Designing a tech MBA

In an age of technology, many students are seeking a specialised MBA for the tech sector or tech-centric companies, argues IE Business School’s José Esteves

Technology has emerged as one of the most relevant economic sectors in recent years, with technological innovation driving growth and labour productivity across all areas of the economy. The adoption of emerging information technologies is influencing employment and remuneration, requiring fresh skills, creating new jobs, and not only changing the nature of tasks in which workers are engaged but also the workplace environment.

At IE Business School, we believe the best way to meet these challenges is by designing a specialised MBA for the tech sector and/or for tech-centric organisations.

Why a tech MBA?

We identified four key business realities that a tech MBA can address: the rise of technology ecosystems; digital transformation; constantly evolving technology; and technology shortfalls.

1 Technology’s contribution to economic growth and labour productivity 

In a 2017 report, Huawei and Oxford Economics estimated that ‘the digital economy is worth $11.5 trillion USD globally, equivalent to 15.5% of global GDP and has grown two and a half times faster than global GDP over the past 15 years’. An analysis of the top US companies by market capitalisation shows that tech companies are the highest valued, among them Microsoft, Apple, Amazon and Google. In the past two years, some of these companies have reached capitalisation of $1 trillion USD.

2 Digital transformation 

The vast majority of companies are engaging in transformation initiatives as part of a rethink of their global strategies, business models, and organisational approaches.

3 Evolution of technology 

While the accelerated adoption of technologies, such as cloud computing, robotic automation, AI, machine learning, the internet of things (IoT), and 5G technologies is promising for the tech industry, it also demands continuous updating of skills and knowledge. 

New jobs will undoubtedly be created in this scenario, and the demand for data sciences, coding, digital ecosystems, and e-commerce will continue to grow. 

However, it will be difficult for workers to develop the skills needed in these areas. The mismatch between the skills required and workers’ capabilities will necessitate the expansion of retraining programmes.

4 The global tech talent shortage

Technology is creating more jobs than any other, but by 2030, it is estimated that the technology, media and telecommunications sectors will have a shortfall of 4.3 million workers worldwide, according to a 2018 report by Korn Ferry. 

Shortages in these industries are expected to cost $449.7 billion USD in unrealised revenue, while fintech and BFIS (banking, finance, insurance, and security) will have a shortfall of 10.7 million workers by 2030, resulting in $1.3 trillion USD in lost revenue. 

The situation when focusing in on specific countries and regions is similar: the European Commission, for example, has forecasted that 100,000 data-related jobs will be created across Europe by 2020. Since 2010, the number of tech-related jobs in the US has increased by approximately 200,000 every year, and the US economy is increasingly reliant on tech labour for its survival. Based on data from the US Bureau of Labor Statistics on projected employment in the year 2026, service-providing industries are expected to account for the majority of 11.5 million newly created jobs. 

Diving deeper into technology

IE Business School decided to create a tech MBA after listening to recruiters and students. Students are increasingly interested in working in the tech sector, or for tech-centric companies, or in tech-demand roles. In response, two years ago, as part of the International MBA programme, we launched the TechLab. 

However, we noticed that some of our students were looking for more. They wanted to dive deeper into technology – not only learning about the latest trends, but also being able to understand and leverage these emerging technologies and tech ecosystems fully. At the same time, our corporate partners were increasingly looking for graduates with a clear understanding of technology and business analytics as well as business acumen. 

The ingredients of a tech MBA 

IE Business School’s Tech MBA is a tech-centred programme that blends three modules – ‘business mastery’, ‘technology immersion’, and ‘transformational leadership’. Each of the three modules is outlined in more
detail below: 

1 Business mastery 

At the heart of any MBA programme, whether general or specialised, lies a curriculum in business management, strategy, and economics.

In the case of our specialised Tech MBA, this part of the curriculum is designed to ensure students are equipped with the knowledge and lasting growth strategies that every tech-centric business needs to succeed in the current landscape. From the very beginning it applies case studies and examples taken from the tech context.

2 Technology immersion 

This module provides a deep understanding of the tech ecosystem, exploring the processes and challenges that underpin technological innovation, and endowing students with the skills needed to manage within firms that are focused on the areas of tech and innovation.

3 Transformational leadership 

The leadership module prepares students to be leaders who can design, drive and manage change by expanding their mindsets, skills and tools in a volatile, uncertain, complex and ambiguous (VUCA) world of work. 

This is the glue that holds the programme together and differentiates our students. It is the vital element that will equip them to lead the future.

We cover core courses in all three modules, which are fully integrated. The programme runs for one year, across four periods, and the first two periods include tech-related industry forums which take an experiential learning approach and provide a practical perspective with workshops on fintech, insure-tech, edutech and so on, all featuring leading experts.

The tech MBA learning journey

The learning journey ensures that students acquire technology, management and transformational leadership competencies, using an integrative approach made up of three phases: ‘exploration’, ‘action’, and ‘immersion’.

During the ‘exploration’ phase, students discover tech and business through specialised courses. In the ‘action’ phase, they undertake a specific technology experiential learning approach, and in the ‘immersion’ phase, they choose from electives to sharpen their business and tech knowledge.

During the programme’s core modules, the focus is 55% on tech and 45% on business. However, electives mean students can customise their tech MBA to their specific needs. If all the electives chosen by a student are tech-related, the percentage of tech courses covered by the end of the MBA would be more than 75% of the total studied. 

‘Tech career treks’ take place regularly throughout all four periods. Students spend two to three hours visiting a global tech company with the objective of learning about its company culture and priorities, and also learn more about career opportunities where applicable. Treks typically happen within Madrid or Barcelona.

The School’s Tech MBA will be run separately from its International MBA. We will also create a specific portfolio of electives for the Tech MBA. However, we will allow the students of both MBA programmes to share the portfolio of electives. Plus, students will be able to network across the two programmes during extracurricular activities and events (for example, the School’s TechIE annual conference or IE Global Innovation Challenge).

The classroom experience

Students who feel they would benefit from one-to-one time with professors, or who prefer working in groups, should consider on-campus MBAs as these allow for greater face-to-face interaction with classmates and instructors, not just academically, but also socially. 

The social events that materialise from being on campus also provide valuable, yet unofficial, networking opportunities. Students should never underestimate the opportunities that a coffee break can generate, and will want to take advantage of facilities and resources on campus, including extracurricular activities, lectures, libraries, and athletic facilities. 

In addition, attending a full-time MBA provides easy access to advice, career counselling, and other on-campus student services and activities, all of which help students build a robust professional network.

José Esteves is Associate Dean for the International MBA and Tech MBA programmes at IE Business School, Spain. 

Exploring Business Schools’ challenges in Latin America

We share insights from leading Business School professors who attended AMBA’s 2018 Latin America Conference in Buenos Aires, Argentina, about their Schools’ current strategies, challenges and opportunities. Interviews by Jack Villanueva

Alejandra Falco, Strategic Management Professor, Universidad del CEMA

What challenges do teachers, instructors and professors face when using online technologies in their courses?

