The Problem with B-Schools is the Problem with Business

The New York Times’ business section yesterday published an article by Kelly Holland (perhaps her best yet) titled, Is it Time to Retrain B-Schools?

The putative answer was ‘yes,’ and I agree. But what does that mean? From the article:

“It is so obvious that something big has failed. We can look the other way, but come on. The C.E.O.’s of those companies, those are people we used to brag about. We cannot say, ‘Well, it wasn’t our fault’ when there is such a systemic, widespread failure of leadership.” Ángel Cabrera, Dean,Thunderbird School of Global Management in Glendale, Ariz.

“We lived through an enormous extended period of financial good times, and people became less focused on risks and risk management and more focused on making money. We need to move that focus back toward the center.” Jay Light, Dean, Harvard Business School

“The schools suffer from an overemphasis on rigor and an under-emphasis on relevance. Business schools have forgotten that they are a professional school.” Warren Bennis, USC Business School and noted leadership author.

“A kind of market fundamentalism took hold in business education. The new logic of shareholder primacy absolved management of any responsibility for anything other than financial results.” Rakesh Khurana, a professor at Harvard Business School

“Business creates value in terms of services and products. That’s what business delivers, just like medicine delivers a healthy person.” Sharon M. Oster, Dean, Yale School of Management.

“There are extraordinary things taking place in business education, and a lot that is very promising. But what’s the central theorem of business education? It’s wanting.” Judith F. Samuelson, Exec. Director, Business and Society Program, the Aspen Institute.

The bookend quotes have it right. Cabrera when he says there’s an obvious problem, and Samuelson when she says the central theorem of business education is wanting.
Those in the middle, IMHO, are not yet at the core of the answer.

So here’s my take.

The first post I ever did in this blog—October 2006—was looking back from a 30th reunion at Harvard Business School. It was about this very point, and I think it holds up. Here, in part, is what I said then:

The biggest single characteristic of business in future is that everything is getting connected. In a connected world, a focus on competitive relationships isn’t useful. What we need is an emphasis on connectivity, trust and collaboration.

HBS needs to teach less competitive differentiation and more collaborative value-adding; less how to win supply chain negotiations and more how everyone gains by operating them as a system; less about transactions, more about relationships.

We don’t need more ethics courses—we need an ethos of business itself.

Last I looked, the ethics course at HBS teaches a “balanced” approach to three spheres: competitive, legal, and social.

Meanwhile, down the hall in the core strategy courses, those same students are taught that business at its core is about corporate competition. To define strategy that way is to define ethics as a branch of strategy—how to steer the corporate ship between the Scylla and Charybdis of the law and society.

In that Hobbesian world-view, there is no room for an Other. And where there is no Other, There Just Cannot Be any such thing as “ethics.” “Business ethics” is become an oxymoron.

There can be no ethics until “strategy” reclassifies customers, suppliers and employees as co-equal with shareholders—rather than as categories of “competitive forces.”  Which is exactly what is taught now, and which lies at the heart of the matter. 

The solution doesn’t lie in Dean Oster’s redefinition of value; nor in Dean Light’s move back to the balanced risk center. Nor even in de-emphasizing shareholder value.

The solution lies in modernizing our ideas of how business actually works. Away from an ideology of corporate competition forged in the past. Toward recognizing the collaboration of many in the pursuit of commerce that is fast becoming reality today.

Collaboration is the new competition. We are not isolated anymore. We are all linked. It’s a fact, and one that our mental representations need to catch up to.

We can no longer afford competition-centric thinking—neither in business, nor in the b-schools.

 

5 replies
  1. Chris MacDonald
    Chris MacDonald says:

    Charles:

    A thoughtful post.

    My question is how to define collaboration. Some forms of collaboration, after all, are and ought to be illegal. I don’t think we should want competition to fade into the background: it’s the engine that drives innovation, and competition between companies is what keeps prices down. What we need is a way of thinking about business ethics that recognizes that business is, and must be, competitive, yet sets reasonable limits on competitive behaviour.

