Pentacle’s Eddie Obeng: Creating Business Education That Keeps Pace with the Modern World

Is the business school model outdated? British educator and entrepreneur Eddie Obeng thinks so, and dedicated himself to developing Pentacle, which touts itself as the "Virtual Business School." Speaking to Arabic Knowledge@Wharton at the recent TEDGlobal 2012 conference in Scotland, Obeng describes the non-traditional ways he researches and analyzes business problems, and dismisses case studies as anachronistic.

Obeng so strongly believed in his ideas that he left a fast-tracked career in traditional business education to launch Pentacle. When he struck out on his own, Obeng had become the youngest executive director at a European business school, that being UK-based Ashridge Business School.

Obeng champions a concept he calls ‘New World Management,’ favors applied practice rather over conceptual thinking, and treats his students as customers. Acknowledging the modern pace of life in business studies, and factoring that into how one can gain immediately applicable skills, he says, provides "what you need to teach in a MBA curriculum for a new, complex world."

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: You’ve taught about dealing with a fast-paced environment. You state the pace of learning is slower than the pace that the world changes. What do you teach students about how to do it?

Eddie Obeng: The analogy I like to make is about a little experiment they show you sometimes where you fill a glass up with water from a tap. At first there’s nothing to see until you inject a needle with green dye in it. It makes a nice thin line down the middle, very gently and calmly. As we increase the tap water, it stays the same. And then all of a sudden, the green line disperses because it becomes turbulent.

A lot of things you build into how you live and work no longer make any sense. So that’s what turbulence really is. We don’t know for sure because no one has injected any green ink. It’s shifted from a stable environment to a turbulent environment. At the same time, we haven’t sped up our rate of learning. So the pace has outstripped our ability to learn. So the world we’ve learned about how to live is completely different. And it’s random.

We have companies that make forecasts for 10 to 15 years but they can’t predict. Why can’t they predict? In turbulence, it’s really hard to predict anything. So learning faster isn’t the answer, because all we’re doing is chasing after the little bits. You have to look at the big pattern, which is why I went for causality-based research.

Arabic Knowledge@Wharton: Can you explain your work at Pentacle?

Obeng: What I have been doing for the past 16 years is a very simple experiment. I used to be at a normal business school, but I left when I realized the world was getting more complex. The pace was accelerating. I examined what we were doing in the business school, such as teaching case studies. In a stable world, you’ve got two years to research a case study, one year to write it, and then you can teach it for 20 years. If the world is changing, these case studies are going out of date.

Looking at the kinds of things that clients wanted, they wanted people coming out of business courses to do something different afterwards. What we did was concentrate on making the class work be useful. But the people attending were a mix. Some wanted to learn how to do things differently, and others wanted to network. If the world is complex, that’s not right. We’ve got to think about what is it we’re researching so we can teach them, how we’re teaching them so they can apply it, and how are we helping them to apply it.

At the same time was I had a couple of projects that made no sense to me. One was about a banking project called SWIFT. The project was massively overrun, and they couldn’t understand why. I couldn’t understand why either; it was just a big project. You just define it, plan it, resource it, and implement it, so why didn’t it work? I started digging and I realized nobody really understood what the outcome would look like, because the outcome was so different than from what they were doing. I realized it didn’t have the normal formula for a project.

I was also working at the time with a company called Mercury. They approached me and asked, "We want people to work across the business to work together. Can you come up with something that will align everyone?" That was interesting because most companies were interested in keeping divisions apart, not together. So we came up with a system called flexible teams.

What I presented at TED was this: If the pace of change is accelerating, we function because we can understand the world around us. But if the pace keeps going up, are we learning as fast as the pace is going? If we’re not, then we’ll get to a point where the pace will overtake us. And therefore we’ll be in a world that we can’t understand.

So that’s why I quit [UK-based Ashridge Business School], to find out what you do when the pace of the world goes faster than you can manage. Not so much about how to catch up, because catching up is really hard. If you suddenly find you don’t have all the clues, now what do you do? Catching up from there is almost impossible. You don’t know what to catch up on. So how do you cope?

I had in mind setting up a business school to do what I was describing. To apply everything I’ve researched into the school. And that was Pentacle. It’s a simple idea. The first idea is don’t have a faculty. You have people who can contribute but you run it on a project-by-project basis. As long as you have a faculty, you have research programs. Once you have a research program, then they’re interested in what they’re interested in, and not what the customer is interested in.

Arabic Knowledge@Wharton: You mean the customers are the students?

Obeng: Exactly. Teachers are interested in their own stuff. Let’s say I’m interested in Chinese growth in tourism, does anyone care? No. But I’ll go into the classroom and teach what I researched. So don’t have a faculty. Do it all by projects. So you have a virtual faculty, and depending on what the clients need, you bring people in as appropriate.

