Desiring a change is one thing, but taking concrete action to bring it about is quite another. Effectively addressing the climate crisis will demand unwavering commitment, the adoption of new tools, and the expansion of our skill sets.
As a recent addition to our interview series, “Global Thought Leaders: B-School Edition,” we engaged in an open and insightful discussion with Dr. Serguei Netessine, who holds the position of Senior Vice Dean for Innovation and Global Initiatives at the Wharton School of the University of Pennsylvania. Our conversation explored various compelling topics, such as the role of business education in today’s corporate landscape, the essential skill set for success in the business world, and the considerations that come into play when selecting a business path that aligns with one’s individual growth aspirations.
Dr. Serguei Netessine’s background is a tapestry of diversity, spanning Russia, the United States, France, and Singapore. He holds degrees in computer science and electrical engineering from the Moscow Institute of Electronic Technology and has experience with industry giants like Motorola and Lucent Technologies. His academic journey culminated in MS and Ph.D. degrees in operations management from the University of Rochester.
As a prominent authority in business model innovation and operational excellence, Dr. Netessine collaborates with governments and Fortune 500 companies. In the startup world, he’s both an advisor and an investor. His reputation as an innovator and entrepreneur is evidenced by his presence at prestigious forums like the World Economic Forum in Davos and the World Knowledge Forum in Seoul. He’s played a pivotal role in shaping the “future of the economy” for the Singapore government and has received awards for exceptional teaching in MBA and Executive MBA programmes. His insights are featured in respected publications like CIO Magazine, Forbes, and The New York Times. Dr. Netessine shares his knowledge through his blog at RenaissanceInnovator.com and the HBR Network.
Let’s explore the key highlights from this insightful interview:
Q1. With over two decades of immersion in business and business education, given your extensive background, what motivated you to choose the Innovation and Global Initiatives division at Wharton, where you currently serve as the Senior Vice Dean?
Ans: After completing my PhD at the University of Rochester, NY, in 2001, I embarked on my teaching career at Wharton. After achieving tenure in 2007, I decided to take a sabbatical and spend a year abroad. During that time, INSEAD in France offered me a position, which I initially accepted without long-term plans. However, during our year in France, my family and I became attached to the country, and INSEAD’s offer grew more appealing, especially with the collaboration between Wharton and INSEAD. I assumed the role of overseeing the alliance while maintaining my connections with Wharton. My tenure at INSEAD spanned several years, including sabbaticals and a leave of absence year. In 2017, my focus shifted back to the United States as my children aimed for US-based colleges. After considering various options, I concluded that returning to Wharton was the best course of action. In summary, my journey from industry to academia took me across Russia, the U.S., France, Singapore, and back to the US.
As for the decision to leave right after earning tenure, it wasn’t an easy one, especially with two young children. Moving abroad appeared to be a logistical nightmare. However, upon further reflection, I realised that there’s never a perfect time. The right moment may align with something other than good health or a willingness to make the move. After discussing it with my family, we decided that while there might never be a perfect time, the fact that our kids were young and not yet in school made it the right time to take the leap. They learned French and now speak it fluently. Looking back, it was undoubtedly the right decision. It was an incredible experience that completely transformed the way I approached teaching. I shifted my focus from subjects like supply chain management and operations management to teaching innovation. I didn’t just teach; I also wrote my book. I transitioned from teaching MBA students to working with executives, particularly in custom programmes.
Q2. With your extensive two-decade journey in the business world, how do the offerings of the Innovation and Global Initiatives Division at the Wharton School uniquely match your career objectives and vision?
Ans: When I got back to work, Geoff Garrett, then dean at Wharton, and I had a discussion. He asked me to lead global initiatives at Wharton, and it felt like a natural fit, considering my diverse background and extensive travel experiences. Given the strong global focus on my research and teaching, it just made perfect sense to accept this role. Furthermore, I took on the responsibility of overseeing innovation.
At Wharton, innovation goes beyond our standard degree programmes and executive education. My role involves nurturing and incubating these innovative initiatives, helping them grow into independent divisions. Teaching innovation and having written a book on business model innovation, I’m deeply involved in startup investment and venture capital. I also invest in venture capital firms. About half of my time is spent engaging with startups and venture capitalists, while the other half involves working with large corporations to drive their innovation efforts. This role seamlessly complements my expertise and is an exciting addition to my portfolio.
