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Are MBAs “so” last century?

January 31, 2011

A group of MBAs from Cass took an elective in 2008 which used thinking about the future of management to introduce them to scenario planning and other futures techniques. The results were not what we expected.

Background – The electives class consisted of a typical Cass mix of participants from Africa, Asia, and Europe – including the UK. The aims of the elective were to introduce tools and techniques for thinking about the future by providing a context in which participants use them, and enable the participants to anticipate how management may change over the next decades by using the tools to think about the future of management.  The course used research and case studies to illustrate “what works and what doesn’t” when organizations try to anticipate the future and implement decisions accordingly.  We were not aiming to develop futurists but rather to develop managers who know how to get the best from futurists.

The class first approached the task of horizon scanning – what are the forces which will affect management in 2025 and hence the content of an MBA?  They found that Google is not the total answer, that the way a question is posed determines the range of answers, and that judging the reputation of the sources required judgement.  From the 24 trends that were captured and documented – ranging from regulation, the role of IT, the changing world balance, to shortages of raw materials, it was clear that the world in 2025 could be very different from today, in ways which could be anticipated.  But it was also clear that the lessons of the last few years were that there could well be a series of unexpected events which changed the shape of our world.

This led us to focus on four scenarios – with axes chosen to bring out the ability of management to cope, as well as the challenges.  The names were chosen to communicate their essence:

  • Business As Usual, in which the changes are those predicted, and management is able to evolve to cope
  • Failure of Management, in which organizations fail to evolve to meet the predictable challenges
  • Success of Management, in which management evolves to manage the predictable changes and in addition is able to meet the challenges of “unpredictable” changes
  • Death, in which organizations are unable to cope with the combination of predicted changes and unpredictable change.

Business As Usual – This scenario is also often called “The Official Future”, as it reflects the unspoken assumption that life will continue with minor changes, all of which are for the better.  Within this scenario, one of general global prosperity, China, India and the OPEC countries have all taken their place within the current international structure and fora (UN, WTO, etc) and have adopted democracy.  However the US has suffered comparatively in terms of economic growth, and Europe is not yet harmonized in terms of taxes, migration policies, etc.

Concerns over CO2 have led to extensive plans for wind, solar and nuclear energy, although the amount delivered is comparatively small.  Globally, population growth has slowed and become negative in many industrialized countries, while populations in Africa, South Asia and many Muslim countries increase.  In all parts of the world, the number of over 60’s increases.

There is a split in the world between those who use technology – the majority – and those who do not.  Technology is essential to world trade, whether for information on prices of raw materials or exchanging designs among three time zone teams.  There are likely to be large numbers of economic migrants in many countries, not just the US and Europe, and also there will be refugees from the effects of climate change:

In this scenario, management has concern for all stakeholders – but private companies are more usual than today as management try to simplify their responsibilities.  Management responsibilities and challenges in this scenario include,

  • Global complex networks need new styles of management
  • Increased outsourcing with an emphasis on expertise and delivery capability rather than cost per se
  • The need for managers to face a different demographic of resource – whether in-house or outsourced – in terms of an ageing work force and a globally mobile workforce
  • Managers will increasingly find that IT systems are used to do many of their traditional tasks, leading to a revolution in how managers spend their time.
  • Social networks and virtual worlds will be part of the fabric: these increase peer to peer interaction and make hierarchies behave differently.

What are the implications for the MBA? Clearly, the MBA needs to become truly global.  This does not just mean placements but suggests exchanges with other business schools for long enough to understand cultural differences, particularly those affecting business.  For instance, what are the requirements of Shari’ah law for financial services?  What does family obligation mean in practice in Chinese and Korean conglomerates?

The MBA in European schools needs to focus on innovation and entrepreneurship, since large corporates will increasingly delayer as more middle management tasks are taken over by IT systems.

Over the next 20 years, the world will be coming to a new realization of shortages of raw materials, from water through minerals to energy.  This will mean a wider interpretation of “sustainability” towards “we would like to make a profit in the changed circumstances and stay in business” as distinct from “corporate whitewash”.

Some courses taught in MBAs cover aspects of management now mostly covered by IT systems – these could be enhanced for specialists who need to be able to modify the systems but taken out of the standard MBA.

But perhaps the most over-arching implication of “Business as Usual” is that soft skills will become the prime differentiator.  When so many facets of an organization are covered by regulation and legislation, the ability to take work with people who think differently, to take charge when needed, the ability to handle peer to peer communication and facilitate decision making, will be highly sought after attributes and can be encouraged if not taught in business schools.

