someone in strategy consulting is twofold. First, with only a few years experience, he is still inadequately experienced to run much of anything or be dropped into a COO-type position and be successful. Second, because consulting firms charge hefty prices for the privilege of their advice, clients are rarely small or medium businesses, limiting the networking and “watch-and-learn” opportunities.
Two ideal career path options for a strategy consultant with an eye towards being an effective operator would therefore seem to be either take an operating role directly (either literally in operations or in product development, sales, or marketing) in an industry of particular interest, or continue in an advisory position (as a consultant, either in a professional services firm or perhaps internally in a company with an internal strategy group).
Helpful Clarity, but Further Questions:
Whether anyone else will find the above helpful is of course an open question. I certainly found it to provide helpful structure to a question that is difficult to navigate.
It leaves open some deep questions for personal reflection. At the end of the day, do I want to be an operator or an owner? Does the challenge posed to an entrepreneur bridge both? Do any of the careers I described above (e.g. investing, industry operating roles, or strategy advisory) really prepare someone to be an entrepreneur, or does it all just come down to trial and error of starting a few companies and seeing what works?
Why Smart People Make Big Money Mistakes
Despite my general inability to get past page two of nonfiction books on topics like personal finance, I recently finished reading Why Smart people Make Big Money Mistakes: and how to correct them by Gary Belsky and Thomas Gilovich.
For brevity’s sake, and because time is short, I will refrain from a full review of the book. Rather, I will provide a few quick highlights that I found most personally relevant, and encourage you to read full reviews or even pick up a copy if you find these compelling.
To give quick context, the book is written from the perspective of behavioral economics, which studies the sociological and psychological reasons for our economic decisions. It makes a strong case that while many of us may think that we are financially savvy, that we in fact make many financial decisions due to social and psychological pressures rather than purely objective, rational ones.
The book outlines several fallacies and important lessons:
- All Dollars are Created Equal: If you spend your bonus check or tax refund more easily than your regular salary, or if you invest your inheritance, retirement or education savings more conservatively than the rest of your portfolio (and are several years from needing these things) you are likely losing money. A dollar of inheritance money has the same buying power as a dollar of your salary or a dollar from your lucky lottery winnings - so they ought all be spent or invested by the same criteria and consideration.
- Loss aversion and the Sunk Cost Fallacy: Do you sell your “winning” stocks in order to lock-in the gain, but hold your “losers” in hopes that they will rebound? Are you throwing good money after bad?
- Bigness Bias: Would you not spend an extra $50 on your $200 domestic plane ticket to fly a specific airline, but don’t mind spending $100 extra to fly your preferred airline if its a $900 international ticket? Extra charges look smaller when they are wrapped into big purchases, but still cost you the same amount of money.
- Ego Trap: Do you think that you can outperform the market with your smart stock picking techniques? Do you think that you’re doing pretty well with your investment return in the last year, but not actually know how much the overall market grew in that same time? You may not know as much as you think you do - the law of averages will beat you more often than you likely want to know.
See good reviews at Get Rich Slowly and The Simple Dollar.
Putting it Together: The Credit Crunch, A Weak Dollar, and Entrepreneurship
I am writing today in response to an Open Thread on GigaOM.
The credit crisis will have an important impact on entrepreneurs, but must also be considered in the context of a weakening dollar and the risk of an economic downturn. The likely affects are three-fold:
- “Exits” through acquisition by an established industry player or private equity buyout will be less likely
- Consumer dollars may shift away from startup businesses whose products look a lot more like “luxuries” than day-to-day essentials
- Top qualified job candidates and new entrepreneurs may delay their entry into the market until conditions improve
Exits: If acquisitions become more challenging, startups will be pushed toward IPOs as the most viable exit strategy. Unfortunately, with an overall economic downturn in sight, investors are also less likely to be seeking high risk small-cap startup IPOs.
Overall, if entrepreneurs and venture capitalists cannot exit on their investments, the engine that powers Silicon Valley could slow down (note: I deliberately refrain from using “grind to a halt”). At first, if VCs are flush with cash to invest, they will continue to do so. As the burden of their growing portfolio grows, however, investing would slow.
Consumers: With home values dropping or plateauing in many markets, consumers will be cutting back on spending on luxury goods. And yes, Premium Membership at Flickr counts as a luxury good. The same goes for a weak dollar. Imported goods like electronics and gourmet foods, which become more expensive as the exchange rate weakens, could easily force consumers to shift spending away from new web toys.
