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In early April, a Thai student in our entrepreneurship class saw a shortage of high quality, low cost hand sanitizer across Thailand. To support the Covid relief effort and generate revenue, he quickly shifted his family’s medical supply company to sanitizer production. Closer to home, when Dollaride, a business incubated in NYU’s Future Labs, recognized that the pandemic had eliminated demand for their shared commuting van business in New York, they refreshed their business model to leverage their existing vans, technology, and routes to support burgeoning package delivery demands.
Neither entrepreneur followed a typical business school approach when deciding to pivot their business: they didn’t conduct a long-term market analysis, develop a business plan, or weigh various alternative approaches. In fact, had they done these analyses, they might have concluded that the short-term gains wouldn’t justify the retooling investment, or they might have gotten stuck trying to figure out how to estimate the duration of the pandemic or how soon global manufacturing might recover. Instead, they simply took action based on the resources at their disposal.
This approach to entrepreneurship is called “effectuation,” or leveraging what we know, who we know, and who we are in order to take action. Business schools don’t generally teach this approach, as they tend to focus more on lengthy risk and return calculations. But as we face an increasingly uncertain, complex future, schools must adopt new teaching philosophies designed to forge agile, entrepreneurial leaders.
Can Business Schools Teach Entrepreneurship?
While modern MBA programs offer a host of entrepreneurship programming ranging from formal coursework to startup competitions and incubators, there is a great degree of skepticism around the idea that entrepreneurship can be taught by academics in a classroom. Countless successful entrepreneurs never went to business school — many didn’t even graduate from college. Moreover, developing the penchant for imagination, disruption, and counterintuitive action required for effective entrepreneurship doesn’t generally fit into a typical business school curriculum defined by abstract analytical models and precise calculations.
Further Reading
Nevertheless, many schools feel that there is still a place for formal education in the world of entrepreneurship, and have taken steps to update their offerings to meet the needs of today’s students. In a recent study, we looked at three top North American MBA programs to better understand how they are approaching this challenge. In an industry where programs are prone to mimicking one another, we found that these programs broke the mold and developed their own philosophies in teaching entrepreneurship.
The first approach we observed focused on instilling an appreciation for the value of real-life experience with an “operating theater” classroom setup. The University of Toronto’s Rotman School of Management converted their entrepreneurship classroom into a medical-school-style operating theater, where students sit in a large auditorium and watch as a professor performs surgery not on a human body, but on a startup. In Rotman’s Creative Destruction Lab, a panel of established entrepreneurs join the professors in poking and prodding at these startups, helping students absorb the intuition that entrepreneurship skills can only be developed through experience. Other business schools have adopted similar programs, such as NYU Stern’s Endless Frontier Labs, which shares Rotman’s focus on experiential learning.
The second approach we observed focused on “rewiring” students to take action instead of falling into analysis paralysis. We all have a voice in our heads that says, “What if this goes wrong?” or “How do I manage this risk?” Imagine the power of an education that helps you quiet that voice and instead say, “What if it goes right?” The University of Virginia’s Darden School of Business is the birthplace of “effectual” entrepreneurship, an approach that invites students to recognize their existing entrepreneurial resources and accept a certain amount of risk. This mindset is antithetical to a more conventional business school approach that emphasizes minimizing risk. Additionally, while the business world is often known for its cut-throat, fiercely competitive nature, Darden’s program instills in students an appreciation for the power of collaborative innovation by encouraging students to share ideas openly with their peers and tap into diverse insights and perspectives to co-create entrepreneurial ventures.
The final program we observed took more of a traditional business school approach. Our research suggests that the University of Pennsylvania’s Wharton School continues to emphasize the types of resource and risk optimization approaches that are more characteristic of the rest of the business school world. This approach is grounded in the idea that business schools should teach entrepreneurship in a similar way to how other subjects are taught: by providing students with analytical models and tools from published academic research on new venture creation. While this philosophy may be helpful for more mature startups, as well as for helping founders avoid common startup pitfalls — such as choosing the wrong co-founder, accepting poor venture finance terms, or making suboptimal product decisions — it’s less useful for entrepreneurs dealing with extreme uncertainty.
Educate MBA Students to Embrace an Unknowable Future
The current pandemic illustrates the importance of preparing entrepreneurs to face an increasingly complex, uncertain world. We must educate these future leaders to view the uncertainty of our unknowable future not as a problem to be solved, but rather as a reality to be embraced.
After all, in the unknowable future, all leaders will need to be entrepreneurs: visionaries that can imagine, adapt, and act nimbly to address whatever challenges come their way. Business schools should not delay in adopting new teaching philosophies that empower the next generation of entrepreneurs — as well as all business leaders — to meet these challenges.
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