WORKING PAPER
FINDING A NEW WAY FOR BUSINESS SCHOOLS

G. DAVID HUGHES*
July 20, 2005

 

ABSTRACT

Bennis and O'Toole have argued that business schools have lost their way by focusing on "scientific" research that led to hiring faculty with limited real-world experience, thereby producing graduates not equipped to lead companies or even to get good jobs.1 This "scientific" research has been described as "physics envy." By tracing the evolution of physics we see that there has been a paradigm shift in science, while business schools remain in Newtonian physics. Comparing the evolution of three of the oldest business schools to the scientific evolution of the period, we see that none of these schools has adapted to the new scientific model that accepts variables that cannot be measured and fuzzy relationships among variables, but one is moving in that direction. The significance of the new science for business is that rigid organizational structures and formal communications will give way to knowledge networks that present new challenges for directing and motivating teams toward a shared goal. Business schools, therefore, must reflect this organizational paradigm shift in their research and courses.


* G. David Hughes retired as a distinguished professor of business at the University of North Carolina, Chapel Hill. He was a professor at the Graduate School of Business, Cornell University. He has been a visiting professor at the University of California, Berkeley; the University of Louvain/Leuven, Belgium; and Harvard University. He has been a visiting lecturer at universities in Austria; Manchester, England; Lancaster, England; and Buenos Aires, Argentina. He was a Fulbright Senior Scholar at the National University of Ireland, Galway and at the Business School at the University of Auckland, New Zealand. In 2006 he will return to the University of Auckland as a Professorial Fellow. He holds a BS from Drexel University, an MBA from the Wharton School, and a PhD in Applied Economics from the University of Pennsylvania. He has published 7 books and over 75 articles.


PARADIGM SHIFT IN SCIENCE

After a brief review of a paradigm shift in science we will see how this shift impacts business organizations and the teaching of business.

The Decline in Materialism

In the 1920s when management science was created, it used scientific models that were based on understanding the behavior of matter. This study of the science of matter began 400 years earlier with Copernicus opposing the Ptolemaic theory that the earth was in the center of the universe and with Newton's theories of motion, gravitation, and light, as well as his invention of calculus. Scientific management advanced the practice of management by moving it from description to analysis. But during this same period the physical sciences were challenging the old materialistic models that could not explain conflicting particle and wave theories of light or that a particle could be in two different places at the same time. The rejection of matter as the sole basis for explaining the universe was a paradigm shift in science.

Paradigm shifts appear as sharp breaks in knowledge for two reasons. The first and obvious one is the sudden creation of new knowledge. The second reason is the resistance to change of persons in the old system (they will lose power as a result of the new knowledge), which slows the adoption of new knowledge. The Christian church provides an example. It had used the 1,400-year-old Ptolemaic theory of the earth in the center of the universe in its doctrine; it could not easily change and thereby have its doctrines doubted.

The split between science and the Church was part of a Renaissance movement to rid the church of political corruption and the adherence to dogma that was disproved by science. It would appear that the church and science reached an agreement: science was free to explore the physical world, but it must stay away from exploring relationships with God, angels, miracles, and supernatural phenomena. This agreement opened the way for more discoveries. Copernicus' theories provided the foundation for Galileo's telescope (and his trial for heresy), Kepler's planetary law, and Newton's gravitation principle. These discoveries of how matter functions quickly led to the industrial revolution. There remained, however, the tacit agreement that science must not explore nonphysical explanations of systems.2

Gilder has observed that all social institutions adapted Newton's materialism theories. Newton's 18th century contemporary Adam Smith saw the economy as a great machine. In the 19th century Karl Marx viewed politics in the light of ownership of matter, that is, physical capital. In the early 20th century Sigmund Freud developed psychological theory in terms of forces and pressures.3 Other psychologists used terms such as vectors, which are rooted in materialistic theory. Thus, any challenge of scientific materialism's ability to explain observed behavior in the universe is a challenge to the roots of economic, political, sociological, and psychological theories. We may anticipate strong resistance from those who embrace these existing theories. We may, in contrast, expect dramatic results from those who understand and adopt the new scientific paradigm.

Harman, an engineer and a philosopher, concluded that scientific materialism is a dying orthodoxy as a social force while the new scientific paradigm shifts science from fragmented, mechanical, non-purposive explanations to holistic, organic, and purposive ones.4 Personal experiences that include subjectivity, perception, consciousness, and intuition have taken their place along with objectivity as possible explanations for the behavior of systems within the universe. It should be noted that the new nonmaterial foundations of science are not discarding scientific physical knowledge or dogma, as was the case with the Church 400 years ago. They are expanding knowledge outside the physical box that constrained science because of its agreement with the Church. The new paradigm recognizes science as an evolving process that reflects the perceptions and changing culture of the observer. The new paradigm is not limited to western culture; it warmly embraces eastern philosophy.

Ray notes that quantum physics demonstrated that Newton's predictions were true only for large-scale events such as the movement of planets, but they were totally wrong in the world of very small objects and fast movements, which is a world of vibrations and energy waves.5 By examining the significance of the new paradigm on business, he concludes that reality is no longer limited to the physical senses outside human experience, but that it includes internal experiences as well. This leads him to the startling conclusion that intuition, emotions, creativity, and spirit are vastly more important than information gathered only through physical senses. People, therefore, are not easily replaced components as in a machine because they do not respond in standard ways. Instead they are unique, each with a different consciousness that determines his or her perception of reality. This conclusion requires that we replace the definition of management as "getting things done through people" to "getting things done with people."

Not only is the new scientific paradigm not limited to the physical senses, it also is not limited to linear, cause-and-effect explanations based on controlled experiments. It accepts meaningful coincidences, which, in the 1920s, the Swiss psychologist Carl Jung called synchronicity. This concept suggests that there are interconnections in the universe that are not dependent on cause-and-effect relationships. Jung's concepts put him in conflict with Freud's deterministic, cause-and-effect models. A popular book, The Celestine Prophecy, instructs the reader to be sensitive to coincidences, which are a form of synchronicity, because they will appear as answers to pressing questions.6

Paradigm Shift in Organizations

Wheatley examined organizations in the light of the paradigm shift in science. She notes that organizations are Newtonian, emphasizing structure and parts, reflecting the engineering training of many organizational theorists. Organizations were seen as systems that could be controlled and predicted, the primary characteristics of the old science paradigm. "At the end of the twentieth century, our seventeenth-century organizations are crumbling. We have prided ourselves, in all these centuries since Newton and Descartes, on the triumphs of reason, on the absence of magic. Yet we, like the best magicians of old, have been hooked on predictions. For three centuries we have been planning, predicting, analyzing the world. We've held onto an intense belief in cause and effect. … We have been, after all, no more than sorcerers, the master magicians of the late twentieth century."7 "In organizations, we focused our attention on structure and organizational design, on gathering extensive numerical data, and on making decisions using sophisticated mathematical ratios. We have reduced and described and separated things into cause and effect, and drawn the world in lines and boxes."8

She sees organizations as links of relationships up to four levels of separation that share information, a force we hardly understand. "We social scientists are trying hard to be conscientious, using the methodologies and thought patterns of seventeenth-century science, while the scientists, traveling away from us at the speed of light, are moving into a universe that suggests entirely new ways of learning."9

