HBS Under Attack…By A Silly VC?

The new Rotman School of Management at the University of Toronto

The new Rotman School of Management at the University of Toronto

B-Schools Better at Analyzing Disruptive Innovation Than Dealing With It


‘Those who can, do. And those who can’t, teach.’

Bet you’ve heard that axiom before. It’s the common man’s response whenever some ivory tower do-gooder harkens a Cassandra-like warning. And here’s another one: “Physician, heal thyself.” Translation: ‘Fix yourself before giving me advice.’

Those themes are the backbone of a recent Schumpeter blog in The Economist. As you can tell from the first paragraph below, this post doesn’t hold back in its criticism of business schools:

“…it is a rare profession where failure to obey its own rules is practically a condition of entry. Business schools exist to teach the value of management. They impart some basic principles—like setting clear goals and managing risk. They also teach how dangerous the business world has become. The most fashionable phrase today is “disruptive innovation”: professors solemnly warn people that entire industries face powerful new forces and that comfortable incumbents are at the mercy of swift-footed challengers. But when it comes to their own affairs, business schools flout their own rules and ignore their own warnings.”

Classic! You elevate the mission before pointing out the gulf between perception and reality. So how are over 12,000 institutions exposed to an unprecedented disruption?  The anonymous author initially cites a lack of barriers to entry and poor management. But then pivots to the usual boogeymen of academia:

1) Academic Restrictions: According to the author, “business schools have been captured by the academic guild,” alluding to a golden age where they were trade schools before being co-opted into “little more than flags of convenience for academics.” Yes, the blame is heaped on “tenured academics are untouchable and can block any change in a school.” The author adds, “Professors have too little incentive to focus on teaching: the best will perish unless they publish in the right journals. And they have too little incentive to produce usable research. Oceans of papers with little genuine insight are published in obscure periodicals that no manager would ever dream of reading.”

It’s almost like The Economist was hijacked by Sean Hannity! But wait…there’s more!

2) Herd Mentality: Apparently, most business schools suffer from “Harvard or Stanford envy.” While Freud might disagree, the author does make a legitimate point: “…[Schools] dream of having fancy buildings and star professors. But the cost of participating in the arms race is going up—Columbia Business School is spending $600m on a campus—and the supply of people who are willing to pay top-dollar for an MBA is falling” (as are applications).

And what is the prescription for business schools to save themselves? Well, it may be too late as the Trojan horse (MOOCs) has already rolled up to academia’s gilded gates. But our anonymous author emphasizes that schools outside the top tier should “compete on cost or innovation,” citing examples of “Cornell and Rochester offering shorter courses” and UCLA and Maryland freezing tuition.

Even if academia makes token reforms, they must still contend with for-profits like the Career Education Corporation and Laureate Education. These private panaceas will supposedly “directly [challenge] the faculty-dominated not-for-profit model, employing staff to teach rather than research and making it easier to combine study with work.” Even in-house mini-MBAs are a threat (if they don’t get shut down when company budgets tighten first).

Although this piece reads like a for-profit’s PowerPoint, it does make two points. First, clichés about greedy, out-of-touch academics never go out of style. More seriously, business schools cannot rest on their laurels. They are not immune from the technology and pressures re-shaping the marketplace.

If you believe that there is a glut of business schools, you can take heart in this article’s closing remarks:

“Michael Porter of HBS once warned that the most dangerous place for a business is to be stuck in the middle without an obvious advantage of cost or quality. Over the next few years a striking number of business schools are going to discover just how right he was.”

Source: The Economist

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