On June 9, 2021, Professor Jagdish Sheth shared his views on how to move beyond the MBA to achieve leadership in digital business today. Prof. Sheth is the Charles H. Kellstadt Professor of Business at Emory University. He is a renowned scholar and internationally recognized thought leader who has published over 300 research papers and more than 30 books. He is the recipient of the 2020 Padma Bhusan award from the Government of India.
Prof. Sheth addressed these topics for digital business:
- MBAs were designed for the Industrial Age - the Digital Age calls for online education and lifelong learning
- The Business of Business is more than business: have a stakeholder vs. shareholder orientation
- Emerging markets and the aging of advanced economies are changing the needs and wants of society
- The critical missing ingredient in leadership is empathy
Moving forward, let’s see how digital business can be improved with MBA
How Things Have Changed From When the MBA was the Ticket to Business Leadership
The MBA was designed primarily for the industrial age. It was introduced right after world war ii, primarily for engineers to learn the internal vocabulary and the language of business to help them rise to management level. They had to learn typical things like double-entry accounting systems, macroeconomics, microeconomics, and behavioral sciences.
Today, there's a huge change. We are in the digital age: the world is going from physical first to digital-first. All the processes and procedures that were on a manual basis at one time are now computerized to a level where you can't work without access to the computer, the network, and the databases.
Another reason is that events are taking place today outside the control of the company. The MBA was never designed for externalities and formulating "plan b." Here are two quick examples. The first one, the great recession of 2008 and 2009, was man-made. The restructuring of the housing market, leveraging it to a level that the whole economy collapsed, made liquidity a survival issue for companies. Firms with cash flow began to buy out others. A second, more current example is the impact of the pandemic. Nobody imagined that a natural disaster would last this long (unlike an earthquake or a flood) or have such a persistent effect.
The MBA was designed for internal communication and internal coordination. So, we have to revise the MBA because more external factors drive the industry and the company, such as the supply chain disruption. How we relate to the external ecosystem and environment is becoming very crucial.
At one time, if you were an accounting graduate, you might become a corporate controller, then move up to treasurer, and eventually become the CFO. You would be valued for how well you managed internal capital. However, today's CFO has to be very good at mergers and acquisitions: how you negotiate between two companies is a very different, higher-level skill set. The same is true for the HR function. It is no longer compliance and procedures: it is saying, "how do I recruit talent for the next generation?" Every primary function today at the top level, like VP of Manufacturing, HR Function, or Finance, has a next plateau of understanding which the traditional MBA doesn't reach.
Another change is is that the MBA was designed for general managers. A typical IIT graduate from one of India's top engineering colleges might join a top IIM management college. The new MBA would then start at the lower level of a company and be ramped up quickly to become a brand manager, a business unit manager, and then rise to the top by their late 30s or early 40s.
Today that is not the case. Now surprisingly, what people are looking for in the MBA program is a specialized MBA. You still have to be a generalist but are you also very much expected to know a particular area in depth, demonstrate you are an expert in that field and be what Prof. Sheth calls a deep generalist.
You have to have more depth in your discipline today than ever before. For example, 40 percent of the corporate IT budget for digital conversion today goes into the marketing function. It is no longer all in the hands of the CIO for downsizing, outsourcing, migrating processes to cloud computing, and so on. Instead, 40 percent of the IT budget goes for the marketing discipline, which has evolved dramatically from newspaper and magazine ads to television and radio and now obviously to digital advertising and digital communication. The traditional Chief Marketing Officer who got an MBA a decade or two ago has no idea about digital marketing, but they now have to learn it.
A third change is the half-life of knowledge is getting shorter and shorter. In software, it is down to 18 months. In management, it is also down to 18 months. By the time you graduate with a traditional MBA and have worked a few years, half of your knowledge is obsolete. The concepts that MBA candidates studied in the 1980s and 1990s, and 2000s about time and motion studies, managing the queueing system in stochastic processes, and just in time inventory don't fill today's needs. Now you have to learn more about blockchain, distributed manufacturing, how to coordinate smaller quantities you made in all different locations, and how to manage an uninterrupted supply chain. That means, by definition, the MBA is no longer a terminal degree. You have to start thinking about lifelong learning and engaging in lifelong learning while working.
That was all about how MBA can improve our digital business. Moving forward, let us see how business serving is an old idea in digital business.
Business Serving a Range of Stakeholders is Actually an Old Idea
The business of business has always been more than business. Look at the history of the industrial revolution in Europe. If you go back to the cities which are bigger cities now like Birmingham, for example in England, these were originally small towns blessed with rivers and waterways or some natural resource like iron ore or coal. Wealthy families began to settle there to go from the agricultural age to the industrial age. The towns welcomed them and gave them access to their natural resources and public resources: there was an excellent symbiotic relationship. The industrialists became stakeholder-oriented because every Sunday, they and their families went to church to hear the message, "you are not above god," to remind them of their duty to the community. Their neighbors were their managers and employees, and their children went to the same village school with the neighbors' children, so you had a lot of informal social communication outside of the corporate hierarchy. They came to rely on suppliers who moved to town to serve their companies, and those suppliers became stakeholders.
Once they listed their company stocks on the public market, their headquarters had to relocate to the capital markets like New York, London, Hong Kong, or Bombay. Away from their roots, they became preoccupied with only one stakeholder – the stockholder - out of the five stakeholders. They forgot the community where they made their money, where their factories are. They forgot their suppliers, their loyalty, and their value. They forgot the employees and even forgot the customer in their shareholder obsession.
