New technologies are radically reshaping how work is done in the worlds of business and government. Twenty-first century enterprises look very different from their predecessors: more agile, more ephemeral, less hierarchical, less stable. Yet management education has lagged the change in organizations. To keep pace, management education needs new guidelines to accomplish its aims. I suggest that the United Nations’ Sustainable Development Goals (SDGs) provide a solid framework for how we educate future managers.
20th-century Management Education
Management education is a product of the 20th century, which ushered in the dominance of large-scale corporations: General Motors, AT&T, General Electric, and US Steel grew to become exemplars of industrial prowess. Economies of scale through mass production and mass distribution meant that bigger firms were often cheaper—as long as they were managed properly. Industry needed professional managers to staff their ever-expanding hierarchies, and educational institutions such as Harvard Business School (HBS), founded in 1908, were established to provide them.
The growth of government bureaucracies also created demand for management education. The US federal government was miniscule in 1908: There was no income tax, no estate tax, no Department of Labor, and minimal regulation of industry. The annual federal budget was smaller than the assets of US Steel. But under pressure from the Progressive movement, the growth of the corporate sector was matched by the growth of a central government that was able to keep it in check.
In design and administration, schools of management mirrored the corporations that they served. To this day, most business schools around the world are organized like a US corporation circa 1970, with departments of finance, accounting, operations, marketing, management, and strategy. If IBM were to transmogrify into a business school, it would arguably look a lot like HBS.
Yet business is organized very differently today than it was in the heyday of the “major corporation.” There are half as many public corporations in the US today as there were 20 years ago. Jobs replaced careers, and now gigs are replacing jobs. Tech companies now get by with few employees and modest management workforces. Netflix, for instance, has just 5,500 employees around the world—after bankrupting Blockbuster, which had 90,000 workers. And the federal government employs about as many people today as it did when President Richard Nixon left office in 1974; it instead relies on an ever-expanding cadre of contractors. Many “managers” have few if any subordinates, and enterprises often bear little resemblance to the bureaucratic hierarchies of old.
Emerging Models of Enterprise
Enabled by off-the-shelf providers for core inputs, organizations increasingly look like Nike, which relies on specialized contractors for their essential tasks. Such outside providers offer design (IDEO), staffing (Adecco), programming (Upwork), payroll (ADP), server space (Amazon Web Services), manufacturing (Alibaba), an online storefront (Salesforce), and distribution (Amazon). With minimal upfront costs, it’s possible for anyone with a modest credit limit to launch an enterprise.
This ecosystem has created entirely new forms of organizing. Consider the Instant Pot, a high-tech computerized pressure cooker that has become the best-selling kitchen appliance in decades. The product was designed and self-financed for $350,000 by Robert Wang, an unemployed computer-engineering PhD, and launched in 2010 on Amazon. Manufacturing was done by a Chinese contractor. “Marketing” consisted of sending Instant Pots to 200 influential food bloggers and cookbook authors, and then paying careful attention to Amazon customer reviews. Distribution consisted of a listing on Amazon.com. In 2018, Amazon sold 300,000 Instant Pots on Prime Day, and the site sells $300 million of pressure-cookers per year. In every culinary category you can name (Italian, paleo, vegetarian, halal), the best-selling cookbook is almost inevitably an Instant Pot entry. And after inventing and dominating its category, Instant Pot’s parent company still has just 50 employees in a suburb of Ottawa, Canada. It is the industrial equivalent of a pop-up store, but it has a vast retail footprint.
Even more ephemeral are enterprises like Wyze and Sunvalley, which scour Amazon for overpriced products (such as webcams, electronic cables, and mobile-phone batteries) in order to introduce superior entrants at much lower prices. On Amazon, the bestseller in a category is no longer the company with the most famous brand, but the one that gets the best customer ratings for a reasonable price. Low cost Vizio, for example, has effectively driven Sony from the television market, and similar strategies are being applied across the marketplace. In the words of the New York Times tech columnist Farhad Manjoo, “We’re going to get better products for ludicrously low prices, and big brands across a range of categories—the Nests and Netgears of the world—are going to find it harder than ever to get us to shell out big money for their wares.” In the face of reliable customer reviews, brand names are increasingly superfluous.
How to Educate for the Future
These seismic changes in business and markets in the last decade alone pose a significant challenge to management education. As I often tell my colleagues, management schools are organized like Eastman Kodak to train people to work at Eastman Kodak. We have siloed departments of accounting, finance, operations, marketing, management, and law, and are organized into stable hierarchies in which the more senior employees can spend their entire careers in the same organization. In the outside world, on the other hand, capitalism is in the midst of a substantial re-organization that has displaced the 20th-century large corporation as its central organizing institution. This creates new delights for consumers, pervasive hazards for labor, and inscrutable forms of power for our digital and financial overlords.
In a world where traditional corporations are vanishing and pop-ups are pervasive, management education requires a substantial overhaul. Here are four guidelines for reform:
1. “Business” and “management” are a means, not an end. The purpose of management is to serve human needs. Meeting those needs effectively is the ultimate measure of business success. We do not need to fetishize the tools of human collaboration (e.g., the for-profit corporation). Jim Walsh, a colleague of mine at the University of Michigan’s Ross School of Business, often tests audiences with this analogy question: “Law is to justice as medicine is to health as management is to ... ?” There is surprisingly wide variation in how people contemplate this puzzle. We might consider giving him the following answer: Management’s broad purpose today is the achievement of the UN’s Sustainable Development Goals. Some of these 17 goals include: no poverty; zero hunger; good health and well-being; quality education; and gender equality. If we were to train our students to manage with the SDGs as the lodestar of management education, we would unleash a force for human progress more powerful than the innovations emerging from Silicon Valley.
2. Let’s abandon the theology of shareholder capitalism. The notion that corporations exist to create shareholder value, and that share price is the ultimate measure of business success, has led to mischief on a grand scale. Perhaps this was a useful fiction in the 1980s to break up the bloated conglomerates that had grown too large and sloppy, but it is clear that the theology of shareholder value has outlived its usefulness. With the number of public corporations declining dramatically, in good times and bad, while innovative alternative forms of financing are emerging every year, it no longer makes sense to teach “shareholder value maximization” as the default mantra of business.
3. We should train our students in a rigorous agnosticism about the best vehicle for accomplishing the ends of management. Sometimes a for-profit, shareholder-owned corporation is the best approach, but sometimes it might be a nonprofit organization, a social enterprise, a government policy, an open-source software program (like Linux), a social movement, or an entirely new form of collaborative action. We live in an era in which one Facebook post on the day after an election could bring a half-million women (and other people) in pink hats to Washington on the same day. The range of ways of getting things done through collaboration (that is, “management”) has never been broader, and it is needlessly limiting to start with the assumption that any solution will eventually pass through a public corporation.
4. The skills needed to manage in a world of platforms and pop-ups are rather different from those of the traditional large corporation. We might imagine that management education could learn from the Waldorf approach, in which learners are steeped in arts and culture to be able to apply creative thinking to different types of materials. At my school, we aim to give students opportunities to incubate social innovations by drawing on the broad cross-disciplinary resources of the university through pop-up projects in our Impact Studio. Making a really appealing pitch to investors (the end product of many incubators) is not the goal: The objective is to have tangible positive impacts in the world.
The world of organizations is changing radically; the world of management education, much less so. There is no better time to reconsider the what and the how of management education for the 21st century. Training managers to use new tools of collaboration, in service of the Sustainable Development Goals, while being vigorously agnostic about the vehicles (whether for-profit, nonprofit, government, or other), will help create the world we want to live in.
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Read more stories by Jerry Davis.