Once, a business plan competition may have garnered nothing other than a passing mention in a local newspaper and an article in the alumni magazine. No more. These days, single-campus competitions are often well-covered by local media, and larger intercollegiate business plan competitions are big news, receiving coverage in business and mainstream publications.
What’s motivating the burgeoning enthusiasm for business plan competitions? Most likely, the fascination with entrepreneurship itself, say educators. The startup stories generated by entrepreneurial competitions show people just what can come from a great idea and a well-conceived plan. At the same time, competitions provide an almost all-in-one educational experience, where participants learn a comprehensive set of business skills, including initiative, innovation, and strategy.
Moreover, such skills aren’t just useful to self-employed entrepreneurs. They’re also in demand among traditional companies looking for ways to set out in new directions, says Randy Swangard, director of the Lundquist Center for Entrepreneurship at the University of Oregon’s Lundquist College of Business in Eugene. The Lundquist Center hosts the New Venture Championship, one of the most prominent plan competitions in the U.S.
“The more traditional companies—the Kodaks and GEs of the world—are beginning to look not so much for ‘business as usual’ as for ‘business as unusual,’” says Swangard. “They’re asking, ‘How do we move on, how do we adapt, how do we implement change?’ Companies want employees who can recognize opportunity and build a plan that capitalizes on that opportunity.” With these competitions, business schools can create people who think entrepreneurially, says Swangard, not just people who are entrepreneurs.
From Classroom to Craze
The current explosion of business plan competitions began in the early 1980s, when the concept of entrepreneurship was first making the rounds among business school students. At the time, most business school faculty and administrators still did not view entrepreneurship as a skill to be taught; they kept their focus strictly on more traditional business disciplines.
“In the 1980s and even in the 1990s, putting on a competition like this was a radical concept,” Swangard says. “Now it’s not so radical, but there are still people at every university with an entrepreneurship program who believe that this is a flash in the pan that will eventually go away.”
Not surprisingly, the first competitions in the U.S. were launched by students, not faculty. In 1984, two MBA students at the University of Texas at Austin’s McCombs School of Business wanted to create a learning experience that taught entrepreneurship to business students in the same comprehensive way that “moot court” trials taught litigation skills to law students. Soon after, they launched MOOT CORP, the competition that is believed to have been the first official plan competition on record. MIT’s $50K (formerly $10K) at the Sloan School of Management in Cambridge, Massachusetts, followed in 1989. Students at the Lundquist College launched its New Venture Championship in 1991.
Today, there are dozens of intra- and intercollegiate business plan competitions around the world. In fact, competitions have become so au courant that Gary Cadenhead, director of MOOT CORP, recently published the book No Longer MOOT: The Premier New Venture Competition from Idea to Global Impact. It chronicles the competition’s growth from an intracampus project to a global event, with events held on b-school campuses in Europe, Asia, Australia, Africa, and Latin America, culminating in an annual global championship in Austin.
The new realization, says Cadenhead, is that entrepreneurship programs and competitions do what no other business discipline does quite as well. They integrate the entire business school curriculum into a single course and address topics a business curriculum typically does not cover.
“If you want to launch an entrepreneurship program at your business school, it makes sense to start a business plan competition, because students learn topics such as intellectual property and trademarks, venture capital, and guerrilla marketing,” Cadenhead says. “A competition fills a need that otherwise can only be met through outside speakers or new courses.”
The Allure of the Entrepreneur
Where prior generations dreamed of landing a top-level job with benefits and a corner office, members of this generation dream of coming up with that one great idea that will allow them to break free of their traditional jobs and be their own bosses. This attitude is a legacy left by the late, great dot-coms, says Patrick Turner, a professor of entrepreneurship on INSEAD’s Singapore campus.
“Two things came from the dot-com era,” Turner says. “The first was very positive. It communicated to a generation that it was possible for everyone to start a business. The second was very negative—it gave the impression that it was easy, which it isn’t.”
And although technology is still popular, students are branching out of that sector, says Turner. A recent winner of INSEAD’s internal business plan competition wasn’t a high-flying computer company, but a juice bar chain. “This year, our two finalists were a chain of juice bars in Spain and a sophisticated nano-tagging tracking system,” says Turner. “The second plan was probably the more interesting of the two, but it needed a lot of work to make it viable. The juice bar chain, on the other hand, was well-rounded and the most fundable plan in the contest.”
One of the valuable aspects of a business plan competition, says Turner, is that it teaches students an important lesson about entrepreneurship: In most cases, a great idea is not enough to guarantee success. Through competition, participants learn how to examine their ideas under a microscope to see if they can stand up to market pressure and demand.
In addition, as small business generation becomes more important to the global economy, it will become more important to expose people to entrepreneurship when they are young, believes Sharon Bower, associate director for the Jefferson Smurfit Center for Entrepreneurial Studies at Saint Louis University’s Cook School of Business in Missouri. To reach a younger population, SLU’s Global Student Entrepreneur Awards targets not MBA students, but young undergraduate entrepreneurs who are already established.