We made organizations fit Newtonian mechanical models by putting responsibilities into functions and people into roles with boundaries and a secure sense of control.10 When we studied organizations, we thought we confirmed these models because we used research designs that assumed cause and effect relationships. We assumed also that these relationships move toward equilibrium, when, in fact, they move away from equilibrium as they learn and renew in response to an ever-changing environment. Stacey challenges the present organizational models by noting that stability, harmony, predictability, discipline, and consensus, which are central to most Western management practices, are all wrong. Instead of equilibrium, he argues, we need bounded instability, which is the framework in which nature innovates.11

Stacey and his colleagues at The Complexity and Management Centre at the Business School of the University of Hertfordshire, England, provide the most abstract examination of organizations. They challenge many of the cherished organizational concepts. In 2002 Stacey changed his thinking about an organization in terms of chaos and complexity sciences because he concluded that human actions couldn't be reduced to nonlinear, recursive, deterministic equations, which ignore learning and freedom. Now he considers these sciences as useful metaphors to stimulate our thinking about organizations rather than rushing into their application. He concludes that the reason for continuing planning, even when it usually does not work, is to have a social defense against anxiety. He gives examples of how detailed plans cause internal conflicts in people and make them ill. Power and control, he argues, are limited to our relations with each other, which are enabling and being enabled at the same time. He concludes that computer simulations cannot have sufficient rules to reflect the patterns of human interactions that produce creativity. It is these patterns of behavior that are the organization. Instead of focusing on what should be done, on a control system or on a strategic plan, he concludes that we should focus on the current behavior patterns. We should ask what we are doing now, not what we should be doing.12 To change present behavior patterns we need to understand what motivates members of the knowledge network.

Western business organizational designs can be traced to Western thought that is dominated by deductive reasoning. Eastern philosophies, in contrast, could greatly impact organizational designs. "In Buddhism reason is seen as limited, and the knowledge derived from it is transient and unreliable. Reason is therefore not considered a trustworthy source of knowledge of the absolute reality underlying a change. The Buddha taught that intuition, not reason, is the source of ultimate truth and wisdom. In Zen meditation, the discriminating conscious mind is quieted, and the intuitive mind is liberated."13 As businesses become global, will Eastern thinking influence organizational designs by demonstrating that rationality and reason are not the only sources of knowledge? Perhaps these new designs will become a new source of global competition.

What does this new scientific paradigm mean for business? Gilder answers this question as follows:

"The central event of the twentieth century is the overthrow of matter. In technology, economics, and the politics of nations, wealth in the form of physical resources is steadily declining in value and significance. The powers of mind are everywhere ascendant over the brute force of things."14

He notes further that value will no longer be added by moving massive bits of matter against friction and gravity. Wealth and power came from owning the resources or having military power that could conquer them. Now value is added by knowledge-ideas and technologies. "Today, wealth comes not to the rulers of slave labor but to the liberators of human creativity, not to the conquerors of land but to the emancipators of mind. Impelled by an accelerating surge of innovation, this trend will transform man's relations with nature in the twenty-first century. The overthrow of matter will reach beyond technology and impel the overthrow of matter in business organizations."15 He concludes that entrepreneurs will succeed while bureaucracies with rapidly depreciating capital equipment will fail. Military power will rest with those systems that control information technology. "Finally, the overthrow of matter will stultify all materialist philosophy and open new vistas of human imagination and moral revival." Gilder notes that Max Planck, the discoverer of quantum physics, stated that the new science moved from the visible and controllable to the invisible, which is a shift from macrocosm to microcosm.16

While these conclusions seem dramatic and will take years to evolve in some industries because of vested interests in old systems, the microchip industry provides dramatic evidence of this nonmaterial evolution. The physical materials in a microchip are largely the silicon in sand, a common substance, and constitute less than one percent of the cost of making a microchip. The remainder of the cost comes from adding knowledge.17 Yet this small device has had major impact on all social institutions. After analyzing the evolution of the microchip industry, Gilder reached the following conclusion regarding the impact of the new scientific paradigm on business.

The materialist superstition succumbs to an increasing recognition that the means of production in capitalism are not chiefly land, labor, and machines, present in all systems, but emancipated human intelligence. Capitalism-supremely the mind-centered system-finds the driving force of its growth is innovation and discovery. In the age of the microcosm, the value added shifts rapidly from the extraction, movement, manipulation, and exhaustion of mass to the creative accumulation of information and ideas.18

How have business and business schools responded to this new science that focuses on nonmaterial systems? Are business schools directing research to the challenge of managing knowledge networks? We explore these questions by examining the evolution of three business schools. Then we move to how some business schools are including the new science in their research and teaching. Finally there are suggestions of how schools can leap ahead in their research and teaching.


THE EVOLUTION OF BUSINESS SCHOOLS

Management advice is not new. In an instruction book of 2000 B.C., Egyptian leaders were told to listen to subordinates. Span of control can be traced to Moses as he prepared for the exodus from Egypt-a foreman for every ten workers and a supervisor for every ten foremen, etc.19 The need to study and teach management practices evolved in the late 19th century when economists introduced management as a factor of production. When the economy was largely agricultural, the factors of production were land and labor. The industrial revolution raised the need for capital to buy equipment, thereby adding capital to those factors. Then economists observed that some companies were better than others because of their management practices, so they began to study these practices and added management to the list of productive factors. Economists dominated early business school faculties. In the late twentieth century, information was added as a factor of production because in many economic institutions it became more important than physical factors.

This discussion of the evolution of business schools will be limited to three of the oldest that consistently rank in the top five in surveys-Wharton (1881), Harvard (1908), and Northwestern (1908). It would be impossible to examine the more than 1,000 business schools that graduate more than 300,000 students per year.20>

The Wharton School of the University of Pennsylvania

Wharton is credited with transforming the study of business from a trade to a profession. It created the first business textbooks, named the first business professor, and established The Industrial Research Unit (1921) as the first business research center, thereby marking a shift from just teaching management to the inclusion of academic research. It established the fields of accounting, entrepreneurship, health care management, marketing, operations and information management, real estate, and many others. It prided itself in focusing on fundamentals, not fads. "The hallmark of its work was to apply rigorous scientific methods, modeling, and analysis to business studies."21 "It conducted pioneering studies of industrial relations, analyzing problems and economics of diverse industries and a variety of issues, including employment of African-Americans, strikes, measuring the cost of training and airline mergers…pricing history, labor migration and mobility, and productivity."22 Thus, Wharton established its focus on the deductive side of management science.

During the mid and late 20th century, Wharton continued to innovate in business education by linking its approaches to other fields. It established the first and longest-running executive program, the Securities Industries Institute, in 1953. It established the first MBA program in health care management in 1970. In 1973 it established the first center for entrepreneurship. In 1978 it created the first dual-degree program in management and technology. It established executive advisory boards in Europe (1988), Asia (1988), and Latin America (1994).23

In 1988 Wharton studied 300 CEOs as part of a re-examination of its model of business education. This study led to the Center for Advanced Studies in Management and a new curriculum to reflect global, cross-functional, collaborative, and high-tech organizations. In 1999 it announced plans for a new building to support the latest technologies and curricular innovations.24

While Wharton prides itself in innovative links to other fields, curricular innovations, and using new technology, it is difficult to find evidence of its teaching students to innovate. Entrepreneurship courses apply material from the MBA core to design and evaluate new ventures. Only when digging into the format of MGMT 801 do we find evidence of creating an environment for innovation. "In this course you are asked to get out of the habit of being a receiver of ideas, facts, concepts, and techniques, and get into the habit of generating ideas, identifying problems, analyzing and evaluating alternatives, and formulating workable action plans…"25 But then students develop a plan for a start-up company, which is late in the innovation process. There is little evidence of their being taught to be innovative and encouraged to get out of the box to create wild ideas for a new venture. We will call this approach to entrepreneurship managerial entrepreneurship, to contrast it with innovative entrepreneurship that will be discussed later.

