The Future of Business Education
Hunter Hastings
Value creation processes built on the principles of Austrian economics
Based on an interview with Professor Mark Packard , Research Director of the Madden Center For Value Center at Florida Atlantic University.
The university education model has existed for a very long time, and has probably served society well for a good part of that time. There are some great teachers and great researchers in universities, and well-meaning donors have allocated a lot of their capital to strengthening the institution because they recognize its role in their achievements.
But one of the consequences of institutional success is resistance to change. There is little, if any, innovation in the university education model, and the speed of change in the world is leaving it weak and isolated.
This aversion to innovation is, perhaps, especially marked in business education.
The first business school - Wharton School Of Business - dates from 1881, and the first MBA - Masters In Business Administration - program was established in1908. Business schools still offer the MBA, even though administration is not what is needed in today’s workplace.
We need entrepreneurial leaders.
How do we start to innovate in business education?
Start with Philosophy
Philosophy might sound like an unusual place to start for business education, but it’s imperative to do so. The dominant focus of business thinking has always been on things: strategic plans, financial results, methodologies, tools, organization structures, and so on. To start the business education innovation process, we must shift the focus from manipulating and modeling things in the external world to the understanding and appreciation of people’s subjective values and perceptions. This starting point leads to a very different place than the attempted prediction of people’s behavior and the resultant outcomes in some kind of econometric model or business plan.
Appreciating subjective value and all its implications is the right way to think in business economics and management.
The Value Experience
Subjectivist philosophy as a way of thinking provides us with the understanding that it is customers’ subjective experience of value that is the most important element of business. It’s customers actually enjoying their experience - irrespective of what they tell surveys that they “want” - that determines whether a business is successful.
Firms that get the value experience right can be confident of success. Amazon has been a great example. The company culture has always been focused on the customer experience, and their famous commitment to working backwards from the customer experience to reverse engineer the products, services and systems that will facilitate the desired experience, and make it faster, higher quality and lower cost whenever there is an innovation opportunity. The driver is always customer expectations – asking how could their experience be even better?
Entrepreneurship
The business model to achieve the continuous improvement of the customer experience is entrepreneurship. Traditional business school teaching misunderstands the concept of entrepreneurship as concerned with launching startups, or as small and medium businesses as compared to big business. But this is a misconception. Entrepreneurship is the continuous pursuit of new economic value for customers, defined by ever-better experiences. It’s an economic function that operates at every scale.
Entrepreneurship creates new value knowledge. Firms can not survive long-term by maintaining just their current value knowledge, because entrepreneurs outside the firm will always create new value knowledge.
Entrepreneurship must take place inside all firms if they are to survive.
Management is the maintenance of existing value knowledge, pursuing greater efficiency and better operational execution, but not uncovering new value.
Teaching management can lead to wrong thinking about how businesses succeed. Entrepreneurship is the only sustainable business model.
Every modern business of every size must be entrepreneurial.
Systems Thinking and the Consumer Sovereignty Principle
Customers pay the bills for all businesses; their willingness to pay is the source of cash flow. The rest of the business system is focused on the customer for that reason.
The customer has their own system that they operate: a household is a system, an office is a system, a manufacturing plant is a system, all of which have many components dynamically interacting and generating constant change.
The entrepreneurial business model is to fit in to these systems and contribute new value. Fitting in and contributing require empathy and humility.
The entrepreneurial leader articulates the culture of empathy and humility, communicating the commitment that the firm makes to delivering the customer experience as they demand it with ever-increasing convenience, quality and affordability as defined by the customer’s own standards, not the firm’s.
The ambidextrous firm is able to combine this entrepreneurial commitment with operational efficiency and consistency.
It’s a hard act to pull off.
Expanding the firm’s value knowledge through R&D and experimentation can be at odds with efforts aimed at lowering costs and increasing speed.
There are trade-offs that the entrepreneurial firm succeeds in balancing.
Austrian Economics to the Rescue
These four core elements of the new approach to business education - subjectivism, value experience, entrepreneurship and consumer sovereignty - are captured and codified in a branch of economics that is known in academic circles as Austrian economics.
We can call it entrepreneurial economics.
It’s a cogent and comprehensive body of economic thought that originated in the second half of the 19th century when business and corporations were beginning to emerge as the organizational form of capitalism, and it blossomed in the twentieth century as it helped the world understand why free markets provided the environment for economic growth and widespread well-being all across the globe.
