Management Education: An Interview with John Kay

~ Pergamon European Management Journal Vol. 17, No. 5, pp. 541-545, 1999

© 1999 Elsevier Science Ltd. All rights reserved Printed in Great Britain

P I I : S0263-2373(99)00043-2 0263-2373/99 $20.00 + 0.00

ACADEMIC INTERVIEW

Management Education: An Interview with John Kay Professor John Kay was interviewed by EMJ's Edi- tor, Paul Stonham, at the Said Business School's temporary premises at the Radcliffe Infirmary, Oxford, in his role at that time of Director of the newly-established Business School, and in advance of the School's installation in its modern, purpose- built campus in central Oxford.

Shortly after the interview, in July 1999, Professor Kay returned to his post as a Director of the consultancy, London Economics. The interview is reported unchanged on the grounds of his three years of pioneering work in setting up the School, which is now imbued with much of his philosophy and strategy.

John Kay has at least three persona: a well-known management and business guru and prolific author, whose fortnightly column in the Financial Times provides continuing interest; a management educator over a long period of time, which includes teaching and research at London Business School; and then the challenging role of leading a new Business School of the University of Oxford with the aim of ranking at least fourth or fifth among European business schools in as many years.

Wearing the first of these persona, he was asked his views on what he believes are the management 'hot topics' of the moment, and how corporations are dealing with them, assuming of course that they are recognised. This led him into a discussion of the nature of competitive advantage and the role of information technology and knowledge management, and into the effects of stock markets on corporate behaviour. He has somewhat contrarian views on the influence of governments on the company sector, and has a fairly hard-nosed opinion of the future of EMU and the Single European Cur- rency.

As director of a fledgling Business School in Oxford, he has strong opinions on how Said Busi- ness School's position in the management education market should be characterised. The School will be research-based and has chosen four areas as appropriate and essential to develop research in. He believes Oxford University is a strong brand and intends to use its strength in such areas as intellectual rigour, to catapult Said Business School into the European top league.

John Kay was asked what he considers to be the most pressing issues or 'hot topics' of our time which corporations of any size in advanced economies should be thinking about. He believes there are essentially two major ones.

'First, there are all the things associated with the long stock market boom, together with the increased importance of financial markets, and their greater influence on corporate behaviour.

Notice that, in my view, the Internet does not come into my discussion as a "hot topic', except rather marginally under competitive advantage which I shall speak of later'.

He emphasises that the stock market has not been a major source of new capital for industry for a long time. Its influence is much more in the sphere of valuation. Stock markets are currently having two kinds of effects: first, the dominance of deals like mergers, acquisitions and divestments is encouraging a financial markets orientation in the strategic thinking of corporations. Second, is the appearance of a particular type of short-termism which has come from expectations of earnings growth way ahead of the underlying growth of markets or the economy. These can only be met by short-term cost reductions with no certain and long-run impact on the valuation of businesses.

As a management educator, he prefers to take the long view of management education, predicting it in the future to settle down into a professional structure akin to that of medicine or law, as the discipline matures.

So, how are companies reacting to stock markets setting valuations and benchmarks rather than acting primarily as conduits for investment capital? John Kay thinks corporations see themselves as having little choice over this new role. In large measure, they

European Management Journal Vol 17 No 5 October 1999 541

MANAGEMENTEDUCATION

go along with the view. Increasingly, top managers' total earnings are tied to what is happening in the stock market.

In his view, the second current pressing issue is competitive advantage. He believes that, in any gener- ation of managers, competitive advantage is based on distinctive capabilities - things some firms can do themselves which other firms can't, even when the latter realise the benefits that are being generated. At this point John Kay is keen to introduce information technology and communications technology and their effects on business behaviour.

'There is a good deal of naivetd around concerning the effects of these technologies. For example, it is widely believed that the greater ease with which information is transmitted reduces the role of intermediation in information. I actually think the opposite'.

He explains this view in the following way. As products become more complex and information more elaborate, intermediation in various aspects is becom- ing a more important part of competitive advantage. Examples are: the place of branding and reputation in relation to managing products vis-a-vis consumers; the part played by gateways in terms of access to the Internet and electronic commerce, and in terms of the kind of intermediation that publishers use across the whole range of media; and the ability to handle information, not only the quantitative sort which has been the object of most transformation so far, but also the qualitative kind which will never be transformed in the same way within organisations - all these become a more important part of competitive advantage.

