Q&A: SloanGear's Lorenzo Farronato
Lorenzo Farronato recently graduated from MIT's Sloan School of Management (Sloan Full-Time MBA Profile), where he served as a co-owner and chief marketing officer of SloanGear, a student-run business that sells school merchandise to the community. The concept of SloanGear, which has about a 20-year history on campus, is unique because it is student owned and operated, with no involvement by the school.
Each year groups of six to 10 second-year MBA students bid on the rights to the company and write a business plan in the hope of persuading the soon-to-be graduates to sell it to them. In the end, the graduates pick one team to run SloanGear for the next fiscal year, after which the new team chooses another and the cycle repeats.
The students use their own funds—garnered from personal savings, extended student loans, or money from family and friends—to purchase the company and get started, explains Farronato. They have to pay Sloan royalties to use the school's logo on merchandise, such as T-shirts and diploma frames. The team sells the items at tables in the lobby of the school once a month, on the SloanGear website, and through direct sales chiefly of customized products for specific events and clubs. And a nearby store selling university gear is SloanGear's competition.
Having enjoyed the experience so much, Farronato admitted he didn't want it to end. Alas, he and his classmates have sold the business to another group of second-year students, who Farronato says were not the highest bidders but had the most interesting plans for SloanGear in the future.
"We picked the group that provided the most interesting, thoughtful, and easy-to-understand business plan, which could enable them to do well in the future and make sure the company could be successful," Farronato says. "It's a great tradition, and by no means did we want to be the ones screwing it up."
Recently, Farronato, who will be working in management consulting at Booz & Co. in Cleveland, Ohio, talked with Bloomberg Businessweek reporter Francesca Di Meglio about what attracted him to SloanGear and the many lessons learned. Here are edited excerpts of their conversation:
Di Meglio: What originally drew you to SloanGear?
Farronato: I wanted to have a hands-on management and entrepreneurial opportunity as I was doing my MBA. It represented a chance to apply all the lessons I was picking up in class. You take SloanGear way more seriously, and it is way more fun. It's more serious when you have your own money on the line. I could test my knowledge, how well I was learning, and what I could further improve. Second, I wanted to have a practical leadership position. Everyone on the team was responsible and accountable for a specific set of deliverables. You were also accountable for the money everyone had invested. Third, I wanted to broaden my skill set, including improving my communication skills, while further bonding with my classmates.
What was the greatest learning experience?
I got to experience how it feels to be both a manager and investor. When I looked back and considered the work I was doing at Procter & Gamble before coming to Sloan, my point of view was very much focused on the deliverables that my organization and department had to achieve. I was disconnected from the greater company and the expectations of its investors. When I was working at Procter & Gamble, I was making mistakes and achieving success with the company's money. When I was working at SloanGear, I was making mistakes and achieving success with my money. It was a good learning opportunity to recognize another layer of perspective that I was ignoring before.
What changes did your team make to SloanGear?
The changes we made were around building a stronger equity and repositioning the products and services in a way that were aligned with the needs of the people in the school. Until last year, SloanGear was seen as nice, but the designs were plain vanilla, not so special. People could get a Sloan T-shirt for $10 to $15. We wanted to offer unique, limited edition T-shirts that related to some specific event or happening at the school. We wanted it to be closer to what students were doing and for the designs to always be fresh, so we'd be on the top of student's minds.
Every month we launched one new T-shirt, which meant a higher price point because we could not buy or sell the T-shirts in bulk. The shirts cost up to $20. We also used 100 percent sustainable materials to make the T-shirts, including ink that did not contain harmful chemicals. We sold only diploma frames with recycled wood or with wood coming from forests that were replanted every time they were cut down. These products were more expensive. It was good, though, because it suggested we were environmentally friendly, which is a topic we talk about at school all the time. People wanted that.
What were some of your failures?
I don't want you to think that everything was always successful and smooth. We didn't expect to have such a hard time expanding the business to the alumni network. We have 50,000 alumni, but 95 percent of the revenue comes from on-campus folks. It was really tough to reach alumni. That was the problem. We expected to see more sales in that segment, and we did not meet those expectations. It is very difficult to pitch products like these beyond the campus. We failed to learn how to use Facebook in a proper way. In class, there's all this hype around social media and how you can use it as marketers and how it is the wave of the future. But when my friends and I tried to apply it, we faced a barrier. It's a challenge I know I need to overcome someday. I'm happy to see that the incoming owners started up a new Twitter account and are creating a new Facebook page.
What message do you have for the new owners?
The message I have for them is to give it their all. They should have fun. They should try every single idea, even the craziest ones they have. And make use of this unique opportunity at Sloan to do everything you want in a still somewhat protected environment. You have the market—1,000 students who are looking for the products and services you are offering—so it's not as risky as opening a store in downtown Manhattan. Leverage the history. Then make sure you are handing over the business to the right team next year.
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