Why do business schools teach dead ideas?
Posted: November 5, 2011 Filed under: business school 14 Comments
Fast Company has an article on Why do b-schools teach the 4ps of marketing when three are dead?
This raises a broader question about a whole host of concepts that are seemingly “dead” but still taught at business schools. For example, should we still be teaching Porter’s five forces, industry analysis? Or, Ezra Zuckerman raises the question about why CAPM is still taught (in response to Mike’s post at orgtheory.net).
Here are some reasons why dead ideas might still be taught at business schools:
- naivete – professors not admitting or knowing that the ideas indeed are dead.
- it’s in the textbook.
- perhaps a legitimate effort to teach the history of the field, including dead ideas.
- so students don’t make the mistakes implied by dead ideas and models.
StrategyProfs.net 
What exactly is the case for thinking that industry analysis is “dead”?
because the medium has changed the model. the transparency and speed of information, including the fact that the mass drives the business vs. the business driving the mass, kills ideas and the way business run. how has the music idustry changed in the last 10 years and why?
Right on, Nicolai.
I’d agree with Nicolai. Industry analysis has its limitations — as does any theory — but it’s hardly dead.
I’ll vote for industry analysis having been undead from its birth. I still do it some for institutional reasons–people think MBAs should know about the five forces.
But seriously, that Fast Company article is such an example of consultant BS that I want my brain cells back. Pricing tactics don’t matter in marketing? Place doesn’t matter? Apparently this guy has never heard of supermarkets, restaurants, consumer packaged goods, or health clubs.
A fairer critique of marketing and strategy classes is that many newer markets have a platform or two-sided feature that our standard frameworks handle poorly, just as they did for traditional two-sided businesses like banking.
A knee-jerk response:
Dead, eh? Like SWOT – still used by over 50% of businesses – and so on.
Of course, it would help if our fellow academics stopped talking about Porter’s 5-forces model as an ‘industry analysis’.
It isn’t. It’s about protecting a FIRM’s rent-stream.
It normally happens that some of the folks in your own industry can disturb your rent-stream. That’s the ‘industry bit’ of the 5-force analysis. No question, if you are Coca-Cola you had better watch what Pepsi is up to. But equally so can your customers disturb your rent-stream – boycotts, changing taste, etc. – and they, by definition, are NOT in your industry, just as your suppliers are not in your industry either.
Whoever invented this nonsense about Porter’s analysis being an ‘industry level’ analysis that complements the RBV as a ‘firm-level’ analysis – which it isn’t? They belong in different universes of discourse.
No question Porter’s approach was informed by IO economics – as he argues very clearly in his 1981 and 1991 methodology papers. Notwithstanding the richness of this tradition, his innovation was to take these IO concepts and apply them at the firm level. But this was actually not as original as most people think. After all in his “Theory of the Business Enterprise” (1904) Veblen made the same points. Monopoly, not efficiency, is the essence of the competitive game for those who think neoclassical economics is irrelevant to business, and business strategy in particular.
In fact, as I have argued elsewhere, Porter’s analysis is better understood as an interesting reformulation and ‘stiffening’ of the Learned, Christensen, Andrews and Guth analysis he learned as an MBA student.
When it comes to saying his analysis is ‘dead’, this is so clearly idiotic to anyone that thinks that rent-streams are central to strategic analysis as to be laughable. On the other hand I suppose there are those who profess to know something about strategy who have other views. So I’ll read the Fast Company piece and ponder exactly what kind of analysis is supposed to be ‘alive’.
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Ah, hoist by my own petard – another P.
The Fast Company piece has nothing to do with Porter’s thinking – where did the graphic come from?
OK OK – I get it. It’s Teppo as ‘agent provocateur’ – and his sense what is dead?
OK, perhaps any rumors of the death of five forces are much exaggerated. Does certainly have some weaknesses. But all models do. There is a question, for me, of what the key focus should be in strategy – but I suppose for teaching purposes we cover the whole terrain (from the micro to, gasp, stakeholder ‘theory’).
(JC: graphic is just from the wiki entry for five forces.)
Actually, every semester I run into students who have been taught the BCG matrix and they think it has something to do with marketing. I would normally not mention it at all but I feel I need to let them know that it is not marketing and it will lead one to incorrect conclusions.
SWOT analysis is another problem framework that others teach as the students don’t understand that more rigor is needed (for both the internal and external analysis components).
Teppo – I’m aligned with idea four. When I teach leadership theory, I begin with the great man theory and create a survey of the history theory. The reason is that, understanding what the old theory was helps us better appreciate, understand and build off of the current theory.
For example, Einstein essentially proved that Newtonian physics was “dead” (in the same figurative sense that seems to be used here). However, we still teach it. There are places where it works. In addition, understand where is DOESN’T work helps us understand why what does work actually works.
Three reasons, as noted here:
1. Some of these ideas aren’t so dead
2. Some of these ideas are passe but not all practitioners know it, so I want to inoculate my students against them before they encounter the ideas on the job
3. I want students to appreciate current thinking by contrasting it with the older stuff
BTW, I also agree that consultants have an interest in claiming that the world has changed and they’re the only ones who know how to deal with it, but I find most of their ideas to be intellectual snake oil.
First, the 4Ps are alive and well … They are used by companies every day with great success … To identify a few firms that at first blush appear not to be using them is ignorance … All the firms noted by the authors employ the 4Ps today. I would urge the author to read some of of the more detailed expositions on the 4Ps rather than use the brief definitional summaries … Dead just like Newton’s mechanics …
Second, CAPM is a powerful model … It’s not dead but extremely useful … It’s a powerful lens that is widely used today and with success by companies around the world …
I guess the real issue is do people understand what theories are and why and how they should be used … A theory is not an assertion of truth … It is a model, a perspective, a lens to see a situation … It can aid decision makes come to grips with a problem … A decision maker would wise to attack a problem by seeking out multiple models as they work through a problem …