Back to B-School

Last week I spoke with Analytics at Work co-author and Babson College professor Thomas Davenport about the ways in which analytics can benefit organizations. This week, the conversation turns to why it’s imperative to use analytics responsibly.

BNET: The book briefly discusses the financial crisis, saying that a good portion of the financial services industry used analytics in the wrong way.

Davenport: It’s a very critical issue for business education. We basically have created two classes of people: quants and non-quants. They didn’t communicate very well in a number of companies during the financial crisis. The quants could develop these financial algorithms that made it look highly desirable to enter into a series of complicated derivatives and things like that. The non-quants — who tend to be senior managers — didn’t understand that, didn’t understand the assumptions behind them and didn’t know when the world was changing, so as to make those algorithms invalid. The quants haven’t been good at explaining what they’re doing in simple terms. Non-quants haven’t been diligent enough to delve into the assumptions behind the models and to know when they work and when they don’t. As a result, we have a really severe recession and a number of firms went out of business. So the stakes are high.

BNET: What are the keys, then, for using analytics more responsibly?

Davenport: One thing is for every manager to know something about quantitative analysis, so they can at least raise reasonable questions. The other thing is to realize that every model is a representation of reality. You need to know what are the assumptions behind the model. You need to know that this particular model only makes sense to base our operations on if housing prices are rising, which was the assumption behind a lot of the mortgage derivatives and so on.

Another common assumption that wasn’t widely known was that if you’re doing risk analytics, the most commonly used assumption is called value-at-risk. For different investments, their values are independent of each other. We found out in the financial crisis that if one class of investments fall, the others are likely to fall as well. So you need to state clearly what those assumptions are, and then managers can decide in straightforward terms, am I willing to take this risk?

BNET: What role does b-school play in analytics training?

Davenport: We have these quantitative courses in business school, but they haven’t really succeeded in creating a generation of well-equipped managers for this analytical world. There are some requirements now for business schools to do a better job of making the non-quantitative managers that they graduate more quantitative and making quantitative people better communicators and better at engaging in dialogue with decision makers about what the data and analyses really say. But I don’t think we’ve done a good job of preparing either group.

While a good deal of the water cooler talk today will be about the historic first Super Bowl win by the New Orleans Saints on Sunday, many of us will also be talking about the Super Bowl ads: which ones we liked, which ones we didn’t get or which ones simply left us cold.

The ads were an especially important part of the game for about 40 Kellogg School of Management students who participated in the 6th annual Kellogg Super Bowl Advertising Review.

According to the students, the best three ads belonged to Google, Audi and Denny’s. In the bottom three were ads by the U.S. Census, Focus on the Family and Honda.

I spoke briefly Sunday evening with Kellogg professor Derek D. Rucker, who said that the common factors shared by the best commercials were superior branding and positioning, as well as linking the ads to the product. The Denny’s chicken ads also stood out because of their thematic grouping.

“The second one reinforced the first, and by the last one you knew immediately that you were watching a Denny’s ad,” Rucker says.

The ads that ranked the poorest were not attention grabbers, nor did they present a strong position. Despite the controversy surrounding the Focus on the Family spot, Rucker said the ad actually played it very safe.

“The message was so soft and subtle. There wasn’t a strong call to action,” Rucker said of the ad’s invitation to go online and learn more about Tim Tebow’s story. “They didn’t really show a plan or give direction.”

Rucker said that using the strategic academic framework called ADPLAN (attention, distinction, positioning, linkage, amplification and net equity) allowed students to come to a consensus on the top and bottom ads fairly easy. Did their top three make your list of favorites? And which spots did you think were the biggest disappointments?

Image courtesy of Google.

Super Bowl parties can be fun for sports and non-sports fans alike: even if you have no interest in the big game, there’s the chili, the guacamole, the beer and the commercials.

In fact, for the Kellogg School of Management students taking part in the Kellogg Super Bowl Advertising Review, the commercials are the main attraction.

For the sixth year, marketing professors will lead the Kellogg Marketing Club in ranking the most and least successful ads, based on the academic criteria called ADPLAN: attention, distinction, positioning, linkage, amplification and net equity. (more…)

Almost two weeks ago, I asked readers to weigh in on a subject broached recently in a New York Times’ Room for Debate feature: Should MBA programs treat their students like customers? The majority of voters, about 65 percent, said yes, seemingly agreeing with the idea that MBAs deserve to play an active role in shaping their education and that programs should put a high priority on catering to their desires. A closer look at a few reader comments, however, makes clear that the solution isn’t so simple:

• dennis@: The best approach is to treat the student like a product.  This is because the student is buying the opportunity to be molded into the ‘product’ of…
• jtpickering: No, MBA students should not be treated like customers by MBA schools. The role of customer has too much of a ‘passive’ and deferential connotation … I prefer to think of my MBA school as a partner in my journey.
• M782427: Treat the learners as professionals - period! In my recent MBA class in statistics, there were MDs, CPAs, RNs, CFEs, etc. Many of these professionals have over 25 years of experience that the educational facilitator can and should use to instructional advantage.
• Al Plastow: Maybe we need to divide the collective MBA “student” into two distinct groups: The non-traditional student, one who has already been out functioning in the real world and the more traditional student who has moved from high school, to college, and is now in grad school … I believe it’s the attitude and flexibility of the individual at the front of the room that can make an enormous difference. If they are there to deliver useful knowledge and help student improve, that shows in the results.

It seems that neither student nor customer quite sums up the interactive, collaborative nature of the role MBAs play in the classroom. Perhaps treating them as a blend of student, customer and - most definitely - professional will help MBAs get what they need out of the program while ensuring that b-schools keep their high educational standards. Thanks to everyone who voted and shared their thoughts on this issue.

