Big Companies — You Can’t “MBA” Your Way To Innovation

Corporate executives are grappling with how to compete at the ever-increasing pace of innovation. It seems their go-to move is almost always the same. They turn to their in-house MBA’s. The executives ask their MBA’s to build new products and ventures. To compete against the plethora of startups flooding the market.

These MBA’s then partner with their peers in the management consulting space. They begin to “MBA” their way into creating something new. And this is where executives at corporations fail.

They are asking “administrators” to be “creators.”

The mistake is even in the degree’s title, Master of Business ADMINISTRATION. MBA’s in corporations are not trained to innovate in the risk-prone world of innovation that is being fueled by entrepreneurs. Sure, some MBA programs offer entrepreneurship classes. But nothing beats real-world experience for training someone to have the courage and skills necessary to compete in today’s new market of hyper-innovation.

I like to ask executives I work with these two questions:

“Would you rather learn how to throw a football from John Elway or a certified physical education coach?”

Then I ask:

“Would you trust your family’s life to the training provided by a certified firearms instructor or would you rather learn from a Navy Seal?”

It makes sense that an experienced expert like John Elway or a Navy Seal will be able to provide a better result.

This is the mistake most corporations are making. They are asking the wrong people to fight for the company’s survival at the wrong time. Some things in life can only be learned from doing. No amount of classroom training can prepare you for the difficulties you encounter in creating something new.

There is a big difference in “creation” versus “administration.” I have an MBC, Masters of Business Creation. My MBC is focused on taking an idea, vetting it, building it, and beginning to monetize it. I earned my MBC not at a university. I earned it through the creation, from scratch, of 20+ startups where 5 were successful and 15 failed.

The failures taught me as much as the successes.

More importantly, the failures helped me find my courage. I am not afraid to build something that people think is a bad idea. At the start, brilliant ideas look like bad ideas as they are by nature filled with inherent risk.

It takes a very specific person who is comfortable in high-risk environments. Someone who thrives in the uncertain and unknowable. Most MBA’s I know are trained in risk mitigation and are highly processes driven. These are skills for the operation of a machine, not the creation of it.

It is the real-life experience of creating something new, from scratch, that teaches one the necessary skill of agility. MBA’s struggle with the agility necessary to compete against startups in their market.

Think of someone like me as a creator of a race car. I know the science of racing and am very good at taking an idea and getting it built into a competitive “race car.” MBAs, are taught to be “administrators” or someone who operates a machine (i.e. a company). Great MBA’s can take the figurative “race car” someone like me builds and drive it to success. Will I ever be a great “race car driver” or operator? No, I have the competency of “driving” and can add value, but I will never be a great “administrator.” So why do executives at corporations place so much faith in MBA’s when it comes to creating new products or ventures?

The answer is simple, MBA’s are similar and familiar to executives. Executives tend to suffer from a cognitive bias called “Illusory Superiority.” This bias is when a person “overestimates their qualities and abilities, in relation to the same qualities and abilities of other people” (as quoted from Wikipedia). So, what happens is most executives are trained MBAs themselves. They place a high value on their qualities and abilities derived from their MBA’s. “Who better to create a new product than someone like myself,” they think. The MBA executive then tasks it out to similar and familiar people in the organization.

The problem though is the world radically changed in the past ten years. When corporate executives were coming up through the ranks, having an MBA and creating new products worked well together. MBA’s where taught the brand-building rule-book; develop great TV ads and show them, over and over to captive audiences. Now the rules have changed. Consumers are scattered across many tech-platforms like Netflix, Amazon, and Disney +. There are no commercials or ads on these platforms. Likewise, today’s consumer is way more immune to traditional advertising. Consumers today happily search out great products regardless of the size of the company that created it. They don’t care about the flashy ads.

The new rule-book of the modern economy is also being rewritten from an incredible trend. It has never in the history of the world, been easier to create a new product or company. The tools once only available to corporations are now democratized and available to any entrepreneur. With lower startup costs and access to early-stage capital, startups are creating massive new choices for consumers.

For example, look at the beverage space. Most of the new products that are launching AND getting consumer interest are coming from startups. According to CB Insights, last year alone US Food & Beverage startups raised over $1.7B across in 300 deals, up from $940M in 2016. Creating a new beverage was once a costly and time-consuming ordeal. It was perfectly suited for the MBA skill set. Now, a few people can go from idea to shelf in a fraction of the time and cost it took 10 years ago. Add on top all the freely available tools to market and sell your product, and it takes little to go big.

The answer to this problem is simple. Augment your “administrators” with trained, experienced, and agile “creators.” Use the right skill set for the job of new product creation, agile entrepreneurs over MBA administrators.

I like to share with my clients this analogy:

Special Operation soldiers can inflict massive disruption in a small amount of time, with a very small team. They are well-trained and experienced in fast-moving, high-risk environments. They can operate effectively without a lot of command overhead. Compare this with the infantry-based military which is command heavy and focused on the methodical taking and holding of ground. Each has its role to play in the overall success of a mission. Asking a Special Operations team to make a massive disruption AND hold the ground is almost impossible. Likewise, asking the infantry-based military to create a massive disruption, with a small team, in a small amount of time, in a fast-paced environment, is also almost impossible.

The corporate executives that will see new venture success are the ones who will partner with experienced “creators” like myself. My startup entrepreneurs peers and I are the “Special Operators” of the new innovation landscape. We are capable of creating massive disruption in high-risk and fast-paced ventures. With few resources and with great agility we are disrupting well-known incumbents.

It is only then that the advantage corporations have over startups can then be exploited. Bring in your MBA’s to hold the ground and administer the new product or venture.

Startups have to create this command and control infrastructure from scratch. Also while building their product. Corporations already have their “infantry” and “command” in place. Use your MBA’s, but realize that working with a real-world serially successful entrepreneur always provides more value than a classroom trained administrator when it comes to new product creation.