Q3. Referring to the frameworks discussed in your book ‘The Risk-Driven Business Model,’ how do these frameworks enable the analysis and anticipation of forthcoming changes in the landscape of business education?
Ans: The synergy between business models and innovation is particularly evident in business education. Business model innovation is a type of innovation that doesn’t necessitate the creation of new technology or products; it is more about reimagining how you engage with your existing audience and constructing a fresh business model, often utilising readily available technology. At Wharton, we aim to revamp the conventional business model that contemporary business schools adhere to.
The current model primarily relies on tuition fees, endowments, government funding, and fundraising. This model has remained largely unchanged for centuries, but its static nature often serves as a precursor to impending disruption. It’s essential to recognise that technology alone doesn’t revolutionise the world; true industry disruption occurs when technology aligns with a novel business model. For instance, Uber didn’t introduce new technology, but it completely transformed the transportation industry.
We are currently witnessing early indicators of analogous changes in the education sector. The confluence of technology and innovative business models is where we anticipate seeing substantial transformations.
Q4. What are the key disruptions currently at the forefront of your radar that will impact business education soon?
Ans: I’ve noticed two significant shifts in the education landscape that have captured my attention. Firstly, there’s a noticeable trend away from traditional degree-based education. Many individuals are increasingly questioning the value and cost of pursuing a degree. Instead, students opt for non-degree, non-credit short courses or boot camps that offer specific, up-to-the-minute skills. For example, dedicating years to obtaining a full-time degree in a field like large language models and AI may be optional for many of us. Still, we are interested in quick, focused updates on the latest technological advancements relevant to our work. This shift is evident globally, with a decline in the number of applicants for traditional degree programmes, both at the undergraduate and MBA levels.
The second significant shift, which has been dramatically accelerated by technology and further boosted by the impact of COVID-19, centres around the digitalisation of education. While asynchronous online learning platforms like Coursera have been successful, the pandemic has led to substantial investments in reimagining courses for digital delivery. As a result, we now have a wealth of innovative methods for accessing education from the comfort of our homes, making remote and personalised learning increasingly attractive. Learners can progress at their own pace, free from the constraints of a rigid class schedule and a large cohort. These two transformations are pivotal factors currently shaping the education landscape.
Q5. Are institutions, especially those adopting contemporary methods, continuing their commitment to innovation in online education beyond the initial surge of enthusiasm during the pandemic and the subsequent return to in-person learning, and what role is Wharton playing in this context?
Ans: Without a doubt, digital education is here to stay. Consider our executive education programmes as an example. Among the participants, a clear division exists. Some place a strong emphasis on the in-person experience, highlighting the importance of networking, personal interactions, and the exchange of business cards. On the other hand, there’s a group that values the convenience of online courses, appreciating the flexibility they offer, particularly for those unable to attend in person due to geographical distance, time constraints, or family responsibilities. To cater to these diverse preferences, we provide our classes in two formats: in-person and online. We typically do not offer a hybrid option that combines the two.
Executive education remains a significant component of our offerings. We teach programmes in both formats, covering the same content. However, online classes are naturally adjusted to be more manageable, with shorter daily sessions to prevent extended Zoom fatigue. We’ve also introduced a new global executive MBA programme, which heavily relies on online learning. This programme is entirely synchronous, enabling students to interact with professors and classmates in real-time. It’s specifically designed to accommodate executives in regions like Asia who prefer to avoid frequently travelling to the United States due to time zone challenges and other constraints. Instead, they attend occasional in-person modules for networking, with the majority of their classes taking place online. We’ve also recognised the value of utilising online platforms for exceptional situations, such as when a faculty member falls ill or during disruptions. In the past, such circumstances might have resulted in class cancellations, but now we can seamlessly transition to online delivery.
Regarding the initial enthusiasm for online education, it has somewhat diminished. This could be attributed to the fact that when synchronous learning is the objective and professors engage in real-time teaching, the costs involved are not significantly lower than conducting classes in person. Faculty time remains a fixed factor, and our facilities represent a pre-existing expense. Therefore, if the cost is the same for in-person and online education, most individuals tend to favour the in-person experience for the social aspects, networking opportunities, and enhanced focus. However, although the initial excitement surrounding online education may have diminished, I firmly believe that digital education will continue to be a prominent and indispensable component of our educational landscape for the foreseeable future.