While it is true that many web 2.0 businesses rely on advertising money more than actual consumer spending, it is important to remember that advertising is also linked to consumer behavior. In hard times, advertising dollars shrink.
Top Talent: If exits are hard to come by, it means that one of the great attractions (mind you, not only) of working at a startup, the chance for a big payday after a few years of work, is much less likely. Without that big carrot to lure in the brightest minds, the best job candidates may stray to other businesses with more secure, lucrative paydays like investment banking, consulting, and jobs in “industry.”
If recruiting the right people to fill important roles becomes difficult, growth at startups could slow, further depressing the situation in places in Silicon Valley.
At Least One Silver Lining: It would be inappropriate to conclude a post like this without an explanation of at least one of the potential benefits of the current credit crisis and economic situation.
This is starting to look like a good market for buyers. It will be possible for businesses to acquire other companies and consumer to buy houses at more reasonable prices, assuming they have the cash necessary to afford them. While this won’t be the case for all buyers, those which are well prepared will find the situation to be quite favorable.
As the saying goes, “buy low, sell high.” Sometime in the near future, conditions might be just right to make that home purchase you’ve been waiting on.
What do you think are the other potential upsides?
My Previous Posts on these topics:
- “Buckle Up: Why Entrepreneurs Should Be Scared of the Shifting US Economy”
- “Why the VMWare IPO Doesn’t Dispel the Possibility of Crisis, But May Signal a Shift”
- “Will a Debt Crunch Drive Smart Minds Away from VC, Entrepreneurship?”
Consulting, VC, or a Startup? Best Career for an “Entrepreneur in Waiting?”
I am a part of the great swath of young professionals around the world who might be best described as “entrepreneurs in waiting.” We are people who aspire to one day start our own business, or partner up to create one.
We have in common the desire to be prepared to seize a new business opportunity when it comes our way, but many of us are currently working in other careers, waiting for the right moment to make our move. Jared Smith, a friend, former colleague, and junior partner at PICS (Pacific Industrial Contractor Screening) calls this “waiting for your pitch” — holding out for that great idea you can hit out of the ballpark.
Where, then, is the best place for me to wait for my pitch and optimize my chances of not only receiving the most pitches, but also knowing when I should swing and having the skill to hit the ball? How do I maximize my chances of meeting the right people, while also gaining the skills and experience that will make me an attractive business partner? What career will provide the most inspiration to dream up the big business idea I want to build my career upon?
The answer, obviously, depends very much upon the type of entrepreneur you want to be. Are you a developer or a business guy? How much do you have to lose if you leave your current career and mess up? I am writing today with the business-minded entrepreneur in mind; one who already has a good job and does not want to join just any startup, but the right one. I am, essentially, writing about myself.
Management Consulting [where I am today]:
Pros:
- Build credible work experience and learn best practice
- Develop important business skills in analysis, customer interaction, planning, and management
- Cultivate a management mindset - consultants are trained to structure problems and think about how to grow businesses
- Exceptionally diverse exposure to different industries and business problems, improving the chances of stumbling across new business ideas and innovative solutions to old business problems
- Diverse exposure to different geographies and business environments, possibly giving insight into businesses which could be transplanted from one location to another
- Relatively stable and low risk compensation [bonus based on a mix of personal and firm performance, not necessarily that of clients or a portfolio]
Cons:
- Limited control over the industries, geographies, or business problems you face [i.e. You may be just as likely to be working for an "old economy" auto manufacturer in Detroit as a "new economy" biotechnology company in Silicon Valley]
- Typically clients are fortune 500 businesses or governments, both of which operate very differently than startups, possibly limiting the applicability of some lessons learned
- Limited networking opportunities with other entrepreneurs, for the same reason
Venture Capital:
Pros:
- Exposure to diverse businesses and solutions within a narrow industry area (most firms focus on just two or three industries) – gain understanding of how different players are solving the same problems with different approaches
- Gain an investor’s mindset, looking at businesses in terms of their relative ability to succeed, and understand a venture capitalist’s investment criteria
- Network with entrepreneurs and venture capitalists, increasing the likelihood of running across a potential partner with a “big idea” you are excited about
- Realistic possibility of moving from a position in VC to an operating role in a portfolio company
- Relatively stable compensation, however bonus is tied to portfolio performance and forms a greater proportion of salary
Cons:
- More time spent critiquing business models, management teams, and strategies than thinking about or learning first hand how to grow a business
- Limited diversity of industries and geographies likely to be encountered
- Limited opportunities to gain operating or management experience
Operating Role in a Startup:
Pros:
- Network with other startup professionals in your industry niche and within your company, people who are likely to have very similar passions and might eventually make great business partners
- Build deep knowledge of your industry, increasing the likelihood of identifying unmet needs which could be filled with a new product or service
- Gain practical operating and management experience, improving your credibility as a potential partner
- Understand the challenges faced by startups, and some common methods of overcoming them through personal experience
- Spend part of your day worrying about how to keep things working (operating mindset) and part your day worrying about how to make them work better (growth mindset)
Cons:
- Narrower networking opportunities – relatively less likely to meet potential partners in other industries or geographies, or think of solutions to problems that your company is not in the business of solving
- Possibly reduced professional credibility if later attempting to rejoin the “corporate world”
- More risky – compensation is highly correlated to business performance, which you may or may not have the ability to control
Of course, there are plethora options beyond consulting, VC, or working in a startup for any entrepreneur in waiting. I would love to know your thoughts. Are there other options which should be considered? Advantages and disadvantages of each that I have failed to consider?