Harvard Business School

The Socratic approach and the case method used in the preeminent Harvard Law School were the inspiration for the Harvard Business School's "problem approach," as the case method was first known.26 The first case, "The General Shoe Company," was written in 1921. The 350 cases written per year remain at the center of its philosophy.27 The Harvard Business School approach is inductive. The student is expected to gain diagnostic skills and learn business and institutional facts by working on 500 cases during the two-year MBA program.

The cases are decision oriented in that the material presented stops short of a decision. Students are required to analyze the situation, develop alternatives, and take a decision. This is a structured approach that leaves little room for defining the problem outside the structure of the case or for innovation. In recent years the classroom experience has been highly structured and guided by extensive case-writer notes, even to the detail of what material to place on the different white boards.28

Entrepreneurial courses are for students who expect to found or take a job in a technology-based venture.29 "Field Study Seminar: Evaluating the Entrepreneurial Opportunity," requires students to have a specific idea that they want to flesh out. "The course is not an appropriate vehicle for 'coming up with' an idea."30 Thus, Harvard is taking the managerial entrepreneurship approach that begins after the creative idea, with one exception: a "Field Study Seminar in Managing for Creativity" is given by Professor Teresa Amabile, a pioneer in the research of creative behavior.31
Harvard is innovating in its teaching methods by using technology to enhance its case method. For example, there are multimedia case studies on CD that use video, sound and computer simulations to present the industrial setting.32

The Kellogg School, Northwestern University

In 1966 Northwestern dropped its undergraduate business program to concentrate on MBA programs. It differs from Wharton and Harvard in that it focuses on creating an innovation mind-set in addition to teaching business fundamentals. "The school's three-fold, overarching administrative model incorporates the values of partnership, leadership and scholarship for a balanced approach to education. Underpinning this model is Kellogg's long-standing commitment to innovation. By welcoming changes when appropriate, Kellogg has historically taken action that enables the school to assess contemporary management trends and challenges, and then prepare its students to excel within today's business environment."33

Kellogg takes a combination deductive and inductive approach by having over 20 research centers and by writing cases. "Through the powerful contemporary examples found in these Kellogg School of Management cases, students will participate fully in knowledge creation, learning to think critically, explore strategic alternatives and present persuasive arguments for their viewpoints. We believe you will agree that the Kellogg School of Management Case Collection brings theory and practice together in ways that will lead to innovative solutions for modern business challenges."34

Teaming is an important part of the Kellogg program. Its research on teams found that the most successful teams, whether writing musicals or articles, mixed new and experienced people, adding creative sparks. The unsuccessful teams repeated old collaborations.35 Teaming is important in management designs because the speed of technology and information change flattens hierarchical organizations into loose collections of knowledge networks. Kellogg applies its team emphasis to School management by including student input in decisions on academics, facilities use, alumni affairs, and placement issues.36 Kellogg's emphasis on teaming and innovation has produced top rankings for its resident program and for its executive MBA program.37 Thus, it is moving aware from the old paradigm of science.

BUSINESS SCHOOLS IN THE MIDDLE TO LATE 20TH CENTURY

The rapid growth of the economy after World War II created a demand for executives and therefore a demand for persons with MBA degrees. There were many benefits to having an MBA degree. One learned the language of business, which was a broadening experience for engineers and a focusing one for arts majors. Life-long contacts were established. And, of course, it was the union card for a top management job.

But studies of the curricula produced strong criticism by the Ford Foundation38 and the Carnegie Foundation.39 The critical theme was that the courses were too descriptive and lacked analysis. The Ford Foundation then funded a year-long program at the Harvard Business School to teach mathematics to business school professors. This resulted in many schools changing their MBA courses to require skills in calculus, set theory, and probability theory as a prerequisite for understanding statistical analysis. This may be the origin of what Bennis and O'Toole and others have referred to as "physics envy."40

The literary history of the Journal of Marketing illustrates this shift toward a scientific approach. Marketing was viewed as applied economics from 1936 to 1945. Its approach was heavily descriptive when it focused on the institutions for facilitating exchange, government regulations, and the application of economic concepts such as comparative advantage in international trade. The post-war period, from 1946 to 1955, focused on marketing's role in management planning and introduced the need for marketing to have its own theories. The period from 1956 to 1965 moved marketing to a more quantitative approach, thereby responding to the criticisms of the Ford and Carnegie reports. This period saw the introduction of methods from management science, operations research, statistics, and probability theory. Intuition and judgment were replaced with scientific processes. The need to better understand the consumer led to the period of the behavioral sciences, 1966 to 1975; social and psychological methods dominated this period. The period from 1976 to 1985, known as the decision science period, focused on planning, including models for product design, advertising effectiveness, and market structure. 1986 to 1995 is known as the integrative period because it attempted to integrate interdisciplinary knowledge and theories to understand marketing phenomena.41 Unfortunately this integration has not occurred as of 2005.

Information technology revitalized courses in retailing, wholesaling, and transportation that had been dropped in most business schools in response to the criticism that their content was too descriptive. With the development of information systems, they re-emerged as supply chain management. Wal-Mart and Dell Computers gained a competitive advantage by moving information instead of goods.

The rapid expansion of programs resulted in increased costs because of competition for good faculty, new buildings, new technology and the staff to support it, and layers of professional management. These costs placed a demand on fund raising. Some deans were selected for their ability to attract funds for new programs, buildings, and faculty chairs. Tuition was raised, which caused some students to question the payoff period after graduation. Executive programs became a good source of revenue for business schools but they were frequently hard to staff because the new breed of professors lacked business experience and therefore credibility. In short, business schools became a business.

HOW BUSINESS SCHOOLS RESPONDED TO THE CHALLENGE OF CHANGE

Stepping back to see why certain material is included in curricula, we see that all parties-schools, consultants, and mass media publications-have a need to be unique in order to establish a competitive advantage. Abrahamson notes that "Many management fashion setters-consulting firms, management gurus, business mass-media publications, and business schools-compete in a race to define which management techniques lead rational management progress. Fashion setters who do not participate successfully in this race...will be perceived as lagging rather than leading management progress, as being peripheral to the business community, and as being undeserving of societal support." Furthermore, he "warns that scholars in business schools must both study and intervene in the management-fashion-setting process; otherwise these business schools' long-term viability will be at risk. Swings in management fashion, far from being cosmetic and trivial, are in fact deadly serious matters for business schools and the scholars staffing them."43 "The plea, then, is not to passively watch sociopsychological forces shape technically inferior management fashions, but to act in a scientifically informed manner in order to render management fashion setting a more real, as opposed to superstitious, learning process, which adjusts organizations to changing organizational, political, and economic environments."44

Many of the new management tools were developed by consulting firms in response to companies' need for capital, executives' need for validation of tools, executives' need for control of their organizations, and their need to respond to the growing role of information as a factor of production.

Reflecting Corporate Needs for Capital

The cost of capital resulted in a popular approach known as the portfolio of products. Managers were instructed to regard their products as a portfolio of investments in which products were classified into cells in a matrix with names such as stars, cash cows, and dogs. There were strategies for each of the cells: cash cows would be held just to generate a cash flow; dogs would be sold and the resources reinvested. The popularity of product portfolios led to arguments among consultants and corporations as to who had invented the concept. Classifying products as profitable was made difficult by accountants' inability to allocate costs and revenue to specific products. This allocation problem led to the development of activity-based costing in the 1990s, which looked like distribution cost accounting. The latter had its roots in the 1940s when its purpose was to provide manufacturers and large retailers in the grocery products industry with a defense against price fixing, as defined by the Robinson-Patman Act of 1936.