Image courtesy of Flickr user shlomif, CC 2.0.

If one of your new year’s resolutions is to read more books, you might be interested in checking out a few of the titles that Vanderbilt’s Owen Graduate School of Management dean Jim Bradford has read and discussed with MBA students in his Dean’s Book Club.

In an article published last month on Forbes.com, Bradford called his love of reading an attribute that has broadened his perspective and helped him make better decisions. He thought his Owen students could benefit from good books as well:

“The big question is how we prepare graduates for the complex, sometimes ambiguous environments they’ll encounter after their studies. It’s increasingly clear that graduates who have not only analytical ability but also perspective and wisdom will win the day,” Bradford writes.

Here are a few of the wisdom-building titles the book club has tackled: (more…)

If you paid $100,000 for a two-year service contract, you would expect to get exactly what you wanted and to shape your service experience to some extent, wouldn’t you?

However, many MBA professors and faculty cringe over the idea of treating their students like customers. Others see a collaborative customer-focused approach as inevitable when the student population is made up of accomplished individuals with clearly-defined goals they hope to achieve through the program.

In a recent “Room for Debate” feature in The New York Times, educators weighed in on the student vs. customer debate. Here’s a little of what they had to say.

Treating students like customers has benefits

• “Students are not customers nor are they not customers. They are investing time and money with a purpose in mind. The school that does not serve that purpose will not survive.” — Stephen Joel Trachtenberg, president emeritus and professor of public services, George Washington University.
• “Treatment of students as customers is not about grades or unrealistic expectations; it is about a new paradigm of shared governance…. Faculty, students, alumni, employers and community leaders must re-evaluate and re-design M.B.A. programs to address the society’s pressing needs.” — David Bejou, dean of the School of Business and Economics at the Elizabeth City State University.

MBAs-as-customers weakens education

• “Even in settings where engaged customers interact with companies to influence the value and nature of what they consume, sellers don’t set demanding expectations of customers and partner with them on strategic initiatives…. The best students don’t view themselves as customers, and they shouldn’t be treated as such.” — Edward A. Snyder, dean of the University of Chicago Booth School of Business.
• “Since student evaluations of professors became commonplace 35 years ago, students have played a greater role in campus decision-making. The growth in grade inflation, the near abandonment of Friday classes on many campuses and the provision of country club-like facilities are three indicators that universities increasingly look at students as customers requiring pampering…. Universities are endangering their reputation as being rigorously committed to academic excellence.”  – Richard Vedder, director of the Center of College Affordability and Productivity and economics lecturer, Ohio University.

What do you think? Is the MBA-as-customer model weakening academic standards, or does it allow students to play a more active role in their education? Leave a comment or weigh in below.

Image courtesy of Flickr user shlomif2, CC 2.0.

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Finally: After a year of reading about everything b-schools are getting wrong, an article in Education Week discusses what they have done right. Authors Robert Maranto, Gary Ritter and Arthur E. Levine  even go one step further and discuss the lessons that schools of education could learn from the ways in which b-schools have increased their academic rigor and prominence since the 1950s.

They write, “In the 1950s, business schools were seen as places for marginal students to skate by, and for privileged students to network into future careers. Yet by the 1980s, business schools were training many of the best and the brightest, and became more prominent within universities.”

The change, they say, came when business schools received ample funding from supporters like the Ford Foundation to start building a new curriculum around subjects like applied mathematics, economics and behavioral sciences. This required students to have greater academic aptitude and ensured that they would become valuable contributors to the corporations they joined, securing the MBA degree’s reputation.

For those who believe public schools can be improved by reinventing schools of education, the authors present five lessons learned from studying business schools’ upward progression: (more…)

If you find yourself in Las Vegas this weekend, stop by Caesars Palace and catch some of the annual MBA Poker Championships, which are held today through Sunday.

While it may surprise readers that there are enough MBA poker enthusiasts to necessitate their own tournament, the MBA-poker connection makes sense. After all, it’s a game of numbers and strategy. And anyone incurring gigantic loans in hopes of securing a salary big enough to pay them off has at least a bit of a gambler’s spirit.

Speaking of loans, winners can put a (small) dent in them with cash prizes in the thousands. The event also has a charitable angle: Part of the prize pool is donated to the Alzheimer’s Association. (more…)

Harvard Business Review recently published its list of the 100 best performing CEOs in the world. While the list contained well-known names, there were a few surprises as well — especially when considering who was absent. (More on that later.)

Researchers Morten T. Hansen, Herminia Ibarra and Urs Peyer took a unique approach in compiling their list, in that they considered the performance of CEOs of large, public companies over their entire time on the job.

“Today boards of directors, senior managers and investors intensely want to know how CEOs handle the ups and downs of running businesses over an extended period,” they write. “Many executive compensation plans define the long term as a three-year horizon, but the real test of a CEO’s leadership has to be how the company does over his or her full tenure.”

So who made the top 10? (Drum roll, please.) They are: (more…)

Yesterday, I shared some insights from my conversations with a few MIT Sloan first-year students who are currently visiting the Bay Area for the school’s annual Tech Trek. The students have spent the week calling on potential employers in the tech sector, from startups to the big guns of the Silicon Valley. We found out yesterday that, despite all of the talk about what needs to be done to fix the MBA degree, students and employers alike still place a lot of value on it.

But will that necessarily translate into jobs when these students graduate in 2011?

Jason Costa, who hopes to find a product management job with a small consumer web services company, is optimistic.   (more…)