The

Entrepreneurial

Code

Lessons from an

Ivy League Entrepreneur

Chapter Seven

As they put the finishing touches on the business plan, the school newspaper featured a cover story about a group of students planning to start an off-campus debit card program dubbed "College Cash."  Johnny was shocked because the article wasn’t talking about them.  The article also mentioned how the University was contemplating its own debit card program on the back of the school’s own ID card. 

Suddenly, the Bullfrog Card had two competitors.  Both planned to offer debit cards emphasizing the safety of a “cashless society.”  Both also planned to promote the fiscal responsibility of debt cards, because students could only spend their existing balances and not fall into debt. 

Both the school and College Cash planned to market their programs as being “customized” to meet student needs.  In reality, generic debit cards were already offered by scores of local banks.  The Bullfrog Card was different because it planned to restrict its merchant base to restaurants only.  Therefore, parents could fund the Bullfrog Card and know the money could be used only for food purchases.  By limiting the card usage, the Bull Frog card created a niche for itself because it became an off-campus cafeteria program.  That’s what made it unique.   

Johnny, Maverock, Abe, and Joe were confident about competing with another student business, but they knew it was risky to compete with the school.  The University’s “Business Services” department had a virtual monopoly over its students, a near limitless budget, and a powerful brand. That’s why the University could offer a service and get 90% participation; meanwhile a private company could offer the same service and only get a 1% response rate.  Clearly, it was in their best interest to convince the school to work with them on the Bullfrog Card idea. 

In order to explore the idea of a partnership, Johnny went to the office of Mr. Bureaucracy, who helped manage the university’s ID card (the “U-Card”).  Johnny simply knocked on his door and asked to discuss the recent article in the school newspaper. Mr. Bureaucracy agreed with a slight hesitation, and awkwardly asked Johnny if he worked with College Cash.  Johnny’s instincts told him that if he said “yes,” Mr. Bureaucracy never would have spoken to him.

Since Mr. Bureaucracy already mentioned College Cash, Johnny asked if he would consider working with a student company.  Mr. Bureaucracy’s answer was a thundering, “No!”  His team had been researching debit card systems for many years.  Eventually, he planned to put the system out to bid to large financial institutions like PNC Bank and Bank of America.  Apparently, these large companies would pay big bucks to sell their financial services to students and it felt a lot safer for Mr. Bureaucracy to work with them.

Johnny asked if the U-Card could ever become a restaurant meal plan.  Not only did Mr. Bureaucracy have no intention of marketing a restricted card, but he believed such a “discriminatory” policy would create too much protest in the merchant community.  Instead, Mr. Bureaucracy preferred to offer a generic debit card, so every merchant would be able to participate. The U-Card was going to be accepted wherever VISA or Master Card was accepted.  It was just safer for Mr. Bureaucracy to do it this way.

It was apparent to Johnny that he and Mr. Bureaucracy disagreed on what students wanted.  It also meant there was a chance for the Bullfrog Card still to carve out a niche for itself.  Mr. Bureaucracy even showed Johnny a prototype of the new U-Card with an embedded memory chip.  The high tech chip offered little practical value for students, but such “cool” new technology gave Mr. Bureaucracy something to brag about with colleagues over lunchtime salads.   

The information Johnny gleaned from his meeting with Mr. Bureaucracy was mixed at best.  Although it was encouraging to hear the school wasn’t planning to market an off-campus meal plan, it sounded like the school would never work them.  If the group proceeded with the Bullfrog Card, they would be competing directly with the "Business Services" department of the University.

The school’s Business Services group was the department that provided commercial services to the local community. Besides education, colleges also address other consumer demands such as cafeteria programs, licensing arrangements, real estate development, phone services, and more. Unlike the educational side of the school, Business Services operated like a “for profit” department beneath the non-for-profit umbrella.

With such a dreary competitive outlook, you would think Johnny and his partners stamped their business plan a “no go” and chalked the whole thing up to a very informative class project, but they didn’t. As daunting as the odds seemed, they hoped their idea was sufficiently unique from their competition.  It was a risky gamble, because someone like Mr. Bureaucracy could take out a piece of University stationary, and write a letter to parents and students recommending that everyone avoid the Bullfrog Card.  He could run them out of business pretty quickly.

However, Johnny, Maverock, Abe, and Joe were still students, so they felt they had little to lose.  If the company failed, they would be no worse off.  On the other hand, if it worked, they could become “successful” entrepreneurs.  After all, the 11.8% fee had seemed like an insurmountable obstacle, but they made it work.  They wondered if having the courage to take the initial leap of faith might be the secret ingredient to entrepreneurial success.

Copyright  2005 by Chris Cononico
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