STRA TEGF

CHALLENGES AHEAD FOR SMALL BUSINESS EDUCATION

Speech delivered at USASBE/SBIDA 2001 Joint Annual Conference

Orlando, February 8, 2001

Larry Edward Penley
Immediate Past Chair of AACSB International

Dean, College of Business
Arizona State University
harry. Penleyasu. edu

Thank you very much for the
opportunity

to address you on behalf of AACSB. This is a very
special occasion with the 25'nniversary of the Small Business Institute Directors
Association meeting along with the 15 anniversary for the U.S. Association for Small

Business and Entrepreneurship. I congratulate you on this occasion, and I feel very honored

to be your speaker.

Those of you invoived in small business education have
ou lieve

changed the hves of many people via
a special place in business schools. You bridge the gap field consitlting projects. blare than
between knowledge and practice. Through the SBIDA, h if //
You have changed the lives of manY PeoPle via field afjected by g///Dg's jieid consuiting
consulting projects. More than a half million students activities More ihan l60,000
have been affected by SBIDA's field consulting businesses have had the benefit of
activities. More than 160,000 businesses have had your consulting, and, of course,

the benefit of your consulting, and, of course, hundreds hundreds of faculty have been

of faculty have been changed by their participation changed by their participation
with

with the students and the businesses. the students and the
businesses.

As I begin my comments, I know this isn't a very good time to be a dean. I listened to Dale

Meyers'peech earlier this morning and I heard that deans of business schools aren't too

popular. They are criticized because they don't like entrepreneurial research and, of course,
they'e way too concerned with rankings and ratings. In the face of this criticism of deans, I
can't resist telling you a fairy tale; it goes like this. There was a prince, not a dean by the

way, walking through the forest and he came upon a pond. He heard someone cry out,

"Prince, Prince." He tumed to look toward the pond from where he thought the voice was

coming and he noticed a very large green frog. The green frog said, "Prince, Prince, I am the

dean of a school of business; kiss me and I'l be a dean again." The prince looked at the frog,
walked over to it, reached down, grabbed it; he did not kiss the frog. Instead he dropped it

into the knapsack on his back and continued to walk through the woods. Well, this
didn'

make the frog very happy, so the frog screamed out from the knapsack, "Prince, Prince, I am a

dean of a school of business and I am a very important person; kiss me and I'l be a dean
again." The prince walked on and the frog continued to yell; finally the prince reached into

his knapsack, pulled out the frog, held it up in front of him and said, "Frog, you are a lot more

important to me as a talking frog than any dean of a school of business that I'e ever seen."
Well, enough about deans.

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Journal of Small Business Strategy Vol 12, No. I Spring/Summer 2001

You have asked me to speak to you here today because of my role as Chair of AACSB and I
want to address some issues that I think are important to AACSB and business education.
AACSB is going through an important change at this point. As a part of my role as Chair of
AACSB, I have appointed the Blue Ribbon Committee
On Accreditation to review our accreditation standards

education ntcreased variation,
and processes. We are observing in business education

and it is important that our
increased variation, and it is imponant that our standards standards recognise Iilat
recognize that business schools can achieve quality in husiness scltools can aciiieve
lots of different ways. It is also important that AACSB ttuatity m lots of different ways.
recognize the variations in forms of intellectual contrib-
utions and the means by which faculty can legitimately contribute to our scholarship. We also
need an accreditation process that transforms AACSB from a U.S.- or American-centric
organization into one that is more international, given the globalization of business and
business education these days. Such changes to AACSB standards come out of recognition
that business and business education are both being transformed.

In my comments, I want to talk basically about two issues today; both are challenges for
AACSB and business schools and both are challenges for those of us who are concerned with
small business. The first is diversity and assuring a diverse set of managers for small
businesses. The second is the eBusiness transformation and how we can enable managers and
business owners to manage in a transformed business environment and in transforming
organizations.