The main challenge is to understand that teaching online is not the same thing as teaching face to face. You have to think about the course and your class in a different way. When you teach face to face, you are between the student and the materials so you can see what’s going on in the class, you can see the reactions of the students to what you are saying and the material you are using. This does not happen in the online environment so you can’t make decisions on the spot. 

Schools need to help instructors understand that [online learning] is different [to classroom learning] and make sure that they don’t reproduce what they do face to face in an online environment. It needs a transformation. 

In terms of the online MBA and studying from distance, do you think the experience, learning and the outcome for these students is the same as for those who learn face to face?

It’s an interesting question because the challenge we face in an online environment is to foster learner-to-learner interaction. It is easy to interact between instructor and learner, but the challenge is the learner-to-learner interaction. 

There is something that happens naturally in a face to face environment, so if we can manage this interaction adequately and develop tools to allow the students to interact among themselves, the online option will be richer than the face-to-face option. If we can have the same attributes in an online environment, we add much more flexibility for the student to choose when and how and where he or she wants to study.

Ignacio Alperín, Professor of Creativity and Innovation, Pontificia Universidad Católica

How is business thinking changing around creativity?

Creativity is a process that involves more than one person, it is never an individual idea; it is a communal kind of work. Creativity is the step prior to innovation. Creativity is putting together the correct ideas, innovation is putting together the correct product or service and making it happen in real life. 

Every company expects their graduate or postgraduate students to be open to the idea of being creative, working in a different way, of accepting different manners of work ethics that are not traditional. This not only involves those who come in to work for a company, it has a lot to do with leadership as well. 

Perhaps there is an issue with expectations versus what actually happens in companies. There are too many bosses and too few leaders. There are a lot of people who tell you what to do but very few people who inspire others to do things. In that regard, creative leadership is also a major subject and companies are slowly coming around to the idea that they need to change their leadership style.

Do you think Business Schools are sufficiently inspiring to instil creativity in their students?

When we’re children, we’re extremely creative and we don’t have limits. We like to explore and ask about everything. In Schools as it stands, the creative spirit is squashed by a system that requires students to be right or wrong. 

Creativity is a gift and should be developed like any other talent. We have all been provided with the talent of creativity but when people get to university or Master’s level, they have been kept so far away from their creative juices and, in many cases, it is very difficult to bring them back in touch with themselves and give them inner strength because creativity is a strength. 

We are completely and constantly improvising our lives. Companies, for a long time, tended to squash this, but today, organisations realise that they need to be open and think laterally. If the education system can change enough, many of the problems we face today will be gone because people will come up line already living their creative ability throughout their careers.

In your role, are you trying to unlock existing creativity or teach the creativity?

It’s a bit of both. When I find a master’s class with 30 students, most of them are professional people. They think they know everything and have already made it, and in some respects they are right. 

They will be future leaders, but it’s sometimes difficult to tell them: ‘I am teaching you and I don’t know everything; perhaps you should relax a bit and question yourself about the facts you thought were correct.’ 

By unlocking that vault they will find another Pandora’s Box of issues and problems, but if they learn how to handle them, they may find a way to make their work more effective, their company profitable, their life more exciting and more enjoyable; they may go home and feel like having fun with family instead of taking their troubles with them and feeling miserable when they’re not at work. 

Part of my job is unlocking those talents, it has to do a lot with people’s fear of being wrong in front of other people. After that, we teach processes, ideas and concepts that can help students unleash creativity in themselves and the people with whom they work.

Is it the Business School’s responsibility to lead students towards an uncertain path?

Many students believe the world is divided into creative and non-creative people. We try to erase all this and explain we are all creative – different types of creative but all creative. 

Sebastián Auguste, Director Executive MBA, Universidad Torcuato Di Tella

What are your views on the current global MBA market?

The MBA is the most popular programme within the Business School: about 79% of the applications we receive are for the MBA programme. Demand is growing in Asia, Europe and the US, and it’s increasing in Latin America. The full-time MBA is declining and numbers are increasing in executive and part-time MBA programmes. There is also strong demand for some Master’s degrees such as business analytics. 

How is the EMBA faring?

The EMBA is small but it’s growing in many regions. Many students finish at university graduate level and decide to do a speciality such as a masters in analytics or finance, and then they go for the MBA later when they’re older. Young people are trying to gain more technical abilities; older people are trying to gain more general skills.

How popular is the online MBA?

The numbers show that the online MBA is growing. I previously expected the number to grow, but the increase isn’t as great as I expected. There has been a strong increase in the blended format, even in EMBA programmes. Online is coming very strongly but I don’t see the online MBA replacing the experience of the EMBA or the part-time MBA. You have to learn and you have to be there to learn. It’s quite difficult to learn online.

What’s the effect of specialist programmes on the MBA and on
Business Schools?

Specialist programmes are going to relegate the [generalist] MBA. There is going to be a fall in demand from young people wanting to do an MBA, but an increase in older people wanting to do one. 

In Latin America, you have very technical and specialised degrees so there is less demand for special programmes. Many universities are moving in this direction of having more general graduate-level study, so you’ll need more specialisation later on.

Carla Adriana Arruda Vasseur, Associate Dean, FDC – Fundação Dom Cabra

Why do you think Business Schools should have a role in social development? 

We are the ones who are transforming the leaders of our society. We are working with business managers, leaders, entrepreneurs, company owners, and people who really run the economy of the country. If we don’t have this kind of focus, we will continue to live in a country with a lot of inequalities so it needs to start with us.

How can Business Schools leverage an impact on society? 

All Business Schools have some sort of social impact and development in their value prepositions. Talking is one thing, leading by example is another. We need to provoke students to think differently and to do differently. We need to provoke them to really make a change. And it won’t be just about talking and showing them our mission. It has to be in every single class we give, in the projects that we send them on, it has to be included in all our initiatives.

How can Business Schools help students have a more impactful role in the world of tomorrow?

If you look at Business Schools, most of their students are from the upper portion of the social pyramid and we need to show them how they can really make a difference – in every single class and in every single project. 

A lot of our students come to us because they want management tools. They want to increase profit in their corporations, they want to better themselves in their careers. And, from day one, they realise we’re concerned about economic development but we’re also very concerned about social development. 

Do you work with other Schools to push this idea forward?

We have a partner we’ve been working with on modules and we’re putting an emphasis on that. But I think we can do more. I’ve been talking a lot about that [during this conference] with partners. We need stop considering ourselves as competitors [with other Business Schools] and consider ourselves as ‘co-petitors’ and cooperate more with each other.

Is it a case of starting locally or looking at the bigger picture and effecting change at the top?

Begin with what’s feasible and build up. 

We’re starting to shape the leaders of tomorrow. We’re starting with the students of today to [help them] have a deeper understanding of social development and a deeper understating that there are larger problems in the world. But is there an issue with the bigger businesses themselves not recognising it or not recognising it fast enough and therefore the student not having an outlet for what they want to do?

A lot of the boards require their corporations to think about the social side. Some suppliers refuse to supply to organisations that don’t care about these issues and clients are not buying from them. 

We, as professors of business corporations, need to set the example. 