A simple way to illustrate this point is to compare the largest firms that exist today with the largest firms at the start of the Century, say Merck, Microsoft and Philip Morris with Singer or US Steel. Just looking at the sheer change in physical size of the products that the former firms produce, it is possible to see how the nature of competitive advantage has shifted from size, market power and market dominance to products in which most of the value lies in what is added to them rather than in the resources that go into them.

He believes knowledge management is relevant to this point, in at least two aspects. One is an inter- mediate option which is the ability to process and package information in a way that is actually useful to consumers. The second is the fact that most, or a large part, of the information in corporations is qualitative not quantitative, ie., it is tacit knowledge, and the capacity to process that knowledge within an organisation that is not transformed by information technology in the same way as what we may call "physical data' is, can be just as important a part of the information revolution as the transmission of it.

On the question of whether this kind of qualitative

information is best handled by 'professional' knowledge managers or by being diffused throughout the organisation, he believes that, by the nature of the 'tacitness" of qualitative information, it needs to be managed by diffusion. Branding and intermediation can be regarded as skills of knowledge management in a way. Possibly there is room for both - specialised management and broad-based management of knowledge. But the notion that an exclusive knowledge management division should be set up in an organisation is as preposterous as the idea that planning in a corporation should be handled by a strategic planning body. To be successful, the management of qualitative knowledge has to be integral to the firm's operations.

Asked if the current liberalisation of international capital and trade flows plus continuing domestic commercial deregulation are leading to governments having less influence on the company sector, John Kay has a contrarian view.

He is not at all sure governments do have less influence. There are still good parts of the private sector which are either extensively regulated, as with financial services and utilities, or whose main pur- chasers are public sector or quasi-public sector organisations such as in the defence or pharmaceuticals areas. Even in other fields, government influence can be strong.

"Take Microsoft, which may be the most successful company of the current decade. Its achievement comes from a particular interaction between the structure of the intellectual property legislation we have on the one hand, and the structure of anti-trust legislation that exists on the other. If either of these had been slightly different, Microsoft would not have the market position it enjoys. So the role of governments in influencing the success of private sector corporations remains large'.

He also has positive views on another pressing issue of the moment, European Monetary Union and the Single Currency. Did he give any support, he was asked, to a 'disaster scenario' in which Member States withdrew or at least defaulted on their responsi- bilities? Will the system survive, for better or worse?

He sees the system as a risky venture. Neither EMU nor the SEC will break down, but everyone should be aware of the possibilities that they may do. There can be no certainty that they will succeed and the consequences of failure are severe. In a sentence, it will be a rocky road that we will probably get to the end of.

If the system did start to go badly wrong or even fall apart; it would give rise to speculation. There is a big difference between being 100 percent confident a system will endure and being 99 percent sure. There is a potential instability in EMU and the SEC that is intrinsic. Reiterating, the most likely, though not cer-

542 European Management Journal Vol 17 No 5 October 1999

MANAGEMENT EDUCATION

tain outcome, is that the system will work, and that the Euro, in particular, like any other currency, will go through patches of being strong and being weak, but the show will stay on the road.

As far as withdrawal is concerned, it's hard for Mem- ber States to do this, after all, voluntary withdrawal is, in principle, not an option (a "business novel' could be written about the weekend a withdrawal took place). But a more probable 'disaster scenario" is one where, for example, Euro-denominated assets in Germany are no longer regarded as equivalent to the same Euro denominated assets in Italy. Disaster will loom when people begin to think like this.

On management education, John Kay was asked if he saw much evidence that business schools are dealing with currently important business and management issues in their MBA or executive development courses, or was the provision still all pretty traditional?

He prefers to answer this question by coming at it from a different direction.

If one were to look at business education in (say) 50 to 100 years" time, it will probably look like most other forms of professional education - such as medicine or law. That is to say, young people going to university now, can study disciplines that are basic to a profession; if it's medicine, then anatomy and physiology, if its engineering, then physics and mathematics. Their training then develops as they study more specific applications of that basic knowledge, and they move on to periods of supervised training where they acquire practical skills. Then there are roles for post-experience qualifications as part of a process of continuing professional update and for developing special- isms within that profession.