Let me begin with diversity but not in the way you might expect me to talk about diversity. In
approaching diversity in a somewhat different way, I am not suggesting that we don't have to
increase our outreach and educational efforts for African Americans, Native Americans,
Hispanic Americans and others; we clearly do. This morning with some of your colleagues I
listened to Robert Farlie, Professor from the University of California at Santa Cruz. He
reported that Black and Hispanic males'ncome grew substantially more because of self-
employment. Indeed, there was a statistically significant increase in income for Hispanics
who were self-employed when compared with those who were not. Clearly there is reason to
nurture and encourage the growth and success of minority-led small businesses. However,
there are additional issues of diversity that we must address in our educational efforts for
small business and I fear we ignore them.

Let's ask ourselves a question: What is the background of most small business owners—
whether black, brown or white? The answer? They lack university education altogether,
especially academic business education. Those who do have degrees may have them in
architecture, engineering, chemistry or even dance. How important are those small businesses
that are owned and managed by those with very little business education? Well, I would
argue that they are very important. Small technology firms play a very significant role in the
development of new technology in the United States. We all know the story of Steve Jobs and
the creation of Apple Computer. Recently the story of Hewlett Packard was recalled to us
along with that now famous garage where Hewlett and Packard created the foundation of their
company.

Small firms employ technology workers at a very high rate —37.9 percent of all technology
workers are employed in small businesses. Small firms play a significant role in technology
creation. Small firms produce 55 percent of innovations, twice as many per employee as large
firms. Small firms obtain more patents per sales dollar, and small firms bring new technology
into the market place even when they don't create it. Yet, small business classes are, for the
most part, taught for business students, not engineers and scientists. And most students in

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Journal of Small Biismess Strategy Vol. l2, No. l Spring/Summer 200l

those classes lack the engineering and technology background to create innovative

technological products and services.

Most MBA classes are reserved for business students, especially at the most prestigious

business schools where business programs are relatively isolated from the rest of the
university. And those programs are not for architects, engineers or science students. Indeed,

most of the student teams that you create as a result of the SBIDA do not include engineering
and science students; instead they are made up of business students.

We need alternative models for small business education. This morning we heard Dale Meyer

describe the situation of the University of Colorado as it expands entrepreneurial education
and business planning to students outside the mainstream majors in business. I want to

address that very same issue of looking beyond the business school for how we help students
learn about small business.

I am going to turn to an example at my own school —Arizona State University —not because
our example represents the best model. Instead, ours is an attempt to address and diversify

business education. Let me focus on our ASU MBA High Technology Program. It is

intended for engineers and scientists who continue to fundamentally practice their chosen

professions in small or large firms; that is, the students are not intending to make a transition

from engineering to brand management or financial management. The program is taught at

the ASU Research Park to symbolize its distinction from our other ASU MBA programs.

Business faculty in the first year are especially selected because of their technical orientation,
their engineering background or their desire to integrate high technology examples into the
curriculum experience. The second year includes team teaching by engineering and business

faculty. A major part of the second year is the design of a technology-oriented small business
by the students in the program with judging by venture capitalists. This program is about to

graduate its fourth class this spring in Arizona and our first class in China.

Turning to undergraduates, we have created a small business program specifically for non-

business majors at our Center for the Advancement of Small Business with its Regents-
approved interdisciplinary minor specifically for non-business students. The introductory

course in the minor is an overview of small business; four courses follow. The minor is
designed for majors from areas like engineering.

This kind of approach to teaching non-business students, we believe, is important because of
the number of small business people without an academic business background. It is
important as well because of the shared belief that you and SBIDA have in increasing the
quality of business skills and capability in small business. It is also important because small
business education must be made more widely available to a broader sector of higher
education.

To enhance the closeness of the classes that we teach at ASU to the small business
environment, each class includes not only a faculty member, but a co-teacher who is a

practicing businessperson. To enhance the focus on practice, something that is very important

to SBIDA, students work with small businesses in a consultative way, probably without the

depth of a SBIDA consulting project but in the same vein, nonetheless.

