Will Business Schools Lead the Industrial Transformation?

Tom Peters

As we face the wrenching transformation of every nook of our economy, business schools remain part of the problem rather than the solution. While experimental courses and programs dot the academic landscape, there is no evidence of radical reform.

Yet radical it must be. In preparation for a recent speech to business educators, I formulated a five-part agenda for business education:

1. Induce more faculty interaction with industry and vice versa. Most young business-school faculty are technically or theoretically oriented. Few have held line jobs, and fewer have managed many people. Not many even seem to be interested in business except as an abstract proposition. A publish or perish philosophy discourages junior faculty members from consulting. And those who do consult generally address relatively conceptual problems, distant from the day-to-day reality of the operations center or sales region.

Retired businessmen occasionally hold guest lecturer slots at business schools, and prestigious advisory boards abound. However, hands-on executors—e.g., plant and distribution center managers, marketing brand managers—seldom make more than cameo campus appearances.

New incentives, such as revised tenure criteria, are required to get the faculty involved in real line problems. Businesses also need incentives (such as full-time presence of faculty members in trade) for sending their line operators to campus for extensive stays.

2. Emphasize student co-op experience. Cooperative programs, which alternate lengthy work periods with classroom time, are hard to manage and require a major investment in “sales” and oversight by the school’s faculty. Yet there is no substitute for real job experience in the midst of the educational process.

3. Face up to altered disciplinary premises. Virtually every business-school discipline needs a major overhaul, to align with the changing environment. For example, marketing courses must highlight fleet-of-foot market creation, not tools to achieve slight market-share gains in stable environments. Accounting should emphasize measurement of revenue-generation variables like quality, factory flexibility, innovation, and customer satisfaction, while reducing its cost-accounting focus stemming from the days of the model-T. Economics should stress neglected dynamic models of competition rather than static theories that are its current preoccupation.

More important, new or neglected disciplines must achieve equal status with the old pillars. Among them are quality, innovation, customer service, service-sector management, plus management of sales and service forces, manufacturing and operations, and international activities. At best, most of these are tacked onto mainstream courses as afterthoughts. All of the “new” areas are execution oriented, rather than conceptual. Most span several traditional functional disciplines. Functional walls must be destroyed in schools as in the commercial world.

4. Shift the basis of all instruction from analysis to synthesis and from static to dynamic. Students are taught how to decompose static problems, not how to create units or organizations as a whole that exhibit the distinctive skills necessary to compete today, such as obsession with instant response to ever-changing customer needs. For instance, understanding the origins of hustle and inertia—i.e., how a system executes or delays in the face of change—must replace the current over-emphasis on long-range planning that assumes a predictable future.

5. Teach business history. There’s little or no time devoted to the study of business history. Yet learning our business roots is more essential than ever. Our most basic assumptions, such as our obsession with bigness and the limited conception of labor’s role in adding value, are out of whack with the marketplace. Understanding where we’ve been is the first step to understanding the magnitude of the change required and our deeply entrenched resistance to such change.

The business schools mirror corporate woes. Each point on my agenda, such as the need for more commerce with the external world, directly corresponds to a major corporate failing. Can the schools change from pale reflection to lodestar? I fear not.

The prestigious schools are experimenting ever so gingerly. Undergraduate business education is a wasteland. It teaches outdated techniques to inexperienced young men and women; even a mediocre engineering, science, or liberal arts education would provide a much sounder foundation for today’s—and certainly tomorrow’s—business career.

Perhaps the most optimistic development is the rapid rise of in-house corporate universities, even in some firms of modest size. The corporation is on the firing line; it can’t afford to wait for business schools to help. The in-house university path being taken by Apple, Ford, and others is encouraging. Unlike the standard training department’s Chinese menu of courses, these programs are focusing on rapid and radical new organizational skill development. Yet these pioneers are the minority.

Right now even a grade of F is too kind for the business schools. It is not an overstatement to conclude that they are causing real harm. Every dean’s challenge boils down to one question: Are you changing as fast as the business environment? For most the answer is a resounding no.