Executives' Need for Validation of Tools

Disillusionment with academic theories and analytical tools led in the early 1980s to a desire for pragmatism. Managers were ready for studies of what made companies successful. In Search of Excellence met their need because consultants who observed real companies authored it. Here was the validity that was missing in academic theories. The term excellence quickly found its way into corporate mission statements, plaques on office walls, annual reports, bumper stickers in corporate parking lots, and the lobbies of corporate headquarters. The fact that everyone made the same statement, so there was no competitive advantage, seemed to go unnoticed by its supporters.

How to achieve excellence was unclear, so managers were eager to see the details of successful companies, which made the management world ready for benchmarking. Here they could examine the processes of companies, regardless of their industries, that had achieved the most productive systems for logistics, information systems, handling customers' inquiries, etc. While benchmarking seemed like a risk-free strategy, a solution for one company rarely fits the culture of another. Furthermore, benchmarking may stifle creativity.45 But it can provide a useful checklist to jog one's thinking for developing creative solutions.

The Need for Control

Managers have long sought ways to control people in order to achieve corporate goals. When return-on-investment (ROI) was the goal, DuPont used a system that dissected ROI into its financial components to determine why the ROI goal was not met. For example, they could identify problems such as accounts receivable being too high because accounts were slow in paying, which raised the asset base and lowered the ROI. When the ROI for a division or product fell below a target for a long period, they sold it and reinvested the resources in new products with a higher ROI.

The concept of dissecting business processes is central to the Balanced Scorecard approach, but it does not focus only on financial variables. It focuses on four categories of critical measures of current and future performance that are necessary to reach financial goals. It begins by measuring those factors that are of concern to customers-time of delivery, quality, performance, service, and costs. The second category is the business perspective: What must the company excel at to meet customer expectations? Examples of these factors include cycle time, quality, employee skills, and productivity. These measures and their related goals should be decomposed to the local workstations, thereby involving the operational levels. Information systems are critical to move this information to the executives' Balanced Scorecard for prompt action when goals are not being achieved. The third category focuses on the company's ability to improve and innovate products, processes, and marketing. A common measure of product innovation is the percent of sales that comes from products introduced in the last year. The fourth category focuses on how the company looks to the shareholders. Do the first three categories produce improved cash flow, operating income, market share, and return on equity?46

It is surprising that it took the Balance Scorecard to get some companies to identify what drives their companies to success. Since it was first introduced in 1992, hundreds of companies and governmental agencies have reported positive results.47 But with any new instrument, some questions must be asked. Will it become an end in itself so that energy is spent in designing measures instead of producing? Are the measures valid and reliable? Will the structure of the measurement systems discourage creativity? Are the measures demotivating? Are we getting the change in behavior that we want? For example, in order to evaluate teachers and school performance, standardized tests are given to public school students. For the weeks before the test period teachers are teaching test strategies instead of new material. Teachers complain that they would better spend the time teaching new material.

It is useful to look back at the results from earlier measurement systems that were widely promoted. The experiences of companies that applied popular fashions are not encouraging. Three-fourths of the companies that downsized were worse than before, two-thirds of the companies were disappointed with their total quality management efforts, 70% of reengineering projects did not achieve the planned results,48 and two-thirds of the publicly traded companies that had been classified as excellent under performed the S&P 500.49

Many observers agree with a McKinsey report that senior management should spend at least 50% of its time on the change program. This is a huge investment of executive time. McKinsey also cites a lack of focus and staying power as reasons for failure.50 Lack of middle management support will probably assure failure. Middle managers have lived through previous fashions so they have a good sense of fashion life cycles and how to ride them out. Ackoff notes that failures occur because fashions are adopted without considering the effect on the entire system. He equates importing a fashion into a system with trying to improve an automobile by taking the best engine or transmission from other automobiles: the part will not fit, so the automobile will not run as well as it did before the part was adopted.51

Winning the prize rather than meeting the needs of the stakeholders is frequently cited for the downfall of companies that won a Deming or Baldrige award. Florida Power & Light is cited as a company that focused on the prize instead of its customers. After winning the Deming award, the results from the Deming system did not justify the disruption in the company, so most of the Deming methods were abandoned.52 The cultural differences between Japanese and United States corporations can explain why the Deming systems work better in Japan: the Japanese corporate culture favors structure while the U.S. culture likes less rigidity. This example should remind us that differences in corporate culture prevent the direct importation of a process that looked good in a benchmarking study.

These failures do not mean that the Balance Scorecard should not be used. They do indicate that it should be introduced with care, involving support at all levels of the organization, and that it is not demotivating with misplaced rewards.


The Growing Role of Information

The importance of information in organizations led to new fashions for which computer information systems were crucial. Information became as important to the service and retailing industries as land and labor had been to farming, and capital had been to manufacturing. Many companies that had been manufacturing establishments began to look more like service industries as they processed information to link them to their customers and to their suppliers of components that they formerly manufactured themselves. The discount retailer Wal-Mart began to look like a service organization that built a competitive advantage with information processing. Computers talking to each other could replace information processes that formerly were based on paper and telephone calls. The rapid growth of microcomputers made the redesign of these information processes possible. Reorders no longer required a salesman to call on a purchasing manager. Bar code readers on retailers' cash registers controlled their inventory systems, which reordered products automatically from vendors. Wal-Mart required vendors to have compatible information systems so the vendors could track regional Wal-Mart demand patterns and adjust their production schedules accordingly. Wroe Alderson foresaw this shift toward the dominance of information in the 1950s when he noted that marketing is a system for moving people, goods, and information and that the most efficient marketing systems would concentrate on moving information.53

The Wall Street Journal Reports illustrate how knowledge technology has changed how we have babies, stay in touch with our family, find love, watch TV, listen to the radio, maintain friendships, take vacations, have dinner, deal with our doctors, relate to our spouses, do homework, attend church, commute, invest in stocks, and catch bad guys.54 Turning from the personal affects of knowledge technology to business applications, one needs only to visit a website such as that for Cisco Systems. Here we find business solutions for e-commerce, customer care, supply chain management, workforce optimization, web foundation, e-learning, e-publishing, business-to-business e-commerce, business process management, customer relationship management, employee productivity, and financial and administrative management. These solutions are applied to all major markets, including energy, finance, health care, manufacturing, the public sector, retail and consumer products manufacturing, service providers, and utilities.55

Federal Reserve Chairman Alan Greenspan has supported the theory that new information technologies that track sales and inventories give companies better information to avoid previous decision errors that led to building excess capacities, which led to a downturn in business cycles. Yet not everyone is using this information effectively as "…new pockets of overcapacity emerge each passing week, giving rise to concern that-if consumer demand slows sharply-excess inventories will become a nationwide problem. …The sectors now struggling with excess capacity show that information about future demand may not be perfect after all. …Sometimes, the problem is simply that old-fashioned corporate decision-making hasn't caught up with new Information Age tools."56


This critique of management fashions does not mean that they do not have some management value. In some cases they have become common business practice, which means using them provides no competitive advantage. The competitive advantage must come from innovation within the company, not waiting for the next consulting fashion, which will be adopted quickly by competitors, leaving no competitive advantage.

HAVE BUSINESS SCHOOLS LOST THEIR WAY?