    I wrote about this in a recent blog entry.

    But really the best piece of writing I know of on this topic is this more scholarly piece by my friend Joe Heath:

    “An Adversarial Ethic for Business: or, When Sun-Tzu met the Stakeholder,” Journal of Business Ethics, 69 (2006).

    It can be downloaded on Joe’s webpage, here: http://www.chass.utoronto.ca/~jheath/

    Regards,
    Chris.

    Reply
  2. Ian Welsh
    Ian Welsh says:

    I’ve been railing against MBAs for years (er, present company excepted.  *cough*)  The problem with business schools, to me, is that they turn out people who think they can manage anything and who don’t really understand the fundamentals of the businesses they manage.  I far prefer a company like Honda, which is managed by engineers to a company like GM, which generally isn’t.  If you don’t love the business you’re in and know and love your products, then you’re in the wrong business.  And the MBA ethos works directly against that.

    Reply
  3. Charlie (Green)
    Charlie (Green) says:

    Chris, thanks for the comment.  (Chris writes the Business Ethics Blog at the appropriately named http://www.businessethicsblog.com/ , and a good blog it is). 

    But thanks aside, may I politely suggest you missed, or at least didn’t address, my point.

    I obviously don’t know how to make myself understood, but let me try again.  The problem I’m trying to suggest is not one of balance, or of bounding the rules of competition, or of some phobia about "profit."  That’s what Dean Light at HBS is saying too, and I want to scream, NO!! 

    The problem is not balance.  The problem is a 180-degree wrong ideology–out of date, yet still cited as if it were revealed truth, new facts on the ground be damned. 

    Of course there is good and bad collaboration, always was, always will be.  There is also good and bad competition, always was, always will be.  You seem to define collaboration as the opposite of competition.  I think it has its own right and logic.

    Let me be very blunt here.  You assert that competition is what drives innovation and keeps prices down. I suggest that was usefully true in the 1920s–it is no longer usefully true 90 years later.  What you’re suggesting is a viewpoint rooted in, and still mired in, antitrust law decades old.  Now is different. 

    Read Philip Evans and Bob Wolf of BCG; they describe modern real-world  innovation at Linux and Toyota as powerfully linked to collaboration–not competition.  http://hbswk.hbs.edu/archive/4928.html 

    The question I’m trying to raise is not how much to rein in or regulate competition: the question is, shall we have an ideology of business based on competition?  Or on something other than me-vs.-you?

    The Ideology of Competition is what we’ve had for 50 years now, and it is now killing us.  Angel Cabrera (see original post) is dead right; it doesn’t work anymore.

    If you believe in a Hobbesian world, you will lead with competition.  If you believe in a collaborative world, you will lead with collaboration.

    Detroit led with competition.  Toyota leads with collaboration.  How’s that working for them? That is a capitalist world, and one model is succeeding, and one is failing.

    Detroit competes with its suppliers; Toyota doesn’t.  Ask any US supplier which they’d rather work with.  And ask any US car buyer where they look for value/price ratios, and for innovation.  Answer–not to the companies who hewed to the dominant ideology of competition. 

    Let me be real blunt.  I think both you and Joe Heath equate "capitalism" with competition.  I say, ‘that’s how deeply infected you are by the ideology.’ Capitalism is perfectly consistent with collaboration–capitalism means picking the system that makes more money!  And in that sense, I’m happy to call myself a capitalist. 

    If you could make more money, produce higher quality and at lower prices by collaboration than by competition–and so could your competitors, and so could your customers–then I would be very proud to call that capitalism.  There’s no contradiction between capitalism and everyone making money collaboratively.  In fact, if you can make more money by collaborating–and all stakeholders benefit–then only a fool would pick competition.  

    That’s the new world–a world in which everyone is no longer better off by competition, but rather by collaboration.  

