SELF-DRIVING CARS. Computer programs capable of beating Go masters. Digital assistants built into smartphones to help people deal with their increasingly complex lives. A few years ago, we regarded some of these things as flat-out impossible, and now we take them more or less for granted.
Three converging developments have enabled the realization of these phenomena: the ready availability of high computer processing capacity; the collection, storage, and compilation of data that is comprehensive, detailed, and personalized; and the development of methods for processing this data and turning it into relevant information.
Moreover, this information is being used not just to create new products and services, but also to predict human decisions ever more accurately. No longer are we analyzing and processing data retrospectively; increasingly, we are responding to data that has just been captured—sometimes in real time—from sources that include social media, point-of-sale systems, financial markets, and meteorological measurements. Indeed, as we respond at speeds that were previously almost unthinkable, we are identifying hitherto hidden relationships and patterns, and we’re putting them to use in sports, society, politics—and business.
And as far as the potential applications of data are concerned, this is just the start. While tech companies like Facebook, PayPal, and Google already are driven primarily by data, in the future every company will rely more heavily on generating and processing information.
This means that managers and employees in every industry need to understand the challenges and opportunities that technology entails. This is why today’s business schools absolutely must equip their students—future company leaders and data specialists—with a basic knowledge of how these technologies work and what they potentially can do.
A FEW EXAMPLES
Business students will need to understand the way digitization is increasingly driving change and growth for every business. They will need to see that it can open new markets and provide access to new client segments—or shut out whole business sectors.
For instance, they might study the business of retailing books. Because established book retailers were too slow to make use of new online sales tools, they lost market share; some completely lost their businesses. Amazon easily grew to become the dominant player as it offered new services such as home delivery.
Amazon also added features such as personalized recommendations based on previous shopping behavior and the chance for customers to review books online. These features revolutionized the whole shopping experience. Customers didn’t even miss their chats with the local bookseller.
And Amazon isn’t done yet. Today it has expanded its portfolio across almost all product categories as it challenges supermarkets, drugstores, and fashion retailers. It’s not too much to say that Amazon’s presence as an online retailer has altered social life and behavior—or, indeed, all patterns of urban society.
Those are trends today’s business graduates must understand as they enter the working world. No matter what field these graduates enter, they will see that their industries are facing similar challenges as disruptive new players enter their markets. These players rely on data and data analysis to provide tips to individuals and engage with clients.
For instance, students interested in entering the banking industry will find that it is on the verge of being completely reshaped by technology. Even though the finance field has always been IT-driven, agile new players have been challenging the longtime leaders by developing tech-enabled products and services that are flexible, value-added, self-explanatory, and always available.
In the past, one barrier that kept new entrants out of the banking field was the bond of loyalty and trust that existed between a bank and its clients. The main points of contact between banks and customers were bank branches, where staff members advised customers and sold them products. Interestingly, today’s customers don’t seem to require that personal interaction from their banking institutions. They find it more convenient to use online banking than to show up at their bank branches in person. In the future, they probably will do more and more of their banking through apps on mobile devices.
A number of schools have recognized this trend by offering courses on “fintech,” or financial technology. Fintech startups already have been hugely disruptive to the banking industry, and that trend is poised to continue. Even though most fintechs only offer one or two products, they are generating great momentum. In some parts of the world, fintechs have been awarded full banking licenses, as is the case for the Berlin-based startup Number 26 in Germany. A recent article from Business Insider notes that six out of ten banks worldwide would consider partnering with a fintech, either by collaborating with one or acquiring one. This is an industry that will continue to see upheaval—and it is an industry our students need to understand.
Another phenomenon that has been driven by technology is the so-called “sharing economy.” Companies like Uber and Airbnb are prominent examples that illustrate how the relationships have changed between customers and service providers. While Uber and Airbnb are essentially facilitators—they provide a platform that allows others to conduct transactions—they have turned their respective industries upside-down.
THE ESSENTIAL NEW SKILL SET
As all of these industries are transformed by technology, there’s a growing need for the data scientists who collect, monitor, analyze, and manage the data that makes the technology so valuable. In their jobs, they must combine domain expertise with skills in mathematics, statistics, and computer science. They must determine which types of data are relevant to the business, such as changes in customer behavior. They also must produce the information that enables core business units to adjust product portfolios and communications channels. Finally, they must serve as sparring partners for the decision makers on the management team who use that data to set company strategy.
For these reasons, today’s business graduates must have an additional skill set over and above the traditional business disciplines. Whether they’re in sales, marketing, or product development, they must understand new technologies and know how to use them for the benefit of the business. They don’t necessarily need to be able to code software or apps. But they will need to understand the basic principles of those jobs so they can evaluate and assess the development of new technology. Only then will they be able to fulfill their primary roles.
Business schools need to incorporate technology into their curricula. Traditional master of finance or MBA programs need to include lessons on digital innovation and new technologies. In addition, schools need to develop specializations and programs tailored to the new demands of the working world.
For instance, students in the BBA program at the Frankfurt School of Finance & Management now can choose a concentration in digital innovation and management. This specialization includes modules on information systems engineering, app development, and digital entrepreneurship. Students spend half their time at the business school and the other half working with one of the school’s partners, such as a bank or a fintech company.
Whether or not students choose a more technology-focused program, business schools must help them refine their skill sets so they are prepared for the demands of the working world. In my view, that means business schools must enable all their students to understand technology so they can use it to benefit themselves and their employers.
Peter Rossbach is professor of general business administration with an emphasis on applied business informatics and information technology at the Frankfurt School of Finance & Management in Germany.