On a June morning in the boardroom at General Electric Capital Corp. in Stamford, Conn., Anand Modak is telling a group of executives what he dislikes about the GE Financial Assurance Web site. "The information should be available within three clicks" of a mouse, he says, instead of seven in some cases. Sitting nearby, soaking it all in, are top GE Capital executives such as CEO Denis J. Nayden and Chief Technology & Information Officer Michael W. Stout. But Modak, 33, isn't a GE Capital employee or a top-dollar consultant. He's a second-year MBA student at the University of Connecticut's School of Business Administration, brought in to show GE Capital executives how he and his fellow students could lend a hand with the $56 billion company's e-business problems.
The GE execs came away impressed. "They've got smart people," says Nayden. Five months later, GE Capital has formed a partnership with UConn's B-school--and may establish a model for corporate and academic collaboration on new technologies. The company agreed to invest about $2.5 million and has promised an additional $1 million every year until 2005 to create and operate a new e-commerce lab on UConn's two-year-old Stamford campus, just minutes from GE Capital's main offices. Forty students will work full time during a semester to study various e-commerce technologies and issues. Other students at UConn's main campus in Storrs, Conn., will participate through projects. GE executives will be assigned to the lab, working closely with faculty to guide research.
For GE, the main benefit is a pipeline of potential recruits and an inexpensive team to noodle over e-biz solutions. "We're not interested in theoretical research--I need to transform my businesses radically, and quickly," says Nayden, who is an alumnus of UConn's B-school. "If I did this myself, I'd have to hire new people, engage consultants, or take [existing employees] off of another project."
The venture is the largest between a GE unit and a B-school. GE Industrial Systems has given $1.5 million to UConn's school of engineering, and Richard N. Dino, the UConn B-school's associate dean, says this school may soon become more involved in the e-lab, too. In this new venture, however, GE Capital execs have a continuing commitment and closer supervision. And more such arrangements may be on the way: GE is considering similar deals with two or three other universities.
The relationship pushes to new levels the alliance between corporations and B-schools, which are seeking out financing that allows them to conduct more relevant research. Take, for instance, the year-old Center for eBusiness @ MIT, a venture between 16 corporate sponsors and Massachusetts Institute of Technology's Sloan School of Management, which BUSINESS WEEK ranks No. 5 in the U.S. Sponsors kick in $300,000 a year, half of which goes to have a faculty member, one or two master's students, and a PhD candidate work on an issue important to the company. The contracts involve fewer students than the GE e-lab, however, and don't focus on short-term business solutions.
REAL WORLD. Such collaborations are partly being driven by cost considerations. Faculty research alone costs the University of Maryland's Robert H. Smith School of Business $10 million a year, for instance. Organizations and foundations donate an additional $2 million to $3 million for research. Only $200,000 to $300,000 of that comes from corporations. Smith School Dean Howard Frank wants to boost that share to $3 million, but it's not as simple as saying: "We're smart. Give us money," he says. "You build a value-added relationship."
For students inside UConn's 10,000-square-foot e-lab offices, that relationship includes real-world case studies and access to top GE executives. If e-lab projects are later spun off into products or services, the school has a chance to share in profits. GE Capital may buy innovations that originate with faculty or that grow out of the e-lab. But the project also represents a bid for prestige for the 52-year-old UConn B-school, which has a $16 million annual operating budget and a $17 million endowment. That's tiny compared with the $267.7 million endowment at the University of Michigan's business school, for example. UConn's Dino says he's trying to drive the unranked school into the top 50 schools nationwide: "That's what this whole thing is about."
FEEDBACK. Outside academics worry that too much hands-on involvement by executives in settings like the e-lab can skew results. "If executives are conducting research, then it is likely to be less rigorous," warns S.P. Kothari, professor of accounting and director of the New Economy Value Research Lab at MIT's Sloan School. But UConn faculty say any drawbacks are more than offset by the ability to test their ideas in real-world settings. They have the right to use research conducted in the e-lab as the basis for papers. "We're often approached to do research for money," says UConn's James Marsden. "But we can't write about it...because we have to sign nondisclosure agreements."
Lab results also will be fed back into curriculum. This spring, for example, students can take New Technology Evaluation, a course co-taught by a UConn professor and a GE Capital manager. Students will handle dozens of GE Capital projects in areas such as biometrics, e-auctions, digital piracy, and Web-site design. And as projects demand, students will have access to early versions of new technology, such as souped-up Palm handheld computers and iris-scanning personal identification systems. Says GE Capital Chief Technology Officer Chris Perretta: "We get good toys."
In return, GE Capital should gain a recruiting edge. Other close company-school relationships bear this out: Of the 200 MBAs that Maryland graduated last spring, 20% went to companies that the school had a close relationship with, says Frank. GE Capital's Nayden adds: "Students get a view of working with GE Capital, and we get a telescopic view into a talented pipeline. That's much different than a cold interview."
Just look at Modak, the second-year MBA. This month, he's wrapping up a feasibility study of a new idea from a GE Capital business. After he presents his findings on Dec. 8, Modak will focus on getting a job. Will he apply at GE Capital? You bet. And once dozens of students have channeled through the e-lab, other companies may want a peek, too.