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How Business Schools Aren't Teaching What They Should

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A two-tier framework to succeed: Business as Usual and Leadership.

I think there are two big systems, two big "sets of variables" to run a business. The first one I call it "Business as Usual." It's what they teach you in Business Schools, and includes strategy, marketing, operations, finance, accounting and so on. It's what every executive and CEO "works on," the variables that every Board tracks through the appropriate information systems.

In a Business as Usual context:

  • You target a segment or market with a value proposition.
  • You design your differentiation strategy, your unique way to compete.
  • You make a product or service.
  • You hire a team of professionals where each one knows "something special": marketing, finance, engineering, design, and manufacturing.
  • You build processes so that you can perform your product or service.
  • You hire employees to perform the different tasks.

The most accepted and comprehensive framework to analyze Business as Usual is the strategic one. Thanks to Michael Porter's competitive analysis framework, every CEO and businessman has established their strategy and together with it a cascade of other topics and issues like marketing and operations. In short, strategy determines the basic "hard" variables of the business, its relative priorities and ultimately, the way of organizing work.

In this business framework, the issues that concern people are managed by job descriptions, job evaluations, and organizational procedures, but what people believe, think and feel is irrelevant.

I strongly believe that this variable is missing in Porter's framework, and that he will have to add people as a source of Competitive Advantage. Therefore, in addition to Business as Usual, I am convinced that to run a business you need a second framework: I propose that leadership includes all the aspects of managing people.

Average Executives around the world have a very limited framework of leadership. They say it's about "building trust" or "showing with the example" or "motivating your people"; all tiny pieces of truth, but that lack a larger framework. Have you ever considered what your framework for leadership is? Make the exercise and write it down on a piece of paper...

Academia doesn't have a commonly accepted framework either, so in my last blog I proposed a framework for leadership that is based on my interviews of exceptional CEOs and global leaders and includes the following 5 key roles:

  • To create and light up a vision for your company,
  • To recruit and manage the talent you have and get the best out of it,
  • To design the whole decision-making process.
  • To communicate, to define how the whole organization communicates.
  • To build a culture for your organization.

In the Wharton MBA program -- and I have a Wharton MBA myself -- I could find only a handful of courses about the "Foundations of Teamwork and Leadership," out of over 200 of the MBA curricula.

Why could that be? Because regardless of the position you get when you graduate from business school, you cannot neglect the leadership issues. So either business schools teach them at the MBA, or if they decide not to do so -- and only teach them in executive education -- they should at least warn everyone of such a caveat! They should tell you: "Sir, you can't manage a business with what we teach you!" Business schools are not doing so, they don't teach you what they don't teach you. (In other words, they don't tell you what you are missing, which is what you still have to learn.)

An example of this is like studying mechanical engineering for a couple of years, and when you graduate you think you can drive a F1 car! No sir! Studying engineering doesn't enable you to pilot a F1 car, and even less so to manage the whole racing team. It would be like thinking that you can run a horse race with a thoroughbred without a jockey, or yacht racing with the vessel but without a crew! Business as usual is like having a fleet of cars, and backyard racetrack. Very necessary to test performance and succeed. The car has to have the right combination of fluids, gears and tires necessary to perform and succeed. The team must be designed thoughtfully, with knowledge and taking into account all of their collective auto experience. Leadership, is the ability to select the drivers, pit crew and mechanics to push the F1 team forward. Can you imagine one without the other?

It is only when you add the two frameworks, Business and Leadership, that you can successfully lead and manage a business. It is not true that you are a "Master in Business Administration" when you Graduate from Business school, maybe you are a master in business variables, or in business design, but certainly not in business administration.

"Culture eats strategy over breakfast," said Peter Drucker, and it is only when you fully understand what this means, that you'll lead a successful company.