The second point is to organize work so you can use the new technologies that were coming along at the time… The third element is the actual infrastructure. If you don’t have a faculty, you don’t need much infrastructure. All you need is a way to connect to the customer, so that all the people coming for courses are fed and watered. You don’t need to feed and water them yourself. The only crucial ones you need is doing the researching, teach them well and then following them back to work.

So the infrastructure is really light. Even our reception is outsourced. If you ever come to our office in Beaconsfield, there is no reception. If you phone after hours, it goes to a call center. In those days, that was really unusual. It meant all I really needed was a small amount of workshop space. Even our photocopier is outsourced to a photocopy shop down the road. You just put the file in, they print it and deliver it. Why would you need a photocopier? So even at that level, everything is virtualized and outsourced. That was a key element.

[Lastly] what should you teach people? I realized that if the world is changing faster than we can learn, we’ve got a problem. How do people do research? They collect large amounts of data, which takes time. And they analyze it and that takes time. So if the world is changing that fast and you’re using a conventional research method, that means everything that you publish is already out of date. So I scratched my head and I looked at what people actually do.

If you look at research, you’ll discover that most research is incidence based. What they’ll do is interview 4,000 people and say that 60 % of people believe having a high level of innovation drives their business success. That type of research is easy to do but you should really be suspicious of it. Just because a lot of people do it doesn’t mean it’s true. It’s like saying everybody on the planet should eat rotten meat because there are more flies than human beings and they all eat rotten meat. It’s the same sort of mindset. That’s how a lot of research works. I thought, ‘I won’t do that.’

The second type of research is correlation research. If you look at research which people say is scientifically incorrect, it’s about correlation. This is the bit to remember. Every time birds sing, the daffodils come out. So birds singing and daffodils coming out are correlated. If you drew a graph with birds singing and daffodils coming out, you know why? Because the sun has come out and it’s spring. When there’s a common cause, it always correlates. Just because two things correlate doesn’t mean they have anything to do with each other. So I realized the standard method wouldn’t work. [Correlation research] is used a lot but is actually gibberish.

So I combined lots of systems, and I added some other bits. I came up with a system which meant I could do research really fast and really cheap. I call them bubble diagrams. I say, "This innovation is working. Why is that?" Then I work out the causality and scientific method on top of that. I look for elements I would expect in that situation. Also, I look for ‘dead man’s statistics’ — things you wouldn’t expect.

One thing to examine is business confidence surveys. You look at 100 companies and you say to them, "How confident are you in the future?" At the start of the crisis, you get a number like 20%. And then they interview another 100 companies and then they get 25%. And they say business confidence has gone up. That’s also nonsense because that means 80% are not confident. Guess what, when you interview them two weeks later, some of the people you interviewed have gone bankrupt. So then you don’t interview them. When you go back to interview, you end up with a bigger proportion of the confident ones.

What often happens is you research what’s there but you don’t research what’s not there. So I built all these ideas into my bubble diagram, which meant I could interview about two to three people, a maximum of five, and interview them on issues such as, "Why do your biggest implementation projects fail?" And they would tell me why.

I make a causality map or a bubble diagram as I call it. I would interview another five and ask [the same question], and I would be looking for holes, for differences. When I go to the next five, I ask, "Do your implementation projects fail?" And they say yes. I say, "You must have this and that, and that’s what makes your implementations fail." They ask, "How you do you know our company?"

Instead of having loads of graduate students collecting data and doing interviews that take 20 minutes, I take a big topic and boil it down, meaning I can work out what I need to teach the clients. By doing that over a course of seven years, I rebuilt what you need to teach in an MBA curriculum for a new, complex world.

Arabic Knowledge@Wharton: Why don’t your students get certificates?

Obeng: They don’t get certificates because it’s about applying. I’m actually not interested at all in certificates [for two reasons]. I don’t take certificates that seriously because it’s a sign that you knew something once, but the world moved on. The second element is if you concentrate on the certificate, you can only test them only on the things you can test them on. But what businesses need is courage. How do you run a test for courage? Most of their evaluations come from their colleagues, not from their company. You can test the basics but in a world where competition is changing, certificates can be pointless.

Arabic Knowledge@Wharton: At Ashridge, you were the youngest executive director of a European business school. Can you tell us how you accomplished that?

Obeng: I was young and foolish, only 31 or 32 years old. Every time they asked me to do something, I did it. They would say, "Have a go at revitalizing the MBA curriculum." And I would stay up all night and did it. They would say, "Have a go at this course. It’s on projects and it doesn’t sell very well." I’d do it. So eventually they kept promoting me because I would do it. I ended up on the executive board very quickly because I kept getting promoted like a rocket. They would give me extra work and I would keep saying, "Yes."

