Still Looking for the "B" in B-School

The November 27th issue of Businessweek featured an insightful article by Richard Schmalensee, Dean of the MIT Sloan School of Managment In short, Mr. S. believes that Business schools aren't teaching enough Business but are focusing on much more arcane subjects such as game theory and econometrics, which while undoubtedly appealing to the beuatiful minds out there don't seem to have much to do with business in the real world.

I experienced a perfect example of this today while sitting in my Strategic Management course where we were exposed to the research done by Pankaj Ghemwat in his book Commitment which showed that over a 10 year period a sample of 700 business units half with high performing ROI (average of 38%) and half with underperforming ROI (average 3%) both progressed toward the mean (about 23%) at the end of the 10 year period.

On the surface this seems very interesting. High performers come down and underperformers come up in a very assymptotic approach to the mean till they are very close together. These are averages mind you so there will be some differences to be sure but here is the rub. When I asked the professor if there had been any investigation into why the underperforming business units turned themselves around and the outperforming business units lost some of their luster I was met with a blank stare.

"Well, obviously the underperforming companies tried to emulate the best practices of the outperforming firms", he said. True enough I thought but why in all the years since 1991 when Ghemawat published this little tidbit hasn't some enterprising academic jumped in to fill the knowledge gap and find out why the competitive advantage was lost. Maybe if a few of these academics went beyond game theory, contract theory and agency theory we could figure some of these things out.

What this inquiring mind want's to know is, "What where the factors that lead to the erosion of the competitive advantage that the outperforming firms seemed to have at the beginning of the 10 year period?" Did their talent get headhunted away, did they toot their own horns about proprietary best practices better left undisclosed, did they stop investing in R&D because they thought they had the whole thing figured out? What was it? Did one factor have dramatically more impact than another? Perhaps if we knew we could begin to guard against it. Evidently such trivial knowledge is unimportant in the ivy halls of acadamia, but you can bet we're going to know the in's and out's of the prisoners dilemma...now which box was I in?