No, if you examine the path set by their founders. Harvard has stayed with the inductive approach using the case method. Wharton continues to focus on research, the deductive approach. Kellogg seems to be changing when it stresses an innovative mindset and teaming, so it is ahead of its sister institutions in moving toward the new organizational paradigm. But none of these schools shows evidence of the new nonmaterial scientific approach in research and teaching the concepts of managing knowledge networks.

In Harvard and Wharton innovation has focused on teaching methods and using new technology. Entrepreneurship courses apply core business learning to new ventures, generally high-tech. This is managerial entrepreneurship, not innovative entrepreneurship. We see little evidence of including soft material such as intuition, emotions, values, and creativity in course material. While they have not lost their way in terms of their original missions, they have failed to adjust to the sharp turn in the road, a paradigm shift in organizations.

Are they teaching what is needed for an immediate high-paying job or a long career? There is evidence that they do not train for a long career. There is a growing number of unemployed senior executives in their fifties. Potential employers say that the older executives are unwilling to take risks, are inflexible, have not kept up with technology, and are marking time until retirement.57 They are also more expensive than recent graduates. If business management is a profession, then there needs to be a requirement for attaining continuing education units, as for CPAs, dentists, and doctors to keep them current.

Applying the concept of a product life cycle to teaching methods suggests that methods, such as a pure case approach or focusing on teaching mathematical tools, are late in their cycles. Instead of helping the student to see the big picture in the decision process, beginning with a dream that motivates everyone, some case material is becoming so focused that the student must guess what problem the case writer has embedded in the case. There is little opportunity to define a better problem or to develop really creative alternatives. Some cases are used to convey a management concept or institutional facts. This is an inefficient teaching method. Textbooks are out-of-date before they are published. Students can get facts and articles on the web,58 but few course outlines incorporate these data sources.

Instead of changing teaching methods and course content, technology has been applied to present methods. For example, simulations provide students with the importance of team interaction. But can they truly convey all of the human dynamics in teams? There is also the danger that they model how professors think a business is run, emphasizing the variables that can be measured, modeled and maximized.

"Physics envy" made it unpopular to research relevant management behavior. Is this because young professors' early training had been anti-business? Or is it that business behavior is messy, with lots of variables that cannot be measured and fit into the Newtonian model of science? Knocking off a little part of business behavior that has variables that can be measured and modeled is lazy science. It misses the hard work, the excitement of big successes, and the need to accept failure. But it is a quick path to faculty promotion when rewards are based on counting articles. We are probably at the end of the research life cycle that began in the 1950s. Below we will see that there are plenty relevant management topics to be researched using some of the new research tools.


MOVING BUSINESS SCHOOLS INTO THE FUTURE

If new leadership styles require the effective management of knowledge networks, we must examine the characteristics of networks and how executives process information as they manage them.

Intra-Organizational Networks

In the abstract, a network is a collection of nodes, together with a collection of links between them. The links are all of the same type reflecting a single social relation. For example, we might look at the communication network among all employees in an organization. Each link between any pair of persons A and B means the same thing: A and B communicate. Or you can look at the friendship network. Or the conflict network (in which if A and B are tied, it means they have had a conflict with each other). Any social relation between pairs of people form a network-from who goes to lunch with whom to who is having an affair with whom. The speed with which information travels through a communication network from one node to another is a function of the number of links in the paths linking them. Denser networks have shorter paths, so they transmit information more quickly. The shape of the network is also important: diffuse networks with little structure diffuse information more quickly than others. Networks broken up into subgroups diffuse information quickly within groups, but have trouble getting information moving between groups. Novel information comes in from connections with people outside one's clique. Connections with people outside one's clique (local bridges) are rarely strong ties. Hence, weak ties are especially important for network diffusion.59

Old hierarchical organizations block innovation in knowledge networks.

There is no shortage of network literature; it spans 50 years of research. Beginning in the 1950s sociologists used sociometrics to trace communication networks. Economists used bargaining theory and agency theory to examine exchanges between groups. Psychologists examined the influence of risk-taking propensity on decisions. Katz and Lazer, at the Center for Public Leadership, John F. Kennedy School of Government at Harvard University, reviewed some of this literature, noting that an interest in networks was revitalized at the end of the 20th century.60 They found network studies that examined social influence, diffusion, social exchange, economic exchange, social cohesion, knowledge management, and social capital, which is defined as how relationships improve productivity. They noted studies that used mathematical tools: graph theory, statistical tools to study interdependencies, and simulations to describe the evolution of networks. Their primary finding was the lack of research that linked intra-organizational networks and teams.

Rob Cross, director of The Network Roundtable at the University of Virginia, has worked with over 80 strategic networks in a wide range of industries and consultants. His use of Organizational Network Analysis (ONA) has revealed sharp contrasts between formal and informal organizational structures. It revealed some dangerous information flows. For example, one person played the central role in the entire information network. If this person left the company, the network would be dysfunctional until new links were established. In another case he found that the required collaboration for innovation was lacking. The only interactions between the groups were among the group leaders. The analysis led to the following changes: 1) hiring criteria included evidence of collaborative behavior, 2) project management and evaluation practices were changed to encourage reaching out to colleagues, 3) centralized staffing assured cross-group collaboration and the best expertise on a project, and 4) performance metrics were shifted from individual productivity to collaborative behaviors.61 Cross and Parker provide processes and survey instruments for conducting an ONA.62 Additional instruments, publications, conferences, and network research centers can be found on the website for the International Network for Social Network Analysis,63 which has an extensive list of software for network analysis.64

Consultants are doing some interesting research. "Valdis Krebs is a management consultant and the developer of InFlow, a software based, organization network analysis methodology that maps and measures knowledge exchange, information flow, communities of practice, networks of alliances and other networks within and between organizations. Through eye-opening graphics and revealing measures, this technique allows managers to see what was once invisible."65 This analysis draws on a wide range of disciplines, including social network theory, organizational behavior, interpersonal communications, chaos theory, complex adaptive systems, artificial intelligence, communities of practice, and graph theory.

Krebs makes an important distinction between data and knowledge. "An organization's real edge in the marketplace is often found in complex, context-sensitive, knowledge which is difficult, if not often impossible to codify and store in ones and zeroes. This core knowledge is found in individuals, communities of interest and their connections. An organization's data is found in its computer systems, but a company's intelligence is found in its biological and social systems. Computer networks must support the people networks in today's fluid and adaptive organizations-not the other way around."66

Inter-Organizational Networks

Riemer, Gogolin, and Klein, at the University of Munster, Germany, examine the inter-firm networks, which they define as follows: "An inter-firm network is defined by the relations between a defined set of independent organizations (the network structure) and their interactions in the structure (the network process). The linkages are mostly based on economic, information, or knowledge exchange. The network has a perceivable border to its environment and pursues a common goal, at the same time as the participants have different, local goals."67 They identify forces that lead to inter-organizational networks-mergers and acquisitions, globalization, information systems, changing demand patterns, and the knowledge economy. Collaboration has its risks and costs, so there must be careful management of the network and its relationships. They show how one form of inter-organizational network, the virtual organization, is managed by trust and by defining new, temporary roles.

A virtual organization is a network of small and medium sized companies collaborating to realize projects, which would not be possible without their cooperation. In this way companies enhance their virtual size, but maintain flexibility. Each member brings a core competency. Stability of the network requires a high level of trust. To meet a customer need, they form a virtual factory, which is dissolved after the project is completed. This network can require the assignment of the following roles:

In contrast to the virtual network, the value chain network is a long-term network of partners focusing on a specific market. It is efficiency driven in terms of speed to market, cost reduction, improvement of customer services, and integration of inter-firm information processing for efficient response to demand and just-in-time deliveries.69 Wal-Mart is a good example of a value chain network.

