Let’s create a dynamic MBA!

Dear reader some of you might have read the Financial Times this week and even stumbled over the art

Dear reader

some of you might have read the Financial Times this week and even stumbled over the article with the exclamation header: 

Rip up the existing MBA and start afresh

When I read the headline I immediately thought that this was nothing less than what I have been repeating for years! Of course we have to develop the MBA or we end up with a – excuse my language – master of bullshit and administration instead of what the economy needs: masters of business administration.

I am the last in a row to bury the MBA! But I am so fully convinced that the system needs change. For why should we, the business schools, stand still while all other system relevant parameters evolve. Society and economy do not stall but so does the MBA offered by so many business schools.

I don’t want to reiterate everything that is said by Jeanette Purcell *), the author of the article, but only a few bits and pieces:

What is needed is a review of the MBA and a more innovative approach to its design and delivery. A good start would be to rip up the existing model and start again, focusing on the MBA’s primary objective – to develop effective business people. Rebuilding the degree in this way would produce a very different MBA.The redesign would allow scope for considering how to develop skills as well as knowledge, how to make better use of students’ existing experiences and how to incorporate innovative learning and assessment methods. There would be opportunities to develop a more integrated curriculum and to combine the benefits of e-learning with intensive face-to-face tuition or coaching.

Exactly! We in Horgen, at our business school, we have rebuilt the MBA. And it’s so evident that today, it seems simple to me. We intertwined the Master of Science Program with the MBA. In one sentence:

After finishing your MSc program you can – if you like –  ad major subjects and promote to the broader MBA, or you take your diploma (MSc with four majors) and are ready for new job opportunities: specialization before generalization!

Then there are academic staff to consider, many of whom have an interest in maintaining the status quo and protecting their teaching and research interests. Top faculty staff are scarce and can wield a lot of influence internally. Against this backdrop, deans are understandably cautious about upsetting – and potentially losing – their best people.

Of course! Our business school has no permanent faculty at all. We draw on the best people, the real experts from the respective field, and they are not necessarily from other business schools but also professionals. And as I told Mrs. Della Bradshaw of the Financial Times in an interview (cf. FT, July 27, 2009): ““I will pay back a meaningful fee to the university. I don’t want to be seen as disruptive, as cherry-picking. I don’t want to compete with IMD or Insead: they are doing a great job. But I really believe in this fluidity between schools.“

The MBA is a valuable and respected qualification. But business schools, in responding to demands for yet more content, have lost sight of the MBA’s primary purpose. Now is the time for a fundamental review. An opportunity exists to create a dynamic MBA; one that not only continues to be relevant and important but also has real educational value.

Absolutely! Day after day we are working hard to make our MBA more dynamic, to bring the relevant topics of everyday business to the classroom and let students and faculty discuss it.

I therefore concur with all the major aspects in this article.

Financial Times on Business School such as the Lorange Institute

Yours,
Peter Lorange

*)
Jeanette Purcell is a leadership development specialist and managing director
of Jeanette Purcell Associates. She was chief executive of the Association of
MBAs from 2003-2010.

A satisfied customer is the best business strategy of all

Dear reader, On August 25, I published a blogpost referring to an article in “Business Executi

Dear reader,

On August 25, I published a blogpost referring to an article in “Business Executive”. One of the topics was both the notion and my same-titled book “Leading in Turbulent Times”.

Prof. Dr. William K. Holstein *), Professor of Strategy and IT at the Lorange Institute of Business Zurich, takes a stand on my ideas on how to lead – not only in turbulent times.

Kind regards,
Peter Lorange

***

The best business strategy: a satisfied customer
by William K. Holstein, Professor of Strategy and IT Lorange Institute of Business Zurich

*

Peter Lorange’s recent blog with his article Leading in Turbulent Times got me thinking about strategic thinking, not just in turbulent times, but in general.

I have been a faculty member of Strategy and IT at Lorange and its predecessor institution for more than 15 years and taught the Strategy Block for more than ten years. The almost 800 alumni who have completed the Strategy Block with me know that a strong focus of my part of the course has always been on the customer. I introduce this point using the concept of the Business System, introduced in 1980 in a paper by McKinsey and Company staff and subsequently further developed into the Value Chain by Michael Porter.

