The UK's education system is fostering a "cult of the average", failing to help the brightest youngsters, or those most in need, business leaders have warned.
In a damning indictment, the CBI said that too many children fall behind and never catch up, and that in some cases, secondary schools have become little more than exam factories.
Decades of "patchwork" reforms have confused schools, encouraged a tick box culture that has put off teachers and resulted in a narrow focus on exams and league tables, the UK's biggest business group said.
In a new report, the CBI calls for a major overhaul to ensure that all children can succeed.
It recommends radical changes, such as reducing the importance of GCSEs and making A-levels the main exam for school leavers, and moving away from league tables in favour of Ofsted reports.
"The education system fosters a cult of the average: too often failing to stretch the most able or support those that need most help," the CBI said.
CBI director-general John Cridland said while businesses want school leavers to have a rigorous education, they also want it to be "rounded and grounded".
"Today we have a system where, sadly, a large minority of our young people fall behind," he said.
"They fall behind and never catch up. It's not the fault of any individual concerned. It's not the fault of children, parents or teachers.
"It's a system failure. It's not acceptable any more than it's not acceptable that the top 10% are not stretched enough."
The report, published on the day that the CBI meets for its annual conference in central London, says that the UK's schools have faced "35 years of piecemeal reforms".
While international studies show a slight rise in average pupil performance, this hides "a long tail of low achievement with children falling behind long before they reach secondary school".
Cridland said that the focus on exams and league tables "has produced a conveyor belt, rather than what I would want education to be, an escalator".
The education system "moves children along at a certain pace, but does not deal well with individual needs", the report says.
Often, rather than being used as a measure of a child's achievement, exams have become "a tool for assessing school performance", Cridland said.
As the school leaving age is being raised from 16 to 18 in England over the next few years, the CBI suggests that it is time to move away from GCSEs and focus on A-levels.
Its report calls for pupils to be able to take tough, academic A-levels alongside new vocational A-levels.
Instead of GCSEs there would be assessments at ages 14 or 16 that check pupils' progress and help them decide what subjects or career paths to take.
Cridland said he did not think GCSEs, or another exam at 16, would be axed, but that it may be used for a different purpose.
"I think there will be exams at 16, it's whether they are considered summative, or testing to keep performance moving forward," he said.
He also suggested: "This generation of young people are as streetwise as any, but sometimes in the education system we're not always bottling that.
"In some cases secondary schools have become an exam factory. Qualifications are important, but we also need people who have self-discipline and serve customers well."
The report says there should be a shift away from league tables to Ofsted reports that assess not only academic performance, but the other skills young people need in life.
Teachers should also have more freedom to tailor their teaching to the needs of individual pupils.
Cridland said that today's technology allows much more to be done in the classroom.
"You can have Brian Cox beamed onto a whiteboard to teach science interactively," he suggested.
He added: "In years gone by you had one teacher, doing his best with chalk and talk in front of 30 kids, in the 1950s, there was no alternative."
Now there are laptops, tablets and whiteboards and much more that can be done," he said.
Cridland said that teachers need to be "liberated" to allow them to teach creative lessons.
"The best teachers we've talked to are rebels against the system," he said.
"They have to break out of the straightjacket of the curriculum which has stopped them delivering the sort of education our young people need."
Ministers have announced plans to scrap GCSEs and replace them with new English Baccalaureate Certificates in English, maths and science.
Reviews of A-levels and the national curriculum are also under way.
Cridland said: "Government reforms are headed in the right direction, but are not sufficient on their own. They need to go further and they need to go faster."
A Department for Education spokesperson said: "No school should settle for second best - and every one of our reforms is designed to drive up standards so all children have a first-class education.
"The CBI rightly recognises the importance of English and maths, calls for greater rigour in the curriculum and in exams, welcomes the academy programme, wants a new accountability system and backs greater freedom for teachers.
"These are all part of the Government's radical package of reforms that will give England's education system the thorough overhaul it needs."
Brian Lightman, general secretary of the Association of School and College Leaders (ASCL), said: "This report should not be used as yet another opportunity to denigrate hardworking and committed school leaders. The emphasis should be on working together to further develop a good and improving education service and creating the policy framework to make that happen.
"ASCL particularly welcomes the recommendation that there needs to be a clear and widely owned statement of the outcomes that all schools should deliver and a recognition that this needs to go far beyond academic achievement.
"We wholly agree with the CBI's view that the accountability framework focuses far too much on statistics relating to institutional performance, as opposed to learning outcomes for individuals, which leads to an unhealthy focus on threshold indicators."
Shadow education secretary Stephen Twigg said: "This report illustrates that the government is failing to do enough to prepare young people for the world of work and to succeed in life. That requires a focus on the kinds of skills and knowledge that employers need - both vocational and academic. But this report suggests that the government's planned EBacc Certificates are the wrong approach.
"When business leaders say his approach to education is wrong, Michael Gove looks seriously out of touch.
"There are a number of recommendations which support Labour's policies. It confirms that Michael Gove has focused on the wrong thing by spending two years tinkering with exams at 16, rather than offering all young people the skills and knowledge they need when they leave education at 18.
"The report endorses Labour's plans for all students to study English and maths until 18.
"All Michael Gove is proposing is to offer re-sits. With Labour, all young people will continue to study these subjects, regardless of their previous attainment, up to 18. Without this, we cannot expect our young people to compete in a global economy."
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