Q6. In your role as the leader of the innovation lab, which disruptive factors in education do you foresee as having the potential to be truly transformative, considering the industry’s historical resistance to change?
Ans: Disrupting the education sector is a formidable challenge due to the pervasive influence of branding and well-established networks; education is, to a large extent, a brand-driven business. When it comes to prestigious institutions like the University of Pennsylvania—Wharton, with its rich history and extensive alumni network, top-tier colleges tend to be less impacted by disruptive forces. Meanwhile, mid-tier schools are facing challenges as the demand for traditional degree programmes decreases. Justifying high tuition fees becomes increasingly tricky as students can now access online courses offered by renowned institutions such as Harvard or Wharton rather than paying for a degree from mid-ranked colleges. I believe this is where disruption is making a significant impact on the education industry.
Educational institutions worldwide are launching online programmes in response to the evolving educational landscape. We’ve witnessed the emergence of lifelong learning programmes, boot camps, and specialised master’s degrees; most of this is targeting older students. However, our innovative initiative, the ‘Wharton Global Youth Programme,’ stands out as it targets students as young as high school and middle school, offering a diverse range of business programmes and competitions. This area remains largely untapped despite the global demand for business education, and it serves as a valuable indicator of a student’s interest in business for undergraduate institutions.
Q7. How were you able to effectively redirect the business school’s attention towards a programme designed for younger students, a departure from the usual emphasis on graduates and executives seen in most business schools?
Ans: At Wharton, we possess a significant advantage: a well-established reputation for excellence in undergraduate business education worldwide. With our top-ranked programmes, we naturally attracted a substantial number of young students to our website. A few years ago, a faculty member interested in developing programmes for young minds initiated a small course for students interested in business. The response we received was overwhelmingly positive, raising the question of whether this was a potential risk or a valuable opportunity.
Initially, the presence of high school students on campus posed complexities, including certifications, background checks, and liability concerns, making it seem like a potential risk. However, upon closer analysis, we recognised a tremendous opportunity. Annually, approximately 40 million high school students seek business education, yet they need more exposure to the field.
Leveraging our strong brand, we aimed to introduce them to Wharton at an early stage. This endeavour not only deepened alumni engagement, as they enthusiastically supported high school programmes, realising the benefits of promoting lifelong learning, but also reached underprivileged minority students, introducing them to potential careers in business. By offering free programmes in underserved areas and partnering with historically black colleges and universities that support underprivileged students, we expanded educational access. Our efforts not only strengthened our educational legacy but also democratised business education, benefiting thousands of students.
Q8. Could you outline Wharton’s upcoming education-focused initiatives for the next two to three years?
Ans: We have definite plans to expand our high school programmes, and we are actively exploring global opportunities, including online programmes. Just prior to the onset of the COVID-19 pandemic, we had a programme scheduled in Beijing, China, where local students would commute daily instead of residing in dormitories. Regrettably, due to the pandemic, we had to halt this programme temporarily. However, we fully intend to resume these programmes in other countries, providing high school students with the opportunity to take classes with Wharton. We already launched a programme in the UK this past summer.
Additionally, we are considering the expansion of embedded programmes. For instance, we envision partnerships with established high schools in India, digitally integrating our curriculum and delivering it synchronously through platforms like Zoom.
Our expansion efforts are not limited to high school education; we are also exploring partnerships at the middle school level. This enables us to introduce subjects like entrepreneurship and basic banking concepts at an earlier age. We are enhancing our non-degree education offerings and plan to introduce non-credit classes for undergraduate students. Our goal is to transition from high school to undergraduate education and potentially extend to executive MBA programmes. For example, we envision students from institutions like the Indian Institute of Management spending a week at Wharton to experience our education, addressing the growing demand for non-degree education.
On the technology front, we are placing a significant focus on simulations. While simulations have been used in business education for some time, we aim to create a more immersive and engaging experience. We’ve developed what can be linked to the ‘Fortnite for business education.’ In these simulations, you interact with real people, engage in Zoom calls, work with slide decks, and exchange emails—it’s a highly interactive experience. These simulations are part of the Wharton Interactive unit and are accessible online. They provide a completely personalised experience, ensuring that no two game experiences are alike. We firmly believe that this interactive approach represents the future of business education, as it is significantly more engaging and enjoyable for students compared to traditional case study methods.
