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Monday, October 1, 2012

Foolish MBA student business plans

One nice thing about teaching entrepreneurship at an independent technological university (like KGI) is the possibility of having actual science in our startup business plans. Tech startups may not create all of the shareholder value, economic growth or improved societal welfare, but certainly they play a disproportionate role in doing so.

The challenge of teaching entrepreneurship (particularly business plans) in a business school is (politely) sifting through all the restaurant, bar, website or other service businesses that are unlikely to amount to a hill of beans. Maybe the business plans of science and engineering students are equally likely to fail, but the potential payoffs are higher and they’re more likely to learn something relevant in the process.

I was reminded of this when reading a HBS case† from my intro entrepreneurship class. The case centers on four Harvard MBA students who want to start a business. So they spent a year sifting opportunities through six criteria, which included these quintessential MBA student goals:
  • “Be their own boss”
  • Invest a minimal amount of start-up capital
  • Build a sustainable and defensible business
What’s wrong with this picture? I don’t know about the Harvard boys (and they were all male), but at least our KGI students take strategy in the first year and learn about something called “entry barriers”. (Perhaps the boys slept during Michael Porter’s class.)

This goes back to the fundamental problem of b-student business plans: anything a typical MBA student can start is something any fool can start. Meanwhile, science and engineering students are working on creating something that hasn’t been done before — one that hopefully has a lucrative commercial application.

So instead of dreaming about the perfect opportunity, the Harvard students would have been better off buying drinks down at the bars near MIT for smart technologists who actually have some secret sauce.

† Title omitted to protect the guilty.

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