Organizational network analysis, therefore, is a rich scientific area that can make important contributions to the management and teaching of business. It is used by a wide variety of companies, thereby providing opportunities for case writing.

Where is Information Networking Being Taught?

One must really dig to answer this question. No claim is made that a web search on the topic of organizational networks can possibly reveal all network courses that may be taught in the 1000 schools offering an MBA degree. It is relevant, however, that there were only six hits worldwide, including courses, research centers, and a call for conference papers. The teaching note for a course at the University of Munster, Germany, was noted above. A course titled "Organizational Networks and Communication," is offered in the Laboratory of Work Psychology and Leadership, Department of Industrial Engineering and Management, Helsinki University of Technology, Finland.70 The Graduate School of Business, Stanford University, offers a course titled "Managing Organizational Networks."71 The website for the International Network for Social Network Analysis (INSNA)72 reveals The Laboratory for Computation and Visualization at the Virtual Center for Supernetworks is at the Isenberg School of Management at the University of Massachusetts at Amherst. It researches decision-making, financial networks, advertising strategies, etc. Clicking on the list of courses shown on the INSNA website73 we find two courses at the Carroll School of Management, Boston College. Most of the courses at other universities listed here are in the departments of sociology and electrical engineering, with a few in education, medicine, and government. There was a call for papers for a business networks conference to be held in Germany, October 12 and 13, 2006.74

The conclusion is clear: by being stuck in the old paradigm of science, all but a few business schools are missing opportunities for exciting, publishable research on knowledge networks that could make companies more competitive in the world. More important, students would be better prepared for leadership roles in the knowledge economy. This preparation must include better use of the vast information that is available.

Training in Information Utilization

Given this explosion in the dissemination of information, we must ask why old-fashioned corporate decision-making has not caught up with the information age. Why does a decision maker not use the vast amount of information that is available? To answer this question we must distinguish between information and knowledge. Information will be used here to mean facts. A library, a database, and the Web are full of facts. They are transformed into knowledge only when they are used to answer better questions and when answers to these better questions lead to better decisions. Thus, one possible explanation is that executives are stuck asking the same old questions for which they have found comfortable information that supports their previous decisions. Even when new information is presented, it is filtered through selective processing to support previous decisions.

The failure to use information that is available from technology is not a technological question but a cognitive one. What determines processing styles when information is presented? This is a question that has been asked by researchers of consumer behavior. The findings suggest that executives may be in the same information-processing traps.

A computer simulation of automobile purchases examined brand-switching behavior by giving information that was more favorable to the subjects' second choice brand. The major finding was that switchers and non-switchers treated available information differently by selective exposure, selective perception of the content, and selective processing of information. Brand switchers processed more information than those who remained loyal.75 Failure to use available information may be traced to a lack of time to process the information or to cognitive laziness.

In another simulation of car buying, significant effects were observed: social sources had a negative influence, copy themes that were neutral had a slightly positive influence, and a negative theme had a greater absolute influence than a positive theme.76 Thus, there are source effects in information processing, which is to say, people attached their own evaluation to the validity and reliability of a source. This evaluation could be based on experience with these sources or on a desire to downgrade or upgrade a source to make the content of its information consistent with the decision already made.

In another study "changes in probability induced when a message supported a subject's original position were greater than those when the message was counter to this position."77 This finding raises a question: When do decision makers seek information only to support their decision and when do they want information to ask and to answer better questions and therefore make better decisions?

In one experiment of stock purchasing decisions "it was demonstrated that subjects' sensitivity to new information was influenced by their risk-taking propensity, fatalism, need for certainty, and their self-confidence. Prior probabilities of buying a specific stock, i.e., habit, and probabilities of investing in the stock market, were found to be the most significant variables for the subjects. Thus, the revision of probabilities after receiving new information was strongly influenced by prior probabilities. In conclusion, the subjects responded differently to identical information due to individual differences in personalities and prior probabilities."78

Since, in many cases, executive decision processes have not kept pace with the speed of information technology, the next step in the development of knowledge systems is to study executive information processing styles and to develop ways to improve them. Several hypotheses are suggested by these studies of consumer behavior:

  1. Previous successful decisions will be repeated, regardless of new information to the contrary.
  2. Decision processes will be cut short by using personalities and feelings instead of new valid information.
  3. The content and source of the information will be distorted to support a prior decision.
  4. Executives are stuck in old questions that are no longer relevant.

The sequence from information to an actionable strategy begins with asking critical questions. These questions turn information into knowledge, which along with executives' experience and intuition, produce strategies. But these strategies are only potential actions until they are translated into intentions. Intentions go beyond goals because intentions include a strong irreversible commitment to achieve the goals. To turn intentions into action requires that individuals have focus and energy.79 Unless the critical questions are asked, the information revolution can easily become an information inundation. An MBA course that taught this sequence would be very powerful.

Leadership Styles Needed for Knowledge Networks

Information flattens hierarchical organizations and requires new leadership styles. Leadership must begin with dreams that continue to inspire persons in networks after lower-level goals have been met. Daniel Burnham, the architect for the Chicago World's Fair, said, "Make no little plans; they have no magic to stir men's blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency."80

Business school research and courses need to reflect the fact that the required management skills are no longer the same at each level in the new, flat organization. Operating level managers move from being implementers to being entrepreneurs. Middle mangers are no longer controllers but supportive coaches. The top-level managers move from resource allocators to institutional leaders.81

Leadership in an information-driven organization requires motivating teams that have widely varied skills and decision styles. These can be teams that are loosely organized as knowledge networks with interconnected nodes operating at different degrees of separation. The old reward and recognition paradigm-goals, appraise, and give or withhold rewards-can be traced to Taylor's assembly lines and Skinner's behavioral control thinking. They are not motivators because their absence de-motivates. They are controlling and they rupture network relationships. They reduce risk-taking. They undermine intrinsic motivation.82 The new leader must build on intrinsic motivation (the joy of discovery) and the reward from recognition by professional peers. To encourage risk-taking, projects need to be regarded as experiments, because we accept that experiments can fail, but projects are always expected to succeed. Failures should be well documented and celebrated as contributing to knowledge so that the failure is not repeated and perhaps enables later researchers to discover and overcome the reason for failure, making an important breakthrough in knowledge.

Business School deans must encourage research on subjects that will have high management impact. Too many business journal articles are focused on trivial topics. But
trivial research questions are not limited to business schools. An article in the Journal of Economic Psychology concluded that people who choose their jobs more carefully are more likely to be satisfied with them. An article in the Archives of Internal Medicine concluded that better communication between doctor and patient could reduce drug side effects. The Annals of Emergency Medicine reported that the highest risk of finger amputation was by men over 55 using power tools. And finally, an American Heart Association conference reported that full-time workers who spend their spare time in front of the TV get less exercise than part-time workers who spend the same number of hours in front of the TV but do other things with the rest of their time. While these AHA findings may be obvious, they were published because they met the standards of scientific rigor. The findings were statistically significant and based on a large sample- 4,500 people.83 It appears that other university departments should question the evaluation criteria of counting articles.

