Entrepreneur? Then an MBA May Not Be for You.

I ran across an interesting article by John Warrilow titled “4 Reasons an MBA is Bad for Entrepreneurs.” He starts out with some pretty harsh words:

“I think not only is getting an MBA a waste of money and two years of your life; it may also, in fact, reduce your chances of building a successful business.”

He then goes on to list the 4 reasons why he thinks an MBA is bad for those wanting to become, or who already are, entrepreneurs. The 4 reasons are:

MBA Programs teach causal reasoning
MBA Programs teach adaptive thinking
Your fellow classmates will not be entrepreneurs
Don’t waste 40% of your “risk free” time in a classroom

The main point of John’s article is that basically that an MBA teaches you how to better run a company, not necessarily how to create one from scratch. An MBA teaches analysis, logic, and structure while an entrepreneur, a true entrepreneur, tends to thrive in a world of creativity, visioning, and chaos. Since I have (and fought hard for) an MBA, you’d think I’d take offense. However, I’ve come to agree with Mr. Warrilow 100%.

I came to this conclusion while reading an excellent book titled, “Win: The Key Principles to Take Your Business from Ordinary to Extraordinary” by Frank Luntz. In the early part of the book, he talked about the difference between a manager and an entrepreneur. A manager tries to improve their business while an entrepreneur on the other hand, seeks to transform their business (or the entire industry). If you improve your business by reducing costs, improving efficiencies, creating synergies, etc – basically all of the “tools” an MBA provides – you help the bottom line incrementally. This can translate into a 5-10% improvement to the bottom line. Although this is certainly significant, it’s hardly “break out the champaign” time.

When you transform your business or industry however, you completely change how the business (or industry) operates. You change how goods and services are ordered and/or delivered. You change how the market uses your product or service – or you create a product or service that the market doesn’t even know it wants and needs yet. When you transform your business, you can change the bottom line by orders of magnitude. Instead of increasing profits by 5-10%, you increase them by 10 or 15 times. Now THAT’s something to celebrate!

When I looked at my own business, the first question that popped up was, “OK, so how do I actually transform my business?” Between my partners and I, we had already ironed out every efficiency we could possibly find. We had already cut every cost we could identify. And yes, we had helped our bottom line incrementally. But how to transform it? That was a question where my MBA training failed me. How do I totally transform how my company functions? There’s no way to calculate NPV on that, there’s no way I can build a spreadsheet to model it, there’s no BCG-matrix I can use to help answer that question.

And that’s where John Warrilow’s article hit home. Getting an MBA had taught be how to become a better manager. It gave me a framework with which to analyze the financial impact of various decisions. However, it did nothing to improve my creativity. There were no tools on how to create a vision of something that didn’t yet exist.

So do I think getting my MBA was a waste of time? Absolutely not. An MBA is simply a tool (or more accurately, a set of tools). Like most tools, it works great in some areas and not so good in others. The key is in knowing when and where to use the right tool.

Is an MBA right for you? That depends totally on you. If you see yourself as a manager or a leader of others, if you see yourself working within an established business and working your way to the top, if you get satisfaction from taking an existing system or process and making it better, then an MBA might be exactly what you need. On the other hand, if you see yourself as a designer or creator (as opposed to a manager), if you’re a “lone wolf” (as opposed to a group leader), if you can “see” what other people can’t even imagine, then an MBA will be the proverbial round-peg-in-a-square-hole for you.

The world needs both professional managers as well as independent and “way-out-there” creative entrepreneurs. The best thing you can do is to figure out which one you are. Once you do, the correct path to take from there will be obvious.

Hiram
MBA, University of Houston 1989