Beyond this area of diversity —for non-business students —another area of diversity that does
not receive enough attention, at least I believe, is gender-related diversity. We know that,

disproportionately, women are choosing to work in small businesses rather than large. More

than 9 million women-owned businesses exist in the U.S. today. Those businesses employ
about 30 million people. They generate just under $4 trillion in sales annually.

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Jiinrnol ~&fSmall Business Srrarel0 Vol. /2, iyo. I Springlgutnmer 200/

My own state of Arizona is especially noteworthy when it comes to female-led small
businesses. Women now lead forty-one percent of Arizona's small businesses. Yet, women
may have less access to small business classes than is desired by all of us who are educators.
Certainly we know that large numbers of women are not getting access to small business
classes through graduate management education. Less than a third of MBA students are
female; two-thirds are male. Women remain disproportionately over-represented in some
traditionally non-business majors like healthcare, social work and education.

Few small business programs are designed for outreach to women, I fear. Small business
classes in most business schools are very much like other business classes in terms of the
faculty who lead them; that is, most business faculty are male. In a session this morning I
listened to several women who pointed out the significance of modeling for women and the
problem we confront in business classes without case studies that use female role models of
entrepreneurs.

I am going to turn again to an ASU example, not because it is perfect but because it is an
attempt to address the challenge of gender-related diversity about which I am talking. Again,
the example comes from our Center for the Advancement of Small Business headed by Mary
Lou Bessette. In the Center for the Advancement of Small Business, female faculty teaches
three out of five classes and 75 percent of the co-teachers are women. We use live case
studies and 50 percent of the case study judges are women. Forty percent of the students are
women, hardly a complete success but an effort nonetheless to address this issue of gender-
related diversity in business education.

Let me now turn to that second issue that I wanted to talk with you about. That is the
eBusiness transformation and how we must enable small businesses to take advantage of the
digital revolution. I understand that this is not the time to talk about eBusiness; after all, the
markets are down, dot corns are failing, and venture capital firms find no opportunities that
interest them. It might seem that the eBusiness revolution is dead and the new economy looks
very much like the old economy. Despite a downturn in the market, despite dissatisfaction
with eBusiness at this point, the digital revolution is real, and technology is not dead.
Anything that can be digitized will still be digitized —whether it is music, video, text or
lectures.

I believe that it is going to be very important that small businesses not stand aside from the
digital revolution. After all, almost 40 percent of high technology workers in the United
States are in small firms. Many new, initially small companies are creating some of the most
interesting eBusiness applications that will be lapped up by large businesses. A recent
example was Microsoft's acquisition of Great Plans Software —a producer of eBusiness
solutions for small businesses. A company called Zaplet has created new web applications
that incorporate dynamic spreadsheet, database, and messaging capabilities into regular email.
MarketSoft and Ventaso, small companies, have created applications that enable innovative
supply chain management. New service providers like LogicTier and Loudcloud offer
innovative assistance with business infrastructure.

The benefits of eBusiness apply to small as well as large businesses. Web-based supplier
consortia reduce costs for small as well as large businesses. Integrated supply chain soRware
reduces costs for small businesses as well as large. Improvements in the quality of service can
be facilitated by integrated customer databases and sophisticated data mining - no matter the
size of the business. Financial software, in fact, may be more critical to cash-strapped small
businesses than to large. Productivity gains from IT are finally evident, and small businesses
can reap these advantages as well.

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Journal ofSmall Business Strategy Vol. /2, No. I Spring/Summer 200l

The digital revolution is as real to small businesses as it is to IBM, GE or Intei. Now the

watchword of this digital revolution is change - especially significant change —for small
businesses. I realize that any call for change must be considered with due skepticism, but to

ignore significant environmental change with a substantial likelihood of its affecting your

business, your education, your profession is folly.