Q9. As someone passionate about technology and exploring the incorporation of AI, such as Chat GPT, in education, what are the key hurdles and advantages that you identify in AI’s application to business education?
Ans: Challenges arise when attempting to deal with ChatGPT and other similar large language models. If your teaching methodology involves having students compose essays, this practice needs to be updated, as technology can generate essays, rendering the grading process nearly irrelevant. Efforts to counter this by utilising software to detect AI-generated content also need to be revised, as it results in a multitude of both false positives and false negatives. Detecting AI-generated content with just a few prompts is nearly impossible, and adjustments can always be made to render it undetectable.
In my view, these challenges stem from resistance to the integration of technology. When students are encouraged to generate startup ideas with the aid of ChatGPT, their creativity is enhanced. ChatGPT excels at crafting narratives, which is invaluable for devising startup concepts. Additionally, AI offers tools for generating visuals, videos, synthesised voices, and other components, enabling swift and cost-effective prototyping of business models and startups. By embracing these technologies to support the learning process, significant advantages can be obtained.
Nonetheless, it’s crucial to acknowledge that certain limitations exist, such as the generation of fictional content or “hallucinations,” which necessitate human cross-referencing and verification to ensure accuracy. Alternative models can be trained with a fixed dataset and instructed not to generate fictitious content or use external web resources, offering opportunities for more controlled applications. In sum, embracing large language models opens up substantial possibilities in business education.
Q10. As an engaged angel investor offering guidance to various startup companies, have you ever extended your advice to startups within the education sector? Furthermore, what criteria do you typically employ when evaluating these companies?
Ans: Absolutely. EdTech holds a special place in my interests. I’ve made investments in three or four startups within this sector, each offering a range of solutions. Some are focused on platforms for educational resource discovery, while others harness generative AI for real-time workplace learning. One intriguing example involves a platform akin to Slack, where when you encounter a work-related challenge, such as data analysis, a virtual assistant provides resources and guides you through the process, all seamlessly integrated into your workflow. This represents a departure from traditional educational approaches.
When evaluating these early-stage companies, my primary focus is on the team. For example, consider this company, which was started by a former PhD student who went on to become a professor at a prestigious business school. Their extensive academic background in sophisticated language models was an excellent sign of their potential. In addition, I investigate the business models used by these businesses, scrutinising their product monetisation strategies and estimating the size of their target market. Unit economics, which includes comparing costs and revenues, is also an important part of my appraisal process. These concepts are quite similar to the ones I teach in my seminars.
Q11. Why is it that some of the world’s brightest minds, who excel in tech and innovation across various industries, often struggle to disrupt the education sector? What do you think is causing this unique challenge?
Ans: Entering the highly competitive Education sector, particularly in a country like the United States, can be quite challenging. This industry boasts numerous established players. Consider if you’ve developed an interactive simulation that you wish to sell. Initially, the process involves convincing faculty members to embrace your product. They would need to attend a demonstration or understand how it functions. If they find it promising, they might agree to try it. Given that I usually teach once a year in September or October, the adoption might only take place in my class in September or October 2024.
If they find it favourable, I can provide it for free for initial use. However, actual widespread adoption may only occur two years from now, primarily due to the prolonged decision-making cycle. Following that, I need to persuade someone within my department or degree programme to allocate funds for it. They may seek negotiations for a discount, and my Chief Technology Officer (CTO) may need to address integration concerns, such as data sharing and potential risks. Budgeting committees might question the necessity of the product and suggest alternatives like traditional textbooks. Navigating through these negotiations and addressing all these aspects is time-consuming due to the extended budget cycles. Our industry is characterised by complexity, with many well-established players, making it a formidable challenge to break into. Finding a concentrated group of potential customers to target is a demanding task.
In contrast, businesses that sell hardware or physical products in the education sector have established extensive sales teams that regularly approach potential customers. With such a dedicated salesforce, reaching customers becomes significantly easier. Furthermore, there’s the added challenge of students. While we sell our products to faculty, it’s the students who ultimately use them. If faculty misjudged something or failed to provide proper instructions, students may have a negative experience with the product. We often lack direct communication with students, leaving us unaware of any issues they might encounter. The path to success involves navigating through numerous layers, requiring substantial patience.