    I don’t mean "collaborate" just in the sense of legally-sanctioned joint agreements.  I mean it in the sense of mission-critical, baked-in, values-driven respect for customers, employees and suppliers.  A commitment to each others’ long-term well-being, because we each recognize the fruits of our own long-term success as interdependent with theirs.  That is a new capitalist model.  But we still have the old capitalist ideology.  

    Basically, we believe things that are increasingly useless, even harmful. 

    The ideology we are struggling under right now, make no bones, is anti-collaborative.  Michael Porter’s seminal work–which drives b-schools and companies to this day–states very simply, the business world is first and foremost about competition.  Within competition, five dynamics determine the struggle.  Two of those dynamics are competition between company and supplier, and between company and customer.

    What a horrible mindset for the 21st century!  Competing with your customers, and competing with your suppliers.  Yes of course, there’s some degree of truth to  that, always will be.  There was also always some truth about collaboration helping all.  

    The question I am trying to raise is:  do we choose to build our belief systems on the old notion?  Or on a newer set of facts on the ground?

    There are fewer and fewer success stories in the real world about successfully beating your suppliers, employees and customers; you see more and more success stories about successfully forming long-term, transparent, collaborative relationships with them.  The nature of business in future is less competitive, more collaborative.  Preaching competition is increasingly like spitting into the wind.  

    We are in fact more and more interdependent.  It is time to change our belief systems to reflect reality.  We can no longer afford to think we are in a Hobbesian world–we do so at our mutual peril.  

    To bring it back to ethics, I think business ethics is not at all about what Heath seems to suggest, i.e. the mediating rules governing competition.  I think it is as Kant put it, before Hegelians confused it:  ethics is simply about whether you treat others as ends not just as means.  (I realize that’s a much longer debate).

    OK, well, I’ve probably pissed off enough people by now.  Let me try and dial back a bit.  

    Chris, I do thank you for weighing in on this, I hope you don’t feel too sandbagged.  You have a lot to contribute and I hope you’ll continue to do so.

    As for Ian–well, I resemble that remark, but I totally agree w. you. 

     

    Reply
  4. Chris MacDonald
    Chris MacDonald says:

    Charles:

    Toyota can collaborate with suppliers; that’s excellent. But it can’t (and shouldn’t) stop treating GM as a competitor. Whe competitors collaborate, customers get screwed. Monopolies and oligopolies are dangerous; I don’t think that’s controversial. (And yes, you acknowledge that there’s good & bad collaboration; I’m just providing an example of that.)

    I don’t equate capitalism with competition, though I think it plays an important role. That’s Econ 101. The point Joe makes (and that I endorse) is that we need to distinguish the rules & norms that apply in competitive domains (Coke v. Pepsi) from the rules & norms that appy in collaborative domains (Purchasing Dept. hand-in-hand with HR, and maybe Coke hand-in-hand with its suppliers. (There are efficiency-based reasons, as per Coase, why firms have the boundaries they do.) Neither of us is talking about what kind of "world" it is, in general.

    Overall, I’m leary of calls for "change of mindset." Partly because I don’t know what it means, and partly because I’m skeptical that it’s possible. I’d rather have good reforms of corporate governance.

    Cheers,
    Chris.

    Reply
  5. David Corking
    David Corking says:

    I’m delighted to read this article (thanks to Ron Shevlin and Morriss Partee for tweeting the link.)  I am horrified to read about the competition/mission/ethic you report as endemic in business schools, and I am glad my business school did not try to teach to to me.

    As Chris said above, collusion and the formation of cartels (to control supplier or customer relationships) is also unethical.  Yet neglecting the benefits of many win-win relationships is harmful both to a business and society.

    Just a few days ago, I was intrigued to read an old slide deck from Barry Nalebuff about his "co-opetition" application of game theory to business.  I think there is food for thought there:

    http://users.uoa.gr/~atsaoussi/Nalebuff.pdf

    I think I would like to add to that that democratic control of a cooperative can act against a check against some forms of abusive collaboration: a co-op is at least less likely to abuse its own members.

    Reply

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