The speed of change today is clearly very rapid, but it may be most evident in the adoption

rate of digital technology. Whereas it took about 25 years for the telephone to reach 20

percent of U. S. households, it has taken the web only five. Why must small businesses be a

part of this revolution and engage in this tremendous amount of change? We have to look no

further than the example of a company called Webcor Builders in San Francisco to understand

why small businesses must be players in this revolution. Workers for Webcor look like any

other set of construction workers —they wear hard hats, they wear work clothes, they carry

steel rods and drive heavy equipment, but they'e a little bit different. They carry palm

wireless computers in their back pockets. Using wireless handheld devices and sophisticated

project and supply chain software on their computers back in the offices, Webcor keeps track

of delays, budget forecasts and suppliers. Suppliers to Webcor have to be a part of this

network and integrate themselves with the technology. Only small businesses that use the

technology can participate and lots of small independent businesses are involved in
construction: engineers, architects, every type of subcontractor whether plumber or

electrician. Webcor saves 2-3 percent on its building costs with its integrated system and

wireless technology. When profits for a construction company range from 2.5 to 10 percent

typically, the savings can mean the difference for a construction company between loss and

profit.

Let's talk about what's implied by the eBusiness revolution for small businesses. What does

it really mean for them? What does it mean for those of us who teach about small business or

for those of us who provide consulting services to small businesses through our field-based
student consulting teams?

Well, I was in the gym the other day and I heard an advertisement for a class from one of our

local community colleges. The ad went something like this: "Get your small business into

eBusiness. Learn how to get your business on the web. Sign up now for 'Building your Own

Web Site,'tarting February 20.'his is not eBusiness —it is not eBusiness as I am thinking
about it anyway. That kind of class and this kind of B2C approach to eBusiness is little more

than what I would call Brochureware —a brochure that is digital rather than physical, a

brochure that is electronic rather than paper and ink, eBusiness transformation implies

fundamental change in the way that business is done, and a web-based brochure, no matter

how good it is, is not a fundamental change.

To be successful, B2C has to surpass the quality of traditional service. It must be faster and

more convenient than traditional service; it must be more personalized; it must shorten

delivery time; and, it must be cost effective for the small businessperson as well. Now think

for just a moment about any web-based consumer-related retailing that you'e seen. Think of
Amazon, or eBags, or PetFoodl3irect.corn or whatever your favorite example really is. Ask

yourself some questions about that example. Is the service quality better than what you find

in the store with a human being who can answer your questions? Is the service faster by mail

or even FedEx than it is by stopping by the store on your way home from work? Even when

the 82C software goes well beyond Brochureware to sophisticated consumer-adapted web

sites, is that screen more personal than what you would find at PetsMart or Bames and Noble

or the small business down the street? Is it any surprise then that B2C is not the answer for

small businesses?

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Journal ofSmall Dusittexs Sirategy Vol. l2, bio. I Spring/Summer 2VVl

Where we begin to see applications of eBusiness for small businesses is in the area of B2B—
business to business —or really in the E2E area —end to end integration. The construction
example I used earlier had a significant impact on lowering costs and in integrating suppliers
and operations with customer service. We tend, however, to think of expensive supply chain
software, like ARIBA and Manugistics, as intended for big businesses not small, but small
businesses are also able to integrate their supply chains and reduce costs with less expensive
versions of software and software that is being specifically designed for small business. Small
businesses can enable themselves to be linked to their suppliers via the Internet. Small
businesses can automate the procurement cycle, lowering the costs associated with operating
resources and other materials.

With supply chain software small businesses can extend trading networks among themselves.
They can drive accurate, reliable, real-time promises of and commitments for delivery of
products by simultaneously performing availability checks of their own inventory and
production scheduling with the distribution and transportation information of their suppliers.
Small business supply chain software enables the small business to become a reliable provider
of out-sourced manufacturing for a larger business.

I think you can see the very profound potential impact of eBusiness solutions for the small
business. I think you get the idea then —eBusiness is here to stay even if dot corns are not.
Small businesses, to be players, will employ eBusiness systems in the future. And students in
field consulting teams will need to know about eBusiness if'hey are going to help small
businesses compete in this environment.