Failure of Management – What could prevent management coping with the predicted challenges of the next 20 years?  What characteristics of management would allow a company to take advantage of the predicted changes?

Companies rise and fall.  The Fortune 500 reflects this, with one company from each of India, Mexico and Russia 10 years ago, compared with now 7, 5 and 5; and 29 from China.  Companies change direction. In 1967, Nokia of Finland was making wellington boots.  3M began life as a mining company.

The main problem was seen as the pace of change.  Most organizations are not well designed to recognize drivers of change and then to adapt to change, and the role of manager becomes very different when the organization is designed for adaptability.

Another predicted change is the commoditization of knowledge – as the Cass class members found, there is a lot of knowledge out there, the hard thing is to know what to make of it.  This puts a focus less on general managers, with delegated authority from a hierarchy, and more on specialists in accounting, IT, logistics, who stand or fall on their expertise.

What does this mean for the MBA course?MBAs will often join organizations that do not find it easy to change.  The crucial education would seem to be that which allows the students to recognize external challenges, and help the organization respond to them.  Recognizing external challenges requires an external focus, and capability of researching topics, that is not currently expected in MBAs.  The class members thought that everybody should take the elective on scenario planning!

Success of Management – This scenario described a world in which management successfully dealt with unpredictable change. The main differentiator was seen as the ability to deal with “events”, while the ability to deal with predicted change – major though the impacts were likely to be – was seen as necessary but not sufficient.

In the next twenty years, we are likely to see some (though probably not all) of the following “unpredictable” events:

  • Shocks in financial markets, for instance as WTO is rolled back or China repatriates funds from the US
  • Shocks in energy markets, for instance due to war in the Middle East or between Russia and NATO
  • Shocks due to unpredictable weather such as flooding of London, Amsterdam or New York
  • Shocks due to terrorism, for instance taking out the electricity supply of London or a major airport
  • Shocks due to pandemics, for instance based on SARs or a derivative, with the effect on the health services and on vital public services
  • Shocks to the economy due to earthquakes devastating Los Angeles or ther Bay Area in California, or Tokyo
  • Shocks to the economy due to nuclear war between Asian countries for instance India and China.

Considering these potential shocks led us to two conclusions:

  • Many of these would be foreshadowed by early indicators which could be watched for so that if pre-planning had been done, organizations would be able to act.  For instance, war in the Middle East could be a consequence of political changes in Israel and Iran, which could be identified.
  • It is important for managers to be able to quantify and qualify risk in its widest sense.  For instance, in considering a SARs pandemic, we could take into account that the Black Death affected about 20% of the world’s population, and most of them died; that the 1919 flu epidemic affected about 20% of the world’s population, and about 5% of the world’s population died. This suggests that with modern vaccines, a pandemic is unlikely to kill more than 1% of the world’s population, or a few percent of the staff in an organization.

What is the implication for the MBA course?  – Two specific courses of study for MBAs would start to prepare for the next decades: one on geopolitics, and one on risk.

  • Geopolitics would be focused around understanding the potential flashpoints in the world which could affect the global economy.  By studying these, students would be sensitized to news of which otherwise they might not see the importance.
  • Risk management would be much wider than the current focus on financial risk, and allow students to use research to compare risks and anticipate how they might change in the future.

It would also be important to teach these using case studies and hypotheticals, to make the connection between geo-political events and management decisions.

Death  – This scenario is one in which many of today’s major corporates fail because of lack of capability to adapt to the challenges to their business model from the changing world order, and to plan for “the unexpected”.

We discussed the changes in the business model of retailers if shipping and warehousing replaced just in time air freight for a number of items, due to climate change and energy cost pressures.

We discussed the hollowing out of the corporate centre and the associated reduction in ability to anticipate change or plan for contingencies.

The implications for the MBA course are the need  to sensitize students to the possibility of disruptive change and to anticipate ways of dealing with it.

In Summary  –  The conclusions reached by the class were more far reaching than expected, calling into question the current syllabus and asking for new dimensions to help them face the world of the next twenty years.

This paper has been written by Gill Ringland, the course lecturer, with input from Dr Gordon Ringland, and from the students who were in alphabetical order Nazanin Hamidi, Yasir Khalid, Diraj Khanna, Ekaterina Kuzmina, Voon Lai, Thomas Leonard, Pranay Manocha, Nicholas Michaelides, William Nicodemus, William Pedder, Melanie Reynolds, Tayo Quadri, Floria Shidanshid, Chris Theodorou, Kamran Zalqarnain.

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