Do B-School Managers Lack Strategic Vision? Does it Matter?Posted: October 26, 2011
For many years now, I have been interested in the business of business schools. In 1999, my then Simon School colleague Glenn MacDonald and I wrote a piece entitled, “A Proposal for Transforming the Simon School,” in which we identified several systemic problems looming on the horizon and suggested proactive solutions. Since then, the looming problems have arrived and, by the look of things, could get much worse.
I have written more recently about these issues here and here. My concerns echo those of Glenn Reynolds and others who raise the possibility that we are presently living through a higher education tuition bubble, pointing out that higher education shares some salient features with the pre-collapse housing market. See The Economist andThe Chronicle of Higher Education for related views.
The central question for those of us @strategyprofs.net is: what is the successful business model in which research faculty (i.e., people like us) deliver MBA education? Up until now, I would argue that b-schools have ridden the explosion in demand for MBAs with reckless abandon. After all, when the next class is always larger and willing to fork over higher fees, why trouble oneself over complex questions like this? However, if the wave we’ve been riding is a bubble and if that bubble bursts, then providing an answer to this question will become a matter of some urgency.
Even if the bubble alarm is overblown, there are plenty of reasons to conclude that the flow of cash spouting from the MBA spigot is in danger of running dry anyway. First, worldwide capacity is expanding at a rapid rate. Not only do existing programs continue to add seats apace, but foreign competitors are working furiously to improve quality and make their programs attractive to domestic candidates (India and China come to mind and Europe already has several programs that rival those of the best US institutions). Second, competition is sprouting up from non-traditional sources, such as “in-house MBAs” offered by businesses and online programs and courses (some of which are offered by places like Stanford). Third, young people are beginning to question the value of the degree (and point to the large percentage of hight-tech moguls who happen to also be college dropouts).
At Rotman, we try to keep student quality up by recruiting heavily from overseas. Even so, the admissions distribution dips further to the left than we’d like. Add to this the fact that we are putting the finishing touches on a building that requires us to increase the number of students by almost 50%. Contrary to the persistent denials of our senior management team, we all know from which side of the distribution that increase must come. Now, if you add to that a smaller population of interested foreign candidates, and things start looking a bit worrisome. Thing is, I don’t think our situation is exceptional. In a industry of high fixed costs, low marginal costs, and softening demand … well, it doesn’t take a Nobel prize in economics to figure out where that ends up.
Over the last several decades — during which tuition money rained from the sky regardless of what we did — we’ve gotten sloppy with our educational strategies. Those running the show seem genuinely confused about the service we are providing. We are here to provide networking opportunities, or signaling value, or interview skills, or “practical” experience. Students have been framed as “customers;” content has been relentlessly dumbed down; grades have been inflated; clubs, parties, case competitions, networking events and a host of other distractions have been granted equal status to academic pursuits.
I raise the question again: what is the successful business model in which research faculty deliver an MBA education? The research faculty model operates at a cost disadvantage to its alternatives because research faculty require time to do research. So, what is our value proposition? We are not the efficient providers of networking services, pseudo-experience, interview training and so on. If you think about it long enough, I’m fairly sure the answer you inevitably come to is that we must provide an education in which our research plays a central role. That’s the one thing we are uniquely efficient at providing.
Of course, any model build around a research-based education will require that students be treated as students, faculty take their certification role seriously, content and academic standards be raised to a level befitting graduate study, and recruiters and students be brought to understand why state-of-the-art, general academic principles are valuable in practice.