Let me spend just a few moments as I am about to end these comments in talking about the
educational implications of the eBusiness transformation. Businesses must have graduates
with database knowledge and skill. New managers must possess the statistical tools for
improved managerial decision-making in the face of large amounts of information, and they
must understand the fundamentals of large databases which house this information. All
graduates of our business schools may not need to know how to install large pieces of
eBusiness software, but they must understand how to manage with that software. Managerial
strategy classes must address the eBusiness- revolutionized organizational structure and the
new relationships among firms. New performance measures like the balanced score card and
the one-day close have to be included in our accounting and management classes. Legal and
ethics classes must address issues like intellectual property and computer security. Our
business education must be transformed as business is transformed.

Well, I have talked long enough. Let me conclude. As small business and entrepreneurship
I'acuity members, you have a great advantage over most faculty because you deal with
real problems - of small businesses - in your classes and in the
student consulting projects that you supervise. You also have an

great advantageadvantage in being close to business, close to the needs of small
over most faculty

bllsiness, and you can see the need for change in what we provide because you deal
for our students in the curriculum. with real problems-

of small businesses
What I have talked about today are areas where I see the need —in your classes and
for change. We who teach business —especially those of us who
touch the lives of current and future small business owners- suliing prof ecis that

you supervise.hold great power. We can enlarge and enhance the economic
potential of this country by combining opportunities to leam business skills with technical
knowledge and skill. We can enlarge the potential beneficiaries of this society not only by
including more minority students and business owners, but by encouraging more women to
acquire the business skills that will enable them to be greater players in this economy.

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Journal of Sniall Business Straiegy Vol. /2, No. I Spring/Summer 200/

And whether for engineers, scientists, minorities or women, we can alter what we teach in

small business classes. We know that the digital revolution is real. We have only to couple

vision with action, and of course resources, in order to provide students with the knowledge
they will need for a transformed world of eBusiness management.

As the Dean of a public school of business in which l take great pride, as a member of the

leadership of Arizona State University, as the Chair of AACSB, as a faculty member, l find

this an exciting time. The risks are great. The challenges are invigorating. The opportunities

are considerable. There really is no option but to move ahead.

Lurrr Edward Penley hos been Dean of the College of Business ai Arisona State University
LASUj for almost a decade. He was selected as Dean from ihe ASU Faculty where he served

iis Chair vf the Department and Professor of Management. He holds ihe Universibcs Roben
Herberger Arizona Heritage Chair.

As Dean rif the College, he has seen its reputation improve markedly. The ASU MBA

Prograins are nationally and internationally ranked among the very best, and the ASU

Business Honors Program for undergraduates is considered among the finest programs ofits

type associated iviih a public university. The College's Faculty has been ranked among ihe

iop scholars in the U. S, and ihe College's Seidman Insiiiuie houses prestigious,
iniernaiioiially recognised programs in services marketing, supply chain nianagemeni, and

eci&nona'c'orecasii ng.

Demi Penlcy hos tauglit strategic and human resource management. His erecutive training

experience and his consulting have brought him in contact with industries ranging from

manufacturing io health care. His researcli has focused on individuals'rgani"ational

relationships ond the skills required of effective managers, and it has been published in ihe
leaili ng acadeinicj ournals.

Deaii Penley is Immediate Past Chair of AACSB International. Ai ASU, he is an affiliaied
faculty member with the Center for Latin American Studies. He serves on the boards of
several cr»nniunity orgamsaiions, including the Greater Phoenix Economic Council. He is

past Chair of ihe K-12 Ediicatiun Task Force of the Valley Citi ens League. He was honored

by INROADS Arisona with the Frank C. Carr Award.

In addition io his academic positions in the U S., Dean Penley has taught in Mexico and

Venezuela, His doctoral degree is from the University of Georgia, and his undergraduate
degreeis from Wake Forest Umversity.

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