He believes management will go that way. The rea- son that it has not already done so to date is partly due to the relatively short period of time people have devoted so far to professional management education and partly because the study of management is not sufficiently rigorous or disciplined enough to be cap- able of being organised in the kind of professional way described. One has to be optimistic about management research and management education, and this means believing the professionalising of management education will eventually occur.

"If the limited amount of management education that is currently provided were to be too concerned with what is happening in this week's newspapers, we would be heading in the wrong direction. There is much work and training to be done before students reach that level of concern. I think this contemporary matter will ultimately be in the fabric of MBA courses because MBA courses will be part of continuing professional management education'.

But what of the current trend to 'in-company" management training (the 'company university')? Will

this not continue at the expense of the fixed-location business school? He thinks there is room for both. The trend will continue, but not at the expense of fixed-location business schools because the overall market will grow. A university like Oxford can pro- vide a management education very different to that which takes place in the market environment, and the only development of tailor-made programmes that Said Business School will be undertaking will be with a relatively limited number of companies with whom the School has a wider set of relationships. The Said position is not to be an aggressive competi- tor tendering for company-specific courses.

He comments on the use of information technology in management education (eg., computer-based learning, CD ROMS, multi-media case studies, internet research and distance learning), and particularly whether all these modes "de-humanise" management education. Although he thinks IT does involve some 'de-humanisation' of management education, successful education has to embrace all forms of learning. It seems inevitable that the person will always loom large in education; it is not difficult to think of so many people who have been inspired by their teachers. But this is not to say there is not a large role for CD ROMS.

It is certainly debatable whether the method of lectur- ing to large groups is appropriate to management education compared with other methods. But inter- active class discussion is a very important part of MBA courses and is part of the excitement for students. It is difficult to imagine that ever 'technologi- sed'.

John Kay was then asked about the prospects and future of Said Business School and especially to out- line the main features of the School's work where they contrast with those of longer-established com- petitors.

He emphasises that Said does have distinctive characteristics to its position in the management education market. These centre around what he terms the four Ts.

These are as follows. First is intelligence. Because of the Oxford name and the Oxford brand, Said has to aim for a top-of-the-market intellectual position and to go for high-grade students and fairly rigorously- demanding courses.

Second is integration. This characteristic will differen- tiate Said from the most successful European business institutions which are largely stand-alone, unlike those in the US. Said has an almost unique opportunity in Europe to develop a business school in a major international university. John Kay wishes to make the most of this by buying in faculty from other disciplines around the university, for example, from anthropology, economics or international politics, and to develop courses that reflect this

European Management Joumal Vol 17 No 5 October 1999 ,543


integration. At Oxford it should be mentioned that there is built-in social integration in the sense that all the MBA students and business school faculty are also members of Oxford colleges and can 'have another life', eg., at Balliol or St John's, students can meet philosophers and physicists, not just their fel- low MBA students.

Third is individuality. Oxford is known for its one-to- one tutorial system, although clearly an MBA course cannot be run solely by tutorials.

Finally, there is internationalism. This is not the usual narrow meaning normally used by business schools, ie., claiming that their students and faculty come from all over the world; there is a more fundamental meaning to the Said view. Management education is rooted in the American business culture. In fact, there are many different business cultures around the world. Said Business School aims to be sensitive to the different business opportunities thrown up by these cultures.

The 'free-standing' European business schools like INSEAD and IMD obviously have strengths like budgetary flexibility. Said Business School aims at similar budgetary flexibility to match its strategic flexibility. It needs to reach the point of being a viable, stand- alone institution as soon as possible; this will not be achieved until all the funding requirements for the new build- ing are satisfied. Said has to be self-funding as part of its mis- sion. In principle, Said should get the best of both worlds - the benefits of being part of a university without the disadvan- tages.

Third is international business with a new focus, ie., less on case studies of corporations like ASEA Brown Boveri, and more on the multiplicity of business cultures, corporate responses to them, and different kinds of competitive advantage that are required to handle these business cultures.

Fourth will be business economics - a personal mis- sion for John Kay - and an attempt to recapture much of the strategy area for economics. Strategy as a management subject grew up in the 1960s with hardly any basis in economics. At that time, economists were not very interested in the kinds of issues or with communicating in a way that was relevant to business people. Rather, they were interested in public policy more than business policy. 'Excess profits' were a problem, not a desirable goal for firms.

