Schools must open their minds to new models

Some of the most consistently well-subscribed courses at business schools are those involving innovation and the creation of services. There is a visible appetite among students to learn about web platforms, such as Google’s, that support a plethora of innovative services. These businesses are often described as ‘open’ because they work together around a set of common standards.

Businesses that adopt standard processes and systems benefit from lower costs (bespoke things are expensive), and crucially, from the ability to take other people’s processes and systems and use them to create innovative services. However, although business schools are spending more time and energy discussing these open models, this information is usually only available to MBAs via non-core, ‘special interest’ areas such as innovation, or entrepreneurialism. Open thinking may well have moved out of the lunatic fringe, but it still needs to move much further towards the heart of the MBA curriculum.

This is because the open model is starting to grow out of its traditional roots in hi-tech (think Amazon’s EC2, Google’s Android) and R&D innovation (think crowdsourced success stories from YouTube) and is now knocking at the door of almost everyone. As the open model grows it is beginning to challenge the commercial viability of traditionally organised corporate functions such as finance and HR, which, whether outsourced or insourced, will appear increasingly expensive if they ignore the emerging economics of doing things using common standards.

This is where business schools come in. We owe a debt of honesty to develop a clearer idea of the impact that open models are likely to have on the strategy, operating models and – let’s face it – the margins of a swathe of businesses that cater for traditional, more integrated tastes. After all, such organisations are the primary recruiters from business schools and the great majority have yet even to acknowledge that open models are moving out of the wacky fringe of technology gurus and Fred-in-a-shed innovators and are now posing a real threat to some very established business models that have made money reliably for over 20 years.

Business schools need to equip graduates with the ability to ask some tough and often uncomfortable questions. For example, what does the open model really mean for traditionally organised firms? What are the primary functions that will be affected? What are the (undeniable) opportunities for those businesses that adopt common standards early on and how are these achieved? How can existing ideas about organisational transformation, usually based around achieving greater efficiency and possible outsourcing of existing departments, be adapted to engage with a truly transformational, component-based view of the world? What are the (again, undeniable) opportunities to design and deliver innovative new services around open designs? And what will be the costs of not taking this seriously?

MBAs who are capable of holding a mirror to an organisation’s strategy and operations in this way will have valuable skills that will be in very high demand within a maturing open marketplace.

In turn, in leading the debate about the potentially explosive implications of such a component-based view of the firm for traditional, ‘integrated’ ways of organising, business schools will need to change themselves. For example, we must realise that in teaching lean techniques – a business school favourite – we may merely be producing more efficient idiosyncrasies, rather than a ticket to the open standards table. We also need to reassess the implications of an open economy in cutting straight across our own, cosy subject-silos of strategy, operations management, innovation, information systems, finance and organisation design. If the rest of the world doesn’t behave in this way, why should we?

Dr Mark Thompson, is a university lecturer in information systems, Cambridge Judge Business School, University of Cambridge and strategy director of UK service innovator methods.