Michel Hermans, Professor of Human Behaviour and Human Resources, IAE Business School – Universidad Austral

How can Business Schools help students develop skills beyond the analytical tools in the curriculum through action learning?

It’s not only about teaching rational decision making. It’s about helping students anticipate risks and [influence] people who are especially relevant in certain contexts. That’s what we do and this is the added value we consider action learning has. This reflection part is a very important role faculty have. 

One thing is to think about is how to evaluate a company in turbulence. Another is to think how a company can actually use what it has – its resources – to transform its strategy for much broader markets. Think about internationalisation and the acquisition of companies in emerging markets, and then present this analysis to senior managers. 

Can students themselves better prepare for their careers through action learning?

It depends on the student themselves. 

Especially in the Latin American job market, recruiters are looking for ‘plug-and-play’ students so when they roll out of their programme they want students who need little time to be fully functional within the context of their companies. 

If they are able to find students who are proactive, and have used this productivity to actually do something within the context of their programme and learn something from that, it’s highly valued. 

How important is action learning in fast-tracking understanding around the need for adaptability and evolution within businesses? It’s like moving house. If you don’t lay foundations in the MBA programme (which would be knowledge and analytical skills) it’s hard to start thinking about action learning in the first place. 

You have to lay a solid foundation in the first part of the programme and then build on this with follow-up courses. That gives us, as faculty, the confidence that teams are able to benefit from action leaning. We launch most of our projects towards the end of the programme because that’s when students take advantage of the projects they are being offered that they themselves propose. 

We’ve seen many students use their action learning projects to move into new career tracks or to find a different job in companies with whom they collaborated for their action learning projects. 

If you do a full-time MBA programme and you are away from the job market for a full year, gaining contact with the job market again – with employers and organisational life – is fundamental to a follow-up career. 

Juan Pablo Manzuoli, Strategic Marketing Professor and Director of MBA, UCA Business School

What do you consider to be the main disruptive trends students are facing?  

I have highlighted deep trends that are not often evident. For example, millennials want the earth, but they don’t have special powers. Loneliness is another powerful trend, as is self-exploration.

What’s next for the MBA? 

We have to have a convergence between the needs of people and technology and make an improvement. Make things better. We need to adapt and be flexible in how we think and in our business models. This generation is teaching us how to make improvements in different ways not only with the technology, but with emotions. 

Luciana Pagani, Professor of Strategy and Competitiveness, Saint Andrews University

How is the digital age transforming the MBA experience?

Changing behaviours in individuals as learners, and technology, are providing opportunities to deliver a different experience [to students], enabling people to access courses no matter where they are. 

What challenges is the digital age presenting to the way Business Schools teach?

The digital age is creating a new world of opportunities for businesses, while also causing a lot of pressure and setting very different type of challenges. Businesses need to change the way they lead. 

Technologies have to be implemented and customer experiences are transforming, so at the company level, transformation is amazing but very challenging. 

Business Schools have to rethink their value proposition massively. They must consider how they are going to offer something of vital importance to their students to enable them to learn and access the best faculties all over the world, offering a unique experience that blends the best from the physical world and the digital world. 

It’s an enormous strategic and operational challenge for universities.

Schools are transforming in terms of content, so all the strategies and management content required to lead in the digital area is being added to traditional content. They are also adding a broader spectrum of elective courses to meet the specific needs of students. 

They are forming partnerships with industries, with other universities worldwide and with governments.  

They are also transforming their infrastructures in order to provide space for innovation, creativity, and experimentation and they are working across platforms to collaborate, and to enhance their value proposition, with the best faculty, the best universities and the best companies as partners.

Do you think Business Schools rising to the challenges sufficiently quickly, given the current economy? 

The challenge of the fourth industrial revolution is too aggressive for everyone. Universities are moving forward, but it would be nicer if they could move faster. However, it’s not easy. 

I hope the pace will increase and we will have more and more examples of convergence to the new value proposition in the near future.

Melani Machinea, Professor and Business Development Director, UTDT Business School

Tell us about the development of your specialised master’s degree?

A few years ago, we realised we didn’t have an offering for recent graduates who wanted to pursue a career in business. Either they had to do a Master’s in finance or they had to wait five or six years before they could do an MBA. At the same time, we discovered a need for very specific skills, so we designed a Master’s in management which merges the two sides of the story: business for those who come here from a science background and, for those with a business background the skill set they need for the new corporate world. 

We looked at the world. In Europe, there were a lot masters in management programmes which were launched by Business Schools, in addition to their MBAs which are still their flagship programme. In the US, we have seen the emergence of master’s in business analytics programmes. We decided we would have a competitive advantage if we could offer both management and analytics in the same programme.

The first challenge was the type of students we wanted to sign up. We decided early on that we wanted recent graduates or people with little analytical experience who could learn about areas such as  programming and coding through the courses that we were going to teach. When we launched, we realised that there were a lot of men in mid-to-higher management, people with 10-15 years of experience, who said they were lacking this expertise and wanted to do the degree. We had to make a decision at this point and we decided to stick to our initial plan of targeting younger professionals, while just offering short courses for more mature professionals. 

Do you think the MBA is evolving fast enough or do you think there is so much more that could be done?

I think the MBA is still a flagship programme in Business Schools, and the challenge is to maintain and update it to make it relevant. Our hope is that our students from the Master’s in management and other programmes will come back in five or six years to do their MBAs when they realise they need other skills related to management and strategic leadership.

The ever-evolving MBA

Only those MBA programmes that adapt quickly to new challenges will succeed in the long term. ESMT Berlin’s Rick Doyle explains how his Business School is ensuring ongoing evolution

As we constantly read, hear and experience, these are volatile times – politically and for business. 

Digitisation and the disruption it causes have made it onto Business School campuses and into curricula. Vast environmental and social challenges, such as climate change and an increasing disparity between rich and poor, have done the same. MBA programmes are constantly evolving to help students recognise upcoming challenges and give them the skills to be successful, responsible business leaders and entrepreneurs. 

An MBA helps students change their careers by continuously challenging them through an innovative curriculum and programme design. Throughout the programme, they work on academic and professional projects that are designed to place them in unfamiliar situations. The groups rarely have two students from the same country or professional background. 

This fosters a learning environment in which they can explore new areas of business, develop fresh competencies and a new career plan, while working in an international environment. By the end of the programme, students develop managerial and cross-functional skills needed to branch out in new directions and to succeed professionally. 

Constant evolution

European MBA programmes have to evolve constantly to remain competitive in the market. As most people know, a typical MBA programme in Europe lasts one year. The goal is to offer a general management programme in a condensed format. This is so candidates minimise their time out of the workforce, while gaining practical experience that helps them change or transform their career. 

Some MBA programmes are shorter, while longer ones might offer a modular format allowing the student to customise their studies. For the latter, students can often add on exchanges, specialisations or internships, but they spend more time out of the job market, so there is, as always, a tradeoff. 

The ESMT MBA programme lasts 12 months. To get the most out of the one-year programme, students need to have a clear idea of the outcome they would like to achieve. Most students have significant work experience from the beginning, with the average experience of ESMT MBA students being six years. By participating in the practical aspects of the programme – company visits, masterclasses, international field seminars and consulting projects – our students gain experience in a new field or delve deeper into managerial issues in a sector already familiar to them. 

