The Business Model of Business Schools

Starling Hunter, on his blog "The Business of America is Business" (a curious name) talks about the change required by the B-Schools in America.

Quoting from the Los Angeles Daily, it sites that there is decline in the student participation for MBA programs across America. (I would say it is increasing in India, China and other Asian countries and even Australia, although I do not have concrete numbers backing it). One of the ways that American schools are solving the present problem is recruit students from overseas like Taiwan, India and China.

The article suggests a few solutions:

Instead of adding accounting and marketing courses, USC is attempting to tap creativity. The school is focusing on strategies to help students manage innovation. To do that, Gupta is advocating that students work in groups and understand how businesses interact with their environment.

However, there is a deeper problem. Hunter connects the problem to "functional division" of the b-school.

Attracting foreign MBA students from the world's developing economies is certainly one option, but only a stop gap measure, a way to keep the money coming in while the strategies are overhauled. If US schools want to keep US students interested in the MBA and thus be educators of the world, not the outside world, then they'll need to overhaul not only curriculum but also pedagogy. Chief among the needed changes is the division of labor among business school faculty along functional lines.

Anyone who has read much about modern organization theory knows that while functional organization is very effective in certain sectors of the economy, it does carry with it the hazard of the functional silo problem. This is especially the case in business schools where faculty often have very deep functional expertise in just one area of management studies, many time without anywhere as much practical experience in said area. When you put several dozen such experts together, the task of achieving cross-functional coordination and providing students with a cross-functional perspective on organizations is very difficult indeed. What you get instead is graduates who are, as a rule, smart as whip, but who have no view of firms as a whole. It is precisely this kind of graduate to whom many businesses have said "no thanks" in increasing numbers, preferring instead to uncover and train management talent on their own

.In the increasing trend towards systems thinking, strategy, innovation and business model innovation there is greater need for "various kinds of knowledge in one head".

The business schools expect that once students attend 10 different courses on various subjects they will be able to connect them in their mind and become multi-disciplinary. However, this does not happen. The main reason is that when we do a particular course there is no way a Professor connects that to other disciplines and ideas.

The width is missing in the b-schools. And the only way to Innovate is to have a wide variety of ideas in one head and make the lollapalooza effect come about. This is what Charlie Munger, Vice-Chairman of Berkshire Hathaway called "the latticework of mental models" (PDF).

Sadly, the b-schools do not understand that.




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