There are many topics in network theory that need to be researched in business organizations. For example, what are the most efficient networks for communicating technological information or financial knowledge? How can members of networks be motivated to share knowledge? How can we measure the value of knowledge? Could the width of the arrows connecting nodes reflect this value? How can a manager identify when knowledge is missing in the network and needs to be brought from outside the network? Which network design will innovate fastest?

Teach the Spirit of Inquiry

To turn data into knowledge, executives must practice a spirit of inquiry that asks the right questions, finds information, and uses intuition. Information would not be supplied in a case; instead, the student would be required to locate it online or interview alumni and executives recruited as a support team for the school. Intuition is rarely discussed in business schools. The author once asked the vice chairman and director of research of a large high-tech firm he if ever used his intuition. "Yes, but don't tell my technical staff," was his reply. The president of a division of a large chemical company was asked the same question. "Yes, I cannot take the time to analyze all of that data," was his reply. Intuition is a skill that is taught worldwide, but outside of business schools.84 It is part of the new scientific thinking that relaxes the assumption that all critical variables can be measured and predicted. Intuition is not anti-science. Major scientific discoveries started with intuition and were then tested with controlled experiments. The spirit of inquiry is timeless; students will use it throughout their lifetimes.

Teach Innovation Processes

The importance of innovation is reflected in the troubles of General Motors and Ford. Because they relied on SUV sales for profits, they did not invest in design and innovation for standard cars. When gas prices increased, causing a decline in SUV sales, consumers were not willing to pay list prices for unexciting cars.85

Innovation is not limited to companies. In 1999 the New Zealand Government defined its goal as "growth through innovation." This goal was adopted by all of its ministries. "The Government's Growth and Innovation Framework (GIF) is designed to deliver the long-term sustainable growth necessary to improve the quality of life of all New Zealanders."86

GIF provides a very complete definition of innovation that can be used in companies as well as governments:

Innovation is the dynamic process of creating and introducing new ideas and new ways of doing things. Innovations may be incremental (small, stepwise improvements), major (substantial improvements), or radical (new lines of business, paradigm shifts). The traditional view of innovation is from two perspectives: innovation as an output and innovation as a process. From a policy perspective, a more integrated and useful viewpoint also considers innovation as a system.

Innovation as an output

Innovation as a process

Innovation as a system

This means looking at innovation as a system of interconnected organisations and institutions that influence the development, diffusion and use of innovations. Innovation systems occur at a variety of levels. They may relate to specific sectors, geographies or markets. All are open systems and they overlap with one another. A group of businesses, for example, will at the same time be part of a sectoral, a regional and a national system.

Thinking about innovation from a systems approach highlights important factors that impact on how innovation actually occurs in the economy.

Given this very complete definition of innovation, we examined courses given in the three business schools studied here. There were no courses on innovation.There were, however, cases and courses in entrepreneurship but they began after an invention was established. Students are taught how to manage it, which is managerial entrepreneurship, not innovative entrepreneurship. Cases and courses should begin earlier in the entrepreneurship process, with a dream, so that students experience the innovative process.

The most widely used approach for innovation is the Osborn-Parnes creative problem- solving model.88 It has been used for over 60 years, so it is not a passing fashion. It is a six-step process that asks critical questions at each step, as is shown in Exhibit 1, which expands the model to innovation. While it may be applied to any of the outputs, processes, or systems noted above, Exhibit 2 shows how it can be adapted to developing a new product. This model helps to overcome weaknesses in many idea-generating approaches. For example, in some cases the problem is given to the group without a dream (step 1) or without exploring what is constraining reaching the goal (step 2). This results in the problem being the wrong one or being too low an abstraction. Furthermore, brainstorming sessions (step 4) not only ignore the first three steps, but they also do not provide a means for refining the many ideas and converting them into an action plan (steps 5 and 6).

Teaching innovation requires a new type of business case that takes the student only to the end of step two. They then experience the process of defining the problem, generating ideas, refining them, and creating an action plan in a team environment that helps them to appreciate the decision styles of other members.

Since diversity produces creative ideas, teams should be diverse in their age, experience, knowledge, skills, and preferred decision styles. There are many scales for measuring decision styles, such as the Hermann-Brain Dominance Scale, the Myers-Briggs Type Inventory, and the Kirton Adaptive-Innovative Scale. Teams will operate more effectively when they become tolerant of others' decision styles and learn the importance to the team of a diversity of styles.

Teams may interact in person, online, or by using interactive mindmaps.89 Team members could include businesspersons. They could also be run globally to incorporate ideas from different cultures. This student-business-global team is an excellent means for researchers to track how decisions are made and to examine various network designs. Mindmaps can be stored on the computer as part of the interaction and easily downloaded for analysis. During an innovation session, students are given a series of exercises to stimulate ideas-toys, pictures, random words, eating with the non-dominant hand, etc. They learn that you must generate a lot of ideas to get a really good one. Students will find that creative problem solving methods work in personal lives as well.

Refocus Doctoral Programs

Bennis and O'Toole noted that "Today, business practitioners are discovering that B school professors know more about academic publishing than about the problems of the workplace. It's no wonder there's been such a marked increase in the number of in-house corporate universities and for-profit management education organizations."90 If the present trend continues, the gulf will widen. Some PhD programs are requiring applicants to have already published two articles, but no business experience is required. In contrast, many MBA programs require two to five years of business experience for acceptance. Thus, the student may have more professional experience than the teacher. If the PhD student has no relevant business experience before getting the degree, there could be internships after the PhD degree, as in medicine, or post-doctoral experience, as in the field of chemistry.

Design A New Model for Managing Business Schools

Moving business schools into the future begins with an understanding of how business organizations are evolving from hierarchical organizational design to horizontal networks that are linked by sharing information, knowledge, and skills. The 3M Corporation became highly successful by supporting entrepreneurial practices that built on an individual's sense of ownership, self-discipline instead of top-down control, and the acceptance of challenges and failures.91 The very creative and successful SAS Institute regards its creative thinkers as its most important asset. It has harnessed the creative energies of customers, software developers, managers, and support staff using a set of principles that evolved over thirty years: value the work over the tools, reward excellence with challenges, and minimize hassles.92

The present model for managing a business school is the old scientific model, which uses Taylor's approach-goal, reward, and punish-in which the criteria are easy to measure and count. In fairness, it must be noted that student evaluation of teaching, committee work, and community service are added to the academic evaluation, but these too are subject to problems of creating measuring instruments that are reliable and valid. Counting articles does not encourage risk taking and innovation in research. If the research fails, it should be documented so others will avoid the error. As one person, who prefers to be anonymous, said, "We need a Journal of Negative Results." Eli Lilly & Co. keeps its drug pipeline full by studying products that failed on the first test. "Lilly has long had a culture that looks at failure as an inevitable part of discovery and encourages scientists to take risks."93

The new model should be organized as knowledge networks that are linked across functions, linked to industry, and linked to other university departments. Including the physics department could pull the business school into the new paradigm. An Organizational Network Analysis should be done on business schools to find better structures for creating and teaching knowledge. Sociologists could introduce the latest thinking in the adoption of new processes, thereby expediting changes in business school systems. Rewards could be based on individuals sharing knowledge and on team outputs. Following the advice of Govindarajan and Trimble, this new design should be viewed as a strategic experiment and a new venture in which some old ways are to be forgotten and some borrowed from the old ways.94


A New Business School Leadership Style is Needed

Organizational shifts in business schools will require strong, innovative, courageous leadership and patience. With regard to patience, Rogers reports that the adoption of innovation in education has ranged from five to fifty years. Modern math in public schools took five years because it had strong champions-the National Science Foundation and the U.S. Department of Education. Driver training took 17 years, 1935 to 1952, with the strong backing of insurance companies and automobile manufacturers. Kindergarten took 50 years (1900 to 1950), probably because the children were not organized. How long will changes take in business schools? Who will be the champions for these changes?