Q12. India’s growing startup sector has seen companies trying to scale rapidly by hiring famous YouTube educators. However, when these educators became popular on the new platforms, they often left due to poor treatment. This raises a critical question: Are EdTech entrepreneurs overlooking the importance of valuing and retaining teachers, thinking that technology alone can deliver education?
Ans: I believe that in some ways, our approach at Wharton is distinct because we recognise the unique advantages of our brand and faculty. These elements are closely intertwined. Many people perceive our brand as a representation of our exceptional faculty members, who offer valuable and unique knowledge. At a business school like Wharton, our primary focus is on something other than teaching but on generating valuable knowledge that other educational institutions can use to educate their students and advance the field of business. In my case, I teach only six weeks a year, which is a small part of my overall responsibilities. Most of my work revolves around administration and research. We understand the importance of supporting our faculty members, which is why we receive sabbaticals that allow us to travel and explore various opportunities worldwide. This is a benefit not commonly found in other industries. We have various perks because universities recognise that faculty members are a valuable resource.
For individuals with a technical or entrepreneurial background, it can take time to comprehend this perspective. They often prioritise scaling quickly. Teaching, however, requires a considerable time investment. For each hour I spend teaching, I typically need to invest three to four hours in preparation. Thus, the time and effort required make faculty a valuable resource. In the industry, Coursera was one of the early players that disrupted the landscape by successfully attracting millions of learners to its platform. Coursera established a revenue-sharing model between content providers and their platforms, where the split was approximately 50-50. Many startups in the space now look to Coursera as a benchmark, seeking even more significant shares, like 60-70%. I’ve spoken with several of these startups and witnessed their business models. They often argue that Coursera merely places classes on its platform and garners a substantial share. This mindset can lead to content providers being undervalued. So, in my view, this is how we arrived at this current landscape.
Q13. If you could completely reimagine the MBA programme without any constraints, what changes would you make?
Ans: That’s a great question. Personally, I believe in rethinking the length of the programme; Traditionally, we tend to follow a one- or two-year format, which has become the prevailing norm in academia. However, the idea that a programme must have a fixed duration is quite arbitrary. For instance, after your first year, you might want to embark on an internship, and if you find that experience valuable, you may wish to extend it for an additional year while taking the remaining classes online. This kind of flexibility should be possible. If you’ve already secured a great job and achieved your goals through the programme, why should the rest of your education be limited to in-person classes or a specific structure?
At Wharton, we have had great success with what we call global modular courses. These courses take students to various countries over a year and bring together undergraduate students, MBA candidates, and executive MBA students. Typically, these three groups have separate classes and schedules, but I need to see a strong reason for this separation. Students have different levels of expertise, experiences, and goals. It should be possible to create commonalities and flexibility among them. The challenge lies in the fact that these programmes have evolved independently with different schedules. One might have started 300 years ago, another 100, and another 50 years ago. Historical rigidities have made it difficult to align them.
I believe that offering more flexibility to MBA students by integrating online components can provide great opportunities. This would allow students to access courses when they are most relevant to their educational and career goals. For example, if a course you’re interested in is not offered next year because a faculty member is on sabbatical, you could still take it a few years down the line. We currently face challenges in implementing this vision, but it’s an important area to explore.
Q14. For students who returned to the US, how would you enhance a course you’re launching to make it irresistibly attractive to them?
Ans: I believe a blend of classroom instruction and visits to intriguing companies, including virtual visits, influenced my transition into teaching. One of the most captivating experiences I had was the Global Modular Course in China, where 30 students from Wharton and 30 students from India visited Beijing. We had the opportunity to explore top Chinese startups like Alibaba, Baidu, TenCent and Xiaomi. It was a tremendous learning experience, both for me and the students, as we spent minimal time in the classroom and instead focused on learning from companies through tours and interactions.
Suppose we could integrate elements of this approach into our classes, perhaps by offering courses in locations like Palo Alto, San Francisco, New York, or Beijing and incorporating virtual components for remote access. In that case, I believe it could significantly enhance the quality of our courses. This will be an interesting enhancement to our programme.
To get more insights into the Wharton way of viewing business education, watch this video or visit https://www.wharton.upenn.edu/
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