The business system concept portrays key elements of the process by which a company delivers its product or service. Here is an example for a technology company. The elements for companies in other industries or circumstances would vary.

Being clear about the elements helps to focus management attention on each link and pushes functional managers, often operating in silos, to think about how competitive advantage can be extracted (or not extracted) from each stage of the overall process of delivering a product or service to market.

As early as 1983, while a faculty member at IMEDE, the predecessor organization of IMD, my colleagues and I played with the then-new concept of the business system. We were frustrated by the abrupt ending of the last element, usually labeled Service or After-Sales Service. My recollection is that it was Prof. Xavier Gilbert who came up with the idea of making the final element The Customer, with a diagram like the following over-simplified version. He never used the word ‘customer,’ but rather a drawing of people to show that customers are real, live people, not just a label on a box.

Key questions to ask are: On which elements can we attack? On which are we vulnerable? Where are existing rivals vulnerable? Where do we have advantages that the customer can be taught to value? (Customers don’t learn such things on their own, they have to be educated.)

I don’t talk about cost and value, but add extra words to discuss low delivered cost and high perceived value – because total cost all across the business system, all the way to the customer, not just in manufacturing, is the critical cost issue, and because value has meaning only in the perception, or the mind, of the customer, not in our or our competitor’s costs.

In 1985 Michael Porter introduced his Value Chain which made the process elements more generic and added a second dimension of Support Activities which can also contribute to the development of competitive advantage. His diagram, rather than just ending in the last element in the business system, closed the diagram with a final arrow-shaped element labeled Margin.

Of course margin is important. Where does great design, manufacturing, etc. lead if it does not lead to satisfactory margin on which competitive advantage can be built? Nonetheless, I found myself hankering for the clear indication of the customer at the end of the value chain and continue to this day to force my students to see it my way and, importantly, to understand why. The ‘why’ is, to me, quite clear. Peter Drucker, The Man Who Invented Management according to Business Week magazine, explained it in terse language much better than I could:

There is no business without a customer.

He also said:

Quality in a service or product is not what you put into it.
It is what the client or customer gets out of it.

The laser-like focus on the customer as the end, the ultimate objective, and the raison d’etre for the value chain, indeed for strategy itself, is critical in strategic thinking. And this applies not only in turbulent times, but at all times.

In his article, Peter Lorange argues that turbulent times call for special strategic vigilance and focus and that top line growth comes first. Since he was my student at Harvard many years ago, I am delighted that he also agrees with me when he says that “customer focus is paramount to achieving this.”

In the years that I taught the Strategy Block, my favorite final exam question was the following:

In a previous Strategy Block exam, a student wrote: the biggest difference between Harvard’s Michael Porter and Prof. Holstein is that Prof. Holstein focuses more on the customer. On no more than one side of one page, explain the implications of this statement on the value chain or the business system.

I couldn’t use that question more than once or twice over the years, but I wish I could have. Everyone should ponder that question and come to their own conclusions in terms of the elements of their own value chain or business system – take your pick.

All around us we see contemporary examples of failure to ‘keep an eye on the customer.’ In a subsequent blog, I will give you a dandy example.

We see something else that needs attention as well, and Peter referred to it in his article – the importance of building trust with all relevant stakeholder groups. There is more to be said about that, and many examples of how the trust aspect is being handled badly by many companies. These failures, particularly in these difficult or turbulent times, can mortally wound a company, but are absolutely unnecessary if leaders develop, execute, and communicate the right strategy.

Every good wish for success with your strategy!

(–> download a printable version)                                                            (c) William K. Holstein

***

*) Dr. William K. Holstein

The former assistant at Harvard who earned his PhD in mathematical economics was (among many other teaching activities ) visiting professor at IMD.

Today, he has been an associate Partner at Crystal Partners AG, Zürich since 2008 and Senior Advisor at Lat Link-Partnership in Change Consultancy, Buenos Aires, Argentina. He is the author of three books on Information Technology, BASIC programming, Operations Management. One of his recent publications include ‘Efficient and Effective Strategy Implementation’.