Arabic Knowledge@Wharton: Your background is quite interesting. Can you tell us how it’s shaped your thinking?

Obeng: I was born in West Africa. I lived in Kenya and then went to boarding school in England when I was 14 or 15 years old. Sometimes I forget I’m black. Other people tell me about their experiences about being black and I listen to them and then I realize, "Oh yes, I’m black." I have a feeling I miss a lot of things that are discriminatory because I am black. It’s everyone else’s problems, not yours, so it’s better to forget about it. You’ll just end up with self-limiting beliefs that you don’t need basically.

The second element is you need to do what makes sense for humans. I don’t know how people describe it. Sometimes, people get caught up with, "I’m from here, you’re from there," and they might lose their sense of humanity …remember that everyone is a human being. If someone else is disrespectful, it honestly is their problem. They’re limiting themselves.

So how did I get to the top of Ashridge? By hard work, doing what they asked me to do, and by being creative. Every time I got stuck, I make something else up. Ignore the politics. I’ve actually built some tools for how to survive politics in one of the courses I teach. How to make the right connections. That’s also quite important: How to manage politics, without becoming political. You don’t want to tell stories about yourself because that means you’re in the game.

Arabic Knowledge@Wharton: Having lived in Ghana and Kenya, did that help you think of this radical way of doing business?

Obeng: Yes it has actually. There are lots of different elements. I’m from Ghana. My mom raised me because my dad died when I was 11 months old. [She] is remarkable. She brought three kids up on her own. She has a doctorate. She’s 86 years old and she Skypes and texts me. She’s cool.

I grew up with some Ghanaian traditions like ‘respect for elders.’ Which is useful and sometimes, not useful. It took me a long time to learn to challenge openly without fear of upsetting people and also, without upsetting people.

Also, when I moved from Ghana to Kenya, stepping off the plane, I remember thinking I had never been so cold in my life. I envisaged Africa as being Africa. Kenya is high and cold and Ghana is low and dry and warm. Suddenly it dawned on me that just because something is labeled the same, it doesn’t mean it is the same.

Arabic Knowledge@Wharton: What are the important traits for the complete leader?

Obeng: I started looking up what would you need to lead in a ‘New World.’ And the reason why it was so complicated was so much has been written about leadership. I realized a lot of the models are working on the model that a leader knows more. Some models are more about servant leadership. I decided I needed to go back to basics. So I started looking at what is leadership, and how it works. And why would anyone follow anyone else?

The reason is very simple: people follow because they have a reason to follow. They like your vision. They want to be a part of it. They’re motivated by it. They want to learn something. They want to go in the same direction as you are. There might be a half a dozen reasons that they follow. As a leader, you can’t do direction or motivation for somebody. So what you do instead is you try to convey that. It comes through your behavior, the emotions you transmit, what you actually do. So then I ask myself, "What should I be doing, what emotions, what behaviors?" You make a list and you realize some behaviors don’t work in all situations. For example, if you’re really confident and things are really uncertain, people don’t follow you.

What I realized is if you’re trying to do change, change actually comes in different flavors. There’s really clear change where you know what the outcome is and how you’re doing to do it, like painting by numbers. Then there’s really uncertain change where you don’t know what will happen and how you’re going to do it, and you end up being lost in the fog. Then there’s change where you’re passionate about the outcome but you don’t know how to do it. I call that a quest, like King Arthur. And then there’s change where you’ve got the tools and you don’t know what the outcome will be. I call that a movie because you have a camera but you have no script.

And it turns out, if you’re really confident, that behavior is great for paint-by-numbers. But how do you go on a quest because that behavior is completely useless if people are lost in the fog? On the other hand, if your behavior is inclusive and you listen, that’s really useful in a fog but completely useless in a paint-by-numbers.

I didn’t just look at leaders’ behaviors, emotions, actions and thinking. But rather the situation and how the situation makes some things work, and turn some things off. So what we’re trying to do in leadership in a complex world is understand the situation we’re in, understand ourselves, understand what behaviors, emotions, actions and thinking will work to enable us to connect to our followers.

We’ve got to do it for real because if you are just acting, people will see right through you. And not everyone knows how to do it for real. Secondly, what will people do for real? There’s no point in telling you you’re charismatic. It’s got to be something that you actually do. So we say, in the fog, you have to listen. Listening means when a person finishes speaking, you take a few seconds and ask yourself, what did I just hear? If you can’t answer, then you ask people to repeat themselves because you were not paying attention. It’s about ‘do,’ not attributes like being charismatic or anything like that. Because in a turbulent world, just do it and find out whether it works and then do it again. If you do things in a conceptual way, then you can’t deliver. By that time it’s failed, and the world has moved on.

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