From the 1970s on, we did outsourcing, downsizing, right-sizing; we did everything only to serve the shareholder. That notion is giving way to the idea that actually, it is in a company's self-interest to be stakeholder-oriented because doing well by doing good gives it more financial returns.
The book Firms of Endearment by Prof. Sheth and his colleagues Raj Sisodia and David Wolfe showed companies that are employee-oriented, customer-oriented, community-oriented, supplier-oriented financially perform better than strictly shareholder-oriented companies. This book was a response to the business book Good to Great: based on the subsequent fate of the "great" companies in that book, the new paradigm is Great to Gone.
Another of Prof. Sheth's books, The Self-Destructive Habits of Good Companies, examined the question of why good companies fail. The main finding from his research into the subject is good companies fail when they're either unable or unwilling to change when the external ecosystem has changed dramatically.
Consider the automobile. Traditionally it was primarily an electromechanical thing, but today an automobile is not metal bending but is chips and software. Prof. Sheth says a Tesla is just a very large and mobile smartphone. In the 1970s, the leading companies in the auto industry laughed at Japanese carmakers and their small cars like the Datsun 210, Honda Civic, and Toyota Corolla. Today if you look at the global rule of three in automobiles, Volkswagen is number one, Toyota is number two. GM and Ford are a distant third and fourth, and there is no guarantee that either can even survive. It's not just the technology that has shifted to electric and digital: the largest automotive market is now China, so Chinese policy will affect the auto industry more than American policy or European Union policy.
Moving forward, let’s see apart from MBA what is the leadership in digital business.
If an MBA is not the Path to Digital Leadership It Once was, What is?
So what do you think? If not MBA then what is the leadership in digital business?
There is no one single path. You need a greater degree of specialization in a given function, so you may take a specialized MBA in finance or a specialized MBA in marketing or branding; whatever the field, it's getting more specialized.
Most importantly, it's lifelong learning. Online learning is becoming a part of your routine, part of the job, and part of the activities you must take time out to do. Constantly learn from platforms like Simplilearn, and learn from every medium available today, including social media and YouTube.
Traditionally, MBA programs teach the why: theories, explanations, frameworks. Today you also have to know the how. Today's MBA now is all about experiential learning. Doing is as much immersive learning as opposed to just cognitive learning. Don't go for the degree itself and think you are done. Pursue certifications in specialized areas and recognize that new knowledge continually arises.
For example, blockchain is a foundation for bitcoins, but it is a foundation for secure supply chain transactions. All four major accounting firms have blessed blockchain as an alternative to the double-entry accounting system. Learning this type of specialized skill as a module is more than necessary as opposed to a full degree. This, of course, also applies to people who have already obtained their degrees. Convergence by functions is something else we need to understand, which primarily says that there is no such thing as one degree MBA that will solve everything. You have to learn again and again.
Moving forward, let’s see how empathy is the key ingredient to Digital business leadership.
Empathy is a Key Ingredient of Leadership That is Often Missing
There are three things every leader should have:
- Competence: You need expertise in the function, geography, or product you are responsible for.
- Passion: If you don't have passion in a management or leadership job, you will burn out quickly. Passion, not compensation, is what drives performance.
- Empathy: Are you compassionate with the other side that you are managing? Are you compassionate toward nature and the physical environment? Are you compassionate toward people?
Empathy, competency, and passion are in a tripod relationship as the three legs of a stool. A good leader has to have all three - there is no trade-off between one or the other. If one is missing, it most often is empathy. Some managers are even oblivious of the kinds of struggles their own employees are going through in their personal lives and are simply saying, "I'm the manager, I demand you as the worker to do the job, and here is the way you have to deliver no matter what you think." This attitude leads to demotivation and shoddy work as workers stop offering their competence and passion when they see these are not valued.
Traditionally, HR practices only focused on people's competency and did not measure whether people are empathetic or not or people have a passion or not. HR selection processes are now changing to look at all three qualities. If you select the correct people, ones who share your passion, who show empathy, and who are competent at what they do, you can cultivate them with ongoing education, training, and coaching to make them into better technical employees but also better leaders. A corporation is like a good diamond cutter who knows how to polish the diamond and get more brilliance out. You cannot create a brilliant diamond out of coal: you have to recruit a person who is a rough diamond, and through mentorship and leadership, you will polish them and reveal their brilliance.
A final note on empathy: a critical form of empathy is empathy for the natural environment, and it is currently reflected in the sustainability movement. Anyone who aspires to business leadership today needs to recognize the importance of sustainability to all of the business stakeholders and our planet's ecosystem.
That’s how empathy is used in digital business for building leadership skills.
That was all about Digital business.
Start on the Path of Lifelong Learning
In this webinar session digital business with or without MBA we discussed Simplilearn offers a variety of ways for you to follow Prof. Sheth’s advice and be a lifelong learner. Our free SkillUp program offers over 600 digital economy skills in a self-learning video format. These courses include completion certificates.
For in-depth learning in emerging technologies and business skills, Simplilearn offers full certification courses in a digital bootcamp format that includes live virtual classrooms and hands-on labs and projects. For aspiring digital business leaders, the Post Graduate Program in Digital Transformation in partnership with Purdue University offers a comprehensive curriculum in applying digital technologies to business operations. Browse through our course and program offerings and find the right place to start your learning journey.
If you have any doubts in this article Digital business, please drop a comment below, our experts will get back to you