December 17, 2011

Competitive Advantage


Time for another rant. I recently read this Forbes article suggesting that the short-term financial tools learnt by management during their MBAs are killing business. Having finished a MBA, I completely agree. As well as the financial indicators mentioned in the article, we were also taught to focus on cutting a company down to its core competencies and thus raising return on equity. Strangely it was always assumed that management was a core competency. I think this was related to the teachers attitude towards students.

There was a split in the lecturers that taught us business. Most were faculty in other departments. We were taught law by a professor from the law school, accounting from the accounting department, economics from the economics department and so on. These people just taught the subject at hand – normally very well. However, the “core” MBA classes (management, strategy, etc) were taught by the business faculty and they seemed to have an agenda beyond the syllabus. They saw themselves as wise men teaching the next generation of world leaders (because business defined the world). They were Aristotle educating Alexander. One lecturer of strategy particularly epitomised this mindset. He taught us to “think like a CEO”. This seemed to be a solitary uber-man guiding the firm singlehanded and with precise execution – success or failure was solely his reponsibility. I didn’t like his Randian/Nietzschean worldview (I got a below average mark – the worst of my degree). Most students appeared to lap it up. He told them what they wanted to hear – they were special, destined for greatness and the cost of the MBA was money well-spent. Other business lectureres clearly held similar views.

I can easily imagine those students that succeeded in business by luck, skill or most likely both, did come to see themselves as special. We were also taught that having a strong sense of personal agency was correlated with business success. However so is believing failures are caused extraneous factors. Success is yours, but failure is not.

Assuming senior management see themselves as the source of competitive advantage can explain much of modern business’ more egregious practices. Huge bonuses, we are the one who make the money. Outsourcing, those people aren’t needed. Perks, we deserve it. Isolating senior management from other employees, they have nothing of value to contribute.

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