领英推荐
Peter Drucker was a leading writer on business and management who expressed the consumer sovereignty principle of Austrian economics in his phrase, “The purpose of a business is to create a customer”.
He further statedthat there are two entrepreneurial functions that make this possible: innovation and marketing.
In his book Innovation and Entrepreneurship, he reinforced the concept of entrepreneurship as a primary activity of existing businesses.
Entrepreneurship is part of the business executive’s job, expressing in business language the economic assertion of Ludwig von Mises that the capitalist system is entrepreneurial, not managerial.
Drucker made the principles of Austrian economics - including subjective value and the well-being of customers as the purpose of business, and entrepreneurship as the driver of value creation - into the core of a management approach that was the backdrop to the post-war American economic ascendancy.
His approach was eclipsed in the later era of bureaucratization and financialization that characterized corporate capitalism at the end of the 20th century.
Today, with the new business models of the digital age revealing exciting new opportunities for the application of Austrian principles, we can bring Austrian business teaching back to the forefront.
How to Think Differently
Starting from the point of view that every individual customer chooses their own values, and that their choices are dynamic and evolutionary, takes business thinking to a new place.
It reveals why entrepreneurship is the driver of all growth, because entrepreneurship is the function that observes the dynamic value-seeking of customers and translates it into new value propositions and innovations.
It also establishes a different set of business processes in the form of working backward from customer values to what the firm does to appeal to them, rather than the conventional idea of strategy and planning that push out to the marketplace rather than receiving signals from it.
True entrepreneurial creativity includes an acceptance of the uncertainties and challenges of this dynamic customer horizon, rather than attempting the predictions and pseudo-precision of planning.
Entrepreneurial creativity as a business practice can be taught through the core trilogy of subjective value, entrepreneurial empathy and the value design process.
Understanding subjective value opens the learner to the world of customer sovereignty, entrepreneurial empathy is the toolkit for understanding and diagnosing the needs that customers are seeking to attend to, and design provides a method for developing new propositions to address those needs.
These three are at the center of the new business education and establish the foundation for thinking differently than would be the case with traditional business education.
The Co-Creation of Business Education
Hiring corporations are the true customers of business education, but they have not been well-served. Recent failures at companies ranging from Anheuser-Busch to Target to Google are testimony to the inability of university graduates to fit into the Peter Drucker culture of creating and keeping customers.
In fact, they’ve turned some company cultures toxic to customers.
The new business education will be co-created by business firms to ensure that they get the graduates they need. There are several co-creation pathways.
First, the capstone of the business education course will take the form of an apprenticeship or internship. Students get to work on real problems in a real-life business environment, collaborating with new colleagues and using available corporate resources; they’ll be able to sample business life while being monitored by their potential employer. Their ability to fit into the business culture will be demonstrated and assessed. A good analogy is the way the medical community trains new doctors - they spend time as residents and interns working on real cases with the supervision of established experts in their field who can transfer their knowledge and experience.
Second, the hiring corporation can provide some of the education content, with their executives serving as adjunct professors and their case studies providing context. There is a greater likelihood of cultural alignment through these mechanisms. Who better to teach standards of customer experience design than the executives of The Four Seasons Hotels and Resorts, or to teach innovation than Tesla?
The Value Creators Online Course
The first educational offering exemplifying this new approach is currently offered online through the The Value Creators course. Professors Mark Packard, Per Bylund ,
David Rapp , Gordon Miller , all of whom teach Austrian economics-based business courses, along with organizational consultant Bart Vanderhaegen , have combined to produce a new business education experience with 11 content modules:
Taken together, these modules provide business students with the basis for business entrepreneurship. They don’t yet constitute a complete degree platform, of course, but they do provide the supplement that combines value creation knowledge with technical knowledge and results in new vistas for those without a business degree.
For example, engineers are experiencing a renaissance for their technical knowledge, and they are becoming more important in the economy.
With the addition of value creation knowledge to their engineering knowledge, they can become even more prominent as business leaders and innovation leaders.
Doctors launching direct primary care practices built on the foundation of their vocational medical expertise can add a new value-creation dimension that renders their entrepreneurial DPC practice more value-productive and stronger as a business.
People with classic education in languages or history or philosophy can leverage the new recognition of their knowledge that Austrian economics confers through subjectivism and humanism.
The new era of business education is arriving, and exciting new vista are opening up.