The answer was that when you’re managing people in England, France, the former Soviet Union, and China, they don’t care about American patriotism. You can’t say, “Oh, we all have the same values.” People have very different values. Take the orientation toward democracy and the role of the state, or issues about women participating in the workforce. You can’t take any of it for granted. We have to teach students to be authentic leaders in that world, but it’s brand new stuff and we’re still trying to figure it out.
S+B: How are you trying to make that transition at Harvard Business School?
KHURANA: Last year, we introduced a major reorganization of the first year of our program. We now essentially get all 900 of our students out of the classroom. We moved away from an individual orientation toward a team orientation. We created team projects and sent them around the world to work on problems. They got graded by the people who were their constituents. Projects ranged from working with big traditional companies like Intel or L’Oreal, to working with startups, to doing market surveys for midsized family companies. We want to encourage students to use more innovation and entrepreneurship rather than just becoming cogs in the machine.
S+B: The traditional MBA education prepares people to keep track of the numbers centrally for an entire enterprise. But most large companies want to shift decision making to the regions, away from headquarters. How are you preparing MBAs for this new landscape?
KHURANA: U.S. corporations are historically imprinted with a hierarchical model—you develop something at headquarters, you scale it, and then you diffuse it. The challenge we face is how do we re-legitimate ourselves as a source of foundational knowledge. We have to have a more innovative and experimental mind-set. I don’t think anybody has figured it out yet. Adopting that has got to be the heart of our repertoire.
S+B: So what you’re saying is that Harvard is basically failing globally minded companies?
KHURANA: Not altogether. Global corporations need leaders who think institutionally, who see themselves as part of the larger fabric of society. They have to work closely with other institutions. They have complex relationships with the environment. They need people with skills that are not just internally focused, like trying to squeeze the last penny out of the supply chain, but externally focused. The next generation of leaders needs to be very comfortable negotiating complex coalitions with NGOs, suppliers, some competitors, and others. In that context, where the organization starts and ends is more ambiguous than ever. For example, Apple would love to say that the organization begins and stops in Cupertino, Calif. Society says no, it goes as far as Foxconn in China. And it goes so far as to say, “After the consumers buy your product, how do they get rid of it? Do they recycle parts or not?” The boundaries of the corporation are not what they used to be.
Look at the dramatic leadership issues facing Indra Nooyi, chief executive officer at PepsiCo. We just did a case study about the issues of childhood obesity and taxes on soda. Will Big Food become like Big Tobacco? PepsiCo is associated with salty snacks and sugary drinks that are translating into public health costs. Growth in the United States has stagnated. The growth is all in China, India, and the Middle East, which now have the fastest-growing rates of diabetes in the world. You’re Indra Nooyi. What do you do? This is the future of leadership.
If we teach this case 10 years from now, I can hear the students saying, “Oh, how stupid. Couldn’t they see this coming? All the data was there.” But when you are teaching it in real time, there are serious, unresolved questions about when to cash in a winning hand and fundamentally change a business.