Combining theoretical and practical aspects of the MBA is critical if students want to gain the skills necessary to become better managers. These ‘soft skills’ are often missing in company hierarchies and are aspects of the MBA to which we pay particular attention at different stages. Developing a career plan, 360-degree feedback, networking, negotiations, leadership, public speaking and many other courses are a vital part of the MBA. 

We would be remiss if graduates were not going away with these skills. In fact, companies reiterate again and again how indispensable they are for MBA graduates to become leaders in their companies. 

International students

One notable trait of European MBA programmes is the international student population. ESMT consists of 95% international students, and most European MBA programmes fluctuate between the 90-95% international mark. Students graduate after an intense experience working with international teams comprising five-to-eight nationalities and the cultural perceptions that come with diversity. 

Every class discussion, lunch discussion, case study, project and so on, is reviewed and discussed from multiple international, professional, and personal perspectives. 

Companies often tell us that the best graduates are those with the skills to navigate an international work environment while helping the company grow and remain relevant on a larger scale. In turn, graduates with these skills are equipped to navigate their careers and manage or effect change for themselves years after graduation. We see this year after year with students coming from backgrounds that typically would not lend themselves to moving into the specific career to which they aspire. 

For example, one ESMT graduate recently moved from a military background into an international career in a major logistics company. Another graduate went from digital marketing to consulting for an international consulting company and yet another previously worked for an non-governmental organisation (NGO) in sustainable development, but is now also working for a major international consulting firm. These are but a few examples with corporate ties, but every year, graduates also put their skills to work for SMEs and start-ups. One of the most recent cases of this is two alumni who founded Space Shack in Berlin, a co-working space and incubator. ESMT students and alumni can use the space and work with
their own or other start-ups during and after the programme. 

We maintain very close relationships with the 25 founding companies of ESMT. They, along with many other companies, are ever-present during the MBA. The level of corporate engagement varies from year to year and ranges from guest lecturing in class, leading master classes, company visits, internships and projects – and of course hiring graduates after the programme. Often, the representatives from the companies are ESMT alumni themselves. 

We spend a lot of time building long-standing relationships with these organisations. It is important that they know MBA graduates have a lot to offer and are equipped with the skills the company needs. Relationship building is the best way to ensure that there is a strong level of knowledge transfer between the companies and ESMT. Company visits in Germany, interview days, individual interviews, and class participation are just a few ways in which we maintain these connections. 

We also involve company representatives in workshops and learning exercises for students. A good example is the workshop about salary negotiations, hosted by an HR director of one of ESMT’s largest recruiters. 

Another example is the annual mock interview day, which is supported by several recruiters from real companies. They practise interviews with MBAs based on a real application, and give constructive feedback. We bring diversity into this workshop by working with interviewers from different industries: from large corporates to Berlin based start-ups. For the case interview practice workshop, we work with real consultants from our partner companies. 

Consulting projects are of utmost importance for the companies, the School and, of course, the graduates. Historically, hiring MBA graduates was not a popular option for businesses in Germany: the PhD was king in business culture. Now 70-75% of ESMT MBA graduates work in Germany each year. 

Integrating consulting projects into the MBA curriculum is a way to demonstrate the benefits on both sides of the spectrum. 

Companies can see, first-hand, the value of bringing in an international group of professionals to solve issues they may not otherwise have the capacity to evaluate. 

One of the cornerstones of ESMT is to promote responsible leadership and especially connecting that with management of innovation and technology, sustainability, and entrepreneurship. These areas ensure that companies and the MBA programme remain relevant as the business world changes. MBA elective courses such as ‘bringing technology to market’, ‘innovation and new product development’, and ‘sustainable supply chain management’ are all courses that touch on helping companies develop their long-term and environmental sustainability. 

These courses lend themselves to preparing graduates to think creatively and strategically while doing their jobs. 

Preparing better managers

It is with these concepts in mind that our career services office creates the consulting projects with our corporate and business partners. This year alone, there is an impressive list of consulting projects that help companies incorporate future-proof business concepts into their short-term plans, such as:

determining the viability of investment in an early phase 3D printing technology start-up by a leading global company to enhance its business channels and help in the development of future technology

conducting market research and a feasibility study for a leading global company to determine how camera-learning technology can be implemented and adapted to introduce the company’s new products into the mainstream market evaluating how current products for a global company can be best developed to incorporate augmented reality technology for the mass market determining an implementation strategy for a global company to enhance and create business channels and products for robotics and cloud-based technologies consulting with a Germany-based real-estate company to establish the social, environmental, and economic impact of the real estate industry. 

Not only are the consulting projects for companies a very effective way to get useful answers to the questions and topics they raise, but they are also an excellent opportunity to identify potential talent and start an interviewing and selection process. For the students, the projects are a great learning exercise and networking opportunity. 

The learning outcomes mentioned previously remain at the forefront from our first meeting with candidates, the application interview process, and during their job search. 

ESMT Berlin’s MBA classes are quite small, comprising about 65 students per year. To maintain a core group of students who complement one another and work together to achieve their career goals following the programme, we have to select those who are best suited to work in small, international groups and who thrive in a close-knit, cooperative environment. The application process is designed so that we work individually with candidates even before they submit their application. 

We encourage them to connect with students and alumni before applying and use the application interview as a key component to assess a candidate’s fit and motivation for the ESMT programme. This way, the candidates and the School are sure to make a decision that is right for both parties. We have to consider the strengths of the ESMT MBA curriculum as well as the needs of the market for MBA graduates at all stages of the programme lifecycle. 

We design our programmes to meet the needs of the market so that there is a direct correlation for everyone involved; for example, electives such as design thinking and digital marketing. In so doing, the MBA remains relevant for the future of business. 

Taking feedback from students and corporate partners into consideration, we have added a full range of leadership seminars and workshops to hone the management and self-awareness of participants. All MBA students have the option to enroll in classes on data analytics and organisational behaviour courses focusing on status in management. The goal is to prepare MBA students to be better managers. 

Pre-experience Masters programmes are more popular than ever and offer excellent opportunities for students to work with businesses and develop them for the future and embrace new technologies. However, this group of students has not yet developed the on-the-ground experience and leadership skills that MBA students bring with them into the classroom, following six or more years of work experience. It is difficult then to compare the learning and development that students are able to achieve as a result. 

Thus, despite the growth in pre-experience programmes, the MBA remains relevant by developing leaders with experience in general management as a key component for future corporate growth. At ESMT, we take specific steps to remain relevant. We continuously invest in faculty research and industry experience, development of forward-looking centres focusing on the latest trends in business, top-notch facilities, and a student population willing to take risks that will likely pay off or help them to land on their feet in new areas of business they have not yet thought of. 

Business Schools have to stay agile and on top of the changing business environment. This is especially true for MBA programmes. Only those programmes that adapt quickly to new challenges will succeed in the long-run. Despite, or perhaps because of this, I remain optimistic about the future of the MBA. 