"Economics was really in the grip of what was called the "structure/conduct/performance' paradigm which, interest- ingly enough, was the framework that Michael Porter used and translated into business terms - which is much more concerned with the factors that influence the evolution of industry than with the factors that explain differential per-

There are not "10 tips on

how to manage your

business'. Rather, the subject

should help people to

understand and therefore be

better placed to solve their

own idiosyncratic

problems

Research is an important part of Said Business School's portfolio. The School is intended to be research based. Four areas have been chosen as essential to developing research.

First is the management of science-based, intellectual property-based businesses. This follows in part from being part of a university where there is a good deal of that type of business going on around the institution. A natural and appropriate thing for Said Busi- ness School to undertake is to direct people from the rest of the university in these kinds of ways and draw on the experiences of companies that are in and around Oxford.

The second area is corporate finance which is intended to be finance aimed more at issues for general managers than aimed at study of financial markets.

specific situations.

formance within an industry'.

These are the kind of issues which he wants to use modern economics to tackle. Business economics cannot prescribe in a generic way to managers. There are not '10 tips on how to manage your business'. Rather, the subject should help people to understand and therefore be better placed to solve their own idiosyncratic problems. His analogy is with doctors who don't have generic treatments (they did 200 years ago). What is needed from the modern doctor is the application of general knowledge in medicine to

The modern manager ought to operate in the same way. There is no incompatibility with general knowledge applied to specifics as long as the general knowledge is relevant. If there is criticism of broad-based academics in the management area, it is that the broad base of their knowledge is not meaningful or relevant to specific situations and, of course, it should be.

He is conscious that others may perceive tension or potential tension between the values and ethics of a university like Oxford and those of business, but does not personally believe this to be so. There is no tension between intellectual rigour and practicality if the intellectual rigour is of the right kind. Much of the criticism of over-theoretical work is that the theory is not actually very helpful. The most convinc- ing counter to this argument is to point out that the jewel in the crown of a business school is finance

544 European Management Journal Vol 17 No 5 October 1999


theory which combines being the most rigorous of any subject taught with being something of direct practical relevance - finance experts are much sought after and very well paid. What business schools should do is build up equivalent kinds of knowledge in other areas.

On the fashionable business school strategy of networking, he stresses that the issue is an important one. Networking is inevitable; indeed, the whole philosophy which says there is a multiplicity of business cultures and environments supports it. In the case of Oxford University, since it is such a powerful brand, it is necessary to be careful about the quality of any networks established or else a price will have to be paid.

Similarly, on the question of the different 'character' of business school faculty in comparison with those in other disciplines in a university, he feels that Said should go for contractual conditions for faculty which are closer to the INSEAD/IMD/LBS model than the usual Oxford model. Employment conditions must be more business-related. An institution like Said is likely to end up with an eclectic mix of faculty, some closer to the traditional university teacher with others in a more footloose, 'jet-setter' mould.

Finally, John Kay was asked whether he felt he could leave a personal imprint on Said Business School's development. He feels, first of all, that he needs to take the School, with one of the best brand names around - Oxford University - into the top league. That is a personal challenge. Second, his aim is to

create an institution that is distinctive but not eccen- tric.

He would feel content if two of the elements of distinctiveness that he mentions earlier - two of the 'i's:" integration and internationalism, were achieved early. Integration emphasises disciplinary integration, and internationalism emphasises multicul- turalism. These are two aspects of distinctiveness which fit very well the development of a business school in Oxford and which also link with his own views on the way he would like to see management education progress.

JOHN KAY, Said Busi- ness School, University of Oxford, The Radcliffe Infirmary, Woodstock Road, Oxford OX2 6HE.

Professor John Kay was until recently Peter Moores Director of the Said Business School at the University of Oxford. He is currently a Direc-

tor of London Economics, a leading independent consultancy in the UK. His long academic career includes Oxford University, the Institute for Fiscal Studies and London Business School. A prolific author, he also writes a fortnightly column on economics and business issues in the Financial Times.

European Management Journal Vol 17 No 5 October 1999 545

Documents

Management Education: An Interview with John Kay