Will Traffic Die, Once and For All?
There are a number of reasons why I am extremely impressed by how well managed London is compared to most cities in the United States. One area, in particular, is in transportation. One of the most controversial of these, when first introduced, was the congestion charge. Drivers are charged £8 (approximately $16 USD) to enter downtown London in their personal cars. The effect is that driving to work becomes too expensive to do it every day, encouraging commuters to use public transportation. At the same time, with less traffic, buses move faster, taxis zip from place to place more efficiently, and the city becomes an entirely more pleasant place to be. In the words of economics, congestion charging corrects a market externality.
As the New York Times reports today (”U.S. Offers New York Million for Congestion Pricing“) there has been a major step forward in New York’s efforts to replicate this important piece of legislation. While the plan is somewhat different, I have the utmost hope that it succeeds, and further demonstrates that public transportation can be successful in places outside of Europe and Asia (in one or two US cities at least…).
The secretary of transportation announced this morning that the federal government will provide New York City with $354 million to implement congestion pricing, if the State Legislature acts by March 2008 to put in effect Mayor Michael R. Bloomberg’s proposal for charging traffic fees in Manhattan.
Mayor Bloomberg’s congestion pricing proposal has attracted the broad support of business, labor, environmental and transportation groups, but he has been less successful at swaying state and city lawmakers representing the boroughs outside of Manhattan…
Nonetheless, the substantial federal support for the project gives enormous leverage to the mayor as he continues to press for his proposal.
The mayor’s plan, unveiled in April, proposes to charge drivers $8 and trucks $21 a day to enter or leave Manhattan below 86th Street on weekdays during the workday. Those who drive only within the congestion zone would pay $4 a day for cars, $5.50 for trucks.
Well done, Mr. Bloomberg. Let’s hope that he succeeds. It would certainly make that eventual move to Manhattan seem all the more tantalizing.
That’s It. Next Stop: Canada
It turns out all those people who said they were going to “move to Canada” if George Bush was elected for a second term weren’t kidding. ABC news reported yesterday that the number of Americans moving to Canada reached a 30 year high in 2006.
The number of U.S. citizens who moved to Canada last year hit a 30-year high, with a 20 percent increase over the previous year and almost double the number who moved in 2000.
In 2006, 10,942 Americans went to Canada, compared with 9,262 in 2005 and 5,828 in 2000, according to a survey by the Association for Canadian Studies.
Paul Kedrosky highlighted this article out today on his blog, but failed to point out one obvious connection: what was happening 30 years ago? The Vietnam war had justed reached its close, and an entire generation of Americans was fed up with its government and a war they deemed as unnecessary and detrimental to our society. Sound familiar?
It is, of course, negligent to fail to mention that before jumping to the conclusion that whole swaths of the country are moving north, remember that the border still booms in the opposite direction:
Of course, those numbers are still outweighed by the number of Canadians going the other way. Yet, that imbalance is shrinking. Last year, 23,913 Canadians moved to the United States, a significant decrease from 29,930 in 2005.
- Welcome to The Strategy Fox
Welcome to the professional weblog of Mitchell W. Fox, a management strategy consultant at Bain & Company in Sydney, Australia.Mitch was previously a Consultant at the Monitor Group, is a graduate of Georgetown University (MSB '05), and was the founder of Hilltop Consultants.