By tapping into the creative resources they have at their disposal – faculty, staff, students, and companies – Business Schools have the potential to educate responsible leaders who are prepared for the fast pace of change. 

Rick Doyle is Head of Marketing for Degree Programmes at ESMT Berlin Business School.

The field of change

Nino Zambadhikze, MBA graduate and Head of the Georgian Farmers Association, talks about her career journey, current goals and the need for greater investment in women in business

Nino Zambadhikze, Head of the Georgian Farmers Association, completed her MBA at Grenoble École Management in 2016 and was selected by the World Economic Forum as one of the most innovative and social-minded leaders under 40. In an interview with David Woods-Hale, she talks about her career journey, her current goals and the need for greater investment in women in business.

Tell us about your career so far

Shortly after I graduated from the Humanitarian-Technical Faculty at Tbilisi Technical University, I went to New York to further my studies and took up a course in marketing.

I decided to launch my first business in the US. I took out a bank loan to buy up GAP jeans and send them to Georgia where my father’s friend was selling them in his shop. However, my father’s friend vanished, and I discovered there was no shop. This was my first failure.

I also recall becoming angry with my country. But I knew that if you jumped on a plane and flew just a few hours, an absolutely different life awaited. This was the biggest motivating factor in becoming an entrepreneur. 

After returning to Georgia, I still had to pay back the $20,000 loan I had in the US. My family had to sell everything in order to pay the money. These hard times lasted for almost a year, but in 1998, I started working as an interpreter for a Greek businessman operating in Georgia. I learned a lot from my employer; however, problems quickly arose as the businessman was forced to leave Georgia.

I found a job at an audit company in Tbilisi, where I met Beso Babunashvili, my eventual business partner. We started to export non-ferrous metals from Georgia and also opened a coffee house. In 2005, we launched the first three take-away coffee booths in Tbilisi.

One day in 2007, Beso went to Akhaltsikhe and bought two cows. This led us to launch a cheese production business. We submitted an application to the Millennium Challenge project and received US$125,000 in funding. Then I moved from Tbilisi to Akhaltsikhe and opened a farm. We created an agricultural company which is mostly in the milk-processing business, as well as animal-husbandry and food processing.

What does a typical day at the Georgian Business Zone look like for you?

I had already started my work with the Georgian Business Zone when I met Petre Tsiskarishvili, the Minister of Agriculture at that time. I told him I wanted to buy highly productive cows and start producing cheese. With the funds from the Millennium Challenge Corporation, we started to build a milk-processing plant. The only problem was that we couldn’t find a technician with modern knowledge in milk processing and cheese production. So I travelled to Turkey to study the profession, and also became a food safety manager. 

When September came, the cows stopped producing milk. I thought the cattle needed fodder, so I took out another loan to build a fodder-producing plant. But it turned out that the problem was due to the genetics of the cows. We eventually built our farm with the help of the Cheap Credit Programme and now produce 400kg of cheese daily. We have 100 cows, 70 hectares of agricultural land, 300 hectares of pasture fields, a five-hectare apple orchard, and a fish farm too.

Mornings start very early in Tsnisi. After breakfast, I start to make the rounds at my businesses. After that, I go to my office where I take care of clerical tasks. In the evenings, I visit my friends and we drink coffee and talk. Days are long travelling from Akhaltsikhe to Tbilisi and back.

Tell us about your involvement with Invest For The Future (IFTF)

I am an Honourable Country Coordinator of IFTF for Georgia, Armenia, Azerbaijan, Turkey and Greece. IFTF was designed to focus on improving the economic situation for women across Southern and Eastern Europe and Eurasia, and was initiated by the US Department of State. The IFTF brought women together to foster development and overcome barriers of gender inequality. I believe that while women are doing a lot of work, they are not being recognised properly.

Women’s talent needs to be discovered. At the Farmer’s Association, we feature stories about new projects on our Facebook page, and magazines also feature stories about our members. I think increasing their visibility will increase their sense of responsibility, which will result in their success. This is important because women’s participation in business helps economic growth, but it’s being overlooked in the region.

Furthermore, employed women are predominantly in low-paying sectors and the gender pay gap is high. I believe this can be changed by promoting women’s entrepreneurship by boosting access to finance for female-led businesses, improving local banks’ ability to serve the female market and help female entrepreneurs’ access business advice.

What were the highlights of your MBA and how has it changed your career trajectory?

I believe there are three key components for success: take risks, have willpower and, to some to extent, consider every failure a success. My MBA taught me how to use theoretical knowledge, how to learn from my mistakes, the importance of time management, and how to achieve my goals.

My goals include increasing agricultural productivity, defending farmers’ rights, developing legislative proposals in the field of agriculture, and strengthening farmers’ social and economic conditions. My MBA can help me to achieve these goals.

As for how my MBA changed my career trajectory, I started watching out for opportunities which come with the constantly changing business environment. This made me more self-confident and a more competitive businesswoman.

What was the most useful thing your MBA taught you?

The most important skills you can acquire in Business School are the abilities to adapt, make the right decisions, become a real leader, and learn how to be a good in business. I reached a new level of confidence in my ability to make a decision with limited information. I learned that the difference between a great idea and great change is in the execution, but the person who comes up with a great idea is just as important.

The MBA is a pathway to global leadership – how do you address the cultural challenges?

As cross-cultural management compares organisational behaviour across countries and cultures and seeks to understand how to improve interaction around the world, I want to reduce the cross-cultural differences and raise awareness of these, in order to have better communication and cooperation in the workplace. To do this, employees have to know each other’s cultures and languages. This keeps employees integrated within the organisation so they cooperate with each other and attain shared goals.

It’s necessary to recognise different business cultures across the globe too. Every country follows a different management style and so managers have to take into consideration the key elements of each country, such as its religion and history.

How do you ensure your messages get to the right people in a volatile, uncertain, complex and ambiguous environment?

In a fast-moving world, the challenge is to retain a clear vision of what you want to achieve. This vision should be flexible in responding to unfolding situations but hold a consistent message. This means you need to be ready for change. Change is about survival but is especially necessary in organisations that wish to prosper in a VUCA environment.

Therefore, the question is what you are going to do to initiate change? What role are you going to assume? If you play the right role, then you and your organisation will survive for as long as the environment tolerates that role. A successful leader knows which role to play at what time, and knows when to change roles.

As people communicate in different ways, marketplaces are becoming busier and silos develop. How would you address this in business?

Execution of a project is the result of thousands of decisions made every day by top management. However, the right decision is one that can guarantee a long stay in the marketplace by ensuring maximum satisfaction of the consumer’s demands.

Organisations need to concentrate on quality, not on quantity, share technological achievements, and keep up with innovations and development. This way, they will gain the consumer’s confidence and become a competitive company in the world market.

What should responsible [and sustainable] leadership look like?

Sustainable leadership is about leading an organisation towards sustainable development, implementing socially responsible methods and acknowledging a shared responsibility for preventing the use of unjustified financial and human resources, and the violation of the environment. A good leader should involve employees in the company’s decision-making processes. 

Sustainability is moving to the core of business strategy. What are the skills you’d look for in your team of the future?

