MBA or hands-on experience—what works better in a startup?

A Master of Business Administration (MBA) is perhaps the only generalist business management degree that continues to enjoy popularity even after 100 years of its existence. According to the All India Council for Technical Education (AICTE), in 2018-19, the intake for MBA programmes in India was 3,72,579 students and India has seen a rise in MBA applicants across the world.

After conversations with MBA holders, aspirants and academicians, here are some of the reasons we found for the degree’s enduring appeal:

1 Landing leadership roles in corporates and startups

2 To create and run successful businesses

3 Having an exclusive network that increases and improves access

4 ‘Being selected’ or standing out

Of late though, the relevance—in terms of cost and time—of an MBA is being questioned, as much of what it imparts, or does not, is derived real-time by either starting up or working at a startup or pursuing new-age MBA formats. It is only natural, then, for us to question if pursuing an MBA is really equivalent to starting up or working at a startup and look into the new-MBA formats.

What is MBA?

In the early 1900s, companies were looking for a scientific approach to management. To meet this need, the Harvard Business School established the first MBA programme in 1908. Eighty students enrolled in the first year, taught by 15 faculty members. In India, the first MBA was founded by XLRI in 1949 and the first Indian Institute of Management (Calcutta) was founded in 1961.

At the time, the concept of a formalised business programme wasn’t looked upon as the same as earning an advanced degree in disciplines like law and medicine. But over the years, the appeal of learning the science of management caught on and the number of MBA students increased across the globe.

As the MBA gained worldwide acceptance and the Industrial Era reached its peak, something changed. Technology made its presence felt and the internet and business on the internet boomed. The world expanded and people started working on ideas that were new and had no legacy like large corporates or the MBA itself.

The conundrum

“An MBA is best designed to produce great middle managers,” said Aditya Kulkarni, Founder, Stoa School, and an IIM-Bangalore and BITS Pilani alumnus. Kulkarni believes that an MBA offers a path to prosperity and in many cases, it helps graduates overcome their confusion of “what to pursue next”. Though, it is just a means to an end.

He knows more founders who came out of his BITS Pilani network than his MBA network. As per a Traxcn study, IITs (Delhi, Bombay and Kharagpur) and BITS-Pilani have together produced 1,066 startups and IIMs (A, B and C) have about 900 startups.

After founding two companies and successfully exiting them, he launched his third venture—a cohort-based learning model. Kulkarni, wearing his founder’s hat, believes that the lack of a management degree is not a hindrance, if one spends the same two years working multiple roles at a startup.

At the same time, as the founder of Stoa, a community-learning based MBA model, he is bullish about the number of students who want to learn “business” in India. At Stoa, he believes the team helps one develop a “business brain” through a community-based learning experience.

As Seth Godin, the founder of Akimbo, home of the altMBA, recently wrote, “For most students, the elite MBA is about the prize at the end and not the learning or the experience.”

MBA is signalling more than learning

MBAs are all about getting better jobs, building a network and gaining exposure to important business concepts —strategy, operations, marketing and finance. “If the choice is to become an entrepreneur, an MBA may not teach you much, as entrepreneurship is about experiments and exploration,” says serial entrepreneur Snehanshu Gandhi, co-Founder of Kaagaz Scanner and two other start-ups since his IIT-Bombay days. He has also worked in boutique management consultancies and has an MBA from Indian School of Business (ISB), Hyderabad.

Gandhi says that if one is an early team member in a startup and is involved in multiple roles, one's experience can be equivalent to an MBA. However, saturation does seep in and here is where an MBA can help one understand certain concepts better and then deep-dive into the ones that interest the most.

His advice to aspirants is simple, “If you are looking for a job and your end-goal is to stay in attractive roles, then having an MBA is helpful, as it has exponential signalling benefits. Of course, the MBA brand matters here.” Looking back to when he pursued an MBA, he summarises, “MBA is not so much about learning, as it is about signalling.”

How much does the brand matter?

Deepanshu Kaushik, an MBA student at FMS Delhi, says the true value-add of an MBA is the classroom discussion of case studies, which cannot be replicated. He joined the course immediately after his engineering and after an internship at Flipkart, where he worked with MBA students from across Tier 1 institutions. He observed that “skillwise we are more or less the same. Once you remove the brilliance of the tag, there is not much of a difference”.

Through experiences of his seniors, he has seen that an MBA can give an edge in consulting roles or specialised roles like sales, marketing (in startups), where one can be hired at x+1 designations (compared to undergraduates). For the rest—generalist or non-consultancy-based roles—once hired, one is pretty much on their own and have to figure out their own journey within the organisation.

The question is how many aspire for consultancy roles or other similar institutions versus joining new-age technology ventures?

Demand-supply gap

While we associate the word MBA with an IIM or a premier “brand”, that is not always the case. For any Tier II or III aspirant, an MBA is a postgraduate degree that is a passport to a corporate job. The salary doesn’t matter as much as the fact that one is employed with a bank, a financial institution, a corporate or a large startup. The top 100 universities produce only 30,000 MBAs a year, not everyone makes it to this coveted list.

“An MBA can be extremely subjective and in Tier II and III cities, it is the only way to beat competition and land a job that can help pay the bills,” said Ashish Munjal, co-founder and CEO of Sunstone Eduversity, a pay-after-placement MBA programme targeted at students looking to acquire skills and not just a degree.

Munjal says, “Current MBAs lack segmentation, they teach the same curriculum (strategy, finance, etc) to 3,00,000+ students, whereas this curriculum is only relevant to the top tier. The rest (90 percent), do not land jobs in strategy. They have to be taught real-world skills for jobs in logistics, warehousing, digital marketing or banks. At Sunstone, we are filling in this gap and ensure our students get placed.”

To pursue or not pursue? 

According to Meeta Sengupta, founder, Centre for Education Strategy, “An MBA gives you the toolkits and makes it easy for people to identify your training and therefore decision-making attributes.” However, what you make of your MBA is up to you, your choices and life circumstances.

Summing up

The use case of an MBA in a startup varies. There are different kinds of roles in a startup—operations, sales, growth, marketing, product and so on. Operations and sales do require an MBA, however, if you are part of the CEO’s office, then the MBA is not required. It is the profile of one's role that matters most.

The developmental stage of the hiring startup matters as well.  Joining an early-stage startup is a financial risk for someone with a premium MBA. Early-stage startups do not necessarily hire from the B-Schools as well—due to the gap in salary expectations and affordability—more Unicorns do. Of late though, more startups are hiring beyond the IITs and IIM. 

If one wants to take up key roles in startups or corporates, an MBA after two or three years of work is more valuable because it enhances classroom discussions. Real-life work translates to better learning and placement. Some companies do have a bar on people they hire even at B-School. For foreign MBAs, three-four years of work experience matters and in India, at least two or three years.

If one wants to start up or find a co-founder, one has to look beyond an MBA. Everyone we spoke to agreed that MBA doesn't teach one resilience and entrepreneurship. It teaches one mental models to deal with ambiguity. If one is able to deal with the ambiguity of life, an MBA may not be necessary.

To conclude, while B-Schools teach one sophisticated models, sophisticated models are evolving and teach survival. So, while the former makes one fit in, the latter makes one stand out.