Bower hopes that children in elementary and high school will learn about competitions such as the GSEA and be inspired. “Through these competitions, we can show very young kids someone who’s only 20 or 22 and already has a business. That exposure can have a really amazing impact on them,” says Bower. “They realize that it’s not just 40-year-olds who are making money—it’s also students only a few years older than they are.”
The Cost of Competition
Although business plan competitions have wonderful promotional and educational appeal, they can put a strain on school resources. As small competitions start to grow and big competitions strive to become bigger, weighing the cost of competitions against their benefits has become a concern for business schools.
“On the positive side, donors wholeheartedly support offering this kind of live-fire experience for students,” says Swangard. “However, it’s a major undertaking for a school to support competitions on a regular basis.”
The Lundquist College, for example, sends about four teams each year to attend between eight and ten competitions each. Supporting the trips costs around $40,000, Swangard estimates. Then, of course, there’s Lundquist’s own New Ventures Championship, which has grown considerably. “Our prize fund is roughly $65,000. Then, we have the expenses associated with putting on the event for teams and hosting 50 judges for three days,” Swangard says. “It costs well above $100,000 to put on the NVC.”
Still, the expense can provide a valuable return on investment, including the good will of corporate sponsors and judges, the appreciation of students, and the attention of the media. And as a successful competition like the MIT $50K proves, even local competitions have big potential, says Ken Morse, director of the MIT Entrepreneurship Center, which puts on the competition with the school’s engineering department. “One thousand students, faculty, and businesspeople get involved with the $50K every year,” says Morse. “It offers a tremendous learning opportunity for everyone involved.”
For its part, SLU’s GSEA competition used to be limited to students in Missouri—it now has regional competitions in Australia, New Zealand, Sweden, and soon, China. And like MOOT CORP, the GSEA has also generated a book, Student Entrepreneurs: 14 Undergraduate All-Stars Tell Their Stories, with another to be published this year on ethics. The competition and the books result in a reputational payoff for the school, says Bower.
“They put Saint Louis University’s name out there and bring more attention to our entrepreneurship center,” says Bower. “In every regional contest, an article will come out about the winners, and each of those articles includes a paragraph at the bottom stating that the team will compete for the top prize at Saint Louis University. That kind of global play is good.”
In the future, the educational value of competitions for students promises to become richer and more targeted, believe some competition sponsors. With the competition field becoming more crowded, individual competitions are seeking out ways to set themselves apart. In many cases, that means specializing in one sector such as biotechnology or health care.
“I think we’ll see more niche-oriented competitions,” says Swangard, pointing to the Global Social Ventures Competition at the University of California at Berkeley, which is built around social entrepreneurship. San Diego State University also holds a targeted competition that focuses on biotechnology. “At Oregon, we’re still in the ‘mishmash’ stage, and that’s fine for now. But many of the biggest competitions will slowly have to redefine who they are to maintain their status.”
The growing sophistication of students themselves may also push competitions into specialization. In the past, a competition may have attracted business plans that were no more than school projects. Today, students are entering sophisticated Health care was one of this year’s biggest business plan targets, with students writing plans to develop treatments for obesity, cancer, and diabetes, for example.
Swangard believes that specialized competitions may become a necessary way to offer a more sophisticated pool of participants a valuable learning experience. There may come a time, he says, when a panel judge from the manufacturing industry won’t have the experience to offer the best advice on a plan for the health care field.
“It really goes back to the learning component of competitions,” Swangard says. “The more we’re able to include judges with specialized knowledge to provide feedback to the students, the better the students will be able to enhance their business plans and improve their skills.”
Something Ventured, Something Gained
Entrepreneurship educators note that competitions have another important benefit when it comes to teaching business skills—motivation. Although a grade at the end of a course is an incentive for students to do their best, a competition complete with prizes takes that incentive to a much higher level.
This benefit is especially true for social entrepreneurship competitions, says Mat Burton, vice president of university relations with Students in Free Enterprise. SIFE has a network of competitions throughout the world, which encourages students to develop projects that will foster free enterprise in disadvantaged populations.
“University students have a natural passion to be part of something positive. They all want to go out and change the world. The challenge is to take that enthusiasm and all they’re learning on campus and channel it,” says Burton. “So we create a competitive process. Instead of just telling them, ‘You ought to go do these things,’ we offer competitions where there’s accountability. We give them a mission. Then, they aren’t just thinking about doing good—they actually accomplish something.”
More business plan competitions also mean more entrepreneurial role models for the next generation, says Turner of INSEAD. “Worthy academics have tried to work out what makes one person more likely to become an entrepreneur than another, like you were more likely to start your own business if you were the second child of immigrant parents who divorced before you were 12. That’s nonsense,” he says. “In reality, you’re more likely to become an entrepreneur if your parents or your grandparents were entrepreneurs, or if you’re part of a community where entrepreneurship is a normal thing to do.”
The modern business plan competition, then, has become more than an educational tool. It’s also a kind of entrepreneurial evangelist, spreading the word that entrepreneurship is an option for everyone. Even more important, competitions remind would-be entrepreneurs that success requires a solid business plan even more than a bountiful bank balance. Once students have truly learned that important business basic, they’re not only better prepared to play the entrepreneurial game—they’re more likely to end up as winners.