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Are business schools stuck in the past?

(MoneyWatch) At the last TEDGlobal conference, Vicki Arroyo talked inspiringly about the work she's doing at Georgetown University Law Center to bring her students into contact with the real world. The model of just teaching theory for three years, she said, is out the window. What students need and want now is hands-on training. And she described some fantastic examples of her students working with state agencies on issues that actually matter in real time to real people.

Her talk was provocative so it made me think: What ever led us to imagine that classroom teaching alone was a smart way to teach anything practical, like law or business? Medical schools teach in hospitals. Why don't more law schools and business schools teach where their subject is taking place in front of their eyes?

Challenges to conventional teaching are becoming more widespread in part because of staggeringly high tuition costs and declining employment rates. All that money - and for what? Fourteen percent of MBAs are unemployed - and, of those who have jobs, 12 percent had returned to their former employer. And both employment rates and income for 2011 MBAs were down compared to their 2010 counterparts. That doesn't make the MBA a waste of time but it does explain why pressure is mounting to deliver something that makes, as the traditional MBA does not apparently make, a seismic shift in understanding, opportunity and capability.

In a number of courses that I've taught, we've gone out to businesses, done live case studies with students doing placements and visited sites and factories to understand how all the different parts of a business fit together. I'm regularly told that these shorter courses make more impact faster than long semesters of lecture room talks and debates.

What's becoming obvious is that classroom teaching alone is easy to do online, and that it can reach thousands of students at no significant additional costs. After all, most lectures are minimally interactive, with most questions being answered by the same few students. Most just sit and stare, or mess around online, send text messages or sleep. So the formal lecture-based teaching need not be on campus at all. So the formal learning doesn't have to take place on campus at all.

What should be campus-based, therefore, must be unique, highly interactive and challenging. Only teamwork projects make any sense of bringing everyone together - and the best of these then take teams out into real businesses or make them create their own. Most business schools have everything to learn about making the campus experience significantly richer than a networking event. And if, as many of my students have found, so much more is learned more quickly, the timetable of these graduate courses could be completely overhauled.

The spiraling cost of graduate education may be what is driving innovation but it delights me. Business isn't abstract, it cannot be about theory and teaching it in classrooms has always struck me as surreal. The sooner and the deeper it connects to real companies with real customers the sooner we'll see real learning.