It’s important to have friendly team where everyone has equal opportunities for development. It’s crucial to have team members who express their thoughts and ideas clearly, directly, honestly, and respectfully. Reliable team members are an important asset for any team, because they get work done. Also, good team players are active participants, fully engaged in the work of the team. They’re open to sharing their information, knowledge, and experience. 

A good manager knows the most valuable asset is the team. Sustainable business is created when each employee considers themselves part of the company. This means employees can work together to solve problems. They respond to requests for assistance and take the initiative to offer help.

What would your advice be to MBA students and graduates?

Make best use of this time, and gain theoretical knowledge and information about practical issues. Be results orientated and make an effort to achieve success in your career. Also, it’s important to ask questions until there are no more answers. After finishing each module during my MBA, I thought ‘that’s enough’, but that was exactly the time to move forward. Knowledge is the biggest investment you can have, and the practice is the most solid foundation. 

Do you think Business Schools and employers have sufficiently strong links?

Business Schools and employers have links, but it’s not enough. We all know how it should be but it doesn’t happen in real life. Business Schools have to keep up with modern trends and adapt their programmes to the latest innovations. I think it’s very important for Business Schools to be focused on giving their students more theoretical knowledge based on interesting and practical real cases. Obvious mismatches between Business Schools and employers occur when the Business School does not take into account the changing business environment. Also, when businesses are less involved with MBA programmes, their expectations for future employees’ skills are inadequate.  

As a successful female leader, what would your advice be to other aspiring women?

Never give up, never be afraid of the risk and don’t be afraid to make a mistake. 

I know the challenges women face every day because they’re ‘the weaker sex’. To achieve equality, we need more education, more support, more female involvement at governmental and non-governmental levels, and more women in leading positions. Especially, in terms of business, I would like women to have more educational programmes, more grants for projects, and more empathy from financial institutions.

Do you feel optimistic about the future of business and the global economy?

Yes, business is not just a way to gain money but a way to impose social responsibility and care about environmental problems. 

Businesses need to do this to stay in the world market, and make a financial profit in the long term. 

Japan’s age of the MBA

To drive Japan’s business success in the 21st century, young people may need to embrace the MBA over traditional linear career progression within Japanese organisations. Leonard Leiser reports

It may surprise you how few Japanese professionals know the answer to the question: ‘What is an MBA?’ 

Despite Japan having the third-largest economy in the world and being home to the Toyota production system, lean manufacturing, Sanpo-Yoshi, Gemba Gembutsu and Ho-ren-so, the idea of enrolling at a post-graduate institution that teaches business practices is far from mainstream. 

Japan is home to operations management guru Taichii Ohno who penned Seven Wastes and Ten Precepts, and whose ideas continue to be adopted by some of the top global executives of manufacturing companies. However, service firms and financial institutions, which make up a significant proportion of businesses in Japan, do not connect success with business administration and management leadership in an academic context. Despite being among the most commercially advanced countries in East Asia, Japan is not considered a destination for post-graduate studies in business. Searches for any Forbes or Financial Times Top 100 ranking for a Japanese Business School will prove fruitless. ‘Cool Japan’ fails to include the MBA. How many MBA students around the world have come across a case study of a Japanese company? 

Galápagos syndrome

Japan is a country of hidden champions but ‘Galápagos syndrome’ (a term of Japanese origin, referring to an isolated development branch of a globally available product) permeates failed business ventures. It is widely believed that ‘what works in Japan, will only work in Japan’. 

It is also believed that a lack of fluency in English and communication skills among traditional Japanese managers is the primary reason for the dearth of international success. 

There are a handful of well-written business cases being employed in MBA courses around the world that support this theory. One impressive company that bucks this trend is Rakuten, led by founder and CEO Hiroshi Mikitani (a Harvard MBA). Despite the success of Toyota and electronics manufacturers in the past, one need only read the business section of any global newspaper to understand the troubles of Toshiba, Sharp, Nissan, Mitsubishi – and even Sony until recently. 

The management processes and operational excellence that made Japan a winner in the past are no longer a competitive advantage and the development of soft skills is sorely lacking. So how can Japan begin to win again? 

The Japanese way

Before talking about post-graduate qualifications, let’s wind back the tape of the typical academic journey of students in Japan to provide context for the MBA. From junior high school-level, schools in Japan are selective. 

In order to get into good schools, students must take entrance exams as elementary school students. At junior high, there are preparations for senior high school entrance exams and these are followed by college entrance exams. What matters most tends to be your undergraduate institution. Once a student has got into college they may already be set for lifetime’s employment within a system of regulation that makes it incredibly difficult for companies to fire employees. 

I have personally heard from many colleagues and professionals that the purpose of the Japanese education and university system is to prepare young people for company life; in other words, to prepare them for the uniquely Japanese culture of harmonisation and the development of the communal mindset and group mentality that lies at the heart of the Japanese corporate machine and Japanese society as a whole. 

And it’s a system that works very well, overall, in Japan. Big companies recruit directly from undergraduate schools, taking the best talent from the big schools. Furthermore, most companies have their own ‘way’ of doing things. Most readers will be familiar with the ‘Toyota Way’ and the ‘Honda Way’ of management, and on-the-job traning and in-house development helps instil these ‘ways’ into the employee’s psyche. 

Many companies are set up to develop generalists within their ranks and those on the executive track have exposure to all sides of the business at some point in their careers. I know of one high-level executive with a degree in engineering who ended up in financial accounting, as well as Toyota engineers who became hospital administrators and directors.  

Enter the MBA…

Beginning with the value proposition of the MBA, many students see MBA programmes as a chance for personal development and life-long learning. However, in Japan, companies are structured internally to promote employees according to seniority rather than merit. With lifetime employment, few Japanese professionals feel compelled to enrol in an MBA or post-graduate programme for the purpose of career switching. 

In the past, prospective students in Japan may have felt it necessary to develop their English and to move to the US or Europe to enrol in a top-flight MBA programme. This would be a difficult barrier to overcome. However, over the past 10-15 years, domestic Japanese language-based MBA programmes, offered as weekend or part-time courses, have started to gain traction. Those that gain international accreditation from organisations such as AMBA, signal to students that their programmes meet the highest quality standards, and are on par with the best international alternatives. While the average age of MBA students at top Business Schools in the US is 27 or 28, the average age of MBA students at Nagoya University of Commerce and Business (NUCB) is mid-30s. Roughly 40% of executive MBA students are over 40, and some are in their late 60s. 

How does the MBA fit in the Japanese market?

Potential MBA students in Japan no longer have to cross the world to study for an MBA; a short hop to a domestic institution offering weekend courses is now available. The power of the MBA is rising in Japan and it is a growing trend.

In the summer of 2017, The Japan Times ran an article that projected the latest findings from the QS World University Rankings Report of 2015-16 and 2016-17. The title of the article summarised its findings: ‘[The] MBA provides better salaries and opportunities.’ 