Three bits of advice given by Machiavelli to the young prince are relevant here.

First, he uses the weapon of the day, archery, as a metaphor for dreaming high:

"He will do as prudent archers, who when the place they wish to hit is too far off, knowing how far their bow will carry, aim at a spot much higher than the one they wish to hit, not in order to reach this height with their arrow, but by help of this high aim to hit the spot they wish to."96 It will take a high dream to motivate business schools out of the investments that they have in the old scientific paradigm.

Second, the leader must anticipate resistance to change:

"It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries, who have the laws in their favor; and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it"97 By anticipating the location and magnitude of this resistance, the leader can develop strategies for overcoming it.

Finally, there is the question of support:

"It is necessary, however, in order to investigate thoroughly this question, to examine whether these innovators are independent, or whether they depend upon others, that is to say, whether in order to carry out their designs they have to entreat or are able to compel. In the first case they invariably succeed ill, and accomplish nothing; but when they can depend on their own strength and are able to use force, they rarely fail."98

If Machiavelli were writing to a new business school dean, his advice might be as follows: have high dreams, anticipate resistance to change and have strategies to overcome it, proceed with strength, both personally and organizationally, and have patience.

CONCLUSION

Business schools are stuck in their old ways and missed the turn in the road brought about by the new scientific paradigm. Research and courses in networking, information utilization, innovation, and new leadership styles necessary to manage knowledge networks are difficult to find in today's business schools. Failure to pursue these topics has left the door open for consulting firms that are less subject to academic rigor and peer evaluations. Moving to the new paradigm will require some courageous leadership in business schools.

 


ENDNOTES

Given the transit nature of web references, the following web pages were double checked and found that they are no longer available: 22, 33, 58, and 74. Note 71 now requires registration. The author has copies in his files.

  1. Bennis, Warren G. and James O'Toole, "How Business Schools Lost Their Way," Harvard Business Review, May 2005, 96-104
  2. Redfield, James and Carol Adrienne, The Celestine Prophecy: An Experiential Guide (NY: Warner Books, 1994), pp. 23-24.
  3. Gilder, George, The Quantum Revolution in Microcosm Economics and Technology (New York: Simon and Schuster, 1989), pp. 20-21.
  4. Harman, Willis, "Toward a Science of Wholeness," in New Metaphysical Foundations of Modern Science, Willis Harman and Jane Clark, eds. (Sausalito, CA: Institute of Noetic Sciences, 1994), p. 375.
  5. Ray, Michael, "What is the New Paradigm in Business?" in The New Paradigm in Business, Michael Ray and Alan Rinzler, eds. (New York, NY:Jeremy P. Tarcher/Perigee, 1993), pp. 2-4.
  6. Redfield, James and Carol Adrienne, The Celestine Prophecy: An Experiential Guide (NY: Warner Books, 1994), pp. 23-24.
  7. Wheatley, Margaret, Leadership and the New Science, Learning about Organization from an Orderly Universe (San Francisco: Barrett-Koehler Publishers, Inc., 1994), 20-26.
  8. Ibid., 27-28.
  9. Ibid., 4.
  10. Ibid., 27-28.
  11. Ralph D. Stacey, Complexity and Creativity in Organizations (San Francisco: Berrett-Koehler, 1996).
  12. Stacey, Ralph D. "Organizations as complex responsive processes of relating," Journal of Innovative Management, 8:2 (Winter 2002/2003), pp. 27-39.
  13. Frances E. Vaughan, Awakening Intuition (Garden City, NY: Anchor Books, 1979) 50.
  14. . Gilder, George, The Quantum Revolution in Microcosm Economics and Technology (New York: Simon and Schuster, 1989), p. 17.
  15. Gilder, p. 18.
  16. . Gilder, p. 19.
  17. Gilder, p. 18.
  18. Gilder, p. 378.
  19. McGill, Michael E., American Business and the Quick Fix (New York: Henry Holt and Co., 1988) p. 7.
  20. "Wharton: A Century of Innovation," www.wharton.upenn.edu/innovation/leaders.html
  21. Ibid., 2.
  22. "From Managing Factories to Managing Knowledge Networks," http://www.wharton.upen.edu/innovation/networks.html
  23. "Wharton MBA Resource Guide," http://matrix.wharton.upenn.edu/whartonnow/facts_at_a_glance
  24. "Wharton: A Century of Innovation," Ibid., 2.
  25. http://www.wharton.upenn.edu/mbaresource/curriculum/mbamajor_mgmt_em.html
  26. Howell, Charles, "Toward a history of management thought," Business and Economic History, 24:1 (Fall 1995), 45.
  27. "Making a Case: The Birth of an HBS Case Study," http://www.hbs.edu/corporate/enterprise/case.html
  28. Author's observations as a participant in the Harvard Visiting Professor Case Writing Program, 1962, and as a visiting professor 20 years later.
  29. "Entrepreneurial Marketing," http://www.hbs.edu/mba/adm/acs/1932.html
  30. "Field Study Seminar: Evaluating the Entrepreneurial Opportunity," http://www.hbs.edu/mba/admin/acs6626.html
  31. "Field Study Seminar in Managing for Creativity," http://www.hbs.edu/mba/admin/acs/6680.html
  32. "Multimedia Case Studies," http://harvardbusinessonline.hbsp.harvard.edu/b01/en/cases/cases_interactive.jhtml;jsessionid=ZCZB2E33NPKCYAKRGWDSELQ
  33. "Commitment to Innovation," http://www.kellogg.northwestern.edu/difference/innovation/index.htm
  34. Dean Dipak C. Jain, "Kellogg Case Collection," http://www.kellogg.northwestern.edu/cases/index.htm
  35. "Dream teams thrive on mix of old and new blood," http://www.kellogg.northwestern.edu/news/whatsnew/Uzziresearch2005.htm
  36. "Student Initiatives," http://www.kellogg.northwestern.edu/difference/culture/index.htm
  37. "History of Kellogg," http://www.kellogg.northwestern.edu/news/generalinfo/history.htm
  38. Gordon, Robert A. and James E. Howell, Higher Education for Business (New York: Columbia University Press, 1959.
  39. Pierson, Frank C. et al., The Education of American Businessmen (New York: McGraw-Hill, 1959).
  40. Bennis and O'Toole, 98.
  41. Kerin, Roger A., "In Pursuit of an Ideal: The Editorial and Literary History of the Journal of Marketing," 60:1 (January 1996), 1-13.
  42. Abrahamson, Eric, "Management Fashion," Academy of Management Review, 1996, 21:1, 254-285, 255.
  43. Ibid.
  44. Ibid., 275.
  45. Robertson, Thomas S., "Corporate Graffiti," Business Strategy Review, 6:1 (Spring 1995), p. 39.
  46. Kaplan, Robert S. and David P. Norton, "The balanced scorecard-measures that drive performance," Harvard Business Review, January-February, 1992, pp. 71-79.
  47. ______and ______, "Using the Balanced Scorecard as a strategic management system, Harvard Business Review, January-February, 1996, pp. 75-85.
  48. Maira, Arun N. and Peter B. Scott-Morgan, "Learning to Change and Changing to Learn--Managing for the 21st Century," Prism, Third Quarter, 1995, p. 7.
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  98. Ibid., 50.