Strategy Through a Rear-View Mirror

Unpopular opinion on case studies in business

Harvard Business School students read about 500 case studies during their two years of study. So do many other business school students.

On the one hand, it looks logical. We all learn from cases and the experience of others. We play with toys and dolls in childhood to rehearse the situations we’ll face in adulthood. We study history to take lessons for the present and the future.

But, on the other hand, business education doesn’t seem to work perfectly. Let’s face the facts:

• Only half of the businesses in the USA celebrate their 5th anniversary of foundation, and 65,5% of companies don’t survive after 10 years of operation (source).
• About 90% of startups fail (source), and 10% of them do it within the first year.
• There is no reliable statistic indicating that building a successful business today is easier than 10 or 20 years ago.
• Top US business schools report a dramatic (more than 10%, on average) decline in MBA applications (2022). “It’s official: The M.B.A. Degree Is In Crisis” — it’s the title of the Forbes article published back in 2019.

So, even though Amazon offers more than 70.000 book titles on management, and thousands of people are enrolled in MBA programs around the world, we can’t say that the average level of business competence improves significantly over time.

And, to my mind, a case study method is one of the reasons. And not because business cases are always “about the past.”

I am not trying to say that business education is useless. But some of the principles need to be rethought.

Info-crooks

I used to live in a country that went through a boom in the popularity of happy life courses nearly ten years ago. Entrepreneurs who called themselves “info-businesspeople” used social media power to promote their online courses, blogs, books, and training programs.

A wave of informational garbage flooded social media. People were willing to pay strangers without diplomas for lessons on mindfulness, oneness with the cosmos, and even karmic breathing (whatever that might mean). Not only celebrities but also cashiers, accountants, and unemployed people discovered unexpected gifts for life coaching.

They all used the same weapon to attract trusting customers. They said: “Our lives have changed, so can yours. Look at our prosperous (happy, carefree, meaningful, etc.) life and become like us.” The wave subsided naturally, and now people of that country call those life teachers “info-crooks.”

In the English-speaking world, successful people also love to share their experiences in books and articles like “The five steps of….” They use the same way to prove that their ideas work. “If I managed to do it,” they say, “anyone else also can.” I may be biased and unobjective, but I haven’t noticed that people who read such books are much happier than those who don’t.

Simply put, the case study method has much in common with this approach. Some companies did X, Y, and Z, and they became successful; be like them. Other companies didn’t do X, Y, or Z and failed, so don’t make the same mistakes.

I oversimplify, of course. Case studies are well-elaborated stories based on hard evidence. But can we learn much from others’ successes and failures?

We fall into the same trap time and again. We believe that what worked well in the past will work in the future and that what was effective for others will be helpful for us. But the world is too complex for such a primitive idea to be effective.

The case study method

The core curriculum at most business schools includes such subjects as accounting, business strategy, finance, manufacturing and production, marketing, and so on.

The difference between those subjects is that accounting, finance, manufacturing (and, in part, marketing) are based on natural laws and rules. The ROE formula works the same way in America, Europe, China, and Brazil. Likewise, manufacturing workflow obeys the strict laws of mathematics.

But strategy is another story.

A business school professor can’t simply share their opinions with students. They need to back their ideas with facts and evidence. And that’s pretty rational. For example, you wouldn’t be happy to learn that a school teacher tells your children that the Earth is shaped like a cube only because he believes it would look better.

Many brilliant scientists tried to collect enough evidence from unraveling the secret of successful strategic planning. They collected tons of data and worked hard to discover patterns and laws. But this secret is apparently yet to be found.

Jim Collins’s books “Good to great” and “Built to last” are good examples. Collins and his team did a tremendous amount of work analyzing massive amounts of data. They presented dozens of case studies to their readers. And nevertheless, they were mistaken. You can easily find on the net the stories of some companies that, according to Collins, were “built to last.” He was unable to foresee their future, let alone predict the emergence of e-commerce, social media, and AI.

The world doesn’t develop linearly. So, even such universal tools as supportive corporate culture and efficient leadership can’t solve all the problems. But business education is not philosophy. Business schools can’t tell students that the world is too complex and incomprehensible. Instead, they need to give the students the tools.

So, they have to introduce the following:

• Problems;
• Solutions (i.e., some tools);
• The correct answer (or a variety of explanations);

When you studied mathematics and learned to simplify fractions, you obtained knowledge the same way.

What’s wrong with that approach?

I read dozens of case studies when I was an MBA student. It was a useful mental exercise. But I can’t say that it prepared me well for my future role as a CEO. And I can say the same about many MBA graduates I have worked with.

The reasons for that, as I see, are the following:

1. Sometimes it’s easy to explain a company’s failure. In some cases, the failure results from one fatal mistake (though it’s not always the case). But how can one interpret success? Why did companies such as Amazon, Google, Apple, Shell, or Walmart become prosperous, whereas many others didn’t? Their success (and others’ failure) is the result of hundreds of factors, and most of them are untraceable.
2. As every case is too complex, it’s impossible to describe all the internal and external conditions in which top executives make their strategic decisions. So, any case study is a highly simplified version of the actual situation. For instance, when I became a CEO of a processing plant, it took me months to delve deeply into all the details. When MBA students read a case study, they don’t have that much time.
3. A group of students who work together usually consists of people with different backgrounds. Most of them don’t have experience in an industry in which a firm from a case study works. So, they make many assumptions, but their ideas will not necessarily work in the real world.
4. Even solving dozens of hypothetical cases doesn’t provide the knowledge needed to manage a company. As one of the MBA graduates told me, “it looked perfectly simple when I made my presentations at the business school, but when I became a CEO and faced real-world difficulties it turned out to be more complicated.”

A possible solution

When I launched my management consulting business, I noticed that many top managers lacked strategic skills to execute a large project, i.e., to develop a strategy. So, I had to start such projects with a short training program on the topic.

I didn’t use case studies for this program. Instead, we discussed the issues and strategic challenges the group members faced in real life. And it worked very well.

Some students enroll in MBA programs to gain new knowledge, make new friends, and get a prestige diploma. And many business schools can provide all of that. But if they want to learn how to develop a strategy, the best solution, from my point of view, is to become a part of a group that is deeply involved in developing their company’s strategy.

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