While the overall salary compensation package for MBAs in the Asia Pacific region had dropped, by contrast Japanese companies were now willing and able to offer higher salaries and bonuses to those with an MBA. The rate at which MBAs are being hired in Japan is on the rise. While the fastest-growing countries in the Asia Pacific region, China and India have Schools listed in the top rankings tables, only one Japanese institute is currently accredited by AMBA. From this, three major trends reflect the demographics and demands of the Japanese employment pool. The increase in MBA students is top-down – executive education courses, including the EMBA, have emerged as the most popular choice, and specialised tracks have been well-received by the market.

When I say that the increase in MBA students is ‘top-down’, I am referring to company presidents, CEOs, directors, founders, and top-level executives enrolling in MBA programmes. 

From this, either during the programme or on their completion of the programme, they establish pathways for their employees to take MBA courses. Although in some cases, a Japanese company may pay for, or subsidise, the occasional non-degree course, they tend to simply recommend or suggest that employees undertake the MBA as a full degree programme. In most cases, students pay for the degree out of their own pocket. Few Japan-based companies cover an employee’s EMBA tuition fees. So, top company executives are dipping their toes into the MBA pool and encouraging their employees to follow them in.

As an extension of the previous trend, in recent years we have also seen the biggest spike in the number of students enrolled in executive education. Executive programmes require extensive work experience, and the market in Japan is drawing on experienced employees who can realistically only attend short intensive courses at weekends or on weeknights. This trend seems to be a natural consequence of the Japanese market.

Specialised courses offered as certificate-bearing tracks are receiving a lot of attention. At NUCB we have just launched two specialised degree pathways: the global MBA and the healthcare MBA. The former includes courses offered only in English and will include a mix of degree and non-degree students, while the latter is focused solely on management in the healthcare industry. 

One of the key aspects, and key value proposition of both, is that they are certificate-bearing. One trend that is certainly not new in Japan is the appeal of official licences, certificates and degrees to Japanese people. 

This specialised track, we hope, will be a way to introduce our university to a larger target audience and define the meaning of the MBA to Japanese employees.

The outlook for the MBA in Japan

There are three changes which I hope to see over the next five to 10 years in Japan. 

First, an increase in the number of younger people taking MBAs, and people increasingly taking more generalised Master degrees. I am hopeful that young entrepreneurs will find Business Schools in Japan an attractive alternative to a lifetime’s employment with a specific organisation. Business Schools could provide the avenue for them to express their creativity and innovation in a way that will generate profits, create jobs and increase personal satisfaction, while fostering a
better society.

This is not a recommendation for all, or even most, Japanese people, but many young people would be well-suited to undertaking a post-graduate programme before turning 30, rather than sticking with one of the ageing business giants of Japan. 

Some of the biggest success stories – and most popular business cases – involve the founders of Apple, Dell, Google and Facebook dropping out of college to pursue the growth of their own companies. 

While I am not advocating that Japan needs young entrepreneurs to follow this route, I am saying that the inflexible educational structure that begins at elementary school age, and continued adherence to rote learning, is in stark contrast to the global teaching methodologies of the 21st century, and the development of soft skills necessary in the modern workplace. Being in a college setting provides a unique sense of ambition, freedom and confidence, allowing students to explore new ideas and develop a business model with resources and opportunities all in one place.

In addition, Business Schools need to attract more women into post-graduate programmes. Japan faces the double threat of an ageing and decreasing population. Women should be able to access the workforce, and leadership roles, irrespective of this, but it is an added reason for the workforce to draw on all available members of the labour pool. 

Women have been vastly under-represented at management and executive level and the MBA could prove a vital resource for women to develop skills and a quantifiable advantage, to help them secure the top spots across all industries and companies in Japan. The MBA alone will not achieve this progression, but it could provide an important step forward and a push in the right direction.

Finally, I am interested to see how the purpose of the MBA in Japan changes. In other words, how will the factors motivating students to take MBAs evolve over time? 

In a conversation I had with President Dr Hiroshi Kurimoto of the NUCB Business School regarding the role of the Asian economy in the next 20 years, he shared with me that the Asian Development Bank has reported that, currently, some 20% of global GDP stems from the Asia-Pacific region; by 2040 that contribution is expected to rise to almost 50%. 

How will this realisation impact on the value and delivery of the MBA in Japan? Will local programmes launch more domestic-orientated courses and specialised pathways, focused on Japanese business or will programmes begin to cater for an influx of international MBA seekers choosing Japan as their MBA destination of choice within the Asian-Pacific market? 

Will Japanese MBA seekers’ aspirations come into line with those of Western-based MBAs, or will international MBA seekers elect to enroll in Japanese programmes to gain an understanding of the group mentality necessary for success in the traditional Japanese corporate environment?

Only time will tell, but for now, it is an incredibly exciting time to be part of the challenge of the MBA in Japan

Leonard Leiser is Coordinator for International Development at Nagoya University of Commerce and Business (NUCB) Business School

Why the tortoise can beat the hare in investment strategy

The benefits of low-volatility investing outweigh those of high-risk stocks, argues Pim van Vliet, in an interview with David Woods-Hale

For generations, investors have believed that risk and return are inseparable. Just ask the huge banks who invested billions in sub-prime mortgages prior to 2008. But is it time we accepted the truth: this just isn’t the case anymore? Pim van Vliet, the founder and fund manager of the multi-billion-dollar Conservative Equity funds at Robeco, has set out to rewrite the rule book on investment strategy. 

In his book, High Returns from Low Risk: A Remarkable Stock Market Paradox, van Vliet combines the latest research with stock market data going back to 1929 to prove that investing in low-risk stocks gives surprisingly high returns – significantly better than those generated by high-risk stocks.

The low-risk funds, in which van Vliet specialises, are based on academic research and provide investors with a stable source of income from the stock market. 

He is a guest lecturer at several universities, the author of numerous financial publications and travels the world advocating low-volatility investing. Together with investment specialist Jan de Koning, van Vliet has presented his counter-intuitive story as a modern upbeat stock market equivalent of ‘the tortoise and the hare’. And he explains why investing in low-risk stocks works and will continue to work, even once more people become aware of the paradox. 

But this theory flies in the face of traditional and accepted thought regarding classic investment theory – so how did he build a theory that goes against the grain?

‘High risk does not bring more return,’ he explains. ‘It’s a paradox and I want to get the message out there. Unfortunately, this is an inconvenient truth for the finance community and it’s puzzled me for half my life.

‘It’s because we define risk in the wrong way, but when I was able to reconcile the paradox and started to research and apply the knowledge I was accumulating, by managing low-risk funds for investors, we were able to generate high risk-adjusted returns by investing in low-risk stocks, which attracted billions of dollars

The concept of investing in low-risk stocks for high returns is a compelling argument, but at odds with the views of some economists. Van Vliet, outlines his own hypothesis as follows, explaining: ‘My investment hypothesis is evidence-based: any idea on investing should be validated by empirical data. Although this approach is common in the field of medicine, it’s not in the world of finance.’   

He pauses, then adds: ‘In general – at a high level – the truth still holds: more risk will equate to more return. In the long run, stocks will earn higher returns than bonds for example. But if you dig a level deeper down, this idea fails within the stock market and also within the bond market. Lower-risk stocks provide higher returns than higher-risk stocks. The slow stock beats the fast stock. I explore this at length in my book. 

