Feature of the Week

May 18, 2014 11:30 pm

Cities fail to make the grade in the classroom

James Ferguson illustration for Business Education©James Ferguson

From debates about the cost of property at dinner parties in London or New York, to the social cost of shanty towns and slums in cities in developing economies, urbanisation touches the lives of the affluent and the destitute. With more than 2bn people expected to move to cities by 2050 and the resulting business opportunities that this presents, urbanisation would seem to be a topic that business schools cannot ignore.

But ignore it most of them do, with urbanisation rarely impinging on the MBA curriculum and just a handful of business school evangelists promoting the topic. Reuben Abraham, former star professor at the Indian School of Business, is one such crusader.

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“I left [ISB] because I was running against a wall,” says Prof Abraham, who now has “a new gig” as partner and head of urbanisation at the IDFC Foundation in Mumbai.

“Urbanisation is the biggest macro trend out there. It opens up entrepreneurial opportunities and business opportunities.” He cites the demand for low-cost housing – in India alone there is a need for 35m new homes. “If that isn’t the biggest [business] opportunity staring you in the face, I don’t know what is.”

Perhaps the real challenge for academics is that the study of urbanisation brings together scholars from architecture, design, policy, governance and central planning, as well as business. However, universities rarely behave in such a cross-disciplinary fashion.

James McKellar, a former architect and planner who is now professor of property and infrastructure at the Schulich school at York University in Canada, believes business schools have generally no interest in this area.

“We run a very successful programme but we’re a real anomaly.” This lack of interest is unlike business he adds, citing IBM, Google and Siemens, which are working on urbanisation and smart city projects.

The academic appointments system also works against this cross-disciplinary approach, says Prof Abraham. “Even the good emerging-market business schools are subject to the publishing system and to tenure. It is not that they want to conform, it is that they are forced to conform. You don’t have an option.”

There is also a growing view that business schools have been teaching the wrong topics. Prof Abraham singles out social entrepreneurship as an example, a thought echoed by former property and construction specialist John Macomber, now senior lecturer of business administration at Harvard Business School. He is a fan of HBS’s social enterprise initiatives, but adds: “You’re not going to get water to 100m people with $40 sewing machines and access to microfinance.”

Economist Paul Romer, director of Stern NYU’s urbanisation project and arguably the guru of urbanisation studies at business schools, believes the fundamental issue is whether the unit of academic study should be the business unit, as it is today, or the city.

“I hope one of the things we can do [at NYU Stern] is set a model for the sort of things we can teach and do research on,” he says.

Arguably the biggest impediment to successful urbanisation projects is the lack of high-quality management he adds. “Urbanisation gives you the opportunity to do tremendous good. Any project of this scale can be managed well or it can be managed poorly.” But the scale of the problem and the speed with which it is unfolding is huge and only compounds these management issues.

All agree that the challenges facing developed cities, such as London or New York, are much the same as those for cities in India, China or Latin America. There is also a real thirst for training in effective management of urbanisation projects – managing the physical infrastructure, the social infrastructure and the enabling infrastructure, such as project financing. There are also vast costs involved in getting it wrong and having to rectify the problems, particularly in emerging markets.

“[In emerging economies] you have a chance to do it right to start with,” says Prof Macomber. “In much of the emerging world there is not so much a resistance to planning as a lack of knowledge and money.”

But it is the scale and urgency of the problem that makes it so daunting, says Richard Florida, a specialist in urban planning and public policy, and director of the Martin Prosperity Institute at the University of Toronto’s Rotman school.

“Although there is a realisation that this is important, nobody is willing to organise something on this scale. We don’t have the data. We can’t even compare the economies of major cities – this is unbelievable.”

This has an impact on business schools and the ability of professors to teach, adds Mr Florida. “We don’t really have the mechanisms for training in this area. We’re kind of winging this. We don’t even speak a common language, like engineering or medicine.”

The lack of a common language and a set of defining principles also worries Leon Laulusa, academic vice-dean for International Development at ESCP Europe. ESCP is planning an executive short course on smart cities from early 2015 with Tongji University in China and Insper business school in Brazil. In France, the term “smart city” refers to ecocities, with sustainable ecosystems, says Prof Laulusa. In Brazil it means digital cities, while in China it refers to solving problems such as traffic and education, and improving the environment.

Other courses are few and far between, although there are elective courses at Harvard, Stern and Schulich. ISB in Hyderabad is planning programmes relating to financing – especially public private partnerships – and big project management, says dean Ajit Rangnekar. He believes that the business school has a convening role in bringing together government, education and business.

But there is a more fundamental point, says Prof Romer: should urbanisation be restricted or actively encouraged? He is clear: “I decided to start working on urbanisation because in developing economies I concluded that the effect of urbanisation was the fastest way for their economies to grow.”

So why have so few business schools taken up the challenge? Prof Abraham is baffled. “How do you miss something this big? Either it is very clear or I am an idiot.”

 

Affordable housing

 

When Laura Fox decided to go to business school, she chose NYU Stern for one reason: its urbanisation programme. “Given the scale of urbanisation in the next 40 years, if we don’t get it right now, we are in real trouble,” she says.

As she approaches the end of her first year, she is part of a team of three MBA students who are working with academics in the Marron Institute at NYU to help policy makers in Mexico City develop a more liveable city. “This project is really different,” she says, “because we are building a business-focused proposal for a policy group.”

In particular, the team has worked on a model to determine the impact of different regulations – building height, density use – on housing development, says Alejandra Rangel Smith, research scholar at the Marron Institute at Stern. “They [Mexico City] have accumulated a lot of regulation over the years and there is some overlap,” she says. “We believe housing affordability is one of the most important factors.”

While Ms Fox is deeply involved in the project it is easy to see why others may not be so enthusiastic. Her summer internship will be at BCG, the management consultancy, and whatever her aspirations, she is unclear whether she can secure a job related to urbanisation on graduation. “There just aren’t a set of jobs you can apply to,” she adds.

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