‘Benchmarking provides an important explanation for this effect. If you have stocks with lower risk factors, you will be less affected by the stock market. Imagine a stock posting a fixed return of 10% per year. That stock has – in absolute terms – 0% risk. However, when adopting a relative perspective this low-risk stock would lag behind if the market is delivering a return of 40% in a year, or be well ahead of the market during a market loss of -20%. This 30% return gap – whether positive or negative – is perceived as relative risk. It is the misalignment of interest here that poses a problem, because the role of an investor is different to that of a money manager. A professional investor is paid to take risks with people’s money to generate return and if they are not taking these risks, they could be shunned. In other words: due to benchmarking low-risk stocks become unattractive.’

Van Vliet compares his investment hypothesis similar in idea to the fable of the tortoise and the hare in that ‘slow and steady’ often wins the race but there is a human nature lesson here as well as advice for financial strategy. 

‘Most people want to bet on hares,’ he says. ‘In psychology, finance and literature it’s the moves in the market that generate the most attention and they drive up prices in stocks, which in turn makes the news. Tortoises are never in the news. Volatility makes headlines – this exacerbates a culture of short-termism and people who are bullish and want a quick buck.’

Van Vliet is quick to point there is fine line between ‘bullish’ and ‘reckless’ when it comes to investment and he worries that investors in general are too quick to ‘shun’ more defensive equity funds. 

He elaborates: ‘For this reason, society is experiencing a collective sense of over-confidence [in that they want to invest in high-risk funds]. This is really good for people’s mental wellbeing but it’s bad for financial health.’ 

Tortoises, according to van Vliet, are stable companies and defensive funds that ‘never seem to go up’ in stock market terms. But, as the saying goes, at least, fortune favours the brave – and in van Vliet’s analysis, it’s those that invest in risky funds that view themselves as brave. He counters this assumption. 

Re-defining bravery

‘Low-risk investors are brave,’ he asserts. ‘They are seen as conservative, but in reality they are not following the crowd. It’s like the character in The Pilgrim’s Progress, following a tough long road, but leading to a good end result.’

To capitalise on the low-risk anomaly, a long-term investment vision is required. The advantage of a low-volatility strategy is that the stocks involved will fall less than other stocks in a declining market. Once the market recovers, low-volatility stocks have less ground to make up to recover and start yielding positive returns again. 

Citing the experiences of the world’s second-richest man as an example, van Vliet explains that Warren Buffett is inclined to take a long-term view when it comes to his investments. Instead of following the crowd, Buffett has built his career and success on seeking out undervalued investments. Although Buffett’s portfolio has lagged behind the market several times during his career, he has beaten the market average decisively over time. 

For Buffett, average is doing what everybody else is doing; to rise above the average, you need to measure yourself by what he terms the ‘inner scorecard’ – judging yourself by your own standards and rather than the world’s.

A sustainable approach

 But where do ethics fit into a low-risk investment strategy? Does van Vliet agree that a values-led, sustainable approach to investing is becoming more important in the current financial climate?

He explains: ‘Low-risk portfolios make for sustainable, long-term investments, but in terms of ethics, the key consideration is how we, as investors, take care of our clients’ money – perhaps by investing in green companies or more sustainable funds for that reason.

‘High-risk and low-risk investments have the same mechanisms. And low-risk investments drive up risky projects. I’m not saying that a degree of risk is not a good thing – but prudent decision making is more important.’ 

Does van Vliet therefore believe that would-be investors have to be finance experts to understand the intricacies of the market?

‘You can over-train for a marathon,’ he explains. ‘You need information about the markets and I’ve outlined this in my own work – but the secret to successful investment is wisdom [rather than market knowledge only]. For example, the latest “hare” in the market place is FinTech and investors are keen to invest here. The truth is that some of these FinTech organisations will win, but most will lose.’

 He sums up by adding: ‘I think a good philosophy for investment is “some risk”. Putting this into the context of diet, a moderate amount of vitamins and salt is a good thing – but not taken to the extreme. There is no such thing as “no risk” as the risk spectrum is not linear. You have to create a bit of risk to generate value. If there is no risk, your investments will be negative. I believe the ideal investment choice, is what I call the “conservative middle”, which is a situation between very high and very low risk. 

‘We often are attracted to the extremes, but ancient philosophers wisely pointed to the virtue in the middle. Too much risk hurts long-term wealth creation, but a moderate amount of stock market risk is good. There are more and more companies that live and work according to this prudent investment principle, from private equity firms to family businesses. This is the secret to sustainable investing.’

Dr Pim van Vliet is a Senior Portfolio Manager within the Quantitative Equities team of Robeco, an international asset manager with
a strong belief in sustainable investing, quantitative techniques and constant innovation. His primary responsibility is Robeco’s conservative equity strategies.

Van Vliet has published articles in the Journal of Banking and Finance, Management Science, the Journal of Portfolio Management and other academic journals, plus a book on the topic of low-volatility investing. He is a guest lecturer at several universities, advocating low-volatility investing at international seminars, and holds a PhD and
MSc (cum laude) in Financial and Business Economics from Erasmus University, Rotterdam.

Leaders never stop learning

Andrew Main Wilson, CEO of the Business Graduates Association, launches Business Impact and outlines the mission and vision of the organisation

Thank you for taking the time to read Business Impact, our very first edition of the magazine which will discuss many of the issues that form the DNA of the biggest ever brand launch in our 52-year history – the Business Graduates Association. 

We were originally founded in 1967 as the Business Graduates Association, before rebranding as AMBA – the Association of MBAs – in 1987, to focus more specifically on accrediting the world’s leading MBA and masters in general management Business School programmes, while also providing membership to AMBA Schools’ students and graduates. 

Now, in 2019, we are relaunching this powerful brand name, which will stand out in a business education market full of difficult-to-remember brand name acronyms. 

Our vision is very clear. BGA will champion the crucial importance of lifelong learning, selecting Business Schools as members who clearly demonstrate a passion for practical, entrepreneurial business education and an evident commitment to social responsibility and sustainability, across all their programme modules. 

BGA will focus on providing membership, validation and accreditation across the entire programme portfolios of high-quality Business Schools. We will also offer free individual BGA membership to the students and alumni
of our BGA Schools. 

Geographically, we will encourage membership from some of the world’s most sophisticated Business Schools, through to inspirational Business Schools in some of the world’s poorest countries, who can demonstrate admirable evidence in making a real difference to the future of their countries’ economies.

I have been very fortunate in interviewing some of the world’s greatest business and political leaders, from Bill Gates to Lady Thatcher, to Archbishop Desmond Tutu. They all share at least one common belief: the best way to increase fair wealth distribution and improve the quality of people’s lives worldwide, is through better education. Ultimately in life, whether a country is capitalist or communist, a democracy or a dictatorship, business funds society. So better business education for all is right at the forefront of improving our world. 

This vision is the driving force behind BGA’s launch. We look forward to welcoming you to the BGA family and making a real difference worldwide to the education of our current and future business leaders.